[1]

ACKNOWLEDGEMENT

I take this opportunity to acknowledge and express my gratitude towards some of the most

eminent person whose presence is noteworthy & seminal in giving me a grand opportunity to

associate myself with an esteemed organization like Suresh Rathi Securities Private Ltd.

Firstly, I am grateful to Mr. Saurabh Rathi, by entrusting upon me the confidence and

providing a chance to get an experience in the various fields of operations under his guidance.

His enterprising, dynamic, forward-looking, radical approach provided an opportunity to work

under him to inculcate and instill valuable talent.

Secondly, to Mr. Bhavesh Mundra and Ms. Munmun Pungalia, whose sustained

guidance and teachings helped me in progressing forward, also, for their endeavor towards

providing continuous guidance to help build an understanding of the practical aspects of the

work and gain knowledge & valuable experience.

I would also like to thank all the staff members for their support and co-operation during my

summer training.
 [2]

THE ORGANISATION- Suresh Rathi Securities Pvt. Ltd.

M/s Suresh Rathi Securities Pvt. Ltd. is a Member of Stock Exchange Mumbai and was

incorporated on June 19, 1997 and it commenced business on December 29, 1997. Earlier Stock

Broking Business was done in the name of our erstwhile firm M/s Suresh Rathi & Co. since

1989.

The Company is in business of Stock Broking and allied activities and is providing services like

Equity Broking, Investor Guidance & Education, nationwide distribution of Mutual Funds &

IPOs.

The Company is a Depository Participant of Central Depository Services Ltd, since June 1999

with a DP branch at Jodhpur & 6 other cities. CDSL’s ‘easiest’ facility has been recently

provided to facilitate the instructions through internet.

The Company is also a Member of National Stock Exchange of India. It is also a trading

member in the Futures & Options Segment of NSE and Derivatives Segment of BSE. Internet

trading facility has also been made available for investors on BSE. Needless to mention, entire

back-office operations are fully computerized, giving us that technological edge to service the

clients effectively.
 [3]

The company has Network of more than 90 Business branches all over Rajasthan and in the

financial capital of the nation- Mumbai. The company’s business is also running in some of the

other parts of the country. The company has staff strength of 40 at their H.O. with experienced

and professional personnel managing operations with effective risk control .

Duration and Area of the Training Process

 [4]

The overall training process lasted for 6 weeks. In these 6 weeks we were provided with

conceptual knowledge of various investment options (primarily Mutual Funds and IPOs) along

with the field training.

Whole 1 week was devoted to building fundamentals of capital market including Mutual Funds,

Secondary Market and DP Operations.

Remaining 5 weeks were spent learning field operations by actually performing them. Here we

met with the potential customers and try to market our products. It is the real training period in

which we were also provided with opportunities to interact with professionals. Various sessions

were conducted to give us an insight on local market and marketing skills using tools like role

playing, web links, fact sheets of various fund houses, etc.

SRSPL has a bouquet of services to offer which includes Equity Broking, Investor Guidance &

Education, Mutual Fund & IPO distribution and Depository operations. Our major area of

training was IPO distribution and marketing of Mutual Funds. For this we targeted potential

customers in the Mandore mandi (wholesale market of grains, pulses, tea, etc.) in the town.

They have also given a chance to meet their existing clients to get more business. Other than

that I’ve also been exposed to area of portfolio management and analysis.

NATURE OF TRAINING
 [5]

On the very first day of my training Mr.Saurabh Rathi,Director of the company, made a team of

8 trainees with a very clear vision that all of us need to work in a team as this is the way to

work in real corporate life where every small contribution counts without any great burden on

any individual .He introduced us with other employees who are working there from several

years and gave us an overview of the work. Many times the Director of the company as well as

some industry professionals have taken various sessions and gave us personalized opinions

about our progress .they have used ROLEPLAYS, Fundamental building classes and many

more tools to make us better equipped with what we should. They have provided data of some

listed companies so as to analyze their performance in the past and watch out for future.

It was a holistic learning process at SRSPL but certain times I encountered with some Problems

-:

 Despite of so much media hype a big amount of ignorance still lies therein.

 There are still many people who do not want to even look at the equity or the mutual

funds “saying that it is a mere gamble and nothing more than that.” They say that it is

a game for those who can believe in chances and luck.

 A few people who really want to invest, have their own contacts and they do not want

to do business with others.

 People are still living with their conservative mindsets of getting “JUST A MAGICAL

TIP”. If anybody is explaining them that how that could happen Then They are least

interested in it.
 [6]

LIMITATIONS

I enjoyed my training process thoroughly .Sometimes I got some of the chances to work and

learn beyond the jobs I have entitled to do so. My seniors are also kind and helpful. They

always encouraged me and pushed me and opened up more challenges and opportunities for

me. But one limitation is there if I had to mention it---My workplace is the H.O.(head office) of

the company and thee is a great amount of workload on each of the employee. Therefore there

are some instances when the person concerned is not there or not in a position to help me out or

to solve my query.

CONTRBUTION

As the training was done in the marketing of financial services arena so the basic contribution

towards the company SRSPL is totally related to the same.

Emphasis was laid upon selling of the products that includes following- :

1. Mutual Funds

a) New Fund Offers

b) Existing Funds

2. Initial Public Offerings (IPO’s)

3. Opening NEW D-MAT Accounts

Though it was not an easy task still a fair amount of contribution was made in this regard.

Initially I was encountered with a few difficulties but at the time of end of my training I landed
 [7]

up with a business of Rs. 1.2 lacks and more than 20 new customers with D-MAT accounts are

added. I was also exposed to the arena of Equity analysis and portfolio management.

KNOWLEDGE GAINED
 [8]

The knowledge and exposure gained at SRSPL was just not limited to how

organizations like them work, but was multi faceted. Since my training place was

HO of the organization almost all operations were carried out and controlled from

their. So I got a good idea about almost all operations of the company.

