Project Report ON: 1 College of Management Research & Engineering, Pune-52

A
PROJECT REPORT
ON
MUTUAL FUNDS & INSURANCE FOR INDIAN INVESTORS
FOR
KARVY STOCK LTD
IN PARTIAL FULFILLMENT
OF
MASTER IN BUSINESS ADMINISTRATION (MBA)
SUBMITTED BY
PARUL MAZUMDAR
MBA-I
FINANCE SPECIALIZATION
COLLEGE OF MANAGEMENT RESEARCH

& ENGINEERING (CMRE),
PUNE-52
1
College of Management Research & Engineering, Pune-52
ACKNOWLEDGEMENT
Thanks giving seem to be the most Pleasant of all jobs, but it is difficult
when one tries to put into words.
During the course of this project various person have rendered valuable help
& guidance to me. I m highly grateful to Mr. Ravi Gaikwad (Relationship
Manager, Karvy stock Broking Ltd.) who allowed me to do my summer
training in their prestigious organization.
My sincere thanks to Prof. Shusmita Nande of CMRE , who guided me

throughout my project, also giving me opportunity to learn how to exel in
the field of Finance.
With deep sense of reverence, I would like to express my wholehearted

thanks & deep gratitude to my parents who have always been a souce of
inspiration for me.
Finally, I would like to thank Mr. Anshul B Sharma (Director, CMRE) for
his technical & moral support required for the realization of this project
report.
------------------------
Parul Mazumdar
2
SR NO. CONTENTS PAGE NO.
1 Executive Summary 4
2 Company Profile 7
Introduction of Karvy 8
Objective & Scope 11
3 Mutual funds 13
A New window to the investment world 14
What is Mutual fund? 15
Organization of A Mutual Funds 16
Types of Mutual Fund 17 & 20
Merits & Demerits of Mutual Fund 22
Mutual Fund Companies 25
4 Insurance 33
What is Insurance? 34
History of Insurance 35
Insurance in India 37
Need of Insurance 40
Insurance sector Reform 41
Insurance Players 45
5 Conclusion 46
6 Recommendations 48
7 Format of Questionnaires 50
8 Bibliography 54
3
EXECUTIVE SUMMARY
4
PROJECT TITLE:
“MUTUAL FUNDS & INSURANCE FOR
INDIAN INVESTORS”
ORGANIZATION:
“KARVY STOCK BROKING LTD.”
The successful development of new service has become a complex

process involving contributions from range different disciplines. Rarely is
one individual responsible for the conception design, development and
marketing of new service, for today the inherent complexity of products,
their markets and therefore their processes through which they developed,
dictates that a no. of different people, each which there own roles, work
together to crate the service.
This project represents a information regarding

company’s brand awareness and the customer perceptions about the various
services which the organization provides. The main objective of the project is
to understand the customer investment preferences more effectively and
efficiently. For execution of the project methodology adopted is the collection
of data through questionnaire, processing and analyzing the data.
The natures of respondent, which are selected, are the

professionals and having a handsome salary. The area of the project work is
5
Pune city and its location where the survey has been undertaken those are
Hinjewadi IT Park, Kothrud, Senapati Bapat Road, Aundh IT Park,
Magarpatta City, Kharadi, Yerawada and Baner.
Karvy is the only personalized service provider offering a range

of investment services depending on the customer requirements.
The methodology for carrying out the project was very simple that is
through secondary data obtained through various mediums like fact sheet of
the funds, the Internet, Business magazines, Newspaper, etc. The funds have
been analyzed under various types such as Equity Funds, Income Funds and
Balanced Funds.
6
COMPANY PROFILE
7
INTRODUCTION OF KARVY
Founded by a group of Hyderabad-based chartered accountants in 1982, as

a professional services firm – Karvy Consultants Limited
Thus, over the last 20 years Karvy has traveled the success route, towards
building a reputation as an integrated financial services provider, offering a
wide spectrum of services. And its employee have made this journey by
taking the route of quality service, path breaking innovations in service,
versatility in service and finally…totality in service.
Unique value proposition – ‘Full-service’ retail financial services

intermediary with India’s largest ‘owned’ branch network. Caters to the
entire gamut of investor needs:
• Evolving into the role of a ‘personal financial advisor’,

