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PREFACE

BA is a stepping-stone to the management carrier and to

develop
good managerwith
it isexposure
necessary
that
the
theoretical
must be supplemented
to the
real
environment.
Theoretical knowledge just provides the base and its not sufficient
to produce a good manager thats why practical knowledge is
needed. Therefore the research product is an essential requirement
for the student of MBA. This research project not only helps the
student to utilize his skills properly learn field realities but also
provides a chance to the organization to find out talent among the
budding managers in the very beginning. In accordance with
the requirement of MBA course I have summer training project on
the topic Market Capitalization of Mutual Funds and ULIPS. The
main objective of the research project was to study the two
instruments and make a detailed
comparison of the two.

For conducting the research project sample size of 50 customers


of Bajaj Capital was selected. The information regarding the
project research was collected through the questionnaire formed
by me which was filled by the customers there.
In the growing global competition, business has taken a new
shape in the world. Todays Manager has to understand the
uncertainty of business environment to cope with the situation.
Dissertation for each and every student of PGPM is an essential
part of completion at the end of 1st year of the course. The prime
objective of this summer training to familiar with real life business
environment and apply the theoretical concept of business into
reality and know how much theory is applicable in day to day
business activity. It also sharpens their knowledge, hones their
analytical and other business acumen and develops better
appreciation of the practical problems of business, especially from
the management point of view.
Moreover the experience acquired by student helps to decide the
future professional career. As per the module is concern I
underwent in a project entitled Market Capitalization of Mutual Fund
& ULIP.

ACKNOWLEDGEMENTS

Successful project is fruitful culmination of efforts of many people,


some directly involved, and others who have quietly encouraged
and extended their support, while being in the background. I take
this opportunity to

extend my deep sense of gratitude and heartfelt thanks to all


those who have helped us directly or indirectly during the course
of my project.
My colleagues and associates at ASIAN SCHOOL OF BUSINESS
MANAGEMENT continue to have important impact on my thinking.
I am in debt to my corporate guide Mr. Sambit Mohanty (Branch
Head) & Shibashis Pattanaik(Financial Planning Executive) of
Bajaj Capital Bhubaneswar. Who have taught me a great
deal as we worked together to adopt marketing management
thinking to the problems of different situations. This dissertation
could not have been written without Prof.Kalpana Sahoo who not
only served as my supervisor but also encouraged and challenged
me throughout my academic program who patiently guided me
through the dissertation process, never accepting less than my
best efforts. I am also appreciative of all that I have learned from
working with industry executives who have generously shared
their insight and experiences.
I would like to give thanks to all the staff of Bajaj capital.
Bhubaneswar (Orissa) for their valuable and sincere cooperation
and plying all the database of Bajaj capital, Bhubaneswar
(Orissa). I am thankful to my parents, & my entire family who are
always my source of brainchild & unplumbed exertion towards the
journey of my life.
At last but not the least I am grateful to Omnipotent God for his
manifold blessing in this endeavor of mine.
Deviprasad
Dandapat

28th June
2010

EXECUTIVE
SUMMARY

EXECUTIVE SUMMARY

n todays
andhas
competitive
world,
I find that
insuranceas
7
Mutualcorporate
Fund sector
the maximum
growth
and potential
compared to the other sectors. Insurance has the maximum growth
rate of 70-80% while as FMCG sector has maximum 12-15% of
growth rate. This growth potential attracts me to enter in this sector
and Bajaj Capital has given me the opportunity to work

and get experience in highly competitive and enhancing sector.


My project was to understand the different marketing strategies
adopted by the company, namely, Bajaj Capital to increase their
market share and also to achieve its own target in order to attain
the zenith of its respective sector.
My SIP has helped me in learning a lot of things about the
corporate world. As a project trainee I was required to understand
the behavior of the consumer in order to manipulate the market
and gain an advantage in the competitive scenario.
I also learned to develop the agency channel and how to create
business opportunities. This helped me to know the issues of the
competitive

market

and

also

helped

me

enhance

my

communication and convincing skills.


Understanding the ground reality of marketing is like stars in the
eyes of every Management Professional, & this experience
becomes more profound when the inception is with a pioneer like
Bajaj Capital. During the two months Summer Project with Bajaj
Capital had a very nice Corporate World Exposure, which I think
will serve as a stepping stone for me in my corporate journey.

In todays corporate and competitive world, I find that insurance 7


Mutual Fund sector has the maximum growth and potential as
compared to the other sectors. Insurance has the maximum
growth rate of 70-80% while as FMCG sector has
4

maximum 12-15% of growth rate. This growth potential attracts


me to enter in this sector and Bajaj Capital has given me the
opportunity to work and get experience in highly competitive and
enhancing sector.
Unit Links Insurance Plan (ULIP) and Mutual Fund (MF) are the two
most preferred options for a part time investor to invest into
equity. But how do we decide which one should we go for. Though
it is very easy to decide, people tend to confuse themselves most
of the time. This Report talks about some points that you need to
consider while deciding which option we want to take. Mutual
Fund is pure investments. ULIP are combination of Insurance and
Investment.

Market Capitalization of Mutual


Fund and ULIPs

Chapter-01

Mutual Fund
6

INTRODUCTION

Mutual
is anumber
collective
vehicle
formedit with
the specific
objective
of
raising money
fromFund
a large
of investment
Individuals and
investing
according
to a pre
specified
objective. The word Mutual in a Mutual Fund signifies a vehicle wherein the benefits of
Investment accrued pro rata to all the investors in proportion to there Investments. Over the past
decades Mutual Funds have grown intensely in popularity and have experienced a considerable
growth rate. Mutual Funds are popular because they make it easy for small investors to invest
their money in a diversified pool of securities. As the Mutual Fund industry

has evolved over the years

MEANING:
Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. Anyone with an invisible surplus of as little as few thousand
rupees can invest in Mutual Funds. These investors buy units of a particular Mutual
Fund scheme that has a defined investment objective and strategy.
The fund manager in different types of securities then invests the money thus collected.
These could range from shares to debentures to money market instruments, depending
on the schemes stated objectives. The income earned through these investments and
the capital appreciations realized by the scheme are shared by its unit holders in
proportion of the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportune investing a
diversified, professionally managed basket of securities at a relatively low cost.
A Mutual Fund is the ideal investment vehicle for todays complex modern world. It appoints
professionally qualified and experienced staff that manages each of these functions on full time
basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost
to each investor. In effect, the Mutual Fund vehicle exploits economies of scale in all three areas

research, investing and transaction processing.


While the concept of individuals coming together to invest money collectively is not new,
the Mutual Fund in its present form is a 20th century phenomenon. In fact, Mutual
Funds gained popularity only after the Second World War. Globally, there are thousand
of firms offerings tens of thousand of Mutual Funds with different investment objectives.
Today Mutual Funds collectively manage almost as much money as banks.
7

Along with the success of Mutual Funds, inevitably there arose a need to regulate the industry.
Thus regulation and regulatory bodies came into being so that small investors were not misled
or put to loss by some unscrupulous people representing themselves as Mutual Funds.

Characteristics of Mutual Funds:


1 The ownership is in the hands of the investors who have pooled in their funds.
2 It is managed by a team of investment professionals and other service providers.
3 The pool of funds is invested in a portfolio of marketable investments.
4 The investors share is denominated by units whose value is called as Net Asset
Value (NAV) which changes everyday.
5 The investment portfolio is created according to the stated investment objectives
of the fund.

ADVANTAGES OF MUTUAL FUNDS:


The advantages of Mutual Funds are given below:
1 Portfolio Diversification
Mutual Funds invest in a number of companies. This diversification reduces the risk
because it happens very rarely that all the stocks decline at the same time and in the
same proportion. So this is the main advantage of Mutual Funds.
1 Professional Management
Mutual Funds provide the services of experienced and skilled professionals, assisted by
investment research team that analysis the performance and prospects of companies
and select the suitable investments to achieve the objectives of the scheme.
1 Low Costs
Mutual Funds are a relatively less expensive way to invest as compare to directly
investing in a capital markets because of less amount of brokerage and other fees.
1 Liquidity
This is the main advantage of Mutual Fund, which is whenever investor needs money
he can easily get redemption, which is not possible in most of other options of
investment. In open-ended schemes of Mutual Fund, the investor gets the money back
at net asset value and on the other hand in close-ended schemes the units can be sold
in a stock exchange at a prevailing market price.
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1 Transparency
In Mutual Fund, investors get full information of the value of their investment, the proportion
of money invested in each class of assets and the fund managers investment strategy
1 Flexibility
Flexibility is also the main advantage of Mutual Fund. Through this investors can
systematically invest or withdraw funds according to their needs and convenience like
regular investment plans, regular withdrawal plans, and dividend reinvestment plans etc.
1 Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps investors to avoid many
problems like bad deliveries, delayed payments and follow up with brokers and
companies. Mutual Funds save time and make investing easy.
1 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.
1 Well Regulated
All Mutual Funds are registered with SEBI and they function with in the provisions of
strict regulations designed to protect the interest of investors. The operations of Mutual
Funds are regularly monitored by SEBI.

Disadvantages of Mutual Funds:


Mutual Funds have their following drawbacks:
1

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 in Mutual Funds than when they buy and sell stocks on their own.
However, anyone who invests through Mutual Fund runs the risk of losing the money.

1 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 dont use a broker or other financial advisor, you will
pay a sales commission if you buy shares in a Load Fund.
1

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 profit on its sales, you
will pay taxes on the income you receive; even you reinvest the money you made.
9

Management Risk

When you invest in Mutual Fund, you depend on fund manager to make the right decisions
regarding the funds portfolio. If the manager does not perform 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.