Marketing of the financial products require:

• Acute financial knowledge

• Marketing skills

Financial knowledge gained by me is following:

1. Mutual Funds

a) New Fund Offers

b) Existing Funds

2. Initial Public Offerings (IPO’s)

3. Equity analysis

Mutual Fund - An Introduction

A 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 invested by the fund

manager in different types of securities depending upon the objective of the

scheme. These could range from shares to debentures to money market

instruments. The income earned through these investments and the capital

appreciation realized by the schemes is shared by its unit holders in proportion to

the number of units owned by them. Thus a Mutual Fund is the most suitable
 [9]

investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed portfolio at a relatively low cost. The small

savings of all the investors are put together to increase the buying power and hire

a professional manager to invest and monitor the money. Anybody with an

investible surplus of as little as a few thousand rupees can invest in Mutual Funds.

Each Mutual Fund scheme has a defined investment objective and strategy.

Types of Mutual Fund Schemes

By Structure

Open-end Funds
An open-end fund is one that is available for subscription all through the year.
These do not have a fixed maturity. Investors can conveniently buy and sell units
at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is
liquidity.
 [10]

Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3
to 15 years. The fund is open for subscription only during a specified period.
Investors can invest in the scheme at the time of the initial public issue and
thereafter they can buy or sell the units of the scheme on the stock exchanges
where they are listed. In order to provide an exit route to the investors, some
close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that
at least one of the two exit routes is provided to the investor.

Interval Funds

Interval funds combine the features of open-ended and close-ended schemes.

They are open for sale or redemption during pre-determined intervals at NAV
related prices.

By Investment Objective

Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to
long term. Such schemes normally invest a majority of their corpus in equities. It
has been proved that returns from stocks, have outperformed most other kind of
investments held over the long term. Growth schemes are ideal for investors
having a long term outlook seeking growth over a period of time.

Income Funds

The aim of income funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds,
corporate debentures and Government securities. Income Funds are ideal for
capital stability and regular income.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such
schemes periodically distribute a part of their earning and invest both in equities
and fixed income securities in the proportion indicated in their offer documents. In
a rising stock market, the NAV of these schemes may not normally keep pace, or
fall equally when the market falls. These are ideal for investors looking for a
combination of income and moderate growth.
 [11]

Money Market Fund

The aim of money market funds is to provide easy liquidity, preservation of capital
and moderate income. These schemes generally invest in safer short-term
instruments such as treasury bills, certificates of deposit, commercial paper and
inter-bank call money. Returns on these schemes may fluctuate depending upon
the interest rates prevailing in the market. These are ideal for Corporate and
individual investors as a means to park their surplus funds for short periods.

Other Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the
Indian Income Tax laws as the Government offers tax incentives for investment in
specified avenues. Investments made in Equity Linked Savings Schemes (ELSS)
and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act,
1961. The Act also provides opportunities to investors to save capital gains u/s
54EA and 54EB by investing in Mutual Funds.

Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer
document. The investment of these funds is limited to specific industries like
InfoTech, FMCG, Pharmaceuticals etc.

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the
BSE Sensex or the NSE 50. Index schemes are also referred to as unmanaged
schemes (since they are passive) or tracker schemes (since they seek to track a
specific index).Passive investment places lower demands on the time and efforts
of the AMG. All that is required is a good system that would integrate the
valuation of securities (from the market) and information of sales and re-
purchases of units (from the registrar) and generate the requisite buy and sell
orders. Therefore, management fees for index funds are lower than for managed
schemes.
 [12]

Alternately, a mutual fund, through its research can identify a basket of

securities and / or derivatives whose movement is similar to that of the index.
Schemes that invest in such baskets can be viewed as active index funds. .

Sectoral Schemes

Sectoral Funds are those which invest exclusively in a specified sector. This could
be an industry or a group of industries or various segments such as 'A' Group
shares or initial public offerings.

Enhanced Index Funds

The enhanced index fund is a managed index fund that seeks to beat the
performance of its benchmark index by at least 0.1 per cent, but no more than 2
per cent. If the index fund's performance were to exceed this 2 per cent cap, it
would then be considered an equity mutual fund.

Exchange Traded Funds (ETFs)

Exchange traded funds are open-end funds that trade on the exchange. Like index
funds, ETFs are benchmarked to a stock exchange index.

ETFs differ from index funds in the following respects:

A single NAV is applicable for the day in the case of open-end funds. Therefore, a
single price would be applicable for all investors who buy units of an open-end
index fund on any particular day. Similarly, a single price would be received by all
investors who exit from an open-end index fund on any particular day. .An ETF, on
the other hand, is, traded in the market place. Therefore its unit price keeps
changing during the day. This intra-day fluctuation in ETF's unit price appeals to
short-term investors

The AMC of an ETF does not offer sale and re-purchase prices for the units.
Instead, it appoints designated market intermediaries (market makers) who buy or
sell units' from the investors. This constitutes the secondary market for the
ETF.Thus, an investor who wants to invest in an ETF would go to a market maker
who is expected to offer two-way quotes at all times. An investor who chooses to
invest in the ETF would thus know precisely how many units in the ETF he will get
against investment. It is as simple as buying or selling a share. The transaction is
executed through the share trading terminal of the market maker. Since these
secondary market trades are between purchasers and sellers in the stock market,
the corpus of the scheme is not affected. .
A unique feature of ETFs is that besides the secondary market, they also have a
primary market, i.e. a facility for investors to exchange their ETF units for the
underlying shares (redemption) or exchange their investment in shares for units
of the ETF (sale). Such sale and redemption transactions entail change in the
 [13]

corpus of the scheme. The ETF, for administrative convenience, can set a
minimum size for such primary market transactions.
The market maker makes money based on the spread in the two-way quote.
Competition between market makers is expected to keep the bid-ask spread low.
This structure also ensures that the AMC does not need to pay a commission to
market intermediaries for bringing investors into the fund. Similarly, there are no
loads recovered by the AMC. Thus, a significant element of cost is eliminated for
the investors. Investors only bear a cost that is implicit in the bid-ask spread. Low
expense ratio is another attraction for an investor in ETFs.

