Karvy Stock Broking Limited

A Project Report on ³Need for financial advisors for mutual fund investors´
Submitted in partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION In Visvesvaraya Technological University, Belgaum

Submitted By

LAKSHMINARAYAN 4PM08MBA19
Under the Guidance of

Internal Guide
Mr. G.P.Nagesh

External Guide
Mr. Venkat Ganesh Kumar E.S.

P.G. Department of Management Studies PES INSTITUTE OF TECHNOLOGY AND MANAGEMENT NH ± 206, Sager Road, Shivamogga ± 577204 April, 2010

P G Dept of Management Studies, PESITM, Shivamogga

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Karvy Stock Broking Limited

DECLARATION

I, the undersigned, hereby declare that the project report entitled ³Need for financial advisors for mutual fund investors´ has been prepared by me under the supervision and guidance of Mr. G.P.Nagesh Faculty member, P.G Department of Management Studies, PES Institute of Technology and Management , Shivamogga and now being submitted to VISVESVARAYA TECHNOLOGICAL UNIVERSITY, BELGAUM in partial fulfillment of the University regulations for the award of the degree of MBA. I further declare that this report is based on the original project study undertaken by me and has not formed a basis for the award of any Degree/Diploma of V.T.U or any other University.

Place: Shivamogga Date:

LAKSHMINARAYAN 4PM08MBA19

P G Dept of Management Studies, PESITM, Shivamogga

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Karvy Stock Broking Limited

Certificate
This is to certify that the Project Report entitled ³Need for financial advisors for mutual fund investors´ Is an individual work of Mr. LAKSHMINARAYAN. 3 semesters MBA, P.G. Department of Management Studies, PESITM, Shivamogga submitted in partial fulfillment of requirement for the award of the degree of master of Business Administration in Visvesvaraya Technological University, Belgaum under our Supervision a nd Guidance. We further certify that the work is original and has not been submitted to any other University wholly or in part for any other degree or diploma or any other programme.

Mr. G.P.Nagesh Faculty Member & Internal Guide

Dr.R.Nagaraja Prof & HOD, PGDMS

Dr.Vishwanth .P.Baligar Principal ± PESITM

EXTERNAL EXAMINERS [1] [2]

Signature:

Signature:

Name:

Name:

Institution:

Institution:

P G Dept of Management Studies, PESITM, Shivamogga

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Karvy Stock Broking Limited

ACKNOWLEDGEMENT

I take this opportunity to sincerely thank Mr. G.P.Nagesh who guided me through out the project through his valuable

suggestions, without which the project would not have been successful. I thank Mr. Venkat Ganesh Kumar E.S., Branch Manager in KARVY STOCK BROKING LIMITED Davangere for guiding me in doing this Project report. I thank Mr. Sridhar, Regional Manager in KARVY STOCK

BROKING LIMITED for guiding me in doing this Project report. My sincere thanks to my parents and friends who out of hard sweat were able to help me at all time and given encouragement for successful completion of this project.

Yours truly LAKSHMINARAYAN

P G Dept of Management Studies, PESITM, Shivamogga

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1 6. 3.8 STAFF. 3.4 ORGANIZATION STRUCTURE. 4. 2. 1. DEVELOPMENT & PRESENT STATUS OF THE INDUSTRY. LEARNING EXPERIENCE METHODOLOGY OF RESEARCH 7.8 QUALITY POLICY 1.2 COMPANY OVERVIEW.2 ORIGIN.9 DEVELOPMENT & PRESENT STATUS OF THE INDUSTRY. 3.1 PRODUCT PROFILE 4. 3. 3.2 KARVY SERVICES.6 ORGANIZATION STRUCTURE OF KARVY. Shivamogga 5 . 3.7 STYLE.1 7. 1.7 ACHIEVEMENTS. 1.1 METHODOLOGY OF DATA COLLECTION LIST OF CONTACTS PAGE NUMBER 1-8 9-13 14-22 23-30 31 32 33-54 55-56 P G Dept of Management Studies. 7. 3.5 FUNCTIONS OF DEPARTMENTS.3 EVOLUTION OF KARVY. 3.1 SWOT ANALYSIS OF KARVY. 5. 2.3 GROWTH. 1.4 LEADING COMPETITORS IN THE INDUSTRY.6 SYSTEMS.Karvy Stock Broking Limited SERIAL NUMBER 1. 7.9 SKILLS. 2.5 THE SUCCESS LADDER.4 OPERATIONAL DEFINITIONS AND CONCEPTS.1 MCKINSEY 7-S FRAMEWORK 3.4 SCOPE OF THE STUDY.3 STRATEGY.4 SUCCESS SUTRAS OF KARVY. 8. 1.2 SUPER-ORDINATE GOALS.1 INTRODUCTION 1.3 OBJECTIVE OF RESEARCH. 1.2 NEED OF THE STUDY.1 INDUSTRIAL BACKGROUND 2. 7. PESITM.

Analysis on the basis of Occupation.1 ANALYSIS AND INTERPRETATION OF DATA RESEARCH FINDINGS .2 SOURCES OF DATA. 7. PESITM. 57-69 70-72 11. SUGGESTION AND CONCLUSIONS 8.1 RECOMMENDATIONS.2 QUESTIONNAIRE 12. 6.Karvy Stock Broking Limited 6. 6.0 1 2 3 4 5 6 7 Table Name Analysis and Interpretation of Data Analysis on the basis of gender.1 10. Analysis on the basis of Income (yr).3 WEEKLY PROGRESS REPORT 73 74-79 LIST OF TABLES: Table. Analysis on the basis of Age.1 BIBLIOGRAPHY APPENDIX / ANNEXURE 12. Analysis on the basis of Education. Where from do you purchase mutual funds? According to you which is the most suitable stage to invest in mutual funds? Which feature of the mutual funds influence you most? Where do you find yourself as a mutual fund investor? Are you availing the services of personal financial advisors? PAGE NUMBER 53 53 54 55 56 57 58 59 8 9 10 60 61 62 P G Dept of Management Studies.1 12.4 INSTRUMENTATION TECHNIQUE. Shivamogga 6 . No. 9.3 SAMPLING PLAN.

Shivamogga 7 . PESITM.Karvy Stock Broking Limited 11 12 13 Which expertise of the personal financial advisor is demanded most? What is the major reason for using financial advisors? What is the major reason for not using financial advisor? 63 64 65 P G Dept of Management Studies.

Karvy Stock Broking Limited Executive summary This project has been a great learning experience for me. Leading competitors in the industry and SWOT analysis of Karvy. The success ladder of Karvy . collected through a survey done on 50 people. Development & Present status of the industry. Some of them are: why has it become one of the largest financial intermediaries? How investors do chose between funds? Performance Measures of Mutual Funds. Other than that the real savings come when one moves ahead. P G Dept of Management Studies.  The Second part gives an insight about the mutual funds and its various aspects. All the dates have been well analyzed with the help of charts and graphs. This project as a whole can be divided into two parts:  The first part gives an overall details about Karvy Stock Brokin g Limited that is Vision and Mission. The data collected has been well organized and presented. Growth. This part consists of dates and their analysis. One can have a brief knowledge about mutual funds and all its basics through the project. The language has been kept simple so that even a layman could understand. Hope the research findings and conclusions will be of use. Some of the most interesting questions regarding mutual funds have been covered. It has also covered why people don¶t want to go for financial adviso rs? The advisors can take further steps to approach more and more people and indulge them for taking their advices. It covers the topic ³Need for financial advisors for mutual fund investors´. McKinsey 7-S framework as been clearly explained about the organization study of departmental of KSBL and Services provided by KSBL. at the same time it gave me enough scope to implement my analytical ability. It is purely based on whatever I learned at Karvy. and there Achievements and the industrial background of Stock Brokers.Organization structure of Karvy. Shivamogga 8 . All the topics have been covered in a very systemat ic way. PESITM.

1.Karvy Stock Broking Limited 1. Later on it diversified into financial and accounting service s during the year 1981-82 with a capital of rs. Karvy again hit the limelight by becoming the first registrar in the countr y to be awarded P G Dept of Management Studies.150000. entered into financial product distribution services in the year 1993. It added the feather of stock broking into its cap. it achieved its first milestone after its first investment in technology. Karvy¶s strategy has always been being the first entrant in the market.´ If we look for examples to prove this quote then we can find many but there is none like that of Karvy.2 Company overview: Karvy was established as Karvy and company by five chartered accountants during the year 1979 -80. stock broking.e. it stepped into corporate finance and investment banking in the year 1995.. five people created history by establishing Karvy and company which is today known as Karvy. Karvy blossomed with the setting up of its first branch at Mumbai during the year 1987-88. Under this section we will see that how this ³Karvy and company´ of 1980 became ³Karvy´ of 2008. 1. Karvy became a known name during the year 1985-86 when it forayed into capital market as registrar. the largest financial service prov ider of India. Back in the year 1981. At the same time it became the member of Hyderabad Stock Exchange through associate firm Karvy securities ltd and then Karvy never looked back it went on adding services one after another. Karvy which already enjoyed a wide network through its investor service centers. The turning point came in the year 1989 when it decided to enter into one of the not only emerging rather potential field too i. One year more and Karvy was now dealing into mutual fund services too in the year 1994 but it didn¶t stopped there.3 Evolution of KARVY: It is well said that success is a journey not a destination and we can see it being proved by Karvy.1 Introduction: ³Success is a journey. not a destination. Shivamogga 9 . Karvy investor service centers were set up in the year 1992. and then its work was confined to audit and taxation only. it entered into retail stock broking in the year 1990. PESITM.

e. integrity. Karvy entered into one of the hottest sector of present time i. PESITM.Karvy Stock Broking Limited ISO 9002 in the year 1997. 1. learning and innovation. enterprise.the year 2004 also saw Karvy entering into commodities marketing through Karvy Comtrade. Then in the year 2002 it launched its PCG (Private Client Group) which looks after its High Networth Individuals . Year 2005 saw Karvy establishing a separate branch for its insurance services under the head ³Karvy insurance broking ltd´ and in the same year. Vision of Karvy: To achieve & sustain market leadership. it commenced secondary debt and WDM trading. by combining its human and technological resources.e.the Finapolis: your personal finance advisor´.and maintain their portfolio and provides them with other financial services. Australia in the year 2004. Karvy shall aim for complete customer satisfaction. empathy and humility. hence. It was a decade which saw many Indian companies going global so why the largest financial service provider of India should lag behind? Hence. Then it stepped into the other most happening sector i. Then it entered into insurance services in the year 2001 with the launch of its retail arm ³Karvy.. to provide world class quality services. In the year 2003. PCG group of Hong Kong acquired 25% stake at KSBL. dedication. IT enabled services by establishing its own BPO units and at a gap of just 1 year it took the path of e-Business through its website www. hard work and team play.4 Success sutras of Karvy: The success story of Karvy is driven by 8 success sutras adopted by it namely trust. Shivamogga 10 . commitment. In the process Karvy shall strive to meet and exceed customer's satisfaction and set industry standards. In the year 2006. we can see now Karvy being established as the largest financial service provider of the country.com .karvy. after being impressed with the rapid growth of Karvy stock broking limited. These are the values that bind success with Karvy. real estate through Karvy realty& services (India) ltd. P G Dept of Management Studies. Karvy launched ³Karvy global services limited´ after entering into a joint venture with Computershare.

and technology driven organization which will set the highest standards of service and business ethics. : karvy stock broking ltd. depository participant. PESITM. P G Dept of Management Studies.5 The success ladder: Now Karvy group consists of 8 highly renowned entities which are as follow: 1. and we aim to achieve this leadership position by building an innovative.´ 1.Karvy Stock Broking Limited Mission statement: ³Our mission is to be a leading and preferred service provider to our customers. advisory services. Shivamogga 11 . Registered with SEBI as Category I Registrar. 2. : The first securities registry to receive ISO 9002 certification in India. enterprising . The award of being µMost Admired¶ Registrar is one among many of the acknowledgements we received for our customer friendly and competent services. advisory services and private client goups. distribution of financial products. is Number 1 Registrar in the Country. Consists of five units namely stock broking servics.