• Bouquet of services include (equity - cash and derivatives, and debt
trading), Depository services, Distribution of financial products
(Mutual funds, IPOs, Fixed deposits, Bonds) and Merchant banking,
• Expanding services to include commodity and insurance .
Karvy Stock Broking Ltd is a member of National Stock Exchange (NSE),
The Bombay Stock Exchange (BSE), and The Hyderabad Stock Exchange
(HSE).
8
Karvy is India’s largest independent integrated financial services
provider having a pan-India presence and focused on the Retail investor
MISSION OF KARVY:-
Their mission is to be a leading, preferred service provider to our customer,

and they aim to achieve this leadership position by building an innovative,
enterprising, and technology driven organization which will set the highest
standards of service and business ethics.
Karvy offers the following personalized advisory services:
• BONDS & FD
• MUTUAL FUND
• TAX PLANNING
• INSURANCE
• STOCK
9
ACHIVEMENTS:-
• Largest independent distributor for financial products
• Ranking amongst the top 3 stock firms
• Amongst the top 3 Depository participants
• Largest network of branches and business associates
• Ranking amongst top 10 investment Bankers.
• First ISO-9002 certified registrars
• Ranking amongst top 3 Mutual Funds distributors
• The most admired and preferred financial advisor
• Ranking 1st in retail procurement in equity IPOs.
• Ranking 8th in Merchant Banking services.
10
OBJECTIVES
 To understand the investment need of customer.
 To find out the awareness of Mutual Funds & Insurance in Pune.
 The survey aimed at bringing about awareness in the public about the
various Services provided by the Karvy consultancy and suggesting
services according to their needs and requirement.
11
SCOPE
Karvy is the leading organization in terms of providing the

personalized advisory services in investment sector. It focuses extensively in
providing the quality service to its customers. So the company
commissioned to understand the customer behavior and their investment
pattern.
Karvy is available in more then 450 cities in all over India.
Thus, it has access to India , Indian Economy rising & here consumer can
invest more money in financial instruments. An average income per house
hold is rising. People can invest much more money.
Karvy is recently entered in the Commodity Market, which is having a very
good future in India and Karvy can encase opportunities.
Also it tries to understand customer perception about their

services better than the competitors.
12
MUTUAL FUNDS
13
MUTUAL FUNDS- A NEW WINDOW TO THE
INVESTMENT WORLD
The Mutual Funds are becoming the popular investment vehicle offering
various kinds of schemes with different investment objectives. We believe
that investments through MFs are one of the safest, easiest and convenient
ways of successful investment making. The investments are in congruence
to the laid down investment objectives securing the goals & objectives of the
unit holders. All investments, whether in Shares, Debentures or Deposits
involved risk. Share value may go down depending upon the performance of
the company, the industry, state of capital markets and the economy.
Generally however, “Longer the Term, Lesser the Risk”. Companies may
default in payment of interest and principal on their
Debentures/Bonds/Deposits. While Risk cannot be eliminated, skillful
management can minimize risk. Mutual funds help to reduce risk through
diversification and professional management. The experience and expertise
of Mutual Fund managers in selecting fundamentally sound securities and
timing their purchase & sale help them to build a diversified portfolio that
minimizes risk & maximizes returns.
Worldwide, the Mutual Fund, or Unit Trust as it is celled in some parts of

the world, have almost overtaken bank deposits and total assets of insurance
funds. As of date, in US alone there are over 5,000 Mutual Funds with total
assets of over US $3trillion (100 lakh a crosses). In India there are 38 MFs
and over schemes with total assets of approximately Rs.1,00,000 crores. The
Securities and Exchange Board of India (SEBI) regulate all mutual funds in
India.
14
WHAT IS MUTUAL FUND?
Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities.
The income earned through these investments and the capital appreciation
realized is shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a mutual fund :
15
ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates
the organizational set up of a mutual fund:
The mutual fund industry in India began with the setting up of the Unit Trust
In India (UTI) in 1964 by the Government of India. During the last 36 years,
UTI has grown to be a dominant player in the industry with assets of over
Rs.76,547 Crores as of March 31, 2000. The UTI is governed by a special
16
legislation, the Unit Trust of India Act, 1963. In 1987 public sector banks
and insurance companies were permitted to set up mutual funds and
accordingly since 1987, 6 public sector banks have set up mutual funds.
Also the two Insurance companies LIC and GIC established mutual funds.
Securities Exchange Board of India (SEBI) formulated the Mutual Fund
(Regulation) 1993, which for the first time established a comprehensive
regulatory framework for the mutual fund industry. Since then several
mutual funds have been set up by the private and joint sectors.
TYPES OF MUTUAL FUNDS
The Mutual Funds are of four types, namely:
1. Aggressive Funds
2. Growth Funds
3. Balanced Funds
4. Conservative Funds
And, they depend on the proportion invested in the following:
1. Stocks
2. Bonds
3. Short –Terms
17
AGGRESSIVE FUNDS:
This strategy might be appropriate for investors who seek High growth
and who can tolerate wide fluctuations in market values, over the short
terms.
85%
Stocks
Bonds
15%
GROWTH FUNDS:
This strategy might be appropriate for investors who have a preference