Types of Mutual Fund Schemes:


In India, there are many companies, both public and private that are engaged in the
trading of Mutual Funds. Wide varieties of Mutual Fund Schemes exist to cater to the
needs such as financial position, risk tolerance and return expectations etc. Investment
can be made either in the debt Securities or equity .The table below gives an overview
into the existing types of schemes in the Industry.
MUTUAL FUND SCHEME
Other Debt
Schemes
By structure
Open-ended

Schemes

Close Ended
Schemes

B
y
I
n
v
e
st
m
e
n
t
Obj
ecti
ves

Ot
he
r
Sch
em
es
Ta
x
s
a

Interval
Schemes

v
i
n

Debt
Schemes
MM Mutual
Fund

g
f
u
n

10

FMP

Sector specific fund

Index
Schemes

Generally two options are available for every scheme regarding dividend payout and growth
option. By opting for growth option an investor can have the benefit of long-term growth in
the stock market on the other side by opting for the dividend option an investor can maintain
his liquidity by receiving dividend time to time. Some time people refer dividend option as
dividend fund and growth fund. Generally decisions regarding declaration of the dividend
depend upon the performance of stock market and performance of the fund.

Option Regarding Dividend

Growth

Dividend

Payout

Reinvested

Systematic Investment Plan (SIP):


Systematic investment plan is like Recurring Deposit in which investor invests in the particular
scheme on regular intervals. In the case it is convenient for salaried class and middle-income group.
In this case on regular interval units of specified amount is created. An investor can make payment
by regular payments by issuing cheques, post dated cheques, ECS, standing Mandate etc. SIP can
be started in the any open-ended fund if there is provision of it. There are some entry and exit load
barriers for discontinuation and redemption of the fund before the said period.

According to Structure:
Open Ended Funds:
An open ended 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 ended schemes is liquidity.

Close Ended Funds:


A close ended 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
1
1

the scheme at the same time of the initial public issue and thereafter they can buy and 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.

Interval Funds:
Interval funds combine the features of open ended and close ended schemes. They
are open for sales or redemption during pre-determined intervals at their NAV.

According to 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 proven that returns
from stocks are much better than the other investments had 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 the 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.

Money Market Funds:


The main aim of money market funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safe 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.
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2

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 inequity Linked Saving 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.

Special Schemes:
Index Schemes:
Index funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50.

Sector Specific Schemes:


Sector funds are those which invest exclusively in a specified industry or a group of
industries or various segments such as A group shares or initial public offerings.

Bond Schemes:
It seeks investment in bonds, debentures and debt related instrument to generate
regular income flow.

1
3

Indust
rial
Profil
e

14

Industry Profile:
The Mutual Fund industry is a lot like the film star of the finance business. Though it is perhaps
the smallest segment of the industry, it is also the most glamorous in that it is a young industry
where there are changes in the rules of the game everyday, and there are constant shifts and
upheavals. The Mutual Fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is achieved by the pooling
of a number of small investments into a large bucket. Yet it has been the subject of perhaps the
most elaborate and prolonged regulatory effort in the history of the country.

A little history:
The Mutual Fund industry started in India in a small way with the UTI Act creating what was
effectively a small savings division within the RBI. Over a period of 25 years this grew fairly
successfully and gave investors a good return, and therefore in 1989, as the next logical
step, public sector banks and financial institutions were allowed to float Mutual Funds and
their success emboldened the government to allow the private sector to foray into this area.

The initial years of the industry also saw the emerging years of the Indian equity market,
when a number of mistakes were made and hence the Mutual Fund schemes, which
invested in lesser-known stocks and at very high levels, became loss leaders for retail
investors. From those days to today the retail investor, for whom the Mutual Fund is
actually intended, has not yet returned to the industry in a big way. But to be fair, the
industry too has focused on brining in the large investor, so that it can create a
significant base corpus, which can make the retail investor feel more secure.
The Indian Mutual Fund industry has Rs 5.67 lakh crores of Assets Under
Management (AUM). As per data released by Association of Mutual Funds in India, the
asset base of all Mutual Fund combined has risen by 7.32% in April, the first month of
the current fiscal. As of now, there are 33 fund houses in the country including 16 joint
ventures and 3 wholly owned foreign asset managers.
According to a recent McKinsey report, the total AUM of the Indian Mutual Fund industry could
grow to $350-440 billion by 2012, expanding 33% annually. While the revenue and profit (PAT)
pools of Indian AMCs are pegged at $542 million and $220 million respectively, it is at par with
fund houses in developed economies. Operating profits for AMCs in India, as a percentage of
average assets under management, were at 32 basis points in 2006-07, while the number was
12 bps in UK, 17 bps in Germany and 18 bps in the US, in the same time frame.

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5

Major Players in Indian Mutual Fund Industry and Their AUM


Mutual Fund Name

ABN AMRO MF
7803AIG Global MF
SBI Mutual Fund
Birla Mutual Fund
BOB Mutual Fund
Canara Robeco Mutual Fund
DBS Chola Mutual Fund
Deutsche Mutual Fund
DSP Merrill Lynch Mutual Fund
Escorts Mutual Fund
Fidelity Mutual Fund
Franklin Templeton
Investments
HDFC Mutual Fund
HSBC Mutual Fund
ICICI Prudential Mutual Fund
ING Mutual Fund
JPMorgan Mutual Fund
Kotak Mahindra Mutual Fund
LIC Mutual Fund
Lotus India Mutual Fund
Morgan Stanley Mutual Fund
PRINCIPAL Mutual Fund
Quantum Mutual Fund
Reliance Mutual Fund
Sahara Mutual Fund
Mirae asset Mutual Fund
Sundaram Mutual Fund
Tata Mutual Fund
Taurus Mutual Fund
UTI Mutual Fund

No. of
Scheme
s
337
54
177
343
22
54
80
187
211
26
39
230
371
221
431
262
9
185
112
216
3
151
6
345
45
255
219
389
14
315

As on

Crores

July
July
July
July
July
July
July
July
Feb
Feb
Mar
July

31,
31,
31,
31,
31,
31,
31,
31,
29,
29,
31,
31,

2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008

7803
3513
29151.00
37497.00
56.00
4576.00
1853.00
10792.00
19483.00
177.00
7464.00
24441.00

July
July
July
July
July
July
July
July
July
July
July
July
July
July
July
July
July
July

31,
31,
31,
31,
31,
31,
31,
31,
31,
31,
31,
31,
31,
31,
31,
31,
31,
31,

2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008

50,752.00
16,385.00
55,161.00
7091.00
3054.00
18,782.00
17,499.00
7831.00
2,814.00
11,359.00
66.00
84,564.00
175.00
2546.00
11,898.00
20,443.00
289.00
46,120.00

Source: www.mutualundsindia.com/amc_snapshot.asp?amc_name=AM008

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6

History of Mutual Fund:


The Mutual Fund industry in India started in 1963 with the formation of Unit Trust of
India (UTI), at the initiative of the Government of India and Reserve Bank. The history of
Mutual Funds in India can be broadly divided into four distinct phases: -

First Phase 1964- 87


An Act of Parliament established Unit Trust of India (UTI) on 1963. It was setup by the
Reserve Bank of India and functioned under the Regulatory and administrative control
of the Reserve Bank of India. In 1978 UTI was delinked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in
place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of
1988 UTI hadRs.6, 700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds)


1987 marked the entry of non- UTI, public sector Mutual Funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June
1987 followed by Can bank Mutual Fund(Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92).LIC established its Mutual Fund in June 1989 while GIC had set
up its Mutual Fund in December 1990.At the end of 1993, the Mutual Fund industry had
assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)


With the entry of private sector funds in 1993, a new era started in the Indian Mutual Fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all Mutual Funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector Mutual Fund registered in July 1993.

Fourth Phase since February 2003


In February 2003, following the repeal of the Unit Trust of India Act 1963UTIwas bifurcated into two
separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under
management ofRs.29, 835 crores as at the end of January 2003, representing broadly, the assets of
US 64scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of
India, functioning under an administrator and under the rules framed by Government of India and
does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual
Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the
Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March2000 more
thanRs.76,000 crores of assets under management and with
1
7

the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with
recent mergers taking place among different private sector funds, the Mutual Fund industry has
entered its current phase of consolidation and growth. As at the end of September, 2004, there
were 29funds, which manage assets of Rs.153108 crores under 421 schemes.

Analysis:
1

First Phase 1964-87(UTI was the Only Player)

Second Phase 1987-1993 (Entry of Public Sector Funds):

Third Phase 1993-2003 (Entry of Private Sector Funds):

Fourth Phase Since February 2003.

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8

Overview of Mutual Fund Industry:


Over the past decades Mutual Funds have grown intensely in popularity and have experienced
a considerable growth rate. The graph indicates the growth of assets over the years.

Growth in Assets under Management:

1
9

Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the
Unit Trust of India effective from February 2003. The Assets under management of the
Specified Undertaking of the
Unit Trust of India has therefore been excluded from the total assets of the industry as a
whole from February 2003 onwards.
This is how a Mutual Fund going on. it is also called as the life cycle of Mutual Fund.

This is the way how Mutual Fund works. Its starts from investor and it also end with
investor. So investor plays a vital role in Mutual Fund. Its all about Mutual Fund. Now
we are going to discuss about the Reliance Mutual Fund (RMF) in detail.

Economic Environment:
While the Indian Mutual Fund industry has grown in size by about 320% from March,
1993 (Rs. 470 billion) to December, 2004 (Rs. 1505 billion) in terms of AUM, the AUM of
the sector excluding UTI has grown over 8 times from Rs.152 billion in March 1999 to $
148 billion as at March 2008.
Though India is a minor player in the global Mutual Fund industry, its AUM as proportion
of the global AUM has steadily increased and has doubled over its levels in 1999.The
growth rate of Indian Mutual Fund industry has been increasing for the last few years. It
was approximately 0.12% in the year of 1999 and it is noticed 0.25% in 2004 in terms of
AUM as percentage of global AUM.
2
0

Some facts for the growth of Mutual Funds in India:


1

100% growth in the last 6 years.

Number of foreign AMCs is in the queue to enter the Indian markets.

Our saving rate is over 23%, highest in the world. Only channelizing these savings
in Mutual Funds sector is required.

We have approximately 29 Mutual Funds which are much less than US having
more than 800. There is a big scope for expansion.

Mutual Fund can penetrate rural like the Indian insurance industry with simple and
limited products.

SEBI allowing the MF's to launch commodity Mutual Funds.

Emphasis on better corporate governance.