5. 4.Karvy Stock Broking Limited 3. It operates in banking and financial services. telecom and technology. USA and the offshore global delivery center in Hyderabad. in Indian and global markets. inurance. : it is registered with SEBI as a category 1 merchant banker. At Karvy Insurance Broking Limited both life and non-life insurance products are provided to retail individuals. And most importantly. PESITM. public and private sector companies and banks. it offer a wide reach through our branch network of over 225 branches located across 180 cities. Shivamogga . State Governments. It has its sales and business development office in New York. : Karvy Global is a leading business and knowledge process outsourcing Services Company offering creative business solutions to clients globally. : The company provides investment. advisory and brokerage services in Indian Commodities Markets. : karvy insurance broking ltd is also a part of karvy stock broking ltd. Its clientele includesinclude leading corporate. healthcare and pharmaceuticals. media . India 7. foreign institutional investors. 6. : Karvy Realty (India) Limited is engaged in the business of real estate and property services offering: y y Buying/ selling/ renting of properties Identifying valuable investments opportunities in the real estate sector 12 P G Dept of Management Studies. high net -worth clients and corporates.

The board of diretors head the karvy group.: M. the chairman being Mr...Karvy Stock Broking Limited y y Facilitating financial support for real estate and investments in properties Real estate portfolio advisory services 8. V.S. M. Yugandhar.Ajay Kumar. and ranked among the top five in the country in all its business segments. karvy computershares limited. finance & accounting.Mr. A.Mr. PESITM. and karvy global se rvices ltd. India in the registry management services industry. we have the board of directors as the supreme governing body.S.Mr. karvy comtrade. M.Yugandhar as the managing director. Parthasarthy. Ramakrishna. R. Mr. R. C.: K.: V. karvy investors services ltd.Mr.Ramakrishna as directors. Australia an d Karvy Consultants Limited. is a premier integrated financial services provider.6 Organization structure of karvy: Talking about the organization structure of karvy.: M. KARVY. and provides investor services to over 300 corporate. Karvy group being the flagship company looks after the functional departments such as corporate affairs. 1. Kutumba Rao A. The letters K. comprising the who is who of Corporate India. services over 16 million individual investors in various capacities. KARVY P G Dept of Management Studies.: Vikram Singh Y. karvy stock broking ltd. : it is a joint venture between Computershare. technology services and corporate quality. training & development.Mr. V and Y stands for 5 directors names K. Mr. group human resources. Shivamogga 13 .

Karvy computershare private limited facilitates mutual fund services. Karvy has a professional management team and ranks among the best in technology. Distribution of financial products . it can be presented as: Source: Organization structure of karvy P G Dept of Management Studies. Karvy insurance broking ltd. personal client group and institutional desk.Karvy Stock Broking Limited covers the entire spectrum of financial services such as Stock broking. Merchant Banking & Corporate Finance. The services offered by KSBL are: stock broking. Shivamogga 14 . Commodities Broking. And finally the BPO services are managed by karvy global services ltd. Karvy stock broking ltd heads its another branch too ie. IPOs. distribution. share registry and issue registry whereas merchant banking is looked after by karvy investor services ltd. research. Insurance Broking.mutual funds. operations and research of various industrial segments. among others. Summarizing it in a diagram. fixed deposit. depository. Personal Finance Advisory Services. placement of equity. bonds. Depository Participants. equities. PESITM.

PESITM. Quality Objectives As per the Quality Policy. by combining its human and technological resources. P G Dept of Management Studies. Karvy shall aim for complete c ustomer satisfaction. y Provide high quality of work life for all its employees and equip them with adequate knowledge & skills so as to respond to customer's needs. y Use state-of-the art information technology in developing new and innovative financial products and services to meet the changing needs of investors and clients. Shivamogga 15 .7 Achievements: y y y y y y y y Among the top 5 stock brokers in India (4% of NSE volumes) India's No. y Establish a partner relationship with its investor service agents and vendors that will help in keeping up its commitments to the customers. Karvy will strive to exceed Customer's expectations. In the process.Karvy Stock Broking Limited 1. to provide superior quality financial services.8 Quality Policy: To achieve and retain leadership. Karvy will: y Build in-house processes that will ensure transparent and harmonious relationships with its clients and investors to provide high quality of services. y Continue to uphold the values of honesty & integrity and strive to establis h unparalleled standards in business ethics. 1 Registrar & Securities Transfer Agents Among the top 3 Depository Participants Largest Network of Branches & Business Associates ISO 9002 certified operations by DNV among top 10 Investment bankers Largest Distributor of Financial Products Adjudged as one of the top 50 IT uses in India by MIS Asia Full Fledged IT driven operations 1.

1.000 active accounts. managing over 2 crore accounts. Karvy Comtrade. Member of NCDEX and MCX ranks among the top 3 commodity brokers in the country. Shivamogga 16 . clients. 00. Karvy Stock Brokers Limited. P G Dept of Management Studies. PESITM. has quickly established itself as a broker who adds value. suppliers and regulatory authorities) proud and satisfied. Karvy has 575 offices over 375 locations across India and overseas at Dubai and New York. y Strive to keep all stake-holders (shareholders. ranks among the top 5 stock brokers in India. Registered with AMFI as a corporate Agent. Karvy Realty Services. With over 6. Karvy Insurance Brokers is registered as a Broker with IRDA and ranks among the top 5 insurance agent in the country. Over 9.000 crores under management. Karvy Global offers niche off shoring services to clients in the US. investors. 5.000 highly qualified pe ople staff Karvy. registered with NSDL and CDSL. which started in 2006. Karvy is also among the top Mutual Fund mobilize with over Rs. Karvy Computershare Limited is India¶s largest Registrar and Transfer Agent with a client base of nearly 500 blue chip corporate.Karvy Stock Broking Limited y Strive to be a reliable source of value -added financial products and services and constantly guide the individuals and institutions in making a judicious choice of same. member of National Stock Exchange of India and the Bombay Stock Exchange. in the realty sector. it ranks among the top 5 Depositary Participant in India. employees.9 Development & present status of the industry Karvy ranks among the top player in almost all the fields it operates.

Shivamogga 17 . and Ameritrade) P G Dept of Management Studies. Thus. Along with the trading of stocks. to buy or sell.1 INDUSTRIAL BACKGROUND INTRODUCTION A stock broker is someone who buys and sells stocks on the behalf of others for a predetermined commission. Earlier stock brokers were largely unorganized. many stock brokers indulge in giving advice to the clients as to which stocks. 2.2 ORIGIN: The history of stock brokers can be traced back to the origins of the first stock exchange in 1602 at Amsterdam. PESITM. However. Scottrade. Discount brokers (such as E-Trade. With the advent of automated stock broking systems on the Internet the client often has no personal contact with his/her stock broking firm. debentures etc. Stock broking firms have also been allowed to be market makers as long as the appropriate Chinese walls are put in place. Even before that brokers are said to have existed in France dealing with government securities. The Amsterdam Stock Exchange was involved in buying and selling of shares for the Dutch East India Company. as it was called. stock broking became very easy. Wall Street. Till the 1980's stock broking services were used only by the wealthy class who could afford them. most of the once well-known corporate brand names including mid-sized firms such as Smith Barney have been swallowed up by global financial conglomerates. became the hub of brokerage activities. The stock broker basically works as an agent coordinating the activities of the buyers and sellers on the stock exchange.Karvy Stock Broking Limited 2. The stockbroker's system performs all the stock broking functions: it obtains the best price from the market and executes and settles the trade. Today. the first real stock exchange came up in Philadelphia in the United States during the late 18 th century. the price tag on stock brokers lowered considerably and their services became available even to the common man. but later most of them joined hands to form instit utes and organizations. mutual funds. Later it was the New York stock exchange which saw a rise in its popularity. Later with the advent of the Internet.

Various firms like Morgan Stanley and Merrill Lynch were created to assist in the brokering of stocks and securities. They adopted the policy of quoting both the buying and selling price of a security. The firms limited themselves to researching and trading stocks for investment groups and individuals. Soon. The stocks improved the size of companies and became the standard bearer for the modern financial system. expanding the importance of the firms. Soon. stock brokerage firms began to move in a direction of market makers. the US exchange was moved to New York City and for more than one hundred and fifty years Wall Street has been synonymous with the stock brokerage business. houses began to be set up in major cities like Flanders and Amsterdam in which commodity traders would hold meetings. This allows a firm to make a profit from establishing the P G Dept of Management Studies. Stage 3: Considerations During the 1900s. The system was copied by brokerage firms across the world. Shivamogga 18 . Development & Present status of the industry: Stage 1 Beginning: During the 11th century. the Dutch East India Company became the first publicly traded company in which shareholders could own a portion of the business. In 1602. Venetian brokers began to trade in government securities. In the 1300s.Karvy Stock Broking Limited have taken a large share of the business by offering highly discounted commissions. PESITM. which was the center of American finance during the first forty years of the new United States. the French began regulating and trading agricultural debts on behalf of the banking community. but the companies do not offer investment advice in return all they do is execute orders. most notably on Chestnut Street in Philadelphia. creating the first brokerage system.3 Growth. enabling individuals to purchase stocks from a variety of organizations. 2. Stage 2 Significance The earliest brokerage firms were established in London coffee houses. They formally founded the London Stock Exchange in 1801 and created regulations and memberships.

Some banks started their own brokerage operations from scratch and others entered onto joint -venture arrangements. Beginning in the 1980s.Karvy Stock Broking Limited immediate sale and purchase price to an investor. sold. more than 2000 banks are providing active brokerage services to their customers. except to serve a few large accounts in their trust departments. deposit growth slowed as more people invested in equity shares and mutual funds. Trillions of P G Dept of Management Studies. In the 1980s and 1990s. whereby the bank purchases broker services from an established securies firm and markets the services under the name of the bank. Regulators have enforced a system called Chinese Walls to prevent communication between different departments within the brokerage company. commercial banks didn¶t emphasize their brokerage powers or solicit business. creating massive financial institutions that valued. the larger firms began to merge and take over smaller firms in the last half of the 20th century. To date. banks were able to generate non-interest fee income to help offset some of the increased interest costs of relying on borrowed funds o finance their growth. Rather than allowing depositors to withdraw their funds and invest them elsewhere. Shivamogga 19 . The conflict with brokerage firms setting prices creates the concern that insider trading can result from the sharing of information. This has resulted in increased profits and greater interconnection within the financial industry. This conglomeration of the financial sector created an environment of volatility that caused a chain reaction when other firms like Bear Sterns and Lehman Brothers filed for bankruptcy. insured and invested in securities. Firms like Smith Barney were acquired by Citigroup and other investment banks. held. Until the 1980s. many banks (through the non bank affiliates of their bank holding companies) began aggressively offering brokerage services. commercial banks began to offer trading services to retail customers. however. Stage 4: Effects The creation of high valued brokerage firms like Goldman Sachs and Bear Sterns created a system of consolidation. Since the 1980s stock-broking firms have also been allowed to be market makers as long as the appropriate Chinese walls are put in place. PESITM. Working with hundreds of billions of dollars. In this way.