Fixed Maturity Plans I Serial Schemes

An investor in a debt security gets expected yield if he holds a fixed coupon debt
security until maturity. But if he sells security earlier, then what he recovers would
depend on the market situation at the time of sale. He could equally end up with a
capital gain or a capital loss.
A fixed maturity plan (FMP) seeks to eliminate the risk of such capital loss by
investing exclusively in a pre-specified debt security. Thus, if an investor is
desirous of investing for four years, he can invest in a fund that will invest in a
pre-specified 4-year security. ..
On maturity, the scheme would redeem the security and pay the investor. The
investor, however, can exit earlier. But what would recover in an early exit would
depend on the market situation at her time of exit.
Thus, an investor is assured a fixed return if he stays invested in the scheme for
the period originally envisaged. But he also has an earlier exit option in case he
invests in a FMP that is structured as an open-end scheme.
Normally, an assured returns scheme can be offered only if there is a named
guarantor who offers the guarantee. An FMP is an assured returns scheme
through the back door, since the investor is reasonably assured of the expected-
return - (subject to credit risk and re-investment risk) if she holds the units for the
originally envisaged period - but the return is assured without a named guarantor.

Fund of Funds Schemes

Mutual fund schemes generally invest in securities issued by the government or
various companies. Fund of funds schemes, on the other hand, invest in other
mutual fund schemes (which, in turn, invest in the government or companies).
The investment could be in mutual fund schemes promoted by the same AMC, or
in schemes promoted by other AMCs
SEBI has recently permitted such schemes. Managers of fund of funds, being
professional investors, are better placed to handle the information complexities
arising out of increasing number of schemes that are available with varying
structures. This is a benefit for investors. The problem is .the cost involved,
because investors would effectively be bearing fund management costs twice;
 [14]

first, at the level of the fund of funds, and second, at the level of the schemes in
which the fund of funds invest

Load Fund & No Load Fund:

Marketing of a new mutual fund scheme involves initial expenses. These

expenses may be recovered from the investors in different ways at different
times. Three usual ways in which a fund’s sales expenses may be recovered from
the investors from the investors are:
 At the time of investor’s entry into the fund/scheme, by deducting a specific
amount from his initial contribution.
 By charging the fund/scheme with a fixed amount each year, during the stated
number of years.
 At the time of the investor’s exit from the fund/schemes, by deducting a
specified amount from the redemption proceeds payable to the investors

These charges made by the fund managers to the investors to cover

distribution/sales/marketing expenses are often called “Load”. The load charged
to the investor at the time of his entry into a scheme is call a front-end or entry
load. This is the first case above. The load amount charged to the scheme over a
period of time is called a “deferred load” This is the second case above. The
load that the investor pays at the time of his exit is called a “back-end or exit
load”. This is the third case above. Some fund may also charge different amounts
of loads to the investors; depending upon how many years the investor has
stayed with the fund.
The front-end load amount is deducted form the initial contribution/purchase
amount paid by the incoming investor, thus reducing his initial investment
amount. Similarly exit loads would reduce the redemption proceeds paid out to
the outgoing investor. If the sales charge is made on a deferred basis directly to
the scheme, the amount of the load may not be apparent to the investor, as the
scheme’s NAV would reflect the net amount after the deferred load. Fund that
charge front-end, back-end or deferred load are called load funds. Funds that
make no such charges or loads for sales expenses are called no-load fund.
As an example:
If a open end fund NAV per unit is Rs. 11 with a front-load of 2% the price at which
an investors can buy a unit is Rs. 11.22 .If the redemption price is Rs. 10.70 with a
back-end load of 2% the exit load charged by the fund amount to be Rs. 0.21% so
net sales proceeds will be 10.70-0.21=10.49.

NET ASSET VALUE

Market value of fund invested + accrued income – Fund liability

 [15]

No. of units

The market value of fund invested means that total value of invested fund in
particular securities and accrued income means interest or dividend which has
declared but not received and fund liability mean any expenditure which incurred
but not paid or not adjusted. If the number of unit goes up/down every time fund
issue new unit or repurchase existing unit. The unit capital of open-end mutual
fund is not fixed but variable.
Certain condition of Close ended mutual fund gets them listed on a stock
exchange. Trading through a stock exchange enables the investor to buy or sell
unit of a close-ended mutual fund from each other’s, through a stock broker in the
same passion as buying and selling share of a company. The price may be low or
high according to demand/supply or future prospect of the securities. Thus the
Close ended capital remain fixed not variable which as in open ended schemes.

Systematic Investment Plan (SIP), Systematic Withdrawal Plan (SWP),

Systematic Transfer Plan (STP)

The benefits of spreading one's exposure namely, diversification across asset

classes, sectors,etc in any investment activity are well chronicled. What is less
highlighted is the benefit arising out of spreading the timing of one's
actions.Rather than investing, disinvesting or switching the entire portfolio at a
single point of time, it is prudent to spread these actions systematically over a
period of time. This also curbs the tendency of an investor to time the market, an
investment style that several researchers have statistically proved as having a
poor chance of success. 'This principle of time diversification has given rise to the
concepts of -:
Systematic Investment Plan (SIP)
SIP refers to the practice of investing a constant amount regularly, generally
every month. When the market goes up, then the money invested in that period
gets translated into a fewer number of units for the investor. If the market goes
down, then the same money invested gets translated into more units.
Ilustration -- SIP in three market scenarios, when the investor invests Rs. 1,000
per month over a 12-month period. The results are summarized below:

Market Gain / Acquisition

Gain / Loss Point to
Scenario Loss Cost
(change (% to Point NA (% to
(Rs.)
each current V average
month) NAV) Change NAV)
Up1% +681 +5.4% + 11.6% 99.99%
Down 1 % -637 -5,6% -10.5% 99.99%
 [16]

Random +200 + 1.6% 0.0% 98.40%

Thus, it is clear that: When the market gained 11.6% during the year, 'the gain
for the investor was only 5.4%. On the 'other hand, when the market fell 10.5%
during the year, the investor's loss was only 5.6%. SIP, therefore, tempers the
gain or loss from investment.
SIP does not offer protection from losses. If the market turns adverse, then
you can lose money even in a SIP but ensures that your acquisition cost
approximates the average NAV. Therefore, this investment style is also called
rupee cost averaging.
A related concept is value averaging. Here, the investor operates with a certain
target value for her investment. If the investment appreciates beyond that? target
value, he encashes part of the investment. If the investment depreciates below
the target value, the investor brings in fresh funds to bridge the gap. Value
averaging, ensures that the investor books profits in a rising market and invests in
a falling market.