Trying to curb the late trading practices.

Introduction of Financial Planners who can provide need based advice.

Recent trends in Mutual Fund industry:


The most important trend in the Mutual Fund industry is the aggressive expansion of the foreign
owned Mutual Fund companies and the decline of the companies floated by the nationalized
banks and smaller private sector players. Many nationalized banks got into the Mutual Fund
business in the early nineties and got off to a start due to the stock market boom were
prevailing. These banks did not really understand the Mutual Fund business and they just
viewed it as another kind of banking activity. Few hired specialized staff and generally chose to
transfer staff from the parent organizations. The performance of most of the schemes floated by
these funds was not good. Some schemes had offered guaranteed returns and their parent
organizations had to bail out these AMCs by paying large amounts of money as a difference
between the guaranteed and actual returns. The service levels were also very bad. Most of
these AMCs have not been able to retain staff, float new schemes etc.

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1

Members of AMFI:
Bank Sponsored
1. Joint Ventures - Predominantly Indian
1. Canara Robeco Asset Management Company Limited
2. SBI Funds Management Private Limited
2. Others
1. Baroda Pioneer Asset Management Company Limited
2. UTI Asset Management Company Ltd
Institutions
1. LIC Mutual Fund Asset Management Company Limited
Private Sector
1. Indian
1. Benchmark Asset Management Company Pvt. Ltd.
2. DBS Cholamandalam Asset Management Ltd.
3. Deutsche Asset Management (India) Pvt. Ltd.
4. Edelweiss Asset Management Limited
5. Escorts Asset Management Limited
6. IDFC Asset Management Company Private Limited
7. JM Financial Asset Management Private Limited
8. Kotak Mahindra Asset Management Company Limited (KMAMCL)
9. Quantum Asset Management Co. Private Ltd.
10. Reliance Capital Asset Management Ltd.
11. Sahara Asset Management Company Private Limited
12. Tata Asset Management Limited
13. Taurus Asset Management Company Limited
2. Foreign
1. AIG Global Asset Management Company (India) Pvt. Ltd.
2. FIL Fund Management Private Limited
3. Franklin Templeton Asset Management (India) Private Limited
4. Mirae Asset Global Investment Management (India) Pvt. Ltd.

3. Joint Ventures - Predominantly Indian


1. Birla Sun Life Asset Management Company Limited
2
2

2. DSP Merrill Lynch Fund Managers Limited


3. HDFC Asset Management Company Limited
4. ICICI Prudential Asset Management Company Limited
5. Sundaram BNP Paribas Asset Management
Company Limited
4. Joint Ventures - Predominantly Foreign
1. ABN AMRO Asset Management (India) Pvt. Ltd.
2. Bharti AXA Investment Managers Pvt. Ltd
3. HSBC Asset Management (India) Private Ltd.
4. ING Investment Management (India) Pvt. Ltd.
5. JPMorgan Asset Management India Pvt. Ltd.
6. Lotus India Asset Management Co. Pvt. Ltd.
7. Morgan Stanley Investment Management Pvt. Ltd.
8. Principal PNB Asset Management Co. Pvt. Ltd.

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Frequently Used Terms:


Advisor - Is employed by a Mutual Fund organization to give professional advice on
the funds investments and to supervise the management of its asset.

Diversification The policy of spreading investments among range of different


securities to reduce the risk.

Net Asset Value (NAV) - Net Asset Value is the market value of the assets of the
scheme minus its liabilities. The per unit NAV is the net asset value of the scheme
divided by the number of units outstanding on the Valuation Date.

Sales Price - Is the price you pay when you invest in a scheme. Also called Offer
price. It may include a sales load.

Repurchase Price - Is the price at which a close-ended scheme repurchases its


units and it may include a back-end load. This is also called Bid Price.

Redemption Price - Is the price at which open-ended schemes repurchase their


units and close-ended schemes redeem their units on maturity. Such prices are NAV
related.

Sales Load - Is a charge collected by a scheme when it sells the units. Also called
Front-end load. Schemes that do not charge a load are called No Load schemes.\

Repurchase or Back-end Load


Is a charge collected by a scheme when it buys back the units from the unit holders.

Dividend Policy:
Dividend will be distributed from the available distributable surplus after the deduction of
the divided distribution surplus after the deduction of the dividend distribution tax and the
applicable surcharge, if any. The Mutual Fund is not guaranteeing or assuring any dividend.

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Chapter-02

ULIP (UNIT LINKED INSURANCE Policy)


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Introduction:

orld over, insurance come in different forms and shapes. although the generic names
may find similar, the difference in product features makes one wonder about the
basis on which these products are designed .With insurance market

opened up, Indian customer has suddenly found himself in market place where he is
bombarded with a lot of jargon as well as marketing gimmicks with a very little
knowledge of what is happening. This module is aimed at clarifying these underlying
concepts and simplifying the different products available in the market.

Current Market Share of Private Insurance Companies in India:

We have many products like Endowment, Whole life, Money back etc. All these
products are based on following basic platforms or structures viz:
1 Traditional Life Insurance
2 Universal Life or Unit Linked Insurance Policy.
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Traditional Life An Overview:


The basic and widely used form of design is known as Traditional Life Platform. It is based
on the concept of sharing. Each of the policy holder contributes his contribution (premium)
into the common large fund is managed by the company on behalf of the policy holders.
Administration of that common fund in the interest of everybody was entrusted to the insurance
company .It was the responsibility of the company to administer schemes for benefit of the
policyholders. Policyholders played a very passive roll. In the course of time, the same concept
of sharing and a common fund was extended to different areas like saving, investment etc.

Features of Traditional Life:


1 This is the simplest way of designing product as far as concerned. He has no other
responsibility but to pay the premium regularly.
2 Company is responsible for the protection as well as maximization of the
policyholders funds.
3 There is a common fund where in all the premiums paid are accumulated. Expenses
incurred as well as claim paid are then taken out of this fund.
4 Companies carry out the valuation of the fund periodically to ascertain the position. It is also a
practice to increase the minimum possible guarantee under a policy every year in the form of
declaring and attaching bonuses to the sum assured on the basis of this valuation.

5 Declaration of bonuses is not mandatory.


6 Based on the end objective, companies may offer different plans like saving plans,
investment plans etc.(e.g. Endowment , SPWLIP)
It helps to maintain a smooth growth and protects against the vagaries of the market. In
other words it minimizes the risk of investments for an average individual. He shares his
risk with a group of like-minded individuals.

Universal Life or Unit Linked Insurance Policy:


ULIP is the Product Innovation of the conventional Insurance product. With the decline
in the popularity of traditional Insurance products & changing Investor needs in terms of
life protection, periodicity, returns& liquidity, it was need of the hour to have an
Instrument that offers all these features bundled into one.
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Meaning:
A Unit Link Insurance Policy (ULIP) is one in which the customer is provided with a life
insurance cover and the premium paid is invested in either debt or equity products or a
combination of the two. In other words, it enables the buyer to secure some protection
for his family in the event of his untimely death and at the same time provides him an
opportunity to earn a return on his premium paid. In the event of the insured person's
untimely death, his nominees would normally receive an amount that is the higher of the
sum assured or the value of the units (investments).
To put it simply, ULIP attempts to fulfill investment needs of investor with
protection/insurance needs of an insurance seeker. It saves the investor/insuranceseeker the hassles of managing and tracking a portfolio or products. More importantly
ULIPs offer investors the opportunity to select a product which matches their risk profile.
Unit Linked Insurance Plans came into play in the 1960s and became very popular in
Western Europe and Americas. In India The first unit linked Insurance Plan , popularly
known as ULIP Unit Linked Insurance Plan in India was brought out by Unit Trust Of
India in the year 1971 by entering into a group insurance arrangement with LIC o
provide for life cover to the investors , while UTI , as a mutual was taking care of
investing the unit holders money in the capital market and giving them a fair return .
Subsequently in the year 1989, another Unit Linked Product was launched by the LIC
Mutual Fund called by the name of DHANARAKSHA which was more or less on the
line of ULIP of UTI. Thereafter LIC itself came out with a Unit Linked Insurance Product
known by name BIMA PLUS in the year2001-02.
Presently a number of private life insurance companies have launched Unit Linked
Insurance Products with a variety of new features.

ULIP - Key Features:


1

Premiums paid can be single, regular or variable. The payment period too can be

regular or variable. The risk cover can be increased or decreased.


2

As in all insurance policies, the risk charge (mortality rate) varies with age.

The maturity benefit is not typically a fixed amount and the maturity period can

be advanced or extended.
4

Investments can be made in gilt funds, balanced funds, money market funds,

growth funds or bonds.


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The policyholder can switch between schemes, for instance, balanced to debt or

gilt to equity, etc.


2

The maturity benefit is the net asset value of the units.

The costs in ULIP are higher because there is a life insurance component in it as

well, in addition to the investment component.


4

Insurance companies have the discretion to decide on their investment portfolios.

Being transparent the policyholder gets the entire episode on the performance of his fund.

ULIP products are exempted from tax and they provide life insurance.

Provides capital appreciation.

Investor gets an option to choose among debt, balanced and equity funds

Functions of ULIP:
1

ULIPs work on the lines of Mutual Funds. The premium paid by the client (less any
charge) is used to buy units in various funds (aggressive, balanced or conservative)
floated by the insurance companies.

Units are bought according to the plan chosen by the policyholder. On every
additional premium, more units are allotted to his fund.

The policyholder can also switch among the funds as and when he desires. While
some companies allow any number of free switches to the policyholder, some restrict
the number to just three or four. If the number is exceeded, a certain charge is levied.

Individuals can also make additional investments (besides premium) from time to
time to increase the savings component in their plan. This facility is termed "top-up".

The money parked in a ULIP plan is returned either on the insureds death or in the
event of maturity of the policy.

In case of the insured persons untimely death, the amount that the beneficiary is paid is the
higher of the sum assured (insurance cover) or the value of the units (investments).However,
some schemes pay the sum assured plus the prevailing value of the investments.