Karvy Stock Broking Limited dollars of assets were tied together in different companies and resulted in a large economic collapse in late 2008. like TD Ameritrade. Specially. Settlement (of securities) is the process where by securities or interests in securities are delivered. Smaller brokers such as E*Trade. most discount brokerage firms do not have a highly paid research staff producing research reports or account executives soliciting business based on the firm¶s current recommendations to buy and sell. such as those arising under securities trades. and work for modest salaries. a new type if brokerage firms has emerged ± the so called discount broker. They offer fewer brokerage services and pass the savings on to the investors. and instead go to traditional brokers. With the advent of automated stock-broking systems on the Internet. the client often has no personal contact with his/her stock-broking firm. usually against payment. Discount brokers. to fulfill contractual obligations. Beginner investors may turn away from discounted brokers because of the advanced systems and terms. TD Ameritrade and Charles Schwab have taken control of most individual investors accounts. they hire telephone clerks to take customers¶ orders. P G Dept of Management Studies. PTI Securities & Futures and E -Trade. The added convenience and personal attention paid to the small investor has resulted in a large influx of activity. also provide advanced trading systems. These and other savings are passed along to the investor in the form of low commissions. which is why they appeal most to frequent and active traders. The stockbroker's system performs all the stockbroking functions: it obtains the best price from the market and executes and settles the trade. These clerks do not sell. Stage 5: Features A large share of the brokerage firms has moved to an online format. PESITM. In addition the fact that the online resources offer up to the minute pricing and immediate trades makes their format appealing to the modern user as SEC deregulated the brokerage industry and made negotiated commissions available to individual investors around May 1975. Shivamogga 20 . Instead. do not offer any investment advice.

Karvy Stock Broking Limited 2.com Advani Share Brokers Gandhi Securities Invest smart India Moneypore Stock Holding Corporation of India StockMarkit. Shivamogga 21 .4 Leading competitors in the industry: y y y y y y y y y y y Reliance Money Kotak Securities ICICIDirect 5Paisa. PESITM.com ICICIDirect P G Dept of Management Studies.

super ordinate goals are the fundamental P G Dept of Management Studies. staff and subordinate goals. style. although strategy is a critical aspect. systems. In their view effective organizational change may be understood to be a complex relationship between strategy.2 Super-ordinate goals: In 7s framework there is one variable termed as ³super ordinate goals´ refer to a set of values and aspirations that goes beyond the conventional format statement of corporate objectives.Again it is not a simple relationship between strategy and structure. PESITM.1 McKinsey 7-S framework: According to waterman organizational change is not simply a matter of structure. skills. Source: McKinsey 7-S framework The framework suggests that there is a multiplicity of factors that influence the organizations ability to change and its proper mode of change. although structure is a significant variable in the management of change . Because of in connectedness of the variables it would be difficult to make significant progress in one area without making progress in the others as well. 3. Shivamogga 22 .Karvy Stock Broking Limited 3. structure.

Today KARVY is providing services to over 100000 customers all over the country with a leadership position in over all distribution business. has been effectively overcoming competition. A company of Karvy¶s stature cannot afford to work without objectives. An overall group objective is already set and all the employees are driven towards Karvy¶s believes that µno individual is big as the organizational itself. After diversifying into various services providing activities it has become KARVY¶S prerogative to be leader in the business. They are its main values. Shivamogga 23 . PESITM. To strive for excellence in management and othe r long range activities to ensure leadership.¶ Competition is the key to survival and for giving diversification for the given product as such competition is always good. objectives.Karvy Stock Broking Limited ideas around which a business is built. I depository participant and registry department KARVY has maintained a very competitive pricing structure in the line with contemporary markets. Survival of the company as well as the growth of the company over the past 22years. Super ordinate goals are: y y To open up franchisee (branches) all over India. 3. goals and major action plans and policies of the company. which is healthy from the industry standard. Karvy updates itself to the surroundings competition and b ring out changes are services and related products to be in competition. y y To reach the greatest heights in their fields.3 Strategy: The strategy in 7s framework includes purposes. Rendering activity more transparent and providing better services which can inspire investor¶s confidence in mutual funds. mission. In the distribution business KARVY enjoys 40% market. The following are the some of the strategies adopted by the organization: PRICE: KARVY caters to marketing service products and there is no pricing involved. P G Dept of Management Studies. They are the broad nations of future direction. KARVY has a network of 150 branches across the country and over 2500 employees.

for the purpose of smooth flow of its function it is divided into four sections: 1. Mutual fund section Branch Manager Stock broking Depository participation Tax Information Network Mutual Funds Dealing Back Office Front Office Marketing Executive Source: Organization structure at KSBL in Davangere P G Dept of Management Studies. Tin section 4. 3.Karvy Stock Broking Limited PRODUCT DIFFERENTIATION: KARVY caters to various financial products like DP. Stock broking services 2. Registry. PESITM. Each product is headed by a skilled manager and also made as a separate profit center. MARKETING STRATERGY: Being sales oriented organization regular sales promotion events are conducted with various principles agencies and time to time advertising releases are done depending upon the requirements. Insurance and Mutual funds products. Shivamogga 24 .4 Organization structure: In Karvy. Depository participation section 3. KARVY relies mostly on word of mouth publicity than advertising which is worked wonders from them. Stock Broking.

PESITM. This section is guided and supervised by branch manager In front office online trading activities takes place and this is headed by mutual fund section. He is responsible for maintaining investor¶s securities account and the manager supervises operating that account under investors written instructions and Depository participant tax information network section provides tax advisory services . Shivamogga 25 . back office. Transfer of physical shares to Demat form. focus on mutual fund portfolio.it includes providing post budget strategies for effective tax planning. 3. recommending attractive tax planning investment option. Transformations of shares from Demat to trading account etc. P G Dept of Management Studies. BACK OFFICE:    Maintenance of all Demat account with KSBL. This mutual fund section provides advisory services for investors it includes investment advice for new investors. salary structuring.      Account opening. advice on the existing holdings and analysis of funds And one marketing executive who undertakes mutual fund activities is guided by mutual fund section and to turn branch manager supervisor this section. Giving intimation related to the due of AMC¶s to their account holders. Sends quarterly information to the holders related to the holdings.5 FUNCTIONS OF DEPARTMENTS: 1. Transfer of Demat shares to physical form. the accounting and other manual work take place and in dealing buying and selling of shares and debenture activities takes place in this section is supervised and headed by manager Depository participant acts as an agent of the depository and interacts with investor. DEPOSITORY PARTICIPANT SERVISES FRONT OFFICE: In front office the following services are done.Karvy Stock Broking Limited In stock broking section. Holding enquiries.

ADVISORY SERVICES This is the main function done by the ris department kcl gives every financial advisory services to investors for ex: portfolio management. Tax information network services. MAPIN openings Etc. 1. TIN. market the mutual fund schemes by 1 direct selling 2. yearly 4. marketing executives are Seeks for prospective customers. MUTUAL FUNDS MARKETING: KSBL has mainly under taken the distribution of financial products at commission basis.Karvy Stock Broking Limited MARKETING: In this department where the Demat account is marketed. tax planning etc. Shivamogga 26 . 3. TDS return (filling) quarterl. this is recently introduced by the RIS Department in this service. part of this mutual fund marketing is also one of the functions. In these function executives sells the almost all the AMCs schemes Executives. KSBL tries to give the services regarding taxation like 2. equity tips. they help in opening of an account and also these executives collects AMCs and provide other door to door services 2. PAN opening 3. Telemarketing P G Dept of Management Studies. PESITM. RIS This is emerging department of KSBL BACK OFFICE: Here all the records of investors are to be maintained and kept confidentially and identifies the customer¶s requirements and the department members tries to full their Needs.

Internal auditing 3. PESITM. Shivamogga 27 . Maintaining the purchases stores department 2. TATA AIG.Karvy Stock Broking Limited REGISTER SERVICES: KSBL also gives register service to AMC in this service it provide the following benefits to AMC: such as INGVYSAY. It maintains the resumption and repurchase of the schemes 4. KSBL markets the NFO schemes 3. BIRLA. Tele marketing BACK OFFICE: in this department it maintains the necessary records of the clients insurance which are taken by the KSBL 5. KSBL maintains the transaction of schemes of AMC 2. LIC etc. HR & ADMINISTRATION PAY ROLL MAINTAINANCE: maintenance of employee details like salary incentives. Etc. It gives the information related to AMC shames (like NAV. 1. UTI. ACCOUNTS 1. Direct marketing 2. DATES etc) to schemes existing investors 4 INSURANCE MARKETING: as already stated KSBL also markets all companies¶ life insurances products Such as ICICI. BIRLA SUNLIFE. bonus. SBI. ICICI. It maintains all the paper work of AMC 5. Payments and receipts 6. executives market the insurance products by 1. and performance records etc P G Dept of Management Studies.

Shivamogga 28 . regulations and procedures. Each employee has to follow a specific dress code depending on his line or work or duty.So the employees are following the rules. PESITM. Requirement of fresher¶s incumbents are made at local office at the regional level depending upon the manpower requirement. The respective departmental heads holds the HR would dispatch interviews and the appointment from the head office. Karvy has received ISO9002 certification . regulations. and procedures of the international standardization for organization (ISO). All junior staff member will have to report to the designated senior staff member daily attendance register to the human resource department. Periodic fund requirement at the regional level will be se nt as and when required. This is duly processed at the end of each month. which is headed by a regional manager. Identifying the de-motivate employees and providing the necessary motivation 3. All branch heads and various dept heads will report to him on regular basis. both formal and informal that complement the organization structure. Accepting problems of the workers and helps in solving them. The organization follows strict rules and regulations for the employee. 3. But the local regional manager would sign all cheques and such instruments. Usually the employee will be on one-year probation and P G Dept of Management Studies.6 Systems: Systems in 7s framework refer to rules. It follows specific entry and exit timing for its employees. The company has its regional office in Bangalore.Karvy Stock Broking Limited RECRUITMENT DEPARTMENT: this department helps in assessing the needs of Labour force and recruiting the needs of Labour and giving the orientation programmed to new employees HUMAN RESOURCES DEPORTMENT: 1. Finance operations are centralized at the head office level and excess funds are regularly transferred to the head office account. And with this company has its own corporate culture and every employee has to follow it. Maintain good relationship with the employees 2.

3. At all over the branches across the country Regional Manager has been appointed. All back end employees should have atleas graduation with exposure to necessary skills. The company is ISO certified and follows strict register of quality maintenance with high standards of process and systems. 3.Karvy Stock Broking Limited after successful completion he will be made permanent employee. operations at the junior level is largely centralized with division heads making key decisions. Which top managers can use to bring about organizational change each organization differs from others in their styles of working reporting relationships will convey the style of organization.8 Staff: In the McKinsey 7s framework. Each incumbent should have a specific academic qualification to match the position he is going to hold and also necessary skills to execute the assignment. organizations introduce young recruitments into the main stream of their services and in the manner in which they manage their careers as the new entrants develop into future managers. For fresher due training will be given and then will be put on the jobs. the term ³staff´ has a specific connotation. Managers are responsible and accountable for their decisions and subsequent imple mentations. Shivamogga 29 . Marketing/sales people should posses at least a degree and a management degree is preferred and should necessary posses good communication skill and flair for sales . Their potentials will be monitored on a regular basis a nd P G Dept of Management Studies. The chairman will take decision related to the group as such. All other decisions related to the relevant to the region and regional heads will take their line of work.7 Style: Style is one of the seven levers. The chairman who sits at the head office in Hyderabad heads the organization. According to Waterman and his colleagues the term: staff: refers to the way. Top management follows formal relationship with their subordinates and participative leadership is followed. By and large decision making are decentralized for day to day affair. PESITM. Operation of company is monitored by the chairman of the company and various others senior managers.he should have a two wheeler for communicating purpose.