for growth and who can withstand significant fluctuation in market values.
70%
Stocks
Bonds
Short-Term
25%
5%
18
BALANCED FUNDS:
Capital appreciation and income. This strategy might be appropriate for

investors who want the potential for capital appreciation and some growth,
and who can withstand moderate fluctuations in market values.
50% 40% Stocks

Bonds
Short-Term
10%
CONSEVATIVE FUNDS:
Income and Capital appreciation. This strategy might be appropriate for

investors who want to preserve their capital and minimize fluctuations in
market value.
50%
Stocks
Bonds
30% Short-Term
20%
19
TYPES OF MUTUAL FUNDS:
There are many types of mutual funds available to the investor.

However, by the structure these different types of funds can be grouped into
certain classifications for better understanding. From the investor’s
perspective, we would follow three basic classifications:
1. OPEN END V/S CLOSE END
An open-end fund is one that has units available for sale and
repurchases all times. An investor can buy or redeem units from the fund
itself at a price based on the Net Asset Value (NAV). NAV per unit is
obtained by dividing the amount of the market value of the fund’s assets
(plus accrued income minus the fund’s liabilities) by the number of units
outstanding.
Amount Of the Market Value of the fund’s assets +

(Accrued income-the funds liability)
NAV= ___________________________________________
Number of units outstanding
The number of units outstanding goes up or down every time the fund
issues new units or repurchases existing units. In other words, the ‘unit
capital’ of an open-end mutual fund is not fixed but variable.
Where as, in close–end fund it makes a one time of sale of fixed number
of units Later on, unlike open-end funds do not allow investors to buy or
redeem units directly from funds. In this, the fund units can be traded at a
discount or premium to NAV based on investor’s perception about the funds
future performance and other market factor affecting the demand for or
supply of fun’s units. The number of units outstanding of a close-end fund
does not vary on account of trading the fund’s units at stock exchange.`
20
2. LOAD AND NOLOAD FUNDS:
Marketing of a new Mutual Fund scheme involves initial expenses. The

expenses may be recovered from the investors in different ways at different
times. Three usual ways in which a fund’s sales expenses may recovered
from the investors are:-
At the time of investor’s entry into the fund/scheme by deducting a

specific amount from his initial contribution, or
By charging the fund/scheme with a fixed amount each year, during the
stated number of years, or
At the time of investors exit from the funds/scheme, by deducting a

specified amount from the redemption precedes payable to the investor.
These charges made by the fund managers to the investors to cover
distribution /sales/marketing expenses are often called ?Loads”. The load
amount charged to the scheme over a period of time is called as “deferred
load”. The load that an investor pays at the time of his exit is called “back-
end” or “Exit Load”.
Funds that charge front-end, back-end or deferred loads are called “LOAD
FUNDS” Funds that make no such charges or loads for sales expenses are
called “NO-LOAD FUNDS”.
3. TAX-EXEMPT AND NON-TAX-EXEMPT FUNDS:-
When a fund invests in tax-exempt securities, it is called a tax-

exempt fund. In India, after the 1999 union government budget, all of the
dividend income received from any of the mutual funds is tax free in the
hands of investor. However, funds other than Equity funds have to pay a
distribution tax, before distributing income to investors. In other words,
equity mutual fund scheme are tax-exempt investment avenues, while other
funds are taxable for distributable income.
21
When a fund invests in non-tax-exempt securities, it is called a non-tax-
exempt fund.
MERITS OF MUTUAL FUND:-
The MERITS of investing in a Mutual Fund are:
• Diversification: The best mutual funds design their portfolios so

individual investments will react differently to the same economic
conditions. For example, economic conditions like a rise in interest
rates may cause certain securities in a diversified portfolio to decrease
in value. Other securities in the portfolio will respond to the same
economic conditions by increasing in value. When a portfolio is
balanced in this way, the value of the overall portfolio should
gradually increase over time, even if some securities lose value.
• Professional Management: Most mutual funds pay topflight

professionals to manage their investments. These managers decide
what securities the fund will buy and sell.
• Regulatory oversight: Mutual funds are subject to many government