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Types of Funds do ULIP Offers:


Most insurers offer a wide range of funds to suit ones investment objectives, risk profile
and time horizons. Different funds have different risk profiles. The potential for returns
also varies from fund to fund.
The following are some of the common types of funds available along with an indication
of their risk characteristics.

General
Description

Equity Funds
Income, Fixed
Interest and Bond
Funds
Cash Funds

Balanced Funds

Nature of investment
Primarily invested in company stocks with
the
general aim of capital appreciation

Risk
Category
Medium to
High

Invested in corporate bonds, government


securities and other fixed income
instruments
Sometimes known as Money Market Funds
invested in cash, bank deposits and money
market instruments
Combining equity investment with fixed
interest
instruments

Medium

Low

Medium

There are various unit linked insurance plans available in the market. However, the key
ones are pension, children, group and capital guarantee plans.
The Pension Plans come with two variations with and without life cover and are
meant for people who want to generate returns for their sunset years.
The Children Plans, on the other hand, are aimed at taking care of their educational
and other needs.
Apart from unit-linked plans for individuals, Group Unit Linked Plans are also available in the
market. The Group linked plans are basically designed for employers who want to offer certain
benefits for their employees such as gratuity, superannuation and leave encashment.

The other important category of ULIPs is Capital Guarantee Plans. The plan promises the

policyholder that at least the premium paid will be returned at maturity. But the guaranteed
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amount is payable only when the policys maturity value is below the total premium paid
by the individual till maturity.
However, the guarantee is not provided on the actual premium paid but only on that portion
of the premium that is net of expenses (mortality, sales and marketing, administration).

USP of ULIPS:
Insurance cover plus savings:
ULIPs serve the purpose of providing life insurance combined with savings at marketlinked returns. To that extent, ULIPS can be termed as a two-in-one plan in terms of
giving an individual the twin benefits of life insurance plus savings.
Multiple investment options:
1 ULIPS offer a lot more variety than traditional life insurance plans. So there are multiple
options at the individuals disposal. ULIPS generally come in three broad variants:

2 Aggressive ULIPS (which can typically invest 80%-100% in equities, balance in debt)
3 Balanced ULIPS (can typically invest around 40%-60% in equities)
4 Conservative ULIPS (can typically invest up to 20% in equities)
5 Although this is how the ULIP options are generally designed, the exact
debt/equity allocations may vary across insurance companies. Individuals can opt
for a variant based on their risk profile.
Flexibility:
The flexibility with which individuals can switch between the ULIP variants to capitalize
on investment opportunities across the equity and debt markets is what distinguishes it
from other instruments. Some insurance companies allow a certain number of free
switches. Switching also helps individuals on another front. They can shift from an
Aggressive to a Balanced or a Conservative ULIP as they approach retirement. This is a
reflection of the change in their risk appetite as they grow older.
Works like an SIP:
Rupee cost-averaging is another important benefit associated with ULIPs. With an SIP,
individuals invest their monies regularly over time intervals of a month/quarter and dont
have to worry about timing the stock markets.

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Hurdles of ULIP:
No Standardization:
All the costs are levied in ways that do not lend to standardization. If one company
calculates administration cost by a formula, another levies a flat rate. If one company
allows a range of the sum assured (SA), another allows only a multiple of the premium.
There was also the problem of a varying cost structure with age
Lack of Flexibility in Life Cover:
ULIP is known to be more flexible in nature than the traditional plans and, on most
counts, they are. However, some insurance companies do not allow the individual to fix
the life cover that he needs. These rely on a multiplier that is fixed by the insurer
Overstating the Yield:
Insurance companies work on illustrations. They are allowed to show you how much
your annual premium will be worth if it grew at 10 per cent per annum. But there are
costs, so each company also gives a post-cost return at the 10per cent illustration,
calling it the yield. Some companies were not including the mortality cost while
calculating the yield. This amounts to overstating the yield.
Internally Made Sales Illustration:
During the process of collecting information, it was found that the sales benefit illustration
shown was not conforming to the Insurance Regulatory and Development Authority (IRDA)
format. In many locations30 per cent return illustrations are still rampant
Not All Show the Benchmark Return:
To talk about returns without pegging them to a benchmark is misleading the customer.
Though most companies use Sensex, BSE 100 or the Nifty as the benchmark, or the
measuring rod of performance, some companies are not using any benchmark at all.
Early Exit Options:
The ULIP product works over the long term. The earlier the exit, the worse off is the
investor since he ends up redeeming a high-front-load product and is then encouraged
to move into another higher cost product at that stage. An early exit also takes away the
benefit of compounding from insured.
Creeping Costs:
Since the investors are now more aware than before and have begun to ask for costs, some
companies have found a way to answer that without disclosing too much. People are now asking
how much of the premium will go to work. There are plans that are able to say 92 per cent will
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be invested, that is, will have a front load of just 8 per cent. What they do not say is the much
higher policy administration cost that is tucked away inside (adjusted from the fund value).While
most insurance companies charge an annual fee of about Rs 600 as administration costs, that
stay fixed over time, there are plans that charge this amount, but it grows by as much as 5 per
cent a year over time. There are others that charge a multiple of this amount and that too grows.

Are Investment Returns Guaranteed in a ULIP?


Investment returns from ULIP may not be guaranteed. In unit linked products/policies,
the investment risk in investment portfolio is borne by the policy holder. Depending
upon the performance of the unit linked fund(s) chosen; the policy holder may achieve
gains or losses on his/her investments. It should also be noted that the past returns of a
fund are not necessarily indicative of the future performance of the fund.

Charges, fees and deductions in a ULIP:


ULIPs offered by different insurers have varying charge structures. Broadly, the different
types of fees and charges are given below. However it may be noted that insurers have
the right to revise fees and charges over a period of time.
Premium Allocation Charge:
This is a percentage of the premium appropriated towards charges before allocating the
units under the policy. This charge normally includes initial and renewal expenses apart
from commission expenses.
Mortality Charges:
These are charges to provide for the cost of insurance coverage under the plan. Mortality
charges depend on number of factors such as age, amount of coverage, state of health etc.

Fund Management Fees:


These are fees levied for management of the fund(s) and are deducted before
arriving at the Net Asset Value (NAV).
Policy/ Administration Charges:
These are the fees for administration of the plan and levied by cancellation of units. This
could be flat throughout the policy term or vary at a per-determined rate.
Surrender Charges:
A surrender charge may be deducted for premature partial or full encashment of units
wherever applicable, as mentioned in the policy conditions.
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Fund Switching Charge:


Generally a limited number of fund switches may be allowed each year without charge,
with subsequent switches, subject to a charge.
Service Tax Deductions:
Before allotment of the units the applicable service tax is deducted from the risk portion
of the premium.
Can one seek refund of premiums if not satisfied with the policy, after
purchasing it?
The policyholder can seek refund of premiums if he disagrees with the terms and
conditions of the policy, within 15 days of receipt of the policy document (Free Look
period). The policyholder shall be refunded the fund value including charges levied
through cancellation of units subject to deduction of expenses towards medical
examination, stamp duty and proportionate risk premium for the period of cover.
What should one verify before signing the proposal?
One has to verify the approved sales brochure for
1o All the charges deductible under the policy
2o Payment on premature surrender
3o Features and benefits
4o Limitations and exclusions
5o Lapsation and its consequences
6o Other disclosures
7o Illustration projecting benefits payable in two scenarios of 6% and 10%
returns as prescribed by the life insurance council.
What happens if payment of premiums is discontinued?

a) Discontinuance within three years of commencement


If all the premiums have not been paid for at least three consecutive years from inception, the
insurance cover shall cease immediately. Insurers may give an opportunity for revival within the
period allowed; if the policy is not revived within that period, surrender value shall be paid at the end
of third policy anniversary or at the end of the period allowed for revival, whichever is later.

b) Discontinuance after three years of commencement


At the end of the period allowed for revival, the contract shall be terminated by paying
the surrender value. The insurer may offer to continue the insurance cover, if so opted
for by the policy holder, levying appropriate charges until the fund value is not less than
one full years premium. When the fund value reaches an amount equivalent to one full
years premium, the contract shall be terminated by paying the fund value.
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Chapter-03

ULIPs vs. Mutual Funds


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Comparison between ULIPS and Mutual Funds:

nit Linked Insurance Policies (ULIPs) as an investment avenue are closest to Mutual Funds
in terms of their structure and functioning. As is the cases with Mutual Funds, investors in
ULIPs are allotted units by the insurance company and a net asset value

(NAV) is declared for the same on a daily basis.


Similarly ULIP investors have the option of investing across various schemes similar to
the ones found in the Mutual Funds domain, i.e. diversified equity funds, balanced funds
and debt funds to name a few. Generally speaking, ULIPs can be termed as Mutual
Fund schemes with an insurance component.
However it should not be construed that barring the insurance element there is nothing
differentiating Mutual Funds from ULIPs.
Points of difference between the two:
1. Mode of investment/ investment amounts

Mutual Fund investors have the option of either making lump sum investments or investing
using the systematic investment plan (SIP) route which entails commitments over longer
time horizons. The minimum investment amounts are laid out by the fund house.

ULIP investors also have the choice of investing in a lump sum (single premium) or
using the conventional route, i.e. making premium payments on an annual, half-yearly,
quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting
point for the investment activity.
This is in stark contrast to conventional insurance plans where the sum assured is the
starting point and premiums to be paid are determined thereafter.
ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure.
For example an individual with access to surplus funds can enhance the contribution thereby
ensuring that his surplus funds are gainfully invested; conversely an individual faced with a
liquidity crunch has the option of paying a lower amount (the difference being adjusted in the
accumulated value of his ULIP). The freedom to modify premium payments at ones
convenience clearly gives ULIP investors an edge over their Mutual Fund counterparts.

2. Expenses
In Mutual Fund investments, expenses charged for various activities like fund
management, sales and marketing, administration among others are subject to perdetermined upper limits as prescribed by the Securities and Exchange Board of India.
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For example equity-oriented funds can charge their investors a maximum of2.5% per
annum on a recurring basis for all their expenses; any expense above the prescribed limit is
borne by the fund house and not the investors. Similarly funds also charge their investors
entry and exit loads (in most cases, either is applicable). Entry loads are charged at the
timing of making an investment while the exit load is charged at the time of sale.