P G Dept of Management Studies. PESITM. He will be responsible to identify for the right job and get the work done effectively. Min wastages and maximum utilization of available resources is the key organizational behavior and culture is thought to the fellow employees and potential employees are suitable nurtured. A manager is viewed as a skilled person who has the ability to manage people and resources and at times finance also. Annual increments are also given based on the performance predominant. which most people uses to describe a company. The term skills include those characters.9 Skills: Waterman considers ³skills´ as one of the most critical attributes or capabilities of an organization. 3.Karvy Stock Broking Limited will be suitable guidance from time to time. Shivamogga 30 .

services over 20 million individual investors in various capacities.2 KARVY SERVICES 1.Karvy Stock Broking Limited 4. Personal Finance Advisory Services. Stock broking 2. and ranked among the top five in the country in all its business segments. 4. operations. Corporate finance & Merchant banking 6. Registrars & Transfer agents 10. Karvy has a professional management team and ranks among the best in technology. Insurance Broking. Merchant Banking & Corporate Finance. 1992. fixed deposit. The Stockbrokers are the intermediaries who are allowed to trade in se curities on the exchange of which P G Dept of Management Studies. Distribution of financial products like mutual funds. Mutual fund services 8. IPOs. Investment advisory services 5. bonds. in research of various industrial segments. Demat services 3. and provides investor services to over 300 Corporate.1 PRODUCT PROFILE Introduction KARVY is a premier integrated financial services provider. Investment product distribution 4. Insurance 7. IT enabled services 9. Tin 1. Loans 11. stockbroker is a member of the stock exchange. Shivamogga 31 . among others. Stockbrokers are regulated by SEBI [Stock-brokers and Sub-brokers] Regulations. Realty Services. placement of equity. and more importantly. Commodities Broking. PESITM. comprising the who's who of Corporate India. Depository Participants. Stock Broking: KARVY is working as Capital Market Intermediaries. KARVY covers the entire spectrum of financial services such as Stock broking.

Sub-brokers mean ³any person not being a member of a stock exchange who acts on behalf of a stock broker as an agent or otherwise for assisting the investors in buying. They buy and sell on their own behalf as well as on behalf of their clients. Demat Services: Karvy is a depository participant with the National Securities Deposit ory Limited (NSDL) for trading and settlement of dematerialized shares. Stockbrokers expand their business by engaging sub -broker. They are intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under Depositories Act. 3. Investment Products Distribution: Company is also concern with the distribution of investment products like: (A) (B) (c) Fixed Deposit Bonds IPO (A) Fixed Deposit: KARVY is dealer of 34 fixed deposits of various types which includes fixed deposits of Public Sector.´ 2. Non Banking Finance Companies. P G Dept of Management Studies.Karvy Stock Broking Limited they are members. Depository Participants (DPs) are described as an agent of the depository. Shivamogga 32 . investors who use Karvy¶s depository services get a dual benefit. PESITM. They can use Karvy¶s brokerage services to execute transactions and Karvy¶s depository services to settle them. selling or dealing in securities through such stock -brokers. A DP can offer depository -related services only after obtaining a certificate of registration from SEBI. Since Karvy is also in the broking business. Housing Finance Companies and Manufacturing Companies.

Investment Advisory Services: This division provides portfolio management services to high net-worth individuals and corporate. The expertise of Karvy in research and stock broking gives it the right perspective to provide investment advisory services. risk bearing capacity and investment goals of investors keeping in mind their psyche and financial needs. it understands the time horizon. Company provides stationary at the time of IPO as well as provides information to investors regarding IPO and solves their queries. 4. fixed deposits. Karvy apply the principles of Financial Planning as both science & art. Investor¶s willingness to take risk. Taxes. Investor¶s requirement of getting money back. PESITM. insuranc e etc. P G Dept of Management Studies. mutual funds. ambition and family size and future financial planning for the children & old age pension for self and wife so does the pathway to achieve it. Company design portfolio by considering following factors.Karvy Stock Broking Limited (B) Bonds: Karvy is dealer of following bonds RBI Saving Bonds NHB REC (C) IPO: Company is also provides services related to Initial Public Offer of company. Based upon this Karvy it helps individual investors to plan their entire life up to retirement. Shivamogga 33 . Insurance needs and other important personal financial goals. Financial goal of each individual investor varies according to his dream. Investor¶s tax planning etc. debentures.. It designs portfolio for investor to invest their saving in various financial products like shares. bonds. Company provides advisory services to its clients.

It deals with the firm's operations with regard to investing and financing. to harvest unparalleled success. issuing shares. PESITM. Karvy enjoys SEBI category (I) authorization for Merchant Banking.Karvy Stock Broking Limited 5. Shivamogga 34 . Karvy offers the full spectrum of Merchant Banking Services. It concerned with how firms raise capital and the consequences of alternative methods of raising capital. Hence they f acilitate the flow of capital in the market. Merchant banking is a financial intermediation that matches entities that need capital and those that have capital. Corporate finance & Merchant banking: Corporate finance is the financial activity of corporation. beginning from identifying the best time for an issue to final stage of marketing it. Firm¶s capital can be raised by raising loans. and acquiring or merging with other businesses by public or private companies. As a merchant banker Karvy offer following services: Issue management Instrument designing Pricing of the issue Registration process for the issue of shares Marketing efforts Final allotment to investors Listing details on stock exchanges Loan syndication Lease financing Corporate advisory services Underwriting Portfolio management P G Dept of Management Studies.

service nearly 80% of the asset management companies (AMCs) across an extensive network of service centers with assets under service in excess of Rs. P G Dept of Management Studies. company is associated with dealing of following companies. Shivamogga 35 . Income Tax enabled services: Karvy has been started this service since March. Mutual Fund Services: Since its inception in 1982. With Mutual Funds emerging as a distinct asset class. government bodies and individuals.10. Company¶s single minded focus in delivering products for customers has given it the distinguished position of being the preferred provider of financial services in the country. Karvy today. Karvy has since been performing a pivotal role as the intermediary ± the interface ± between these players. 8. These diverse range of services cut across multiple delivery channels ± service centers. Karvy's ability to mass customize and offer a diverse range of products for a diverse range of customers has helped mutual fund companies to uniquely position themselves in the market place. PESITM. and the mutual funds. At Jamnagar branch.  ICICI Prudential Life Insurance  HDFC Life Insurance  TATA AIG Life Insurance 1. distributors. 2004. web. Insurance: Karvy is also dealer of many private life insurance companies. Karvy has demonstrated a dedication coupled with dynamism that has inspired trust from various segments ± corporate. which would address the needs of the end customer.Karvy Stock Broking Limited 6. Karvy shall strive to create new products and services. call center ± has brought home the benefits of technology to investors. Going forward. 000 crores. Karvy is work as TIN Facilitation Centre it provides following IT enabled services. Karvy has made a strategic choice to leverage the power of latest technology to provide a cutting edge to its services. mobile phones.

In 1994 -95. A SEBI Category 1 Registrar. Distribution of TAN Card. Now in its second decade of existence. Shivamogga 36 . Karvy work as an intermediary between NSDL and IT payers. It also solves queries of the tax payers.Karvy Stock Broking Limited y y y Distribution of PAN Card. Registrars & Transfer agents: In 1985. Karvy entered the Registrar and Share Transfer Business to create a market niche in the competitive field of financial services. Vehicle Loan P G Dept of Management Studies. 9. PESITM. Services related to e-TDS. it reached a milestone when it processed 104 Public Issues constituting 46 per cent market share. Karvy provides loans for following. Karvy has handled over 675 ISSUES as Registrars to public issues processed over 52 million applications and is servicing over 16 million investors from various locations spread over 205 clien ts. Handling of Volumes Timely Dispatch Quality Management and Technological Up gradation. This service has not been started in Saurashtra-Kucch region. Karvy is the leader in the industry: In an opinion poll conducted by an independent market research agency MARG. Karvy has been rated as India¶s Most Admired Registrar on various parameters: Overall Excellence. Loan: Karvy has recently started this service at selected branches of metro cities. It also distributes PAN and TAN card to the tax payers. 10. Karvy provides various form for different IT enabled services and guide people to fill that forms. So far.

Karvy Stock Broking Limited

Home Loan Personal Loan 11. TIN National Securities Depository Ltd. (NSDL) has established a nationwide Tax Information Network (TIN) on behalf of the Income Tax Department (ITD). This is designed to make the tax administration more effective, furnishing of returns convenient, reduce compliance cost and bri ng greater transparency. While NSDL will be the primary agency responsible for the design, implementation and maintenance of TIN as per the requirements of ITD, other agencies will also play key roles in the TIN system. Karvy has established infrastructure required to provide IT enabled services so, Karvy provides TIN facilitation centers all over India on behalf of NSDL. Besides Karvy following companies can also work as intermediary between NSDL and customers. Alankit Assignments Ltd. Integrated Enterprise (I) Ltd. Shell Tran source Ltd.

Source: Tax Information Network 37

P G Dept of Management Studies, PESITM, Shivamogga

Karvy Stock Broking Limited

The banking system, being the agency that collects the money on behalf of the ITD against tax obligations from the tax payers will be linked to the TIN central system to provide accounting information on tax paid by various entities under various heads. As banks are relatively technology-enabled entities, they will directly be linked electronically to the TIN central system enabling online tax accounting.

P G Dept of Management Studies, PESITM, Shivamogga

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Karvy Stock Broking Limited

5.1 SWOT ANALYSIS OF KARVY: Strengths: y y y y y Employees are highly empowered. Strong Communication Network. Good co-operation between employees. Number 1 Registrar and Transfer agent in India. Number 1 dealer of Investment Products in India.

Weaknesses: y High Employee Turnover.

Opportunity: y Growth rate of mutual fund industry is 40 to 50% during last year and it expected that this rate will be maintained in future also. y Marketing at rural and semi-urban areas.

Threats: y y Increasing number of local players. Past image of Mutual Fund.

P G Dept of Management Studies, PESITM, Shivamogga

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Karvy Stock Broking Limited

6.1 LEARNING EXPERIENCE: It was a great experience at Karvy Stock Broking Limited., where I got an opportunity to learn the functions of the company in accordance with the present trends. The interaction with the company gave me an insight and very good experience of the company¶s scenario in the competitive environment. It gave an opportunity to study the human behavior and also made to face different situations, which normally would come across while on work in office environment. The project gave me an insight on the practicali ty of some of the academic knowledge gained during the first three semesters of the MBA course. 1. Understand the various functional departments in the organization and the workflow. 2. It gave a practical knowledge about how the labour force is managed. 3. It gave an exposure to the various day to day problems faced by the managers of various departments and the way they tackle the complaints and the problems of the customer. Practical Exposure: Practical study of the organization regarding planning, organizing, s taffing, co-coordinating and controlling of all the departments helped me to improve my decision making skills. Company Exposure: The study gave an exposure to the real life situation in the company, future growth possibilities and its contribution to the economy. Presentation Skills: The study helped in improving my presentation skills, as I need to talk to different people in the organization.

P G Dept of Management Studies, PESITM, Shivamogga

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data collection.Karvy Stock Broking Limited Research: I got an excellent opportunity to meet the clients of KSBL Davangere districts. Shivamogga 41 . P G Dept of Management Studies. PESITM. research process. data analysis and preparation of a research report. I also have learnt on how to conduct research.