Systematic Withdrawal Plan (SWP) "

SWP is a mirror image of SIP. Under SWP, the investor would withdraw constant
amounts periodically. The benefits are the same, namely that through. SWP the
investor can temper gains and losses, though it does not prevent losses. SWP also
has income tax implications.

Systematic Transfer Plan (STP)

Investors' exposure to different types of securities, whether. debt or equity should
flow from their risk profile or risk appetite which, as seen earlier, is a function of
their financial position and personal position.An investor's exposure to securities
changes in two situations:
1)On investment or disinvestment (this is where SIP I SWP are useful);
2)On change in the value of the securities in the market place.
For instance, an investor may start with a 40:60 mix of debt and 'equity, as
determined by her risk profile. But if equity markets boom and debt securities lose
value, then the 40:60 mix could get significantly distorted towards equity. In such
a situation, it would be prudent to sell some equity and re-invest the redeemed
amount in debt to re-balance the mix of debt and equity. In the context of mutual
funds, such re-balancing can be achieved by systematically moving moneys
between schemes. Through a systematic transfer of investment between
schemes, it is possible to maintain' a target mix of debt and equity in one's
portfolio. Mutual funds make it convenient, and sometimes free of cost, to
systematically transfer investments between schemes of the same mutual fund

BENEFITS OF MUTUAL FUNDS

 [17]

Professional management.

Mutual Funds provide the services of experienced and skilled professionals,

backed by a dedicated investment research team that analyses the performance
and prospects of companies and selects suitable investments to achieve the
objectives of the scheme.

Diversification
Mutual Funds invest in a number of companies across a broad cross-section of
industries and sectors. This diversification reduces the risk because seldom do all
stocks decline at the same time and in the same proportion. You achieve this
diversification through a Mutual Fund with far less money than you can do on your
own.

Convenient
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with brokers
and companies. Mutual Funds save your time and make investing easy and
convenient.

Return
Over a medium to long-term, Mutual Funds have the potential to provide a higher
return as they invest in a diversified basket of selected securities.

Low CostMutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.

Liquidity
In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the Mutual Fund. In closed-end schemes, the units can
be sold on a stock exchange at the prevailing market price or the investor can
avail of the facility of direct repurchase at NAV relatedprices by the Mutual Fund.

Transparency
You get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the proportion
invested in each class of assets and the fund manager's investment strategy and
outlook.

Flexibility
Through features such as regular investment plans, regular withdrawal plans and
 [18]

dividend reinvestment plans, you can systematically invest or withdraw funds

according to your needs and convenience.

Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A
mutual fund because of its large corpus allows even a small investor to take the
benefit of its investment strategy.

Well Regulated

All Mutual Funds are registered with SEBI and they function within the provisions
of strict regulations designed to protect the interests of investors. The operations
of Mutual Funds are regularly monitored by SEBI.

Comparison with Other Investment avenues

The mutual fund sector operates under strict regulations as compared to most
other investment avenues. Apart from offering investors tax efficiency and legal
comfort how do mutual funds compare with other products?

Bank Fixed Deposits versus Mutual Funds

 [19]

Bank fixed deposits are similar to company fixed deposits. The major difference is
that banks are more stringently regulated than are companies. They even operate
under stricter requirements regarding Statutory Liquidity Ratio (SLR) and Cash
Reserve Ratio (CRR) mandated by RBI.
While the above are causes for comfort, bank deposits too are subject to default
risk. However, given the political and economic impact of "bank defaults, the
government as well as Reserve Bank of India (RBI) try to ensure that banks do not
fail, Further, bank deposits up to Rs. 100,000 are protected by the Deposit
Insurance and Credit Guarantee Corporation (DICGC), so long as the bank has
paid the required insurance premium of 5 paise per annum for every Rs. 100. of
deposits. The monetary ceiling of Rs. 100,000 is for all the deposits in an the
branches of a bank, held by the depositor in the same capacity and right.

Bonds and Debentures versus Mutual Funds

As in the case of fixed deposits, credit rating of a bond or debenture is an
indication of the inherent default risk in the investment. However, unlike fixed
deposits, bonds and debentures are transferable securities The value that the
investor would realize in an early exit is subject to market risk. The investor could
have a capital Gain or a capital loss. This aspect is similar to a mutual fund
scheme. It is possible for an astute investor to earn attractive returns by directly
investing in the debt market, and actively managing the positions. Given the
market realities in India, however, it is difficult for most investors to actively
manage their debt portfolio. Further, at times it is difficult to execute trades in the
debt market even when the transaction size is as high as Rs. 1 crofe. In this
respect, investment in a debt scheme would be beneficial. Debt securities could
be backed by a hypothecation or mortgage of identified fixed and / or current
assets, e.g. secured bonds or debentures. In such a case, if there is a default, the
identified assets become available for meeting redemption requirements. An
unsecured bond or debenture is for all practical purposes like a fixed deposit, as
far as access to assets is concerned.

Equity versus Mutual Funds

Investment in both equity and mutual funds are subject to market risk.
An investor holding an equity security that is not traded in the market place has a
problem in realizing value from it. But investment in an open-end mutual fund
eliminates this direct risk of not being able to sell the investment in the market.
An indirect risk remains, because the scheme has to realise its investments to pay
investors. The AMC is however in a: better position to handle the situation.
Further, on account of various SEBI regulations such illiquid securities are likely to
be only a part of the scheme's portfolio. Another benefit of equity mutual fund
schemes is that they give investors the benefit of portfolio diversification through
a small investment. For instance, an investor can take an exposure to the index by
investing a mere Rs. 5,000 in an index fund.
 [20]

Life Insurance versus Mutual Fund

Life insurance is a hedge against risk - and not really an investment option. So, it
would be wrong to compare life insurance against any other financial product.
Occasionally on account of market inefficiencies or mis-pricing of products "in
India, life insurance products have offered a return that is higher than a
comparable "safe" fixed return security - thus, you are effectively paid for getting
insured! Such opportunities are not sustainable in the long run. .

How to invest in Mutual Fund

 [21]

Step one- identify your needs

Your financial goals will vary, based on your age, lifestyle, financial independence,
family commitments, and level of income and expenses among many other
factors. Therefore, the first step is to assess your needs. You can begin by defining
your investment objectives and needs which could be regular income, buying a
home or finance a wedding or educate your children or a combination of all these
needs, the quantum of risk you are willing to take and your cash flow
requirements.