regulations that protect investors from fraud.
22
• Liquidity: It's easy to get your money out of a mutual fund. Write a
check, make a call, and you've got the cash.
• Convenience: You can usually buy mutual fund shares by mail,

phone, or over the Internet.
• Low cost: Mutual fund expenses are often no more than 1.5 percent
of your investment. Expenses for Index Funds are less than that,
because index funds are not actively managed. Instead, they
automatically buy stock in companies that are listed on a specific
index.
• Transparency: Mutual Fund schemes are said to be Transparent

because they show the clear allocation of Funds to Investors.
• Flexibility: Mutual fund are flexible because they change time to

time and also if an Investor wants his money back before the maturity
of the Fund He/she can easily redeem it.
DEMERITS OF MUTUAL FUNDS:-
Mutual funds have their demerits and may not be for everyone:
• No Guarantees:
No investment is risk free. If the entire stock market declines in value,

the value of mutual fund shares will go down as well, no matter how
balanced the portfolio. Investors encounter fewer risks when they invest
23
in mutual funds than when they buy and sell stocks on their own.
However, anyone who invests through a mutual fund runs the risk of
losing money.
• Fees and commissions:
All funds charge administrative fees to cover their day-to-day expenses.

Some funds also charge sales commissions or "loads" to compensate
brokers, financial consultants, or financial planners. Even if you don't use
a broker or other financial adviser, you will pay a sales commission if
you buy shares in a Load Fund.
• Taxes:
During a typical year, most actively managed mutual funds sell

anywhere from 20 to 70 percent of the securities in their portfolios. If
your fund makes a profit on its sales, you will pay taxes on the income
you receive, even if you reinvest the money you made.
• Management risk:
When you invest in a mutual fund, you depend on the fund's manager to
make the right decisions regarding the fund's portfolio. If the manager
does not perform as well as you had hoped, you might not make as much
money on your investment as you expected. Of course, if you invest in
Index Funds, you forego management risk, because these funds do not
employ managers.
24
Major Mutual Fund Companies in India
ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN
AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN
AMRO Asset Management (India) Ltd. was incorporated on November 4,
2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.
Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group
and Sun Life Financial. Sun Life Financial is a global organization evolved
in 1871 and is being represented in Canada, the US, the Philippines, Japan,
Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund
follows a conservative long-term approach to investment. Recently it
crossed AUM of Rs. 10,000 crores.
Bank of Baroda Mutual Fund (BOB Mutual Fund)
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on

October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset
Management Company Limited is the AMC of BOB Mutual Fund and was
incorporated on November 5, 1992. Deutsche Bank AG is the custodian.
25
HDFC Mutual Fund
HDFC Mutual Fund was setup on June 30, 2000 with two sponsors
namely Housing Development Finance Corporation Limited and Standard
Life Investments Limited.
HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities
and Capital Markets (India) Private Limited as the sponsor. Board of
Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual
Fund.
ING Vysya Mutual Fund
ING Vysya Mutual Fund was setup on February 11, 1999 with the same
named Trustee Company. It is a joint venture of Vysya and ING. The AMC,
ING Investment Management (India) Pvt. Ltd. was incorporated on April 6,
1998.
Prudential ICICI Mutual Fund
The mutual fund of ICICI is a joint venture with Prudential Plc. of

America; one of the largest life insurance companies in the US of A.
Prudential ICICI Mutual Fund was setup on 13th of October 1993 with two
sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed is
26
Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset
Management Company Limited incorporated on 22nd of June 1993.
Sahara Mutual Fund
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India
Financial Corporation Ltd. as the sponsor. Sahara Asset Management
Company Private Limited incorporated on August 31, 1995 works as the
AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs
25.8 crore.
State Bank of India Mutual Fund
State Bank of India Mutual Fund is the first Bank sponsored Mutual
Fund to launch offshore fund, the India Magnum Fund with a corpus of Rs.
225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund
in India. They have already launched 35 Schemes out of which 15 have
already yielded handsome returns to investors. State Bank of India Mutual
Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor base
of over 8 Lakhs spread over 18 schemes.
Tata Mutual Fund
Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882.
The sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment
Corporation Ltd. The investment manager is Tata Asset Management
Limited and its Tata Trustee Company Pvt. Limited. Tata Asset
27
Management Limited is one of the fastest in the country with more than Rs.
7,703 crores (as on April 30, 2005) of AUM.
Kotak Mahindra Mutual Fund
Kotak Mahindra Asset Management Company (KMAMC) is a

subsidiary of KMBL. It is presently having more than 1,99,818 investors in
its various schemes. KMAMC started its operations in December 1998.
Kotak Mahindra Mutual Fund offers schemes catering to investors with
varying risk - return profiles. It was the first company to launch dedicated
gilt scheme investing only in government securities.
Unit Trust of India Mutual Fund
UTI Asset Management Company Private Limited, established in Jan

