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Submitted in partial fulfillment of the degree of Bachelor of Business Administrtion of Guru Govind Singh Inderprastha University Delhi
Submitted by: Name of the student: Anu Yadav Enrolment no: 0821061807 BBA(B&I) Semester – VI Ansal Institute of Technology Gurgaon
This is to certify that the project titled “The study Campaigning, Promoting & Selling of Mutual Funds ” submitted by Anu Yadav, a student of BBA (B&I) program of Ansal Institute of technology, Gurgaon, affiliated to GGSIP University, Delhi has been examined by the following examiners.
Project Guide’s Certificate
This is to certify that the project titled “The study Campaigning, Promoting & Selling of Mutual Funds” submitted by Anu Yadav, a student of BBA (B&I) program of Ansal Institute of technology, Gurgaon, affiliated to GGSIP University, Delhi is original and authentic ad has been carried out under my supervision and guidance.
Signature, name & designation of the supervisor
I consider it as a great privilege to place a record of my profound gratitude and indebtedness to my mentor Mr. Navdeep Barwal for his constant attention, invaluable guidance, and constructive criticism given to me, without which the project would have not seen the light of the day. I am thankful to all respondents for giving me their valuable time and genuine information. In the end I would like to thank to all my colleagues for giving their support and raising my confidence in carrying out this project.
CHAPTER 1 INTRODUCTION 1.1 EXECUTIVE SUMMARY………………………………… 1.2 OBJECTIVE OF THE STUDY…………………………………………... CHAPTER 2 LITERATURE REVIEW 2.1 INTRODUCTION OF MUTUAL FUND……………………. 2.2 HISTORY OF MUTUAL FUND IN INDIA…………………... 2.3ADVANTAGES OF MUTUAL FUND …………………… 2.4 DISADVANTAGES OF MUTUAL FUND …………… 2.5 CHARACTERISTICS OF MUTUAL FUND…………………… 2.6 TYPES OF FUNDS………………………... 2.7 DIFFEERENT METHODS ADOPTED BY AMC TO TO SELL MUTUAL FUND…………………………………… 2.8 METHODS ADOPTED FOR PROMOTION AND CAMPAIGNING OF MUTUAL FUND……………………..
CHAPTER 3 RESEARCH METHODOLOGY 3.1 RESEARCH DESIGN……………………………. 3.2 DATA COLLECTION METHODS……………………… 3.3 SAMPLING PLAN……………………………
CHAPTER 4 DATA ANALYSIS & INTERPRETATION CHAPTER 5 FINDINGS & CONCLUSIONS CHAPTER 6 BIBLIOGRAPHY APPENDIX
The project covers an over view of the MUTUAL FUND industry. The total corpus of the AMC industry recently crossed 6 Trillion Rupees. which is around 6% of current GDP of India. This means that people in India are getting their focus shifted towards investing in a way which is safe as well as providing returns. In this report we have discussed about “Sales and Promotion of Mutual Fund in India” The project also discusses various ways to promote mutual funds and different ways which are adopted by AMCs to sell mutual fund in India.
OBJECTIVE OF THE STUDY:
The objective of my study is as follows:
• • •
To study the characteristics, needs and importance of Mutual Fund in India. To study the various factors which affects the decision of investors while investing in mutual fund scheme To study various methods adopted by AMCs to sell Mutual Fund in India
INTRODUCTION OF MUTUAL FUND
A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities (usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund. Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own.
ACCORDING TO AMFI (ASSOCIATION OF MUTUAL FUND OF INDIA) :
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.
History of the Indian Mutual Fund Industry
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the 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
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India . In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.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 Canbank 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.
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 The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, 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 March 2000 more than Rs.76,000 crores of assets under management and with 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 29 funds, which manage assets of Rs.153108 crores under 421 schemes.
ADVANTAGES OF MUTUAL FUNDS
Following are the advantages of mutual funds:
LIQUIDITY: Mutual funds are typically very liquid investments. Unless they have a pre-specified lock-in, your money will be available to you anytime you want. Typically funds take a couple of days for returning your money to you. Since they are very well integrated with the banking system, most funds can send money directly to your banking account.