Step Two - Choose the right Mutual Fund

The important one identify your needshing is to choose the right mutual fund
scheme which suits your requirements. The offer document of the scheme tells
you its objectives and provides supplementary details like the track record of
other schemes managed by the same Fund Manager. Some factors to evaluate
before choosing a particular Mutual Fund are the track record of the performance
of the fund over the last few years in relation to the appropriate yardstick and
similar funds in the same category. Other factors could be the portfolio allocation,
the dividend yield and the degree of transparency as reflected in the frequency
and quality of their communications.

Step Three - Select the ideal mix of Schemes

Investing in just one Mutual Fund scheme may not meet all your investment
needs. You may consider investing in a combination of schemes to achieve your
specific goals.

Step Four - Invest regularly

The best approach is to invest a fixed amount at specific intervals, say every
month. By investing a fixed sum each month, you buy fewer units when the price
is higher and more units when the price is low, thus bringing down your average
 [22]

cost per unit. This is called rupee cost averaging and is a disciplined investment
strategy followed by investors all over the world. You can also avail the systematic
investment plan facility offered by many open end funds.

Step Five- Start early

It is desirable to start investing early and stick to a regular investment plan. If you
start now, you will make more than if you wait and invest later. The power of
compounding lets you earn income on income and your money multiplies at a
compounded rate of return.

Step Six - The final step

Need to do now is to go for online application forms of various mutual fund

schemes and start investing. One may reap the rewards in the years to come.
Mutual Funds are suitable for every kind of investor - whether starting a career or
retiring, conservative or risk taking, growth oriented or income seeking.

CHECKLIST FOR AN INVSTOR BEFORE INVESTING IN A MUTUAL FUND

 There are various mutual funds available in the markets which are further
divided in several schemes and options. Here selecting the right one is the
key to success.
 Selection of a fund is subjected to some parameters like risk, cost and time
all of which an investor can control and not the future returns which he
cannot control.
 Rights of a Mutual Fund Unit holder A unit holder in a Mutual Fund
scheme governed by the SEBI (Mutual Funds) Regulations is entitled to:

1. Receive unit certificates or statements of accounts confirming the title within

6 weeks from the date of closure of the subscription or within 6 weeks from
the date of request for a unit certificate is received by the Mutual Fund.
2. Receive information about the investment policies, investment objectives,
financial position and general affairs of the scheme.
3. Receive dividend within 42 days of their declaration and receive the
redemption or repurchase proceeds within 10 days from the date of
redemption or repurchase.
4. Vote in accordance with the Regulations -:

a. Approve or disapprove any change in the fundamental investment policies

of the scheme, which are likely to modify the scheme or affect the interest
of the unit holder. The dissenting unit holder has a right to redeem the
investment.
 [23]

b. Change the Asset Management Company.

c. Wind up the schemes.

Inspect the documents of the Mutual Funds specified in the scheme's offer
document. One should read the offer document and key information memo with
due diligence while investing in NFO(New Fund Offer) and not to think that this is
a cheap one than the exiting .

 The Role of Dividend (Dividend v/s Growth dilemma)

Whenever a dividend is paid, the NA V goes down because funds flow out of the
scheme. The reduced NA V, immediately after a dividend distribution is referred to
as "Ex-Dividend NA V". If we calculate returns based only on movement in NA V,
then it can lead to understatement of return, whenever a dividend is paid.
However, if a scheme has a growth option, namely an option, i.e. where no
dividends are declared, then the earnings would be fully reflected in the NA V. In
such cases, the return can be calculated based on the opening and closing NA V.
Among the investors who subscribe to a scheme’s investment
philosophy ,some might prefer a regular income flow (dividend),while
others might prefer their income from the scheme to grow in scheme
itself(growth option). SO it is clear that it is just a facility or you can say
two different approaches for two different types of investors.
 Asset allocation, relative risk levels in different investment avenues
should also be considered before investing
 One should not go for a one best fund and should distribute the money
among 3-5 different schemes
 Exit from a scheme is not like getting divorced so do it when it becomes
essential. like-:
A) When one is overweight on a worst performing fund
B) When one gets a handsome and reasonable return
 [24]

MUTUAL FUND A GLOBALLY PROVEN INVESTMENT AVENUE

Worldwide, Mutual Fund or Unit Trust as it is referred to in some parts of the world,
has a long and successful history. The popularity of Mutual Funds has increased
manifold in developed financial markets, like the United States. As at the end of
March 2006, in the US alone there were 8,002 mutual funds with total assets of
over US$ 9.36 trillion (Rs.427Iakh crore).

Indian Scenario

In India, the mutual fund industry started with the setting up of the Unit Trust of
India in 1964. Public sector banks and financial institutions were allowed to
establish mutual funds in 1987. Since 1993, private sector and foreign institutions
were permitted to set up mutual funds.

In February 2003, following the repeal of the Unit Trust of India Act 1963 the
erstwhile UTI was bifurcated into two separate entities viz. The Specified
Undertaking of the Unit Trust of India, representing broadly, the assets of US 64
scheme, assured returns and certain other schemes and UTI Mutual Fund
conforming to SEBI Mutual Fund Regulations.

As at the end of March 2006, there were 29 mutual funds, which managed assets
of Rs. 2,31,862 crores ( US $ 52 Billion) under 592 schemes. This fast growing
industry is regulated by the Securities and Exchange Board of India(SEBI).