14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee
Company Private Limited. UTI Asset Management Company presently
manages a corpus of over Rs.20000 Crore. The sponsors of UTI Mutual
Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank
of India (SBI), and Life Insurance Corporation of India (LIC). The schemes
of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management
Funds, Index Funds, Equity Funds and Balance Funds.
Reliance Mutual Fund
Reliance Mutual Fund (RMF) was established as trust under Indian
28
Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and
Reliance Capital Trustee Co. Limited is the Trustee. It was registered on
June 30, 1995 as Reliance Capital Mutual Fund, which was changed on
March 11, 2004. Reliance Mutual Fund was formed for launching of various
schemes under which units are issued to the Public with a view to contribute
to the capital market and to provide investors the opportunities to make
investments in diversified securities.
Standard Chartered Mutual Fund
Standard Chartered Mutual Fund was set up on March 13, 2000

sponsored by Standard Chartered Bank. The Trustee is Standard Chartered
Trustee Company Pvt. Ltd. Standard Chartered Asset Management
Company Pvt. Ltd. is the AMC which was incorporated with SEBI on
December 20,1999.
Franklin Templeton India Mutual Fund
The group, Franklin Templeton Investments is a California (USA) based

company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is
one of the largest financial services groups in the world. Investors can buy or
sell the Mutual Fund through their financial advisor or through mail or
through their website. They have Open end Diversified Equity schemes,
Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax
Saving schemes, Open end Income and Liquid schemes, Closed end Income
schemes and Open end Fund of Funds schemes to offer.
29
Morgan Stanley Mutual Fund India
Morgan Stanley is a worldwide financial services company and its

leading in the market in securities, investment management and credit
services. Morgan Stanley Investment Management (MISM) was established
in the year 1975. It provides customized asset management services and
products to governments, corporations, pension funds and non-profit
organizations. Its services are also extended to high net worth individuals
and retail investors. In India it is known as Morgan Stanley Investment
Management Private Limited (MSIM India) and its AMC is Morgan Stanley
Mutual Fund (MSMF). This is the first close end diversified equity scheme
serving the needs of Indian retail investors focusing on a long-term capital
appreciation.
Escorts Mutual Fund
Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance
Limited as its sponsor. The
Trustee Company is Escorts Investment Trust Limited. Its AMC was
incorporated on December 1, 1995 with the name Escorts Asset
Management Limited.
Alliance Capital Mutual Fund
Alliance Capital Mutual Fund was setup on December 30, 1994 with
30
Alliance Capital Management Corp. of Delaware (USA) as sponsor. The
Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital
Asset Management India (Pvt) Ltd. with the corporate office in Mumbai.
Benchmark Mutual Fund
Benchmark Mutual Fund was setup on June 12, 2001 with Niche
Financial Services Pvt. Ltd. as the sponsor and Benchmark Trustee
Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16,
2000 and headquartered in Mumbai, Benchmark Asset Management
Company Pvt. Ltd. is the AMC.
Can bank Mutual Fund
Can bank Mutual Fund was setup on December 19, 1987 with Canara
Bank acting as the sponsor. Can bank Investment Management Services Ltd.
incorporated on March 2, 1993 is the AMC. The Corporate Office of the
AMC is in Mumbai.
Chola Mutual Fund
Chola Mutual Fund under the sponsorship of Cholamandalam

Investment & Finance Company Ltd. was setup on January 3, 1997.
Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is
Cholamandalam AMC Limited.
31
LIC Mutual Fund
Life Insurance Corporation of India set up LIC Mutual Fund on 19th

June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC
Mutual Fund was constituted as a Trust in accordance with the provisions of
the Indian Trust Act, 1882. . The Company started its business on 29th April
1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima
Sahayog Asset Management Company Ltd as the Investment Managers for
LIC Mutual Fund.
GIC Mutual Fund
GIC Mutual Fund, sponsored by General Insurance Corporation of India