PESITM. a frozen ready meals company learns that there is a growing demand for fresh ready meals but doesn¶t know much about the area of fresh food and so has to carry out research in order to gain a better understanding. The four parameters of research will help us understand how P G Dept of Management Studies.Karvy Stock Broking Limited 7. y y y Exploratory research Descriptive research Causal / Experimental research Descriptive research Descriptive research is also called statistical research. selfreports. It is the glue that holds all of the elements in a research project together. The idea behind this type of research is to study frequencies. It is a master plan contain everything how to start and how to finish effectively. We often describe a design using a concise notation that enables us to summarize a complex design structure efficiently. surveys. It is quantitative and uses surveys and panels and also the use of probability sampling. it does not gather the causes behind a situation. such as observations. which takes three main forms. Descriptive research is mainly done when a researcher wants to gain a better understanding of a topic for example. It specifies pattern of framework for controlling the collection of dada accurately and economically and specifies methods and procedures. It is frame work for action. averages. The main goal of this type of research is to describe the data and characteristics about what is being studied. Research methods The goal of the research process is to produce new knowledge. Shivamogga 42 . and tests. and other statistical calculations. Although this research i s highly accurate. This type of research is also a grouping that includes many particular research methodologies and procedures.1 Methodology of research Research design It is framework that plans the action for the research project.

In other P G Dept of Management Studies. other types of research.2 Need of the study: To know the current opinion of investors regarding financial advisers for Mutual funds. collection data on a few factors from of a number of cases at one point of time. PESITM.  To know the most suitable stage to invest in mutual funds 7. Shivamogga 43 .3 Objective of the study:  The main objective of this project is to collect the opinion of people regarding mutual funds.4 Scope of the study: The research was carried on in Davangere.  Objective is to know the opinion of the investors about the services of financial advisors.5 Operational definitions and concepts: It¶s all about mutual funds Mutual funds: A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks. 7.  I have tried to explore the general opinion about mutual funds. 7. short-term money market instruments. Since the purpose is to gather information regarding specific questions the research must be designed to ensure accuracy of the findings. have visited people randomly nearby locality. small brokers etc. The information was gathered from the questionnaires that were filled by the investors in Davangere. Exploratory research often makes use of survey research design which consists of a cross sectional research design. and/or other securities. It also covers why/ why not investors are availing the services of financial advisors. bonds. i.  Objective is to know from where the investors purchase mutual funds. 7.e. and different from.Karvy Stock Broking Limited descriptive research in general is similar to.

44 P G Dept of Management Studies. Advantages of mutual funds y y Professional management and research to select quality securities. NAV = Total value of the fund««««««. Spreading risk over a larger quantity of stock whereas the investor has limited to buy only a hand full of stocks. PESITM. all expenses are deducted and the resultant value divided by the number of units in the fund is the fund¶s NAV. The investor is not putting all his eggs in one basket. is mostly calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. No. Bonds.Karvy Stock Broking Limited words we can say that A Mutual Fund is a trust registered with the Securities and Exchange Board of India (SEBI). known as the net asset value (NAV). The value of all the securities in the portfolio in calculated daily. y y y 2. The value of each unit of the mutual fund. Ability to add funds at set amounts and smaller quantities such as $100 per month. Fund management fees may be unreasonable for the services rendered. in equity shares. Government securities. which pools up the money from individual / corporate investors and invests the same on behalf of the investors /unit holders. Call money markets etc. Fund manager are able to buy securities in large quantities thus reducing brokerage fees. Disadvantages of mutual funds y y y The investor must rely on the integrity of the professional fund manager. From this. of shares currently issued and outstanding 1. Ability to take advantage of the stock market which has generally outperformed other investment in the long run. and distributes the profits. Shivamogga . The fund manager may not pass transaction savings to the investor..

Punjab National Bank Mutual Fund (Aug 89). History of the Indian mutual fund industry: The mutual fund industry in India started in 1963 with the formation of Unit Trust of India. At the end of 1988 UTI had Rs. PESITM. Second Phase ± 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non. LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.This is sometimes call "Churn and Earn".47. P G Dept of Management Studies. Shivamogga 45 . 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.UTI. 004 crores.UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87). First Phase ± 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. at the initiative of the Government of India and Reserve Bank. 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 mutual fund industry had assets under management of Rs. The first scheme launched by UTI was Unit Scheme 1964. y y y y 3. There may be restrictions on when and how an investor sells/redeems his mutual fund shares.Karvy Stock Broking Limited y The fund manager is not liable for poor judgment when the investor's fund loses value.700 crores of assets under management. Prospectus and Annual report are hard to understand. The history of mutual funds in India can be broadly divided into four distinct phases. There may be too many transactions in the fund resulting in higher fee/cost to the investor . Investor may feel a loss of control of his investment dollars. Indian Bank Mutual Fund (Nov 89).6. Bank of India (Jun 90). Bank of Baroda Mutual Fund (Oct 92). SBI Mutual Fund was the first non .At the end of 1993.

1. As at the end of January 2003. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. representing broadly. some focus on high-risk start up companies that have the potential for double and triple digit growth. the assets of US 64 scheme. Finding a mutual fund that fits your investment criteria and style is important. there were 29 funds. For instance. except UTI were to be registered and governed. Fourth Phase ± since February 2003 In February 2003. PNB.153108 crores under 421 schemes. PESITM. 21. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. Shivamogga 46 . BOB and LIC. On the other hand. there were 33 mutual funds with total assets of Rs.Karvy Stock Broking Limited Third Phase ± 1993-2003 (Entry of Private Sector Funds) 1993 was the year in which the first Mutual Fund Regulations came into being. 835 crores as at the end of January 2003. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. sponsored by SBI. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996.29. following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. which manage assets of Rs. under which all mutual funds. Types of mutual funds Most funds have a particular strategy they focus on when investing. As at the end of September. 2004. some invest only in Blue Chip companies that are more established and are relatively low risk. assured return and certain other schemes The second is the UTI Mutual Fund Ltd.805 crores. It is registered with SEBI and functions under the Mutual Fund Regulations consolidation and growth. P G Dept of Management Studies. 4.

most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. after the offer period. Therefore. If the fund is listed on a stocks exchange the units can be traded like stocks (E. Recently. at any point of time. y Close-ended funds: These funds raise money from investors only once. Shivamogga 47 . P G Dept of Management Studies. Morgan Stanley Growth Fund). Therefore.. such funds have relatively low liquidity. PESITM. fresh investments cannot be made into the fund.g.Karvy Stock Broking Limited Categories of mutual funds: Source: Types of mutual funds Mutual funds can be classified as follows:  Based on their structure: y Open-ended funds: Investors can buy and sell the units from the fund. Redemption of units can be made during specified intervals.

such funds can yield great capital appreciation as. It can be further classified as: y Index funds. y Equity diversified funds. even losses. they fall between equity and debt funds.Equity Linked Saving Scheme provides tax benefit to the investors.A banking sector fund will invest in banking stocks. construction. like BSE Sensex or Nifty is tracked. At the same time. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weight age. investment in equity funds should be considered for a period of at least 3-5 years. Following are balanced funds classes: y Debt-oriented funds -Investment below 65% in equities. As a result. cements sectors etc. PESITM. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. -An infrastructure fund invests in power. equities have outperformed all asset classes in the long term.g.g.Karvy Stock Broking Limited  Based on their investment objective:  Equity funds: These funds invest in equities and equity related instruments. thereby offering higher returns at r elatively lower volatility. y Dividend yield funds. Hence. e.  Balanced fund: Their investment portfolio includes both debt and equity. remaining in debt.In this case a key stock market index.Invest 100% of the assets in sectors which are related through some theme. Shivamogga 48 . historically. With fluctuating share prices. y Thematic funds. y Equity-oriented funds -Invest at least 65% in equities. such funds show volatile performance. short term fluctuations in the market. generally smoothens out in the long term. . y ELSS.it is similar to the equity diversified funds except that they invest in companies offering high dividend yields.100% of the capital is invested in equities spreading across different sectors and stocks. e. P G Dept of Management Studies. on the risk-return ladder.Invest 100% of the capital in a specific sector. However. y Sector funds.

a large portion being invested in call money market. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a month.They generate income through arbitrage opportunities due to miss-pricing between cash market and derivatives market. Funds are allocated to equities. and money market instruments such as certificates of deposit (CD).They invest 100% of their portfolio in government securities of and T-bills. Investment strategies: 1. PESITM. in the absence of arbitrage opportunities.Invest in short-term debt papers. y Liquid funds.fixed monthly plans invest in debt papers whose maturity is in line with that of the fund. 5. y Gilt funds ST. Therefore. y Arbitrage fund.Karvy Stock Broking Limited  Debt fund: They invest only in debt instruments. y Floating rate funds . y MIPs. y Gilt funds LT. Higher proportion (around 75%) is put in money markets. and are a good option for investors averse to idea of taking risk associated with equities. Payment is made through post dated cheques or direct debit facilities. Floaters invest in debt instruments which have variable coupon rate. Put your money into any of these debt funds depending on your investment horizon and needs. y Income funds LT. commercial paper (CP) and call money.These funds invest 100% in money market instruments.Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities.They invest 100% of their portfolio in long -term government securities. they invest exclusively in fixed-income instruments like bonds. The investor gets fewer units when the NAV is high and more units when the NAV is low. y FMPs.Typically such funds invest a major portion of the portfolio in long-term debt papers. Shivamogga 49 . derivatives and money markets. Government of India securities. debentures. This is called as the benefit of Rupee Cost Averaging (RCA) P G Dept of Management Studies.

Karvy Stock Broking Limited 2. return: 7. to an equity scheme of the same mutual fund. 6. Risk v/s. PESITM. Shivamogga 50 . Working of a Mutual fund: P G Dept of Management Studies. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give instructions to transfer a fixed sum. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month. at a fixed interval. 3.

It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. two thirds of the directors of Trustee Company or board of trustees must be independent. ration card. driving license. According to SEBI Regulations. Proof of address (any of the following): latest telephone bill. Shivamogga 51 . voter id. Custodian. Documents required (PAN mandatory): Proof of identity: 1. registered with SEBI. Passport. latest bank passbook/bank account statement. SEBI form ulates policies and regulates the mutual funds. known as unit holders. AMFI also is engaged in upgrading professi onal standards and in promoting best industry practices in diverse areas such as valuation. The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework. 2. latest electricity bill. Photo PAN Card. P G Dept of Management Studies. holds the securities of various schemes of the fund in its custody. latest Demat account statement. Regulatory Authorities: To protect the interest of the investors. The AMCs further invest the funds into various securities according to the investment objective. The objective of the investment should match with the objective of the fund to best suit the investors¶ needs. In case of non-photo PAN card in addition to copy of PAN card any one of the following: driving license/passport copy/ voter id/ bank photo pass book.Karvy Stock Broking Limited The entire mutual fund industry operates in a very organized way. The investors. The return generated from the investments is passed on to the investors or reinvested as mentioned in the offer document. 8. Its objective is to increase public awareness of the mutual fund industry. disclosure. rent agreement. transparency etc. SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. handover their savings to the AMCs under various schemes. PESITM.