DIVERSIFICATION: A good investment practice involves diversifying the amount in different stocks or bonds. It provides the option to hold a number of securities and reduce the risk of losing money, which is not subject to the volatility of a single stock.
WELL REGUALTED: India mutual funds are regulated by the Securities and Exchange Board of India, which helps provide comfort to the investors. Sebi forces transparency on the mutual funds, which helps the investor make an informed choice. Sebi requires the mutual funds to disclose their portfolios at least six monthly, which helps you keep track whether the fund is investing in line with its objectives or not.
TRANSPARENCY: Regulations for mutual funds have made the industry very transparent. You can track the investments that have been made on your behalf and the specific investments made by the mutual fund scheme to
see where your money is going. In addition to this, you get regular information on the value of your investment.
EASE OF PROCESS: If you have a bank account and a PAN card, you are ready to invest in a mutual fund: it is as simple as that! You need to fill in the application form, attach your PAN (typically for transactions of greater than Rs 50,000) and sign your cheque and you investment in a fund is made.
DISADVANTAGES OF MUTUAL FUNDS
Following are some of the disadvantages of mutual funds: • HIGH COSTS & RISKS: Mutual funds require a detailed study of the investment options as the fee charged by the management firm can be quite high. Mutual funds are subjected to market risks or asset risks. If the investment is not sufficiently diversified, it may involve huge losses.
TAX ISSUES: Although, the returns on investments are quite high, a mutual fund cannot guarantee lower tax bills. The tax amounts are usually high, especially in case of short-term gains. Moreover, it is the fund manager who handles these issues and you cannot dictate terms on the amount of tax to be paid.
INVESTOR ISSUES & COMPANY PROFILE :In case of repeated investments by new entrants, the value of shares owned by current or existing investor decreases significantly. Also, a mutual fund requires a deep and long term analysis of the amount of investment and its potential investment areas. If the company fund managers are changing regularly, it may adversely affect the returns on your investment. A mutual fund organization is, however, characterized by frequent changes in jobs and positions.
CHARACTERISTICS OF MUTUAL FUNDS
1. It belongs to the investors 2. It is managed by investment professionals 3. It is invested in a portfolio of marketable investments 4. The investors share in fund is denominated by unit’s 5. The investment portfolio is created according to the stated investment objective
How mutual funds earn money
A mutual fund is a means of investing that enables individuals to share the risks of investing with other investors. All contributors to the fund experience an equal share of gains and losses for each dollar invested. A mutual fund owns the securities of several corporations. A mutual fund pools money from hundreds and thousands of investors to construct a portfolio of stocks, bonds, real estate, or other securities, according to the kind of investments the mutual fund trades. Investors purchase shares in the mutual fund as if it was an individual security. Fund managers hired by the mutual fund company are paid to invest the money that the investors have placed in the fund. Heeding the adage "Don't put all your eggs in one basket" the holders of mutual fund shares are able to gain the advantage of diversification which might be beyond their financial means individually.