ABOUT AMFI (Association of Mutual Funds in India)

 [25]

AMFI is the umbrella body of all the Mutual Funds including Unit Trust of India.
Incorporated in August 1995, it is a non-profit organization committed to develop
the Indian Mutual Fund Industry on professional, healthy and ethical lines and to
enhance and maintain standards in all areas with a view to protecting and
promoting the interests of mutual funds and their unit holders. Mutual Fund both
conceptually and operationally is different from other savings instruments. Mutual
Funds invest in instruments of capital markets which have different risk return
profile. It is very necessary that the investors understand properly the conceptual
framework of mutual fund and its operational features
List of Mutual Fund Companies in INDIA
S.N.O Name of Company
1. ABN Amro Mutual Fund
2. Alliance Capital Mutual Fund
3. Benchmark Mutual Fund
4. Birla Sunlife Mutual Fund
5. BoB Mutual Fund
6. Canbank Mutual Fund
7. Chola Mutual Fund
8. Deutsche Mutual Fund
9. DSP Merrill Lynch Mutual Fund
10. Escorts Mutual Fund
11. Fidelity Mutual Fund
12. Franklin Templeton Mutual Fund
13. GIC Mutual Fund
14. HDFC Mutual Fund
15. HSBC Mutual Fund
16. ING Vysya Mutual Fund
17. JM Mutual Fund
18. LIC Mutual Fund
19. Principal Mutual Fund
20. Prudential ICICI Mutual Fund
21. Reliance Mutual Fund
22. Sahara Mutual Fund
23. SBI Mutual Fund
24. Standard Charted Mutual Fund
25. Tata Mutual Fund
26. Taurus Mutual Fund
27. UTI Mutual Fund
 [26]

Initial Public Offerings (IPO’s)

Corporate may raise capital in the primary market by way of an
initial public offer, rights issue or private placement. An Initial
Public Offer (IPO) is the selling of securities to the public in the
primary market. This Initial Public Offering can be made through
the fixed price method, book building method or a combination of
both.

Book Building - About Book Building

Book Building is basically a capital issuance process used in Initial

Public Offer (IPO) which aids price and demand discovery. It is a
process used for marketing a public offer of equity shares of a
company. It is a mechanism where, during the period for which
the book for the IPO is open, bids are collected from investors at
various prices, which are above or equal to the floor price. The
process aims at tapping both wholesale and retail investors. The
offer/issue price is then determined after the bid closing date
based on certain evaluation criteria.

The Process:

The Issuer who is planning an IPO nominates a lead

merchant banker as a 'book runner'.

• The Issuer specifies the number of securities to be issued

and the price band for orders.
• The Issuer also appoints syndicate members with whom
orders can be placed by the investors.
• Investors place their order with a syndicate member who
inputs the orders into the 'electronic book'. This process is
called 'bidding' and is similar to open auction.
• A Book should remain open for a minimum of 5 days.
• Bids cannot be entered less than the floor price.
• Bids can be revised by the bidder before the issue closes.
• On the close of the book building period the 'book runner
evaluates the bids on the basis of the evaluation criteria
which may include -
o Price Aggression
o Investor quality
 [27]

o Earliness of bids, etc.

• The book runner and the company conclude the final price
at which it is willing to issue the stock and allocation of
securities.
• Generally, the number of shares are fixed, the issue size
gets frozen based on the price per share discovered through
the book building process.
• Allocation of securities is made to the successful bidders.
• Book Building is a good concept and represents a capital
market which is in the process of maturing.

Guidelines for Book Building

Rules governing book building is covered in Chapter XI of the

Securities and Exchange Board of India (Disclosure and Investor
Protection) Guidelines 2000.

BSE's Book Building System

• BSE offers the book building services through the Book

Building software that runs on the BSE Private network.
• This system is one of the largest electronic book building
networks anywhere spanning over 350 Indian cities through
over 7000 Trader Work Stations via eased lines, VSATs and
Campus LANS
• The software is operated through book-runners of the issue
and by the syndicate member brokers. Through this book,
the syndicate member brokers on behalf of themselves or
their clients' place orders.
• Bids are placed electronically through syndicate members
and the information is collected on line real-time until the
bid date ends.
• In order to maintain transparency, the software gives visual
graphs displaying price v/s quantity on the terminals.

In case the issuer chooses to issue securities through the

book building route then as per SEBI guidelines, an issuer
company can issue securities in the following manner:

a. 100% of the net offer to the public through the book

building route.
 [28]

b. 75% of the net offer to the public through the book building
process and 25% through the fixed price portion.

Difference between shares offered through book building

and offer of shares through normal public issue:

Featur Fixed Price process Book Building process

es
Pricing Price at which the Price at which securities will be
securities are offered/allotted is not known in
offered/allotted is known advance to the investor. Only an
in advance to the indicative price range is known.
investor.
Deman Demand for the Demand for the securities
d securities offered is offered can be known everyday
known only after the as the book is built.
closure of the issue
Payme Payment if made at the Payment only after allocation.
nt time of subscription
wherein refund is given
after allocation.

Before investing in an IPO one should go for this checklist

 Lead managers and their credibility.

 Growth prospects of the company vis-à-vis the sector.

 Promoter holdings, both pre issue and post issue.

 To find out whether profits projected by company are

realistic or not.

 Ultimately what will be the use of the money to be invested

in the company?
 [29]

Do not invest only for the listing gains. Invest in IPO if you believe
in that company and investing for a longer period will fetch u
better returns. One should always read the offer document and
prospectus of the issue thoroughly before investing it.

Management of Equity Portfolio

Investment and disinvestment decisions are broadly taken based

on either of the following two approaches. .

Technical Analysis
Technical analysis is a review of the movements of the stock price
in the market. Based on a comparison of these movements with
past volume and price trends of the stock as well as with the
market movements, technical analysts form a view on whether
the market or an individual stock is over-bought or over-sold,
whether a stock is near a support level or resistance level and
accordingly choose to sell or buy the stocks
While the data for a fundamental analysis comes sporadically,
for instance when the financial results are announced or an
earnings warning is issued, data for technical analysis gets added
with every day of trading.
Generally, fundamental analysis is seen to help decide on what
action to take, namely buy or sell, when to implement the
decision, (the timing) could be determined by technical analysis.

Fundamental Analysis.
Fundamental analysis is a study of the industry scenario,
company's financials, management, etc. collectively known as a
company's fundamentals, to determine whether the company's
stock is properly valued. If the view is that it is undervalued, then
the portfolio manager may choose to buy the security. If it is
overvalued, the decision would be to sell the existing stock. The
value drivers mentioned below are all examples of fundamental
analysis.