It¶s advisable to every investor to ask for the offer document and read it before investing. Benchmark index 8. Minimum application amount/ no. Its contents are: 1. 4. recurring expenses 11. Performance of the scheme (scheme return v/s. benchmark return) 12. year. 2. Key Information Memorandum: A key information memorandum. Plans & options 6. is attached along with the mutual fund form. Asset allocation pattern of the scheme. An offer document consists of the following: Standard Offer Document for Mutual Funds (SEBI Format) o Summary Information o Glossary of Defined Terms o Risk Disclosures o Legal and Regulatory Compliance o Expenses o Condensed Financial Information of Schemes o Constitution of the Mutual Fund o Investment Objectives and Policies o Management of the Fund o Offer Related Information. Shivamogga 52 . Name of the fund manager(s) 10. And thus every investor gets to read it. PESITM. Dividend policy 9.wise return for the last 5 financial years. Name of the fund.Karvy Stock Broking Limited Offer document: An offer document is issued when the AMCs make New Fund Offer (NFO). popularly known as KIM. Investment objective 3. of units 7. Risk profile of the scheme 5. Expenses of the scheme: load structure. P G Dept of Management Studies.

etc. he must look at the investment objective of the fund. Banks. y Individual agents. The investors can approach to the AMCs for the forms.Karvy Stock Broking Limited Distribution channels: Mutual funds posses a very strong distribution channel so that the ultimate customers doesn¶t face any difficulty in the final procurement. DSP Merrill Lynch. Kotak Mahindra. Lotus India. Reliance . Shivamogga 53 .e.banking financial corporations too. through the AMCs directly but it will only save 1-2. Tata. NBFC: investors can procure the funds through individual agents. Now the tough task for investors start. ICICI. So it is always advisable to go for MF advisors. The mf advisors¶ thoughts go beyond just investment objectives and rate of return. independent brokers.Birla Sunlife. Whenever an investor thinks of investing in mutual funds. it¶s a very tough job for the investors to choose the best fund for them. they may carry on the further process themselves or can go for advisors like KARVY. Mira Assets. HDFC. SBI magnum. Then the investors sort out the funds whose investment objective matches with that of the investor¶s. 9. Of course the investors can save their money by going the direct route i. banks and several non . Sundaram. LIC. HSBC. whichever he finds convenient for him. whereas foreign AMCs include: Standard Chartered. S o the AMCs dealing through KARVY has access to most of the investors. some of the top AMCs of India are. Canara Robeco. y Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/sub-broker to popularize their funds. JP Morgan. Fidelity.25% (entry load) but could cost the investors in terms of returns if the investor is not an expert. How do investors choose between funds? When the market is flooded with mutual funds. UTI etc. The va rious parties involved in distribution of mutual funds are: y Direct marketing by the AMCs: the forms could be obtained from the AMCs directly. Franklin Templeton. PESITM.eg: KARVY being the top financial intermediary of India has the greatest network. Some of the basic tools which an investor may ignore but an mf advisor will always look for are as follow: P G Dept of Management Studies. AMCs can enjoy the advantage of large network of these brokers and sub brokers.

3. This results in the average cost per unit for the investor being lower than the average price per unit over time. The funds redeemed can be switched to other specified schemes within the same fund house. 100. which will result in reducing the average cost and enhancing returns. PESITM. the investors can get more number of units and vice-versa. the amount or the number of units to be redeemed and the scheme into which the switch has to be made. 2.Karvy Stock Broking Limited 1. The investor needs to decide on the investment amount and the frequency. like Rs 5. level of capital appreciation. In this case.000 a month and nowadays even as low as Rs. Rupee cost averaging allows an investor to bring down the average cost of buying a scheme by making a fixed investment periodically. Rebalancing: Rebalancing involves booking profit in the fund class that has gone up and investing in the asset class that is down. Some fund houses allow such switches without charging an entry load. Trigger facilities allow automatic redemption or switch if a specified event occurs. Whereas STP allows investors who have lump sums to park the funds in a lowrisk fund like liquid funds and make periodic transfers to another fund to take advantage of rupee cost averaging. In case if the NAV of fund falls. More frequent the investment interval. Shivamogga 54 . greater the chances of benefiting from lower prices. even if the market falls. the investor needs to specify the event. Investors can also benefit by increasing the SIP amount during market downturns. To use the trigger and switch facility. Diversification: P G Dept of Management Studies. Rupee cost averaging: The investors going for Systematic Investment Plans (SIP) and Systematic Transfer Plans (STP) may enjoy the benefits of RCA (Rupee Cost Averaging). This ensures that the investor books some profits and maintains the asset allocation in the port folio. the investor is always at a profit. 500 or Rs. level of the market indices or even a date. Trigger and switching are tools that can be used to rebalance a portfolio. the net asset value of the scheme. The trigger could be the value of the investment.

Such transfers may be done with or without entry loads. In case of mutual funds. fixed income bonds. then the SWP is suitable only for investors in the 10-per-cent-tax bracket. If it is short -term. tax implications and minimum applicable investment amounts before committing to a s ervice. Why has it become one of the largest financial instruments? If we take a look at the recent scenario in the Indian financial market then we can find the market flooded with a variety of investment options which includes mutual funds.50 per cent (plus surcharge and education class) on dividends paid out. This is because investors can redeem units using the SWP where they will have to pay 10 per cent as long-term capital gains tax against the 12. the investor may enjoy it afterwards also through dividend transfer option. Investors who need a regular stream of income have to choose between the dividend option and a systematic withdrawal plan that allows them to redeem units periodically. the dividends from debt funds may be transferred to equity schemes. 10. equities. depending on the MF's policy. Under this. PESITM. Debt funds have to pay a dividend distribution tax of 12. the dividend is reinvested not into the same scheme but into another scheme of the investor's choice. corporate debentures. This gives the investor a small exposure to a new asset class without risk to the principal amount. simplicity and affordability. For example. All the tools discussed over here are used by all the advisors and have helped investors in reducing risk. The investors gain through either dividends or capital appreciation but if they haven¶t considered the tax factor then they may end loosing. Even then an investor needs to examine costs. If the capital gain is long-term (where the investment has been held for more than one year). Tax efficiency: Tax factor acts as the ³x-factor´ for mutual funds.50 per cent DDT paid by the MF on dividends. P G Dept of Management Studies. Tax efficiency affects the final decision of any investor before investing. the growth option is more tax efficient for all investors. SWP implies capital gains for the investor. Shivamogga 55 . 4.Karvy Stock Broking Limited Diversification involves investing the amount into different options. Investors in higher tax brackets will end up paying a higher rate as short -term capital gains and should choose the dividend option.

Measuring these investment options on the basis of the mentioned parameters. real estate etc. we find that equities gives us high returns with high liquidity but its volatility too is high with low safety which doesn¶t makes it favorite among persons who have low risk. gold. On three parameters it scores high whereas it¶s moderate at one.return. volatility an d liquidity. . we get this in a tabular form: Return Safety Volatility Liquidity Convenie nce Equity Bonds Co. bank deposits. FDs Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds Source: Performance of mutual funds We can very well see that mutual funds outperform every other investment option. Debenture s Co. PESITM.appetite. life insurance. High High Moderate High High Moderate High High Moderate Moderate High Moderate Low Gold Low Moderate Low High High Low Low Moderate Low High Moderate Moderate Low Low High Low Low Low High Moderate High High Moderate Moderate Low High Moderate High Moderate Moderate High Moderate Low Moderate High Low P G Dept of Management Studies. comparing it with the other options. Shivamogga 56 .Karvy Stock Broking Limited company fixed deposits. safety convenience. Even the convenience involved with investing in equities is just moderate. PPF. all these investment options could be judged on the basis of various parameters such as.

there exists one more reason which has established mutual funds as one of the largest financial intermediary and that is the flexibility P G Dept of Management Studies. if some are safe then either they have low liquidity or low safety or both likewise. But mutual funds have definitely sorted out this problem. Although it ensures high safety but the returns generated and liquidity are moderate. so it¶s not an happening option for person who can afford to take risks for higher return. Shivamogga 57 . there exists no single option which can fit to the need of everybody. it scores low on return . y Flexibility of invested amount: Other then the above mentioned reasons. we can say that mutual fund emerges as a clear winner among all the options available. Suppose they predict that market is going to fall then they can sell some of their shares and book profit and can reinvest the amount again in money market instruments. Similarly the other investment options are not at par with mutual funds and serve the needs of only a specific customer group. Such as if some are good at return then they are not safe.e. Straightforward.Karvy Stock Broking Limited Now looking at bank deposits. Now everybody can choose their fund according to their investment objectives. even the liquidity and convenience involved are too low. y Dispense the shortcomings of the other options: every other investment option has more or less some shortcomings. y Returns get adjusted for the market movements: as the mutual funds are managed by experts so they are ready to switch to the profitable option along with the market movement. PESITM. Gold have always been a favorite among Indians but when we look at it as an investment option then it definitely doesn¶t gives a very bright picture. Its principle of diversification allows the investors to taste all the fruits in one plate. The other option offering high return is real estate but that even comes with high volatility and moderate safety level. The reasons for this being: y Mutual funds combine the advantage of each of the investment products: mutual fund is one such option which can invest in all other investment options. Just by investing in it. the investor can enjoy the best investment option as per the investment objective. it scores better than equities at all fronts but lags badly in the parameter of utmost important i.

Risk associated with a fund. good mutual fund companies over are known by their AMCs and this fame is directly linked to their superior stock selection skill s. PESITM. frankly. general market fluctuations. Though past performance alone cannot be indicative of future performance. with a plethora of schemes to choose from.6 Performance Measures of Mutual Funds: Mutual Fund industry today. with about 34 players and more than five hundred schemes. on the other hand. is P G Dept of Management Studies. higher will be the risk associated with it. Therefore. Systematic risk. but the funds record is an important indicator too. 500 through SIPs and even Rs. can be defined as variability or fluctuations in the returns generated by it. it is. there must be some performance indicator that will reveal the quality of stock selection of various AMCs. The Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns of the fund. However. 100 in some cases. Worldwide. there is a need to correctly assess the past performance of different mutual funds. Return alone should not be considered as the basis of measurement of the performance of a mutual fund scheme. which affect all the securities. First. it should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them. AMCs must be held accountable for their selection of stocks. the retail investor faces problems in selecting funds. is one of the most preferred investment avenues in India. 7. For mutual funds to grow. Shivamogga 58 . In other words. Facto rs such as investment strategy and management style are qualitative.Karvy Stock Broking Limited that mutual funds offer regarding the investmen t amount. called market risk or systematic risk and second. the only quantitative way to judge how good a fund is at present. The higher the fluctuations in the returns of a fund during a given period. present in the market. These fluctuations in the returns generated by a fund are resultant of two guiding forces. One can start investing in mutual funds with amount as low as Rs. fluctuations due to specific securities present in the portfolio of the fund. called unsystematic risk. in a general.

it can be represented as: Treynor's Index (Ti) = (Ri . higher will be its beta. several eminent authors have worked since 1960s to develop composite performance indices to evaluate a portfolio by comparing alternative portfolios within a particular risk class. systematic risk cannot. This Index is a ratio of return generated by the fu nd over and above risk free rate of return (generally taken to be the return on securities backed by the government. In order to determine the risk-adjusted returns of investment portfolios. 2. Symbolically. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund.Karvy Stock Broking Limited measured in terms of Beta. this performance measure evaluates funds on the basis of Treynor's Index. The more responsive the NAV of a mutual fund is to the changes in the market. which represents fluctuations in the NAV of the fund vis-à-vis market. PESITM. All risk-averse investors would like to maximize this value. during a given period and systematic risk associated with it (beta). While unsystematic risk can be diversified through investments in a number of instruments. as there is no credit risk associated). Ri represents return on fund. By using the risk return relationship. a low and negative Treynor's Index is an indication of unfavorable performance. The Sharpe Measure: P G Dept of Management Studies. The most important and widely used measures of performance are:  The Treynor Measure  The Sharpe Measure  Jenson Model  Fama Model 1. we try to assess the competitive strength of the mutual funds vis-à-vis one another in a better way.Rf)/Bi Where. The Treynor Measure Developed by Jack Treynor. Shivamogga 59 . Rf is risk free rate of return and Bi is beta of the fund. Beta is calculated by relating the returns on a mutual fund with the returns in the market.