TYPES OF MUTUAL FUNDS
Mutual funds can be classified into following three categories: 1.BY STRUCTURE: • Open ended funds: A type of mutual fund that does not have restrictions on the amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Openend funds also buy back shares when investors wish to sell. The majority of mutual funds are open-end. By continuously selling and buying back fund shares, these funds provide investors with a very useful and convenient investing vehicle. • Close ended fund: A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a Also known as a stock "closed-end investment".The exchange. former raises a
prescribed amount of capital only once through an IPO by issuing a fixed amount of shares, which are purchased by investors in the closed-end fund as stock. The stock prices of a closed-end fund fluctuate according to market forces (supply and demand) as well as the changing values of the securities in the fund's holdings. • Interval funds: A fund that combines the features of open-ended and closedended schemes, making the fund open for sale or redemption during predetermined intervals. Mutual Fund companies that have launched Interval Funds in India are:
• • •
Birla Sun Life Mutual Fund Prudential ICICI Mutual Fund ABN-AMRO Mutual Fund
2.BY INVESTMENT OBJECTIVE: • Growth funds: Most growth funds offer higher potential capital appreciation but usually at above-average risk. Growth funds are more volatile than funds in the value and blend categories. The companies in a growth fund portfolio are in an expansion phase and they are not expected to pay dividends. Investing in growth funds requires a tolerance for risk and a holding period with a time horizon of five to 10 years. • Income funds: A type of mutual fund that emphasizes current income, either on a monthly or quarterly basis, as opposed to capital appreciation. Such funds hold a variety of government, municipal and corporate debt obligations, preferred stock, money market instruments, and dividendpaying stocks. • Balance funds: A balanced fund is geared toward investors who are looking for a mixture of safety, income and modest capital appreciation. The amounts that such a mutual fund invests into each asset class usually must remain within a set minimum and maximum. • Load funds: A mutual fund that comes with a sales charge or commission. The fund investor pays the load, which goes to compensate a sales intermediary (broker, financial planner, investment advisor, etc.) for his or her time and expertise in selecting an appropriate fund for the investor.
3.OTHER SCHEMES: Tax-saving schemes.
DIFFERENT METHODS OF SALES & PROMOTION OF MUTUAL FUNDS
A. DIFFERENT METHODS ADOPTED BY VARIOUS ASSET MANAGEMENT COMPANIES TO SELL THEIR MUTUAL FUNDS
1. GET IN TOUCH WITH CUSTOMERS
Various AMC directly contact the customers through various database. Then the AMC convince the client to invest in their mutual fund. Many of the times due to promotion the customers also contact AMC for investment. Following are the few banks which use this technique: • • • • • • • • • • ABN AMRO Mutual Fund , Birla Sun Life Mutual Fund Chola Mutual Fund Deutsche Mutual Fund HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Prudential ICICI Mutual Fund
• • • • •
Reliance Mutual Fund SBI Mutual Fund Standard Chartered Mutual Fund Tata Mutual Fund UTI Mutual Fund
2. ONLINE INVESTMENT
Some mutual fund Web sites allow customers to invest online. However, the customer must have an account with the banks AMC have partnered with. For example, Prudential ICICI Mutual Fund allows customers to buy funds online if he have a banking account with any of the following banks: Centurion Bank, HDFC Bank , ICICI Bank, IDBI Bank and UTI Bank.
Each AMCs sell its products through various distribution channels. The distributor in turn gets a variable commission from the AMC.The distributor have a client base of their own in which they promote the mutual fund. Some of the major distributors are listed below: • • • • Indiainfoline Limited Sherkhan Religare Blue Chip India Limited
4 .THROUGH BANKS
Some of the AMCs are sister concern of the bank example Prudential ICICI Mutual Fund is a sister concern of ICICI BANK. These AMCs aggressively promote their mutual fund to their client and develop a interest in them to invest in mutual fund in order to get higher returns.
5. THROUGH ONLINE FINANCE PORTALS
Some of the AMCs sell their Mutual Fund through online trading account example ICICI Direct sell funds online through online trading account. But the client must have a trading account with them. Some of the AMCs which sell their product through online trading accounts are: HDFC Securities, ICICI Direct, KOTAK Street
METHODS ADOPTED BY AMCs PROMOTION AND CAMPAIGNING OF MUTUAL FUNDS
1. Through Advertisement
Each AMCs spends a lot of money in order to advertise for its Mutual Fund. The amount spend is high in case New Fund Offers i.e NFOs. Various mediums of advertisement use are given below: • • • • Television Radio Print Media Hoardings
2. Online Blogs:
Various AMC’s promote their product through online blogs. They advertise their product on various online sites.
3. Telephonic Calls:
Almost all the distributors promote the Mutual Fund with the help of telephone. They have the phone numbers of existing clients and potential clients. A trained person makes a call to the clients and promotes the Mutual Fund.