Value Drivers in Equity Market

 [30]

EPS and PE Ratio (PRICE EARNING RATIO)

These are easily the most popular tools for determining valuation.
For instance, if the aluminum industry has a PE ratio of 10 times,
and if Company Z has an EPS of Rs. 12, then the value of
Company z. stock should, theoretically, be EPS x P/E Ratio,
namely Rs. 120 per share.
When the current market price is compared with past earnings,
it is referred to as "historical PIE". When the comparison is with
projected earnings, it is referred to as "prospective P/E" or
"projected P/E". .

A high P/E ratio means either of two things:

A) Market views the stock favorably, or
B) The share is over-valued - perhaps being pushed up by
manipulators.

A low P/E ratio could mean the reverse. Namely either the
market does not view the stock favorably or that it is undervalued
(value stock).

The skill of the analyst is in identifying which of the

implications is applicable for any stock. This is a critical judgment
call that determines whether the stock would be bought or sold.

CEPS and PRICE Ratio

Earnings are calculated after depreciation, which, in turn, is a
function of accounting policy. Cash earnings (earnings plus
depreciation and other non-cash charges) are less affected by
accounting policy.
In the earlier example, if the CEPS of Company Z is Rs. 15, and
the PICE ratio of the industry is 9 times, then the price of each
share of Company Z should theoretically be Rs. 15 x 9, namely
Rs. 135.
This measure is particularly useful when a stock has positive
cash earnings, but negative earnings after non-cash charges.

Price to Book Value

 [31]

In industries such as Banking and Non-banking finance

companies, where financial assets are a significant component of
the balance sheet, price to book value of the industry, multiplied
by the book value of the individual stock could give an indication
of the value of the stock.'
This measure would be meaningful in all situations where the
book value is representative of realizable values. In the case of
companies whose balance sheet is dominated by physical assets,
e.g. cement' manufacturing companies, book value may not be
representative of realizable value. Price to book value may not be
a useful ratio ill such situations.

Turnover Multiple
This ratio is calculated as sales turnover divided by market
capitalization of the company. Market capitalization is the total
number of equity shares issued by the company x market price of
the shares in the market place.Turnover is a surrogate for market
share and significance of the company's role in a sector --
particularly in a multi-product set-up.
For instance, if Hindustan Lever were looking at taking over
either of two companies, namely Company Z whose turnover
multiple is 20 times or, a Company Y whose turnover multiple is
25 times. If other factors such as fitment in product mix, margins,
location advantages, company culture, etc. are comparable, then
Hindustan Lever would prefer Company Y, because, for every
rupee that it spends on the acquisition, it will gain sales of Rs. 25.
Comparatively, it will gain only Rs. 20 of incremental sales for
every rupee it invests in acquiring Company Z.

Others
The above are the commonly used tools. But analysts tend to use
several creative tools. For instance, during the height of the
dotcom boom, companies were enamored with market
capitalization to eye-balls comparison. Retailers are valued based
on stock keeping units (SKU). Billing rates and mix of offshore and
onsite revenues are relevant for software development
companies.

Classification of shares on the basis of market

performance
The Companies Act, 1956 does not permit issue of different
'classes of equity shares. Therefore, all equity shares of a
 [32]

company are pari passu (similar), except to, the extent that
dividend payment could be made on a pro rata basis on new
equity shares issued during the year.

Some of them are as follows -:

Growth stocks are shares that are expected to demonstrate
earnings growth that is better than the market. From time to time
various promising sectors in the economy emerge, like software
during 1998-2000. Good companies in such sectors are viewed as
growth stocks and attract high level of investment interest.
Ultimately, growth, like beauty, lies in the eyes of the beholder.
"For one fund, the paradigm of a growth stock might be Coca-
Cola; for another fund, it might be Amazon.com. In India we may
well be talking of Reliance in a similar vein.

Income stocks are shares that provide a good dividend return

on the amount invested. In accounting terminology, they provide
a good dividend yield (Dividend to Market Price ratio).
In the old days, these shares were often called "widow and
orphan" stocks a reference to the once "typical" investors who
would buy the stock for the reliability and size of the dividend
payments If we look at power generation companies for
instance, once the plant is set up and it maintains operation, the
off take is relatively certain, and so is the price. In such a
situation, the profits are steady, thus giving the company the
luxury of declaring stable dividends. In India, concerns over the
financials of most state electricity boards, which buy the power
from the power generating company, raise issues of credit risk.
Such risks would be reduced in a situation of direct supply to
consumers coupled with right to disconnect power to consumers
who do not pay. In such an event, companies like Tata Electric
Companies, for instance, would qualify as income stocks.

Cyclical stocks are shares that move in tandem with the

economy. Basic industries such as cement, steel, etc. are
examples of industries whose performance is closely linked to the
economy. This is why stocks of companies belonging to such
industries are cyclical in nature.

Defensive stocks are shares that are relatively protected from

economic cycles. Pharmaceutical stocks are a good example,
 [33]

because consumption of medicine does not vary with the turns of

the economy.

Pivotals or momentum stocks are the shares that move the

market. Hindustan Lever, Reliance Industries and Infosys are
examples of such stocks in India.

Value stocks are shares whose current valuation does not reflect
some aspect of a company that could be extremely valuable.
For instance, an investor, who feels that the last mile
connectivity that MTNL has in the two important cities of Mumbai
and Delhi is not fully reflected in the price, would be viewing it as
a value stock. She would aim to "unlock value" when the market
appreciates the value of last mile connectivity and pushes the
stock valuation up.
The "under valuation" is normally viewed through fundamental
analysis measures such as PIE and P/BV ratios.

Above all I got a good learning about various styles of investing

and making money and also luring the money of outsiders in the
organization

Marketing knowledge gained

The very first thing I learnt is “Selection of particular

customer and the segment of customer is essential to the
very purpose of marketing” Identifying and
understanding the different needs of the targeted
customer group and offering them schemes accordingly.
So marketing starts for me FROM KNOWING THE
INVESTOR.
 [34]

KNOWING THE INVESTOR

Risk Profiling

A heart patient won a lottery worth Rs. 100 crore. The family
wanted to break the good news as softly as possible. The job\vas
delegated to. the family doctor. The 'conversation went along the
following lines:'

Doctor: What will you do if you win a lottery of Rs. 1,000?