Insurance companies have a free hand in levying expenses on their ULIP products with
no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and
Development Authority. This explains the complex and at times 'unwieldy' expense
structures on ULIP offerings. The only restraint placed is that insurers are required to
notify the regulator of all the expenses that will be charged on their ULIP offerings.
Expenses can have far-reaching consequences on investors since higher expenses translate
into lower amounts being invested and a smaller corpus being accumulated. ULIP-related
expenses have been dealt with in detail in the article "Understanding ULIP expenses".

3. Portfolio disclosure
Mutual Fund houses are required to statutorily declare their portfolios on a quarterly basis,
albeit most fund houses do so on a monthly basis. Investors get the opportunity to see where
their monies are being invested and how they have been managed by studying the portfolio.

There is lack of consensus on whether ULIPs are required to disclose their portfolios.
During our interactions with leading insurers we came across divergent views on this issue.

While one school of thought believes that disclosing portfolios on a quarterly basis is
mandatory, the other believes that there is no legal obligation to do so and that insurers
are required to disclose their portfolios only on demand.
Some insurance companies do declare their portfolios on a monthly/quarterly basis.
However the lack of transparency in ULIP investments could be a cause for concern
considering that the amount invested in insurance policies is essentially meant to provide
for contingencies and for long-term needs like retirement; regular portfolio disclosures on
the other hand can enable investors to make timely investment decisions.

4. Flexibility in altering the asset allocation


As was stated earlier, offerings in both the Mutual Funds segment and ULIPs segment are
largely comparable. For example plans that invest their entire corpus in equities (diversified
equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those
investing only in debt instruments (debt funds) can be found in both ULIPs and Mutual Funds.
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If a Mutual Fund investor in a diversified equity fund wishes to shift his corpus into a
debt from the same fund house, he could have to bear an exit load and/or entry load.
On the other hand most insurance companies permit their ULIP inventors to shift investments
across various plans/asset classes either at a nominal or no cost (usually, a couple of switches
are allowed free of charge every year and a cost has to be borne for additional switches).

Effectively the ULIP investor is given the option to invest across asset classes as per his
convenience in a cost-effective manner.
This can prove to be very useful for investors, for example in a bull market when the
ULIP investor's equity component has appreciated, he can book profits by simply
transferring the requisite amount to a debt-oriented plan.
5. Tax benefits
ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This
holds well, irrespective of the nature of the plan chosen by the investor. On the other
hand in the Mutual Funds domain, only investments I-Tax-saving funds (also referred to
as equity-linked savings schemes) are eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (For
example diversified equity funds, balanced funds), if the investments are held for a
period over 12 months, the gains are tax free; conversely investments sold within a 12month period attract short-term capital gains tax @ 10%.
Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term capital
gain is taxed at the investor's marginal tax rate. Despite the seemingly similar structures evidently
both Mutual Funds and ULIPs have their unique set of advantages to offer. As always, it is vital for
investors to be aware of the nuances in both offerings and make informed decisions.

Facts to Be Considered Before Investing In ULIPS:


The high returns (above 20 per cent) are definitely not sustainable over along term,
as they have been generated during the biggest Bull Run in recent stock market history.
The free hand given to ULIPs might prove risky if the timing of exit happens to coincide with a
bearish market phase, because of the inherently high equity component of these schemes.
While a debt-oriented ULIP scheme might be superior to a debt option in a conventional Mutual
Fund due to tax concessions that insurance companies enjoy, such tax incentives may not last.
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Look beyond NAVs:


The appreciations in the net asset value (NAV) of ULIPs barely indicate the actual returns
earned on your investment. The various charges on your policy are deducted either directly
from premiums before investing in units or collected on a monthly basis by knocking off units.
Either way, the charges do not affect the NAV; but the number of units in your account suffers.
You might have access to daily NAVs but your real returns may be substantially lower. A rough
calculation shows that if our investments earn a 12 per cent annualized return over a 20-year
period in a growth fund, when measured by the change in NAV, the real pre- tax returns might
be only 9 per cent. The shorter the term, the lower the real returns.

How charges dent returns:


An initial allocation charge is deducted from our premiums for selling, marketing and
broker commissions. These charges could be as high as 65per cent of the first year
premiums. Premium allocation charges are usually very high (5-65 per cent) in the first
couple of years, but taper off later. The high initial charges mainly go towards funding
agent commissions, which could be as high as 40 per cent of the initial premium as per
IRDA (Insurance Regulatory and Development Authority) regulations.
The charges are higher for a linked plan than a non-linked plan, as the former require lot
more servicing than the latter, such as regular disclosure of investments, switches, redirection of premiums, withdrawals, and so on.
Insurance companies have the discretion to structure their expenses structure whereas
a Mutual Fund does not have that luxury. The expense ratios in their case cannot
exceed 2.5 per cent for an equity plan and 2.25 per cent for a dept plan respectively.
The lack of regulation on the expense front works to the detriment of investors in ULIPs.
The front-loading of charges does have an impact on overall returns as we lose out on the
compounding benefit. Insurance companies explain that charges get evened out over a long
term. Thus we are forced to stay with the plan for a longer tenure to even out the effect of initial
charges as the shorter the tenure, the lower our real returns. If we want to withdraw from the
plan, you lose out, as you will have to pay withdrawal charges up to a certain number of years.

In effect, when we lock in our money in a ULIP, despite the promise of flexibility and
liquidity, we are stuck with one fund management style. This is all the more reason to
look for an established track record before committing our hard-earned money.
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Evaluate alternative options:


As an investor we have to evaluate alternative options that give superior returns before
considering ULIPs. Insurance companies argue that comparing ULIPs with Mutual Funds is
like comparing oranges with apples, as the objectives are different for both the products.
Most ULIPs give us the choice of a minimum investment cover so that we can direct
maximum premiums towards investments.
Both ULIPs and Mutual Funds target the same customers. If risk cover is your
primary objective, pure insurance plans are less expensive. When we choose a Mutual
Fund, we look for an established track record of three to five years of consistent returns
across various market cycles to judge a fund's performance.
It is early days for insurance companies on this score; investing substantially in linked
plans might not be advisable at this juncture.
Try top-ups
Insurance companies allow us to make lump-sum investments in excess of the regular premiums.
These top-ups are charged at a much lower rate usually one to two per cent. The expenses
incurred on a top-up including agent commissions are much lower than regular premiums.

Some companies also give a credit on top-ups. For instance, if you pay in Rs
100 as a top up, the actual allocation to units will be Rs 101. If you keep the regular
premiums to the minimum and increase your top ups, you can save up on charges,
enhancing returns in the long run.
Reduce life cover:
The price of the life cover attached to a ULIP is higher than a normal term plan. Risk
charges are charged on a daily or monthly basis depending on the daily amount at risk.
Rates are not locked and are charged on a one-year renewal basis.
Our life cover charges would depend on the accumulation in your investment account.
As accumulation increases, the amount at risk for the insurance company decreases.
However, with increasing age, the cost per Rs 1,000sum assured increases, effectively
increasing your overall insurance costs. A lower life cover could yield better returns.
Stay away from riders;
Any riders, such as accident rider or critical illness rider, are also charged on a one-year renewal
basis. Opting for these riders with a plain insurance cover could provide better value for money.
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ULIP's as an investment is a very good vehicle for wealth creation, but way
Unit Linked Insurance schemes are sold by insurance company representatives and
insurance advisers is not correct.
ULIP's usually have following charges built into it:
1) Up-front Charges
2) Mortality Charges (Charges for providing the risk cover for life)
3) Administrative Charges
4) Fund Management Charges
Mutual Funds have the following charges:
1) Up-front charges (Marketing, Advertising, distributors fee etc.)
2) Fund Management Charges (expenses for managing your fund)
A few aspects of investing in ULIPs versus Mutual Funds.
Liquidity;
ULIPs score low on liquidity. According to guidelines of the Insurance Regulatory and
Development Authority (IRDA), ULIPs have a minimum term of five years and a
minimum lock in of three years. You can make partial withdrawals after three years. The
surrender value of a ULIP is low in the initial years, since the insurer deducts a large
part of your premium as marketing and distribution costs. ULIPs are essentially longterm products that make sense only if your time horizon is 10 to 20 years.
Mutual Fund investments, on the other hand, can be redeemed at any time, barring ELSS
(equity-linked savings schemes). Exit loads, if applicable, are generally for six months to a
year in equity funds. So Mutual Funds score substantially higher on liquidity.
Tax efficiency
ULIPs are often pitched as tax-efficient, because your investment is eligible for exemption under
Section 80C of the Income Tax Act (subject to a limit of Rs 1 lakh). But investments in ELSS
schemes of Mutual Funds are also eligible for exemption under the same section .Besides the
premium, the maturity amount in ULIPs is also tax-free, irrespective of whether the investment
was in a balanced or debt plan. So they do have an edge on Mutual Funds, as debt funds are
taxed at 10% without indexation benefits, and20% with indexation benefits. The point, though, is
that if you invest in a debt plan through a ULIP, despite its tax-efficiency your post-tax returns
will below, because of high front-end costs. Debt Mutual Funds dont charge such costs.

Expenses
Insurance agents get high commissions for ULIPs, and they get them in the initial years, not
staggered over the term. So the insurer recovers most charges from you in the initial years, as it
risks a loss if the policy lapses. Typically, insurers levy enormous selling charges, averaging
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more than 20%of the first years premium, and dropping to 10% and 7.5% in subsequent
years. (And this is after investors balked when charges were as high as 65 %)

Compare this with Mutual Funds fees of 2.25% on entry, uniform for all schemes.
Different ULIPs have varying charges, often not made clear to investors.
For instance, an agent who sells you a ULIP may get 25% of your first years premium,
10% in the second year, 7.5% in the third and fourth year and 5%thereafter. If your
annual premium is Rs 10,000 and the agents commission in the first year is 25%, it
means only Rs 7,500 of your money are invested in the first year. So even if the NAV of
the fund rises, say 20%, that year, your portfolio would be worth only Rs 9,000much
lower than the Rs 10,000 you paid. On the other hand, if you invest Rs 10,000 in an
equity scheme with a2.25% entry load, Rs 225 is deducted, and the rest is invested. If
the schemes NAV rises 20%, your portfolio is worth Rs 11,730. This shows how
ULIPs work out expensive for investors. Deduct the cost of a term policy from the
Mutual Fund returns, and youre still left with a sizable difference.