4. By Providing More Commission to Distributors:
The distributor gets a variable commission from the AMC when they sell their Mutual Fund. The commission varies from 0.5% to 5%. Thus by providing more commission to the distributor, the AMCs influence the distributor to promote their products only.
5. By Putting Canopies: This method is adopted by both distributor and AMCs
in order to campaign for the product. They put canopy at a place where they could interact with maximum number of probable clients.
RESEARCH DESIGN & METHODOLOGY
A. RESEARCH PROBLEM: “Campaigning, Promoting & Selling of Mutual Funds with special reference to National Capital Region”
B. RESEARCH DESIGN: DESCRIPTIVE RESEARCH Blend of Descriptive method has been used in this research for the collection of data. As the research is related to the study of consumer satisfaction, which can more effectively be studied through direct questions, personal interview and informal talks- experimental research will not much effective. Also, considering the time constraints, descriptive research leading to conclusive result is the most suitable design for this research as it is related to why anything happening. It checks the behavior features of a customer.
C. DATA COLLECTION METHOD: • PRIMARY DATA:-Questionnaire Method
The data has been collected through questionnaire method. The questionnaire was designed in such a way to cover as many aspects of consumer behavior as possible. Many questions have been asked in it for feedback from customers. In it both opened ended questions and close ended questions have been asked for study.
Under this data is taken from the internet. All the data related to its profile, mission and capital structure is taken. Even data related to this study is also taken from the book which is sent to bank’s manager annually and also quarterly related to its management, mission and many other things.
SAMPLE DESIGN: - RANDOM SAMPLING SAMPLE SIZE: - 10 SAMPLE UNIT: - INDIVIDUAL
GEOGRAPHICAL LOCATION: - NCR
FINDINGS AND CONCLUSIONS
• • • • • • • •
Saving is an integral part of every individual. Mutual Fund industry is growing at a brisk pace. But there are some hurdles which the industry has to overcome. The biggest hurdle is to change the mind set of people. The investors looks for four basic things, they are – growth of funds invested, liquidity, tax benefits, and safety. Mutual funds satisfies all the above investors needs. A lot of skills are required to convince a person in order to invest in Mutual Fund. Past return is the most important factor considered by the investors while investing in the mutual fund scheme. Pass back plays an important role for well know how customers in choosing the distributor for buying any mutual fund. Pass back is the amount which the distributor gives to the customer from the commission which a distributor gets from the AMCs.
The future of Indian mutual fund market depends to the large extent on the various initiatives taken and the policies framed by the govt and the regulators towards the development of this market, but one thing is sure that in future mutual funds are here to stay, sustain and grow.
• • • • • • •
The Indian investor is highly risk averse. He looks for safety and reasonable returns. He understands more by emotions and sentiments than by a quantitative comparison. The typical Indian investor looks for the safety of funds, reasonable returns and liquidity. He will be happy if assured a rate of reasonable return on his investment. They don’t have the right knowledge of market i.e., entry & exit time. They don’t have the latest information & technical expertise of timing the market. They need to be educated regarding various investment avenues available to them &the risk & returns associated with them.
• • •
Expansion of the market for various investment instruments is needed. Create awareness among investors regarding the benefits of investing in mutual fund. The commission which the distributor gets from AMCs is variable and may even vary from different Mutual Funds of same AMCs. SEBI (Security Exchange Board of India) should make guidelines in fixing or setting the limits of commission.
There should be transparency in case of commission between AMC and distributor. Majority of the customers are unaware of the pass back option. The distributor should give a fixed pass back to each client who invest more than 2 lakhs rupees.
• • •
Small cities should be targeted for the awareness programmes & promotional activities. Today’s investors need technical advice from experts, timely delivery of documents cheques etc. The AMC,s should be positioned as financial advisors ¬ mere as investment companies.
www.google.com www.buzzle.com www.mutualfundsresource.com www.financialsolutions.com www.investopedia.com www.indiastudychannel.com
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