Heart Patient: I will take my family out for dinner.
Doctor: What will you do if you win a lottery ofRs. 1,000,000?
Heart Patient: I will repay my housing and car loans.
Doctor: What will you do if you win a lottery of Rs. 100 crore?
Heart Patient: I will give you 50 per cent of it.
Immediately, the doctor suffered a heart attack!

Depending on the health risk a doctor is in the best position to

advise a patient on whether she should climb the Himalayas, or
whether she should satisfy herself up Malabar Hill in Mumbai.
Similarly, a financial planner has to advise investors on their
finances depending on their risk profile.
While the investor is dreaming about her financial goals, her
guard would be down. The intermediary needs to look for verbal
and non-verbal cues to assess her risk appetite. At one end of the
spectrum would be an aggressive risk taker - and at the other, an
impulsive risk avoider.
While risk profiling is a highly subjective exercise, it can safely
be said that appetite for risk reduces with:
• Age;
• Increase in dependents;
• Reduction in earning members;
• Any serious health related issues in the family; and
• Job insecurity.
On the other hand, a person would be inclined to take more risks
when:
• Major expenses are taken care of. For instance, when the
investor has her own house and loans are repaid;
• Other major aspirations are met or provided for;
• The investor is a professional whose income streams are on
the upswing; and
 [35]

• The investor has hit a jackpot.

It would be possible to generate a standard list of questions,

the answers to which would be pointers to an investor's risk
profile. However, no ready reckoner of questions can substitute
the need for a financial advisor to keenly observe the investor
and her behavior.
For instance:
A person who jumps the red signal in a traffic crossing is clearly
a person who
is inclined to take risks.
A person who complains for half an hour about the extra one-
rupee wrongly
charged by a bus conductor is a difficult equity investor.
If discussions indicate certain submissiveness on an investor's
part to the views of her superior at work, and an obsessive
concern about job security, then the person is likely to be risk
averse.
Even the type of dreams mentioned would be an indication of
an investor's risk profile. A Richard Branson who wants to
circumnavigate the earth in a hot air balloon would top the chart
in terms of risk preference! Also, in phases of economic
uncertainty (layoffs), it would be better for an investor to tone
down the risks taken. A risk profiling exercise would result in
suggestions on how an investor should distribute her portfolio
between different asset classes.

Asset Classes
As seen earlier, investing the entire portfolio in debt is not
necessarily a prudent option. Inflation and re-investment risks
can wreak havoc to the lives of such investors. Prudence,
therefore, lies in investing in a mix of asset classes.
The performance of different asset classes hinges on how the
economy performs. Economies tend to move in cycles - often
referred to as business cycles. From a trough, the economy
-expands, then reaches a peak, and then contracts back into a
trough.

One categorization of assets would be debt and equity. In India,

even gold is an important asset category. Besides, real estate
could be another component of a client's asset portfolio. '
 [36]

An asset categorization relevant for a mutual fund distributor

is' liquid schemes, gilt schemes, bond schemes, balanced
schemes, index schemes, diversified equity schemes, sectoral or
focused schemes, etc.

Every asset class and mutual fund type implies a risk-return

tradeoff. Generally, one has to take a greater risk for a chance to
earn a higher return. The AMFI Mutual Fund Testing Programme
workbook provides a useful comparison of investments
alternatives.

Return Safety Volatility Liquidity Convenie

nce
Equity High Low High High or Moderate
low
FI Bonds Moderat High Moderat Moderat High
e e e
Co. Moderat Moderat Moderat Low Low
Debentur e e e
es
Co. FDs Moderat Low Low Low Moderate
e
Bank Low High Low High High
Deposits
PPF Moderat High Low Moderat High
e e
Life Low High Low Low Moderate
Insuranc
e
Gold Moderat High Moderat Moderat Low
e e e
Real High Moderat High Low Low
Estate e
Mutual High High Moderat High High
Funds e

A financial planner has to obtain information about the

investor's current distribution of investment between asset
classes and investment types. These would determine what is
already available to finance the client's goals, and the risk
 [37]

underlying her investment portfolio. They may also offer clues to

possible needs of re-balancing the portfolio

Asset Allocation
Credit card issuers use a decision support model to decide
whether or not to issue a credit card to the applicant and the
exposure limit in case they decide to issue one. It is the same
with loan companies. In all these cases, the back-end of the
model synthesizes the information given by the applicant and
throws up a decision. The parameters of this decision support
model are based on statistics of past experiences.
Similarly, it would be possible to have a model that would
suggest the mix of (asset categories for a client. “Optimum
asset” allocation for a client would depend on her wealth
cycle and life cycle

The Wealth Cycle

People typically go through three wealth cycle phases:
ACCUMULATION /SOWING
Where the person's saving is much more than current needs.
So she is in a position to set apart something for the future.

DISTRIBUTION / REAPING I HARVESTING

Where the person's needs cannot be fully met by current savings
the gap would need to be met out of savings or loans. .

TRANSITION
This is a phase between the accumulation and distribution
phases, when the distribution needs are very clearly in the
person's radar, although the harvesting may not have
commenced.

WINDFALL
This is a phase that touches people's lives occasionally. It could
be winning from a lottery, super-normal profits booked on
investments, inheritance etc.
The risk-based asset allocation will be different for each phase as
described previously.
 [38]

Interactions with various customers having different

opinions and views gave me a good overview of the local
market and especially of my work area

Some other learnings

• Working in a team helps to improve individually and

scale up the performance which in turn improves
performance of the team as whole.
• Regular meetings with seniors and the industry
professionals made the training process interesting one
and also encouraged us to learn more.
• Regular reporting to the superiors (daily/weekly) made
me more accountable because it shows how I’m
performing.

CONCLUSION

The training experience at SRSPL (Suresh Rathi

Securities Pvt. Ltd) was a memorable one. I had seen a
glimpse of corporate life Knowing what is a the busy
schedule and how to work everyday with a long list of
work and a daily appointments diary .In between this
everyday’s routine workload, always having a nice
smile on the cheeks is not an easy task.
 [39]

Having said that I would like to mention “All these pains

are taken to lure THE CUSTOMER and making a cordial
relationship with him forever is really a great
challenge.”

I found myself very lucky and fortunate to be a part of

SRSPL (Suresh Rathi Securities Pvt.Ltd.)for the time being
in accepting this challenge.