4
2

Mutual Fund Vs ULIP in a Nut


shell

4
3

Review of the Literature:


In Orissa apart from Bajaj capital there is four more third Party broker Companies
are there. Looking at the market share the LIC is the pioneer but in last few years
the private players have performed very well despite that the Performance of
Bajaj Capital though satisfactory, but it is not the best. Because the other players
are giving a cut throat competition & grabbing a high chunk of the market share.
In order to decipher the reason behind this cause. At first I inquired my respondents
regarding its product line but no where they reflected it as a matter of worry. As per
their opinion Bajaj capital have a sound product line tackle this problem. Then I
focused on the quality of service provided by Bajaj Capital, Similarly the ICs marked
it to be satisfactory, when I asked for their feedback in the questionnaire & through
personal interview, many of them said that the people of Orissa have less
knowledge regarding the products & service quality offered by Bajaj Capital. In their
view the problem might be lying with the promotional strategy of Field Force. So I
decided to carry on a study to decipher the competitiveness of Promotional Strategy
of Field Force of Bajaj Capital in Orissa.

Then I tried to gain as much as knowledge regarding the promotional strategy


being a vital tool for a companys success for this I searched for as much as
information as I can & I went through many journals, books , Internet sources.
The knowledge I have acquire & the problem with Bajaj Orissa in Orissa ,
inspired to me carry on my survey to study the competitiveness of promotional
strategy of field force of Bajaj Capital in Orissa.

The hypothesis taken behind this study is that the promotional strategy of
field force of Bajaj Capital in Orissa is not Profound.

4
4

Chapter-04

Company Profile

Bajaj Capital's Mission Statement

The focus of our organization is to be the most useful, reliable and


efficient provider of Financial Services. It is our continuous endeavor to be
a trustworthy adviser to our clients, helping them achieve BCIBL financial
goals.

45

Bajaj Capital Ltd.

he Bajaj Capital Group is one of Indias premier Investment Advisory and Financial
Planning companies. It is also SEBI- approved Category Merchant Bankers.

Bajaj Capital is among the pioneers of the investment advisory and financial planning
industry in India. For over four decades, the Company has been serving Indian
investors, and giving shape to the vision of its founder-chairman, Mr. K.K. Bajaj.
It offers personalized Investment Advisory and Financial Planning services to individual
investors, corporate houses, institutional investors, Non-Resident Indians (NRIs) and
High Net worth Clients, among others.
As one of Indias largest distributors of financial products, we offer a wide range of
investment products such as Mutual Funds, life and general insurance, bonds, post office
schemes, etc. offered by reputed public and private and government organizations.

Company Profile:
Bajaj Capital is one of Indias leading Financial Services companies offering Free Advice on
Investments, Insurance, Tax Saving, Retirement Planning, Financial Planning, Childrens
Future Planning and other services. It also has a wide range of products and services for
Corporate, High Net worth Individuals, and NRIs all under one roof.
At Bajaj Capital, it believes in dreaming big. Dreams inspire us to excel. They ignite hope and
kindle in us the passion to stretch there limits. It also believes that nothing can or should stop us
from realizing our dreams and financial constraints should be the last thing to stop anyone.

Four decades of excellence:


For over four decades, we have been helping people realize BCIBL aspirations by helping
them make their wealth grow, and plan their financial lives. Today, Bajaj Capital is a one of
the largest financial planning and investment advisory companies in India, with a
strong presence all over the country. It takes pride in serving our customers both individual
and institutional, and is known for our strong professionalism and work ethics.

Wide range of services:


We offer a comprehensive range of services including financial planning and investment advice,
and the entire gamut of financial instruments and investment products of almost all major
4
6

companies, both public and private. In addition, we also provide investment assistance by
helping you complete all the formalities, and help you keep regular track of your investments.

These services and products are delivered through our network of 134 Bajaj Capital
Investment Centers located all over the country.
Bajaj Capital is also a SEBI- approved Category Merchant Banker. They raise resources
for over 1,000 top institutions and corporate houses every year, and offer specialized
services to Non-Resident Indian (NRIs) and High Net worth Clients.

Key Personnel
1

Mr. K.K. Bajaj

Chairman
2

Mr. Rajiv Deep Bajaj

Vice Chairman & Managing Director


3

Mr. Sanjiv Bajaj

Joint Managing Director


4

Mr. Anil Chopra

CEO & Director

4
7

Introducing Bajaj Capital Insurance Broking Ltd (BCIBL)

By your side whenever you need us


Risks are unavoidable in personal life and in business, but can be managed by proper planning.

As a true partner, BCIBL promises to use their knowledge for customer benefit. Be it
advice on the right insurance products or looking after your rights and interests in case
of a claim, with a mission-well be by your side... whenever you need us.
That's exactly where they at Bajaj Capital Insurance Broking Ltd. step in. At BCIBL,
an IRDA licensed "Composite Insurance Broker" bearing license number CB
042/02, they call it Risk Management. They help customers to identify the potential risks
and pass some of them on to insurance companies.
They are customers partners, who help them to identify and understand various risks,
prioritize them and eventually manage them.
As a broker, BCIBL do not offer customers just a single option but multiple options
available, and help you select the most appropriate one.

Products:
They offer a wide range of Life and General Insurance products offered by the
insurance companies that cover almost the entire spectrum of risks that individuals or
your business may face.
BCIBL offers a wide range of insurance packages including:
1 Personal Lines
2
3
4
5

Auto
Home
Travel
Accident & Health

6 Property Insurance
7 Fire and Special Peril
8 Marine
9 Machinery Breakdown
10 Electronic Equipment Insurance

4
8

1 Loss of Profits etc.

2 Liability Insurance
3 Commercial
4 General Liability
5 Product Liability
6 Workman's
Liability

Compensation/

Employer's

7 Contingency Risks
8 Event Cancellation
9 Wedding Insurance
10 All Risk for Mobiles, Computers and
Laptops etc.
11 Industrial All Risk and Project Insurance
12 Specialty Products
13 Professional Indemnity/Errors & Omissions (E&O)
14 Directors and Officers Liability (D&O)
15 Fidelity Guarantee
16 Commercial Cyber Crime Insurance
17 Credit Insurance
18 Mutual Fund & Asset Protection

4
9

Why consult BCIBL?


1

As IRDA licensed Insurance Brokers, BCIBL are your representatives

unlike an agent who represents an insurance company.


2

At BCIBL, BCIBL consider it your right to receive independent, unbiased

and professional advice.


3

BCIBL enjoy the 'Preferred Insurance Broker' status with many of the Insurance

companies. This, in essence, translates into a greater benefit for customers.

In fact, BCIBL enjoy a transactional relationship with almost all the

Insurance companies present in India.


5

We are therefore proud to say that many companies have come up with

insurance products based on our feedback.


6

We have a strong operational and servicing team, and an all-India reach.

We also have the support of a strong IT infrastructure and responsive call

centers. As such, we are easily accessible.

Milestones:
Bajaj Capital has contributed to the growth of the Indian Capital Market at every step.
In 1965, BCIBL were the first to innovate the Companies Fixed Deposit. Today, BCIBL is
playing an active role in the growth of the Indian Mutual Fund industry.
BCIBL is also working closely with private insurance companies to deepen India's
insurance market.
Here is a brief gist of BCIBLs journey through the years.

1964
Bajaj Capital sets up its first Investment Centre in New Delhi to guide individual
investors on where, when and how to invest.
India's first Mutual Fund, Unit Trust of India (UTI) is incorporated in the same year.

1965
Bajaj Capital is incorporated as a Company. In the same year, the company introduces
an innovative financial instrument the Company Fixed Deposit. EIL Ltd. (Oberoi Hotels,
then known as Associated Hotels of India Ltd.) becomes the first company to raise
resources through Company Fixed Deposits.
5
0

1966
Bajaj Capital expands its product range to include all UTI schemes and Government
saving schemes in addition to Company Fixed Deposits.

1969
Bajaj Capital manages its first Equity issue (through an associate company) of Grauer &
Wells India Ltd.; right from drafting the prospectus to marketing the issue.

1975
Bajaj Capital starts offering 'need-based' investment advice to investors, which would
later be known as 'Financial Planning' in the investment world.

1981
SAIL becomes the first government company to accept deposits, followed by IOC,
BHEL, BPCL, HPCL and others; thus opening the floodgates for growth of retail
investment market in India.
Bajaj Capital plays an active role in all the schemes as 'Principal Brokers.

1986
Public Sector Undertakings (PSUs) begin making public issues of bonds MTNL, NHPC, IRFC
offer a series of Bond Issues. Bajaj Capital is among the top ranks of resource mobilizes.

1987
SBI leads the launch of Public Sector Mutual Funds in India. Bajaj Capital plays a
significant role in fund mobilization for all these players.

1991
SBI issues India Development Bonds for NRIs. Bajaj Capital becomes the top mobiliser
with collections of over US $20 million.

1993
The first private sector Mutual Fund Kothari Pioneer is launched, followed by Birla and
Alliance in the following years. Bajaj Capital plays an active role and is ranked among
the top mobilisers for all these schemes.

1995
IDBI and ICICI begin issuing their series of Bonds for retail investors. Bajaj Capital is
the co-manager in all these offerings and consistently ranks among the top five
mobilisers on an all-India basis.

1997
Private sector players lead the revival of Mutual Funds in India through Open-ended
Debt schemes. Bajaj Capital consolidates its position as India's largest retail distributor
of Mutual Funds
5
1

1999
Bajaj Capital begins marketing Life and General Insurance products of LIC and GIC
(through associate firms) in anticipation of opening up of the Insurance Sector. Bajaj
Capital achieves the milestone of becoming the top 'Pension Scheme' seller in India and
launches marketing of GIC's Health Insurance schemes.