(GIC), a Government of India undertaking and the four Public Sector
General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The
New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC)
and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in
accordance with the provisions of the Indian Trusts Act, 1882
32
INSURANCE
What is insurance?
All assets have economic value. The asset would have been created
through the efforts of the owner, in the expectation that, either through the
33
income generated there from or some other output, some of his needs would
be met. In the case of a motor car, it provides comfort & convenience in
transportation. There is no direct income. There is a normally expected life
time for the asset during which time it is expected to perform. The owner,
aware of this, can so manage his affairs that by the end of that life time, a
substitute is made available to ensure that the value or income is not lost.
However, if the asset gets lost earlier, being destroyed or made non-
functional, through an accident or other unfortunate event, the owner & those
deriving benefits there from suffer.
Hence Insurance is a tool which helps to reduce effects of such adverse
events.
HYSTORY OF INSURANCE
The origin and practice of insurance is as ancient as human civilization.
From Cave age till date, the story of evolution of mankind is in fact a saga of
continuous search for security. His problems have been the same, though the
34
form has changed with the social & economic circumstances.
When man used to live in the caves, he used to search for security against
animals because they could kill him while he was asleep. He was not at all
sure if he could hunt every day & get his food. Because of the above
insecurity he used to live in groups so that the other members of the tribe
could come to help him in time of crisis. Later on, insurance was practiced in
a different form. Small contributions of food grains were collected from
farmers, hoarded in the local temple premises to be released when there was a
famine or other calamity. Today, insurance works on the same principle. But,
with growing financial implications the process started demanding money
rather than community contribution.
The modern concept of insurance came to India with the arrival of
Europeans. The first life Insurance company was established in India in
1818 as Oriental Life Insurance Company by Europeans for the welfare of
widows of Europeans.
It was strange that many of the Companies floated thereafter were
looking after European interest and even charged extra premium on Indian
35
lives. Bombay mutual life Assurance society Ltd. established in 1870 was
the first to stop this discrimination. This was the year in which the first
Insurance act was passed by the British parliament. The insurance business
flourished thereafter.
By the year 1955 there were 245 insurance companies and provident
societies, out of which 16 were non Indian companies. A comprehensive
legislation "The Insurance act 1938" was passed with a view to consolidate
and amend the laws relating to the business of insurance. It came into force
with effect from July '01, 1939.The act was modified in 1950.
The broader objectives of socialism prompted the government to nationalize
the insurance business, in the year 1956. The general insurance business was
nationalized in 1972, through GIC Act 1972. The Life Insurance corporation
of India came into existence on 1st September 1956.
INSURANCE IN INDIA
The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a liberalized market again.
Tracing the developments in the Indian insurance sector reveals the 360
degree turn witnessed over a period of almost two centuries.
36
A brief history of the Insurance sector
The business of life insurance in India in its existing form started in India in
the year 1818 with the establishment of the Oriental Life Insurance
Company in Calcutta. Some of the important milestones in the life insurance
business in India are:
1912: The Indian Life Assurance Companies Act enacted as the first statute
to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life and non-life
insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act
with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by
the central government and nationalized. LIC formed by an Act of
Parliament, viz. LIC Act,
1956, with a capital contribution of Rs. 5 crore from the Government of
India. The General insurance business in India, on the other hand, can trace
37
its roots to the Triton Insurance Company Ltd., the first general insurance
company established in the year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in India
are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to
transact all classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of
India, frames a code of conduct for ensuring fair conduct and sound business
practices.
1968: The Insurance Act amended to regulate investments and set minimum
solvency margins and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalization) Act, 1972
nationalized the general insurance business in India with effect from 1st
January 1973.
107 insurers amalgamated and grouped into four companies viz. the National
Insurance Company Ltd., the New India Assurance Company Ltd., the
Oriental Insurance Company Ltd. and the United India Insurance Company
Ltd. GIC incorporated as a company.
38
Need of Insurance.
• To provide cash to meet various routine expenses of the family on
or immediately after the death of the income earner of the family.
• To prevent the family’s accustomed standard of living even after the
death of the breadwinner.
• To provide continuous flow of funds for the living spouse.
• To allocate income funds for the children’s education.
• To provide a retirement income throughout old age.
39
• To provide a reliable savings plan for the future.
• To supplement income when earning power is reduced or eroded by
illness, accident or any handicap.
• To furnish surplus earnings for the investors should disaster strike.
Insurance sector reforms
In 1993, Malhotra Committee headed by former Finance
Secretary and RBI Governor R.N. Malhotra, was formed to evaluate the
Indian insurance industry and recommend its future direction.
The Malhotra committee was set up with the objective of complementing the
reforms initiated in the financial sector.