This measure was developed by Michael Jenson and is sometimes referred to as the Differential Return Method. which is a ratio of returns generated by the fund over and above risk free rate of return and the total risk associated with it. alpha can be obtained by subtracting required return from the actual return of the fund. Higher alpha represents superior performance of the fund and vice versa. the model evaluates funds on the basis of reward per unit of total risk.Karvy Stock Broking Limited In this model. as his knowledge of market is primitive. 3. Jenson Model: Jenson's model proposes another risk adjusted performance measure. which measures the performance of a fund compared with the actual returns over the period. P G Dept of Management Studies. performance of a fund is evaluated on the basis of Sharpe Ratio. Rm is average market return during the given period. PESITM. After calculating it.Rf) Where. While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund.Rf)/Si Where. So. According to Sharpe. Shivamogga 60 . it is the total risk of the fund that the investors are concerned about. Limitation of this model is that it considers only systematic risk not the entire risk associated with the fund and an ordinary investor cannot mitigate unsystematic risk. The surplus between the two returns is called Alpha. a low and negative Sharpe Ratio is an indication of unfavorable performance. Symbolically. it can be written as: Sharpe Index (Si) = (Ri . the returns actually expected out of the fund given the level of its systematic risk. Required return of a fund at a given level of risk (Bi) can be calculated as: Ri = Rf + Bi (Rm . Si is standard deviation of the fund. This measure involves evaluation of the returns that the fund has generated vs.

The net selectivity is then calculated by subtracting this required return from the actual return of the fund. as it is the excess return over and above the return required to compensate for the total risk taken by the fund manager.Rf) Where. Sharpe measure and Fama model that consider the entire risk associated with fund are suitable for small investors. PESITM. Treynor measure and Jenson model use systematic risk based on the premise that the unsystematic risk is diversifiable. F or them. This model compares the performance. Shivamogga 61 . measured in terms of returns.Karvy Stock Broking Limited 4. of a fund with the required return commensurate with the total risk associated with it. These models are suitable for large investors like institutional investors with high risk taking capacities as they do not face paucity of funds and can invest in a number of options to dilute some risks. The investment in funds that have generated big returns at higher levels of risks leaves the money all the more prone to risks of all kinds that may exceed the individual investors' risk appetite. Fama Model: The Eugene Fama model is an extension of Jenson model. Among the above performance measures. a portfolio can be spread across a number of stocks and sectors. as the ordinary investor lacks the necessary skill and resources to diversified. However. P G Dept of Management Studies. Required return can be calculated as: Ri = Rf + Si/Sm*(Rm . Higher value of which indicates that fund manager has earned returns well above the return commensurate with the level of risk taken by him. The net selectivity represents the stock selection skill of the fund manager. The difference between these two is taken as a measure of the performance of the fund and is called net selectivity. Moreover. the selection of the fund on the basis of superior stock selection ability of the fund manager will also help in safeguarding the money invested to a great extent. two models namely. Sm is standard deviation of market returns.

P G Dept of Management Studies.  Research has been done only at Davangere ( Districts).Karvy Stock Broking Limited 7. Shivamogga 62 .  Some of the persons were not so responsive. PESITM.  Possibility of error in data collection.7 Limitation of research:  Time and resource limitation.

Karvy Stock Broking Limited 8. by formal and informal talks and through filling up the questionn aire prepared. 8.4 Instrumentation Technique:  Tools and Techniques of data collection The questionnaire serves as a useful guide for the communication process and may be used with survey research in any form whether the questions are P G Dept of Management Studies.  Sample size: The sample size of my project is limited to 50 only. irrespective of them being investor or not or availing the services or not. It was collected through personal visits to the known and unknown persons.3 Sampling plan:  Area of study: Need for financial advisors for mutual fund investors.  Sample design: Data has been presented with the help of bar graph. line graphs etc. pie charts. 8. Shivamogga 63 . and primary data has been collected by filling a required format.2 Sources of Data: y y Primary data Secondary data Research is totally based on primary data and Secondary data can be used only for the reference. The secondary data has been collected through various journals and websites. Research has been done by primary data collection.1 Methodology of data collection: 8.  Sampling procedure: The sample is selected in a random way. PESITM.

Shivamogga 64 .Karvy Stock Broking Limited in written or verbal form. charts and tables. Without a questionnaire the interview has no structure.  Research tool: Sample statistical tool is this analyzed and expresses in terms of percentage. P G Dept of Management Studies. The information gathered from the primary source would be analyzed by tabulating all information received. PESITM. Conclusion and interpretation of this study would then be made using various tools like graphs.

1 Analysis and Interpretation of Data Table no. Gender Number of Male Female TOTAL Source: primary data Respondents 46 04 50 Percentage % 92% 8% 100% CLASSIFICATION ON THE BASIS OF GENDER 8% Male Female 92% Source: Table no. Shivamogga 65 . PESITM. P G Dept of Management Studies.1 : Analysis on the basis of gender.Karvy Stock Broking Limited 9. 1 Analysis: From the above table it is evident that 92% are male and 8% are female respondents.

PESITM.Karvy Stock Broking Limited Table no. Age group Below 20 20 ± 30 30 ± 40 40 & Above TOTAL Source: primary data Number of Respondents 00 46 04 00 50 Percentage % 0% 92% 8% 0% 100% 100% 90% 80% 70% 92% 60% 50% 40% 30% 20% 10% 0% 0% Source: Table no. 8% responders were between 3 0 to 40 years P G Dept of Management Studies. Shivamogga   ¤ ¤ SSIFI TIO O THE SIS OF % ¦ ¦£ ¥ £ £¡ ¢ £ ¡ E ROUP Below 20 20 30 30 40 40 & Above 0% 66 .2 : Analysis on the basis of Age. 2 Analysis: From the above table it is evident that were 92% responders were between 20 to 30 years.

Karvy Stock Broking Limited Table no. 4% of responders were student and 8% of responders were others. 3 Analysis: From the above table it is evident that 36% of responders were Businessman. P G Dept of Management Studies.3 : Analysis on the basis of Occupation. PESITM. 52% of responders were Employee. Occupation Businessman Employee student others TOTAL Source: primary data Number of Respondents 18 26 02 04 50 Percentage % 36% 52% 4% 8% 100% 52% 60% 50% 40% 30% 4% 36% 10% 0% Businessman Employee student others Source: Table no. Shivamogga § 20%  %   SSIFI TIO O THE SIS OF O UP TIO  ¨¨   ¨ ©  ¨ 67 .

P G Dept of Management Studies.4 : Analysis on the basis of Education. PESITM. 16% of responders are Graduate holders.Karvy Stock Broking Limited Table no. 4% of responders are PUC holders and 4% of responders are Below SSLC. Shivamogga 68 . 4 Analysis: From the above table it is observed that 76% of responders are Post Graduate holders. Education Post Graduate Graduate PUC Below SSLC TOTAL Source: primary data CLASSIFICATION ON THE BASIS OF EDUCATION QUALIFICATION Number of Respondents 38 08 02 02 50 Percentage % 76% 16% 4% 4% 100% 4% 4% Post Graduate Graduate 16% 76% PUC Below SSLC 0% 20% 40% 60% 80% Source: Table no.

5 Analysis: From the above table it is clear that 32% of responders were having below 50000 income. Shivamogga  15%     69 . P G Dept of Management Studies.Karvy Stock Broking Limited Table no. PESITM. 26 % of responders were having 50000 -100000 income.5 : Analysis on the basis of Income (yr). Income (yr) Below 50000 50000-100000 100000-500000 above500000 TOTAL Source: primary data C A 35% 30% 5% 0% 32% 26% Number of Respondents 16 13 19 02 50 Percentage % 32% 26% 4% 8% 100% CA N N H BA NC Bel w 50000 50000-100000 100000-500000 % ab ve500000 10% 4% 5% 0% Source: Table no. 4% of responders were having 100000-500000 income and 8% of responders were having above500000 income.

6 : Where from do you purchase mutual funds? Particulars Directly from the AMCs Brokers only Brokers/ sub-brokers Other sources TOTAL Source: primary data Number of respondents 12 23 12 03 50 Percentage % 24% 46% 24% 6% 100% METHOD OF PURCHASE OF MUTUAL FUNDS 50% 45% 40% 35% 30% 25% 20% 15% 46% Direc ly fr m he M 24% 24% Br ker nly Br ker / ub-br ker O her 6% urce 10% 5% 0% Source: Table no. P G Dept of Management Studies. 24% of responders were purchase mutual funds from Brokers/ sub-brokers and 6% of responders were purchase mutual funds from other sources.Karvy Stock Broking Limited Table no. Shivamogga ! !     # ! ! ! $#    " 70 . PESITM. 6 Analysis: From the above table it is evident that 24% of responders were purchase mutual funds from directly from the AMCs. 46% of responders were purchase mutual funds from Brokers only.

Karvy Stock Broking Limited Table no.7 : According to you which is the most suitable stage to invest in mutual funds? Particulars Young unmarried stage Young Married with children stage Pre-retirement stage Old age stage TOTAL Source: primary data Number of respondents 39 09 Percentage % 78% 18% 01 01 50 2% 2% 100% DIAGRAM SHOWING AGE GROUP FOR INVESTMENT Ol age age Pre-re iremen Young Marrie wi h chil ren Young unmarrie age Source: Table no. 7 Analysis: From the above table it is evident that 78% of responders said that suitable stage to invest in mutual funds is at Young unmarried stage. 2% of responders said that suitable stage to invest in mutual funds is at Pre-retirement stage and 2% of responders said th at suitable stage to invest in mutual funds is at Old age stage. 18% of responders said that suitable stage to invest in mutual funds is at Young Married with children stage. P G Dept of Management Studies. PESITM. Shivamogga '& % '& % ' '& ' % '& ' % 2% age 2% age 18% 78% 71 .

22% of responders said that the feature of the mutual funds influence most is Professional management. and 24% of responders said that the feature of the mutual funds influence most is helps in achieving long term goals. Shivamogga ) ) ) ) 0) ) ) ) ) ) ) ( ) ( 0 22% 38% 0% 10% 20% 30% 40% 72 . P G Dept of Management Studies. 8 Analysis: From the above table it is clear that 38% of responders said that the feature of the mutual funds influence most is Diversification.8 : Which feature of the mutual funds influence you most? Particulars Diversification Professional management Reduction in risk and transaction cost Helps in achieving long term goals TOTAL Source: primary data Number of respondents 19 11 08 12 Percentage % 38% 22% 16% 24% 50 100% FEATURES OF THE MUTUAL FUNDS INFLUENCE THE INVESTOR Helps i achievi g lo g term goals Re uctio i risk a tra sactio cost 16% 24% Pro essio al ma ageme t Diversi icatio Source: Table no. PESITM.Karvy Stock Broking Limited Table no. 16% of responders said that the feature of the mutual funds influence most is Reduction in risk and transaction cost.

9 Analysis: From the above table it is evident that 10% of responders said that they find themselves as a mutual fund investor as totally ignorant. Shivamogga 3 Fully awar 1 21 14% Awar only of any p cific ch m in which you inv t d 1 2 1 1 1 1 2 1 2 73 . P G Dept of Management Studies.Karvy Stock Broking Limited Table no. 34% of responders said that they find themselves as a mutual fund investor have Aware only of any specific scheme in which you invested and 14% of responders said that they find themselves as a mutual fund investor have fully aware. 42% of responders said that they find themselves as a mutual fund investor have Partial knowledge of mutual funds. PESITM.9 : Where do you find yourself as a mutual fund investor? Particulars Totally ignorant Partial knowledge of mutual funds Aware only of any specific scheme in which you invested Fully aware TOTAL Source: primary data Number of respondents 05 21 17 07 50 Percentage % 10% 42% 34% 14% 100% DIAGRAM SHOWS INVESTOR AWARENESS 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 10% 42% 34% Totally ignorant Partial knowl dg of mutual fund Source: Table no.