2000
Bajaj Capital implements its vision of being a 'One-stop Financial Supermarket.' The
Company offers all kinds of financial products, including the entire range of investment
and insurance products through its Investment Centers. Bajaj Capital offers 'full-service
merchant banking' including structuring, management and marketing of Capital issues.
Bajaj Capital reinvents 'Financial Planning' in its international sense and upgrades its
entire team of Investment Experts into Financial Planners.

2002
The Company focuses on creating investor awareness for Financial Planning and needbased investing. To achieve this goal, the company introduced the International College
of Financial Planning. The graduates of this institute become Certified Financial
Planners (CFPs), a coveted professional qualification.

2004
Bajaj Capital obtains the All India Insurance Broking License. Simultaneously, a series of wealth
creation seminars are launched all over the country, making Bajaj Capital a household name.

2005
Bajaj Capital launches 360 Financial Planning, a software-based program aimed at
encouraging scientific and holistic investing.

2007
Bajaj Capital launches Stock Broking and Depository (Demat) Services.

2008
Bajaj Capital launches Just Trade, an online Platform for investing in Equities, Mutual
Funds, IPO's

5
2

Objectives of Bajaj Capital:


1 To serve their clients with utmost dedication and integrity so that they exceed
their expectations and build enduring relationships.
2 To offer unparalleled quality of service through complete knowledge of products,
constant innovation in services and use of the latest technology.
3 To always give honest and unbiased financial advice and earn their clients'
everlasting trust.
4 To serve the community by educating individuals on the merits of Financial
Planning and in turn help shape a financially strong society.
5 To create value for all stake holders by ensuring profitable growth.
6 To build an amicable environment that accords respect to every individual and
permits their personal growth.
7 To utilize the power of teamwork to function as a family and build a seamless
organization.

The Significance of the Logo of Bajaj capital:

The logo depicts Lord Ganesha who is the source of all our values and ethics in business.

The large ears of Lord Ganesha remind Bajaj Capital to hear more. They listen
carefully to our clients to understand their needs.

The weight of the trunk on the mouth symbolizes silence. Bajaj Capital works
silently, without blowing their own trumpet.

The long trunk symbolizes continuous exploration. Bajaj Capital explores all
avenues to provide the best investment opportunities for our clients.

The heavy posture of Ganesha symbolizes stability. Bajaj Capital helps our clients
to attain financial stability through wise investments.
5
3

Lord Ganesha is known as the remover of obstacles and bestower of prosperity.

Bajaj Capital emulates His example and tries their best to help our clients attain
prosperity by proper financial planning.
2

The logo has a yellow background. Yellow is the color of gold, which symbolizes wealth.
According to Vedic lore, it is also the color associated with Brihaspati, the guru and
counselor of the Gods. We offer our clients sage counsel to make their wealth grow.

The letters are in red. Red is the color rajas symbolizing power and incessant

activity. It symbolizes our aggressive quest for your well-being and happiness.
The white streak represents the trunk of Lord Ganesha. White is the color of

satvaguna, and implies our selfless commitment to your life-long happiness.


Strengths of Bajaj Capital:
1

Wide range of products and services

41 years experience as Investment Advisors and Financial Planners

More than eight lakh satisfied clients all over India

Countrywide network of 134 branches

Over 12,000 NRI clients across the globe

Personalized wealth management advice

24 x 7 online accessibility through www.bajajcapital.com

Strong team of qualified and experienced professionals including CAs, MBAs,


MBEs, CFPs, CSs, Insurance experts, Legal experts and others

SEBI-Approved Category I Merchant Bankers


1

Group Co BCIBL is an IRDA-licensed Direct Insurance Broker


5
4

Chapter-05

Research

Research Methodology
5
5

Research Methodology:
Objective of the Research:
1
2
3

To study about the Mutual Funds industry.


To study the approach of investors towards Mutual Funds and ULIPs.
To study the behavior of the investors whether they prefer Mutual Funds or ULIPS?

Scope of the research:


1
2
3
4

Subject matter is related to the investors approach towards Mutual Funds and ULIPs.

People of age between 20 to 65.


Area limited to Cuttack & Bhubaneswar.
Demographics include names, age, qualification, occupation, marital status and
annual income.

Achievements:
My On The Job Training has given me a good experience in learning how to sell a product,
how to deal with the customers, how to generate leads, how to maintain relation with the
existing customers, how to get the references from the existing customers, how maintain a
good relationship with co-employees. I have learn the convincing and persuasive skills in
my OJT. Initially I have faced some hurdles in the beginning of the project to get the leads,
but later on I could coup with the problems and I could perform my task successfully.

Steps of Research Design:


Define the information needed:
This first step states that what the information that is actually required is. Information in this
case we require is that what is the approach of investors while investing their money in
Mutual Funds and ULIPs. E.g. what do they consider while deciding as to invest in which of
the two i.e. Mutual Funds or ULIPs. Also, it studies the extent to which the investors are
aware of the various costs that one bears while making any investment. So, the information
sought and information generated is only possible after defining the information needed.
Design the research:
A research design is a framework or blueprint for conducting the research project. It
details the procedures necessary for obtaining the information needed to solve research
problems. In this project, the research design is explorative in nature.
5
6

Specify the scaling procedures:


Scaling involves creating a continuum on which measured objects are located. Both
nominal and interval scales have been used for this purpose.
Construct and pretest a questionnaire:
A questionnaire is a formalized set of questions for obtaining information from respondents.
Where as pretesting refers to the testing of the questionnaire on a small sample of problems.

Population:
The general public who are investing money in Mutual Funds and ULIPs, both.
Sample Unit:
Investors and non-investors.
Sample Size:
This study involves 50 respondents.
Sampling Technique:
The sample size has been taken by non-random convenience sampling technique
Data Collection:
Data has been collected both from primary as well as secondary sources as described below:

Primary sources:
Primary data was obtained through questionnaires filled by people and through direct
communication with respondents in the form of Interview.
Secondary sources:
The secondary sources of data were taken from the various websites, books, journals
reports, articles etc. This mainly provided information about the Mutual Fund and ULIPs
industry in India.
Plan for data analysis:
Analysis of data is planned with the help of mean, chi-square technique and analysis of variance.

5
7

Analysis & Interpretation


5
8

Market Capitalization of Mutual Funds and


ULIPs:
What do investors prefer?
1) Do you invest in Mutual Funds?

Response

Frequenc Percenta
y
ge

Yes

19

38%

No

31

62%

total

50

100

Interpretation: 62% of the people invest in mutual funds.

5
9

2) If not, then what other option(s) do you prefer to invest?


Options
Fixed deposits

frequency

percentage
s

12

42.10

Post office schemes

31.57

Recurring deposits

15.78

Others

10.52

Total

31

100

What is the mode of information that you use for


insurance companies?
3)

6
0

Options

Frequency percentage

Advertisements
Agents
Seminar
Workshop
Others
total

Options
Advertisements
Agents
Seminar
Workshop
Others
Total

21
11
6
8
4
50

42%
22%
12%
16%
8%
100

Frequenc Observe (observe


y dd- (observedexpected
expecte
expected)
2
)
d
/e
21
11
6
8
4
50

11
1
-4
-2
-6

121
1
16
4
36
178

Expected Frequency=50/5=10
Chi square= observed-expected = 17.8
Expected
At 4 degree of freedom, df (4) =7.815, thus the calculated value is
greater than the table value. Hence, H0 is rejected

Interpretation: It means that all the modes of information are not the
same. Advertisement is more popular

12.1
0.1
1.6
0.4
3.6
17.8

6
1

4) In which sector do you prefer to invest your


money?
Frequenc Percentag
y
es
27
23
50

Options
Government sector
Private sector
Total

54
46
100

Frequenc Observe (observe


y dd- (observedexpected
expecte
expected)
)2 /e
d

Options
Government
sectors
Private sector
Total

27

0.16

23
50

-2
-2

4
8

0.16
0.32

Expected
Frequency=50/2=25
Chi square= observed-expected =
0.32
Expected
At df(1), the table value is 3.841 which is greater than the

calculated value. Hence, H0


is accepted.
Interpretation: People prefer both the sectors equally.
6
2

5) At which rate do you want your investment to grow?

Frequenc
y

Options

Percentag
es

Steadily

17

34

At an average rate

13

26

fast

20

40

50

100

Total

Interpretation: 40% of the respondents want their investments to grow in


a faster rate.

6) Which factor do you consider before investing in


Mutual Fund or ULIPs?
Options

Frequenc Percentag
y
es

Safety of principal

63

14

28

Low risk
Higher returns
Maturity period
Terms and conditions
Total

15

30
14
4
3
50

Frequenc
y Observed-

(observed-

expected

expected)2

28
8
6
100

(observedexpected)
/e

Options
Safety Of
Principal

14

16

1.6

Low Risk

15

25

2.5

Higher Returns

14

16

1.6

Maturity Period

-6

36

3.6

Terms And
Conditions
Total

-7

49

4.9

142

14.2

50

Chi square= observed-expected = 14.2


Expected
At DF (4), the table value is 9.488 which is less than the calculated value.
Hence, H0 is rejected Interpretation: people prefer low risk as the most
important factor before investing in Mutual Funds or ULIPs.

7)

Imagine that stock market drops immediately after you


invest in it then what will you do?
Options
Withdraw your money
Wait and watch
Invest more in it

frequency
8
26
16

Interpretation: 26% of the respondents will wait and watch even if the
share market drops.

8) How often do you monitor your investment?


Options
Daily
Monthly
Occasionally

Frequency
15
25
10

6
5

Interpretation: It shows that most of the people .i.e. 50% prefer


monitoring their investment on monthly basis.
20% of the people monitor their investment occasionally.

9) What percentage of your income do you invest?