40
The reforms were aimed at “creating a more efficient and competitive
financial system suitable for the requirements of the economy keeping in
mind the structural changes currently underway and recognizing that
insurance is an important part of the overall financial system where it was
necessary to address the need for similar reforms…”
In 1994, the committee submitted the report and some of the key
recommendations included:
i) Structure
• Government stake in the insurance Companies to be brought down to
50%
• Government should take over the holdings of GIC and its subsidiaries
so that these subsidiaries can act as independent corporations
• All the insurance companies should be given greater freedom to
operate
ii) Competition
41
• Private Companies with a minimum paid up capital of Rs.1bn should
be allowed to enter the industry
• No Company should deal in both Life and General Insurance through
a single entity
• Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies
• Postal Life Insurance should be allowed to operate in the rural market
• Only one State Level Life Insurance Company should be allowed to
operate in each state
iii) Regulatory Body
• The Insurance Act should be changed
• An Insurance Regulatory body should be set up
• Controller of Insurance (Currently a part from the Finance Ministry)
should be made independent
iv) Investments
• Mandatory Investments of LIC Life Fund in government securities to
be reduced from 75% to 50%
42
• GIC and its subsidiaries are not to hold more than 5% in any company
(There current holdings to be brought down to this level over a period
of time)
v) Customer Service
• LIC should pay interest on delays in payments beyond 30 days
• Insurance companies must be encouraged to set up unit linked pension
plans
• Computerization of operations and updating of technology to be
carried out in the insurance industry
The committee emphasized that in order to improve the customer services
and increase the coverage of the insurance industry should be opened up to
competition. But at the same time, the committee felt the need to exercise
caution as any failure on the part of new players could ruin the public
confidence in the industry.
Hence, it was decided to allow competition in a limited way by
stipulating the minimum capital requirement of Rs.100 crores. The
committee felt the need to provide greater autonomy to insurance companies
in order to improve their performance and enable them to act as independent
companies with economic motives. For this purpose, it had proposed setting
up an independent regulatory body.

43
The Insurance Players…
Licenses have been issued for the following companies

 Kotak Mahindra Old Mutual Life Insurance Limited
 ICICI Prudential Life Insurance Company Limited
 HDFC Standard Life Insurance Company Limited

44
 Birla Sun Life Insurance Company Limited
 TATA AIG Life Insurance Company Limited
 Max New York Life Insurance Company Limited
 SBI – Cardiff Life Insurance Company Limited
 ING Vysya Life Insurance Company Limited
 Bajaj Allianz Life Insurance Company Limited
 MetLife Life Insurance Company Limited
 Aviva Life Insurance Company Limited
 AMP Sanmar Life Insurance Company Limited
45
CONCLUSION
A Mutual Fund pools the money of people with similar investment

goals. The money in turn is invested in various securities depending on the
objective of the mutual fund scheme, and the profits (losses) are shared
among investors in proportion to their investments. After doing the analysis
on 4 funds following conclusion can be made.
46
• Out of the different compared fund UTI fund is better on all the front
line risk, return and volatility as compared to all the other funds.
• Investors have to compensate their risk with the return. Higher the
return higher the risk.
• For the people who are looking for regular income should opt for any
of the Debt Fund, as the long term returns of all the funds are almost
the same.
• Those who want regular income and also capital appreciation should
go for Principal Balanced Fund.
47
RECOMMENDATION
For Karvy......
48
1. The AMC (Asset Management Company) should create in
awareness level among the individuals about the benefits of
Mutual Funds & the returns from the Mutual Fund market.
2. This can be done by arranging in house workshop or by
external program at a public place to educate people about the
nature, benefits & importance of Mutual Funds.
For Individuals
1. Please make your future secure by investing in Mutual

Funds, as this will promise you higher rate of return that
conventional investments like Banks and Post Office cannot
provide
2. The individual should diversify their monthly income by
preparing the Monthly Budget and they can save some money
out of their regular income to invest the monthly plan of Mutual
Funds.
QUESTIONNAIR
49
NAME: ____________________________________________________
AGE: _______ SEX: __________
ADDRESS:____________________________________________________
_____________________________________________________________
E-MAIL: _____________________________________________________
1) Are you aware of KARVY Consultancy?

o YES NO.
If NO, are you aware of any of following consultancy?
India Bulls ENAM Morgan Stanley HDFC
2) Which are the Financial Services you are aware of?

• INSURANCE
• MUTUAL FUNDS
• TAX PLANNING
• BONDS / FD
• PERSONAL PORTFOLIO MANAGEMENT
• STOCK
3)From which media you come to know about Financial Services

• Magazine
• Newspaper
• TV
• Radio
50
• Interest
• Agents
• Franchisee
• Hoardings
• Friends
• Others
4) Would you like to invest in Financial Sector?