10 : Are you availing the services of personal financial advisors? Particulars Yes No TOTAL Source: primary data Number of respondents 41 09 50 Percentage % 82% 18% 100% NEED OF PERSONAL FINANCIAL ADVISORS 8% Source: Table no. 10 Analysis: From the above table it is evident that 82% of responders said Yes and 18% of responders said No to avail the services of personal financial advisors.Karvy Stock Broking Limited Table no. PESITM. P G Dept of Management Studies. Shivamogga 4 Yes No 82% 74 .

PESITM.Karvy Stock Broking Limited Table no. 8% of responders said that expertise of the personal financial advisor is demanded most is Managing assets in retirement. 75 P G Dept of Management Studies. Shivamogga . 40% of responders said that expertise of the personal financial advisor is demanded most is planning to achieve specific financial goals. and 38% of responders said that expertise of the personal financial advisor is demanded most is Access to specialist in areas such as tax planning. 11 Analysis: From the above table it is evident that 14% of responders said that expertise of the personal financial advisor is demanded most is Portfolio review & investment recommendation.11 : Which expertise of the personal financial advisor is demanded most? Particulars Portfolio review & investment recommendation Planning to achieve specific financial goals Managing assets in retirement Access to specialist in areas such as tax planning TOTAL Source: primary data EXPERTISE OF THE PERSONAL FINANCIAL ADVISOR IS DEMANDED MOST Portfolio review & investment recommendation Planning to achieve specific financial goals 40% 14% 0% 10% 20% 30% 40% Number of respondents 07 Percentage % 14% 20 04 19 40% 8% 38% 50 100% 38% 8% Managing assets in retirement Access to specialist in areas such as tax planning Source: Table no.

16% of responders said that the major reason for using financial advisors is that they Don¶t have time to make my own investment decision. PESITM. Shivamogga 6 20% 5 5 Want help with asset allocation 24% 6% 26% Don t have time to make my own investment decision 76 . 12 Analysis: From the above table it is clear that 24% of responders said that the major reason for using financial advisors is that they Want help with asset allocation . P G Dept of Management Studies.Karvy Stock Broking Limited Table no. 26% of responders said that the major reason for using financial advisors is that they want to explain various investment options and 34% of responders said that the major reason for using financial advisors is that they want to make sure I am investing enough to meet my financial goals.12 : What is the major reason for using financial advisors? Particulars Want help with asset allocation Don¶t have time to make my own investment decision To explain various investment options Want to make sure I am investing enough to meet my financial goals TOTAL Source: primary data MAJOR REASON FOR USING FINANCIAL ADVISORS 34% 5% 0% Number of respondents 12 08 Percentage % 24% 16% 13 26% 17 34% 50 100% 25% 15% 10% 5% 0% To explain various investment options Source: Table no.

34% of responders said that the major reason for not using financial advisors is that believe advisors are too expe nsive. 13 Analysis: From the above table it is clear that 24% of responders said that the major reason for not using financial advisors is that they have access to all resources needed to invest on own.13: What is the major reason for not using financial advisor? Particulars Have access to all resources needed to invest on own Advisors are too expensive Unsure how to find a trustworthy advisor Want to be in control of own investment TOTAL Source: primary data MAJOR REASON FOR NOT USING FINANCIAL ADVISOR 34% 30% 5% Number of respondents 12 Percentage % 24% 17 09 12 34% 18% 24% 50 100% vi or are oo expen ive 5% 0% Source: Table no. P G Dept of Management Studies. 18% of responders said that the major reason for not using financial advisors is that Unsure how to find a trustworthy advisor and 24% of responders said that the major reason for not using financial advisors is that want to be in control of own investment. PESITM.Karvy Stock Broking Limited Table no. Shivamogga F 10% Want to e in control of own investment A @ 15% Un ure how o fin a rustworthy a visor E D 0% 18% 9 @ 9 9 AB C 24% 24% Have acce o all re ource nee e o inve on own 9 9 @9 @ 99 35% @A A 7 8 77 .

only 14% have sound knowledge of MFs. Most preferred time of investors to invest in mutual fund:  Most of the investor preferred to invest at a young unmarried stage. 6. 4. Method of purchase of mutual funds:  24% participants buy forms directly from the AMCs. most of them opted for diversification. 5. So there is enough scope for the advisors. Survy of investors:  At the survey conducted upon 50 people. 42% possess partial knowledge whereas 10% stands nowhere in knowledge about MF s. Even 18% persons were ready to invest a t a stage of young married with children. The major reason for availing the service of financial advisors:  24% participants regarded asset allocation as the major reason for going for financial advisors.1 Research findings: 1. 3. person with older age investing due to profit there grandson. The brokers have the maximum reach so they should try to make those investors aware of the happenings. even the AMCs should follow it. But again the number rise to 2% at pre -retirement stage. all are already mutual fund investors. 7. helps in achieving long term goals and helps in achieving long term goals respectively. 82% were already availing the services of financial advisors whereas 18% do not availing the services of financial advisors.34% of them wanted to make sure P G Dept of Management Studies. Availing the services of financial advisors:  Out of 50 responders. 24% from brokers and sub-brokers even then 6% people buy from other sources.Karvy Stock Broking Limited 10. Investors knowledge about various mutual funds schemes:  Out of the 50 persons who already have invested in mutual funds/ are interested to invest. 34% people are aware of only the schemes in which they have invested. Factors that influence investors go for mutual funds:  When asked about the most alluring feature of MFs. 26% of them needed them to explain them the various investment options available. PESITM. 46% from brokers only. Shivamogga 78 . 2. followed by reduction in risk.

2. 1. 8.lack of time. Shivamogga 79 . 10. The major reason investors are not availing the service of financial advisors:  When asked about one reason for not availing the services of financial advisors. While just 16% gave the reason. Nobody will invest until and unless he is fully convinced. Mutual funds offer a lot of benefit which no other single option could offer. So these are enough to drive the investors towards mutual funds. Preferences to young investors:  The advisors should try to change their mindsets. Investors could also try to increase the spectrum of services offered. P G Dept of Management Studies. rebalancing etc. 34% of them pointed the advisors as expensive. these benefits are not offered by other options singlehandedly. 24% of them wished to be in control of their own assets.2 Suggestions: The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Investors should be made to realize that ignorance is no longer and what they are losing by not investing. rupee cost averaging. and systematic transfer plan. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. PESITM. Value added benefits:  The advisors may try to highlight some of the value added benefits of MFs such as tax benefit. Whereas 24% of them said they have access to all the necessary resources required.Karvy Stock Broking Limited that they were saving enough to meet their fin ancial goals.18% of them said that they find it difficult to get trustworthy advisors.

Karvy Stock Broking Limited 3. Thus the advisors should try to attract more and more persons and turn them into investors and finally their clients. But if not possible then they could go for offering more services and benefits at the existing rate. They should also maintain their code of ethics so that the investors could trust upon them. Shivamogga 80 . The advisors should try to charge a nominal fee at the beginning. Reduce cost of service charges:  Now the most important reason for not availing the services of advisors was spotted was being expensive. PESITM. P G Dept of Management Studies.

it is one of the most preferred investment avenues in India. equities. Investment is the stepping stone to achieving one's financial dreams. P G Dept of Management Studies.Karvy Stock Broking Limited Conclusion: If we take a look at the recent scenario in the Indian financial market then we can find the market flooded with a variety of investment options which includes mutual funds. Mutual funds offer an opportune way to longterm wealth creation. bank deposits and etc. fixed income bonds. The financial advisors can tap upon these people by educating them about mutual funds. with about 34 players and more than five hundred schemes. However.. Shivamogga 81 . Mutual Fund Advisory Service at Karvy guides you through this network and ensures that your investments are backed by their quality research. the task of selecting the most suitable scheme gets even more complicated. corporate debentures. with more and more funds flooding the market. After Giving advice to the customers the Advisers should communicate with the clients so there will be better relationship between the Company and the Clients. Mutual Fund Advisors give emphasis on mutual funds than other investment options. company fixed deposits. Mutual Fund industry today. PESITM.

Business India.mutualfundindia.  www. Shivamogga 82 .com  Business Line Newspaper.com Journals & other references:      Karvy the Finapolis.Karvy Stock Broking Limited 11. The Economic Times.1 BIBLIOGRAPHY  www. PESITM. KARVY BAZAAR BAATEINA (Weekly Investment Newsletter from KARVY).mutualfundsindia.  Economic Times Newspaper.thefinapolis. Karvy business associates manual.karvy.com  www.com  www. P G Dept of Management Studies.

Phone number: «««««««... Education: a) Post Graduate c) PUC 6. Occupation: a) Businessman c) student 7. 3...0 APPENDIX / ANNEXURE 10. 5.Karvy Stock Broking Limited 10. Name: ««««««««««««««««««. PESITM.«««««. Income (yr): a) Below 50000 [ ] b) 50000 -100000 [ [ ] ] c) 100000-500000 [ ] d) above500000 [ ] b) Unmarried [ ] [ [ ] ] b) Employee [ ] d) others «««««««« [ [ ] ] b) Under Graduate [ d) Below SSLC [ ] ] [ [ ] ] b) 20 ± 40 [ ] ] d) 60 & Above[ [ ] b) Female [ ] 9. Sex: a) Male 4. Age: a) Below 20 c) 40 ± 60 5. «««««««««««««««««««««««««. If no what is the most important reason for not investing in mutual funds? a) Lack of knowledge about mutual funds b) Enjoys investing in other options d) No trust over the fund managers [ [ [ ] ] ] ] c) Its benefits are not enough to drive you for investment [ P G Dept of Management Studies. Shivamogga 83 . Maritial Status: a) Married 8. Have you invested /are you interested to invest in mutual funds? a) Yes [ ] b) No [ ] 10. Address: «««««««««««««««««««««««««.1 QUESTIONNAIRE 1.

Which expertise of the personal financial advisor is demande d most? a) Portfolio review & investment recommendation b) Planning to achieve specific financial goals c) Managing assets in retirement d) Access to specialist in areas such as tax planning 17. What is the major reason for using financial advisors? a) Want help with asset allocation b) Don¶t have time to make my own investment decision c) To explain various investment options d) Want to make sure I am investing enough to meet my financial goals [ P G Dept of Management Studies. According to you which is the most suitable stage to invest in mutual funds? b) Young Married with children stage [ 13. Are you availing the services of personal financial advisors? a) Yes [ ] b) No [ ] [ [ [ [ ] ] ] ] 16. Which feature of the mutual funds influence you most? c) Reduction in risk and transaction cost [ 14. Shivamogga [ [ [ [ ] ] ] ] [ [ [ [ [ [ ] ] ] ] ] ] ] ] [ [ [ [ ] ] ] ] 12. PESITM.Karvy Stock Broking Limited 11. Where from do you purchase mutual funds? a) Directly from the AMCs b) Brokers only c) Brokers/ sub-brokers d) Other sources a) Young unmarried stage c) Pre-retirement stage d) Old age stage a) Diversification b) Professional management d) Helps in achieving long term goals a) Totally ignorant b) Partial knowledge of mutual funds c) Aware only of any specific scheme in which you invested d) Fully aware 15. Where do you find yourself as a mutual fund investor? [ [ [ ] ] ] ] 84 .

[ [ [ ] ] ] ] P G Dept of Management Studies. Shivamogga 85 . Your suggestion for improvement. PESITM.Karvy Stock Broking Limited 18. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. What is the major reason for not using financial advisor? a) Have access to all resources needed to invest on own [ b) Believe advisors are too expensive c) Unsure how to find a trustworthy advisor d) Want to be in control of own investment 19. If any.

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