Frequenc Percentage
y
s
26
52
13
26
11
22
50
100

Options
0- 5%
5-10%
10-15%
Total

Options
0-5

Frequenc
y MV
26
2.5

Dx=MV7.5/5 Fdx
-1
-26

5-10

13

7.5

10-15

11

12.5

11

Total

50
MEAN= 7.5+ -15/20 *
5= 6%

Interpretation: People invest around 6% of


their income

-15

6
6

10)

You would describe your financial situation as being:

Options (X)
Very Unstable(1)
Somewhat Unstable(2
Moderately Stable(3)
Stable(4)
Very Stable(5)
Total

Frequency (
)
11
12
9
10
8
50

x
11
24
27
40
40
142

11
48
81
160
200
500

Sample mean = Fx = 142 = 2.84


f
50
Standard deviation, = x - x = 2.675

Standard error = Standard Deviation = 2.675 =


0.3783
7.0
n
7
Z= Xs - Xp= 2.84-3= 0.4229
S.E
0.3783
Since The Calculated Value Is Lesser Than the Table Value at (.05) I.E 1.96,
Ho is accepted.
Interpretation: The Financial Situation Is Moderately Stable.

11) If in the near future if you ever plan to invest in your


money in any of the mutual fund company, which
would be your choice?

Options
SBI Mutual Fund
HDFC Mutual Fund
Reliance Mutual
Fund
ABN AMRO Mutual
Fund
Others

Frequenc
y
7
8

Percentag
es
14
16

14

28

11
10

22
20

Frequency

Options

67

Total

50

Observed-

100

(Observed-

(Observed-

Expecte Expected
)2
d
Expected)
/E

SBI
Mutual
Fund

-3

HDFC Mutual Fund

0.9

-2

0.4

Reliance Mutual Fund

14

16

1.6

ABN AMRO Mutual Fund

11

6
0.1

Others

10

50

30

Total

----3.0

Chi square= observed-expected


= 3.0
Expecte
d
At df (4), the table value is 9.488 which is greater than the calculated
value. Hence,
H0 is accepted.
Interpretation: People mostly prefer all the brands equally for their future
investments.

12) Do you have any Idea about Bajaj Capital?

Response
Yes
No
Total

Frequenc
Percenta
y
ge
32
64
18
32
50
100

Interpretation: There are 64% of people are known about the Bajaj capital.

13) Have you ever invested through Bajaj Capital?

Response
Yes
No
Total

Frequenc
Percenta
y
ge
42
84
8
16
50
100

Interpretation: People of Cuttack and Bhubaneswar are pretty much


interested to Invest through Bajaj Capital.

6
9

14) Are you satisfied by the offerings & services

provided by the Bajaj Capital?

Response
Yes
No
Total

Frequenc
Percenta
y
ge
28
56
22
44
50
100

Interpretation: There is a mix response from the respondents about the


services provided by Bajaj Capital.
7
0

15) In which Product of Bajaj Capital you have invested?


No of
people

Products

Invested
Life Insurances
General Insurances
Mutual Funds
Fixed Deposits
Online share Trading
Total

26
14
21
17
11
50

Note: Here one people have invested in more than one product.
Interpretation: Life Insurances And Mutual Funds Could Fetch More Investments.
Followed By Fixed Deposit, General Insurance And Online Share Trading.

71

Demographics:
1

58% of people belong to 25-35 age group and on the other hand only

17% of people age belongs to above 40 groups.

17% of the people are under graduate.

52% of the people are graduates,

31% of the people are post graduates.

55% of the people are married

45% of the people are unmarried.

31% of the people are having their own business.

31% of the people are salaried.

10

25% are professionals.

11

8% are housewives.

12

5% are retired.

13

24% of the people belong to below 1, 50,000 income group.

14

36% of the people belongs to1, 50,000 2, 50,000 income groups.

15

33% of the people belong to 2, 50,000 4, 00,000 income group.

16

Only 7% of the people belong to above 4, 00,000 income group.

7
2

FINDINGS &
Recommendations

Findings:

73

Highest number of investors comes from the salaried class.

Highest number of investors comes from the age group of 25- 35.

Most of the people have been investing their money n the share
market belongs to Rs.400000 and above income group.

Mostly investors prefer monitoring their investment on monthly basis.

Most of the people invest up to 6% of their annual income in mutual funds.

Most of the people between the age group of 25 35 invest their


money in share market.

7
4

Recommendations:
The performance of the mutual fund depends on the previous years Net Asset
Value of the fund. All schemes are doing well. But the future is uncertain. So, the
AMC (Asset under Management Companies) should take the following steps:

The people do not want to take risk. The AMC should launch more
diversified funds so that the risks become minimum. This will lure
more and more people to invest in mutual funds.

The expectation of the people from the mutual funds is high. So, the
portfolio of the fund should be prepared taking into consideration the
expectations of the people.

Try to reduce fund charges, administration charges and other charges which
help to invest more funds in the security market and earn good returns.

Different campaigns should be launched to educate people regarding


mutual funds.

Companies should give regular dividends as it depicts profitability.

Mutual funds should concentrate on differentiating the portfolio of


their MF than their competitors MF

Companies should give handsome brokerage to brokers so that they


get attracted towards distribution of the funds.

7
5

CONCLUSIO
N

7
6

Conclusion
After the successfully completion of my summer internship I understood
that market research is an important aspects for a company through out the
life cycle of a particular product. It helps in knowing the changing taste,
preference, life style etc. of the consumer. During the training I found that
Random Sampling method is a perfective market research technique.
With reference to my research topic that is Market Capitalization of
Mutual Fund & ULIPs. I found that, 43% of the respondents have
responded with a positive note. But a major chunk of them i.e. 53%
respondents opined it to be not satisfactory.
A mutual fund is the ideal investment vehicle for todays complex and
modern financial scenario. Markets for equity shares, bonds and other fixes
income instruments, real estate, derivatives and other assets have become
mature and information driven. Today each and every person is fully aware
of every kind of investment proposal.
Everybody wants to invest money, which entitled of low risk, high returns
and easy redemption. In my opinion before investing in mutual funds, one
should be fully aware of each and everything.
At the same time ULIPs as an investment avenue is good for people who
have interest in staying for a longer period of time, that is around 10 years
and above. Also in the coming times, ULIPs will grow faster.
ULIPs are actually being publicized more and also the other traditional
endowment policies are becoming unattractive because of lower interest rate. It
is good for people who were investing in ULIP policies of insurance companies
as their investments earn them a better return than the other policies.
7
7

BIBLOGRAPH
Y

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8

ibliography:

Books:
1 Business Research Methods Zikmund William G.
2 Research Methodology- Kothari C.R.
3 Management

research

Methodology-

Krishnaswamy

K.N.,

Sivakumar Appa Iyer, Mathirajan M.


4 Managerial

Decision

Modeling

with

spreadsheets

Balakrishnan Nagraj, Render Barry & Stair Ralph M.


5 Summer Internship Simplified Prof. Mishra Anil
6

Marketing Management- Kottler Philip

Indian financial system

Securities analysis & port folio management -Avadhhani.V.A

Websites:
1

www.bajajcapital.com

2 www.amfiindia.com
3 www.mutualfundsindia.com
4 www.principalindia.com
5 www.investorsguide.com
6 www.moneycontrol.com
7 www.sbimf.com
8 www.sebi.co.in
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9

1 www.reliancemf.com
2 www.sebi.co.in
3

www.google.com

www.quickmba.com

5 www.indiainfoline.com
6

www.hindubusinessline.com

www.wikipedia.com

www.economictimes.com

www.yahoo finance.com

Magazine and
Newspapers;
1

Front Line

Stock Market Book

Dallas Street Journals

Outlook Money

Company Brochures & Presentations

4Ps Magazine

The Times Of India

The Economic Times


8
0

APPENDI

X
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1

QUESTIONNAIRE
DECLARATION: I am Deviprasad Dandapat pursuing PGPM
from Asian School of Business Management, Bhubaneswar. As
a part of the curriculum I am doing research on Market
Capitalizations of Mutual fund & ULIPs. Kindly help me in the
same by filling the Questionnaire. Your response would be kept
strictly confidential and would be used only for academic research.
1. Do you invest in Mutual Funds or ULIPs?
Yes

No

Fixed deposits

2. If not, then

Post office schemes

what other

Recurring deposits

option(s) do

you prefer to invest?


If others, please specify:

...
3. How do you get the information of the various
Insurance Companies?
Advertisement

Seminar
Work shops

4.

In which sector do you prefer to invest your money?

Private Sector
5.

Public Sector

At which rate do you want your investment to grow?

Steadily

Fast

At an average rate

6. Which factor do you consider before investing in


Mutual Fund or ULIPs?
Safety of principal

Low risk

Maturity period

Terms and conditions

High returns
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2

7. Imagine that stock market drops immediately after


you invest in it then what will you do?
Withdraw your money Invest more in it Wait and
watch

8.

How often do you monitor your investment?


Daily

Occasionally

Monthly
9.

What percentage of your income do you invest?

0-5%

5-10%

10-15%

10. You would describe your financial situation as being:

Very unstable

Stable

Somewhat unstable

Very stable

Moderately stable
11. If in the near future if you ever plan to invest in your

money in any of the Mutual Fund Company, which would


be your choice?
SBI Mutual Fund

Others:

HDFC Mutual Fund

Reliance Mutual Fund

ABN AMRO Mutual

Fund

12. Do you have any Idea about


Bajaj Capital? Yes

No

13. Have you ever invested through Bajaj


Capital?
Yes

N
o

14. In which Product of Bajaj Capital you have


invested?

Life Insurances

General
Insurances

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3

Mutual Funds
Fixed Deposits
Online share Trading
Are you satisfied by the offerings & services
provided by the Bajaj Capital?
Yes No
PERSONAL DETAILS
Name:
Address:

Mobile No:
Gender: Male
Marital status: Single
Age Group:

Below 20

Between 20-30

Between 30-40

Above 40

Qualification:
Under graduate
Graduate

Post graduate
Other:

Occupation:

Salaried

Business

Housewife

Female
Married

Professional

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4

Retired

Other:

Annual income:

Below Rs 1, 50,000

Rs 1,50,000- Rs2,50,000

Rs 2,50,000- Rs 4,00,000

Above Rs 4,00,000
Signature of the Respondent

Thanks for Your Kind Co-operation

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