• Yes Go to (5)
• No Go to (6)
5) Which Financial Service you will prefer to invest and why?

• INSURANCE
• MUTUAL FUNDS
• TAX PLANNING
• BONDS/FD
• PERSONAL PORTFOLIO MANAGEMENT
• STOCK :
6) Reason Being:
• High Risk
• Lack of Knowledge
• Previous Loss
Lack of Financial Planning
51
7) How much percentage you will like to invest from your annual
income?
• INSURANCE
5 to 10% , 10 to 15% , 15 to 20%, 20% and above
• MUTUAL FUNDS
5 to 10% , 10 to 15%, 15 to 20%, 20% and above
• PPM
5 to 10%, 10 to 15% , 15 to 20% , 20% and above
• TAX
5 to 10%, 10 to 15% , 15 to 20%, 20% and above
• STOCK
5 to 10%, 10 to 15% , 15 to 20% , 20% and above
• BONDS/FD
5 to 10% , 10 to 15% , 15 to 20% , 20% and above
8) What is your Preferable Period for investment?

• January – March
• April – June
• July – September
• October – December
9) Would you like to invest through consultancy?

• YES
• NO
If No then WHY?
52
_____________________________________________________________
_____________________________________________________________
______________________________________________
10) If, Yes What all services you expect from Consultancy?
_____________________________________________________________
_____________________________________________________________
______________________________________________
53
BIBLIOGRAPHY
 www.karvy.com
 www.taxman.com
 www.mutualfundindia.com
54

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A

COLLEGE OF MANAGEMENT RESEARCH

My sincere thanks to Prof. Shusmita Nande of CMRE , who guided me

With deep sense of reverence, I would like to express my wholehearted

The successful development of new service has become a complex

This project represents a information regarding

The natures of respondent, which are selected, are the

Karvy is the only personalized service provider offering a range

Founded by a group of Hyderabad-based chartered accountants in 1982, as

Unique value proposition – ‘Full-service’ retail financial services

• Evolving into the role of a ‘personal financial advisor’,

Karvy Stock Broking Ltd is a member of National Stock Exchange (NSE),

Their mission is to be a leading, preferred service provider to our customer,

Karvy offers the following personalized advisory services:

• Largest independent distributor for financial products

• Ranking amongst the top 3 stock firms

• Amongst the top 3 Depository participants

• Largest network of branches and business associates

• Ranking amongst top 10 investment Bankers.

• First ISO-9002 certified registrars

• Ranking amongst top 3 Mutual Funds distributors

• The most admired and preferred financial advisor

• Ranking 1st in retail procurement in equity IPOs.

• Ranking 8th in Merchant Banking services.

 To understand the investment need of customer.

 To find out the awareness of Mutual Funds & Insurance in Pune.

Karvy is the leading organization in terms of providing the

Also it tries to understand customer perception about their

Worldwide, the Mutual Fund, or Unit Trust as it is celled in some parts of

TYPES OF MUTUAL FUNDS

The Mutual Funds are of four types, namely:

And, they depend on the proportion invested in the following:

This strategy might be appropriate for investors who have a preference

Capital appreciation and income. This strategy might be appropriate for

50% 40% Stocks

Income and Capital appreciation. This strategy might be appropriate for

There are many types of mutual funds available to the investor.

1. OPEN END V/S CLOSE END

Amount Of the Market Value of the fund’s assets +

Number of units outstanding

Marketing of a new Mutual Fund scheme involves initial expenses. The

At the time of investor’s entry into the fund/scheme by deducting a

At the time of investors exit from the funds/scheme, by deducting a

3. TAX-EXEMPT AND NON-TAX-EXEMPT FUNDS:-

When a fund invests in tax-exempt securities, it is called a tax-

MERITS OF MUTUAL FUND:-

The MERITS of investing in a Mutual Fund are:

• Diversification: The best mutual funds design their portfolios so

• Professional Management: Most mutual funds pay topflight

• Regulatory oversight: Mutual funds are subject to many government

• Convenience: You can usually buy mutual fund shares by mail,

• Transparency: Mutual Fund schemes are said to be Transparent

• Flexibility: Mutual fund are flexible because they change time to

DEMERITS OF MUTUAL FUNDS:-

No investment is risk free. If the entire stock market declines in value,

• Fees and commissions:

All funds charge administrative fees to cover their day-to-day expenses.

During a typical year, most actively managed mutual funds sell

ABN AMRO Mutual Fund

Birla Sun Life Mutual Fund

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on

HSBC Mutual Fund