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INDEX

Content Pg.no.

1. Abstract 6
2. Executive summary 7
3. Companies Profile 8
4. History of the company 12
5. Introduction 24
5.1-purpose & objectives of the study 24
5.2- methodology 26
5.3- Value addition to the company 27
5.4- limitation of the study 29
6. Main text 30
6.1 Investment 30
6.2- Mutual fund 31
6.3- Equity 54
6.4- FD 57
6.5-Insurance 60

7. Data Analysis 68
8. Conclusion and recommendation 73
9. Questionnaire 77
10. Bibliography 80

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ABSTRACT

Savings form an important part of the economy of any nation. With the savings
invested in various options available to the people, the money acts as the driver
for growth of the country. Indian financial scene too presents a plethora of
avenues to the investors. Though certainly not the best or deepest of markets in
the world, it has reasonable options for an ordinary man to invest his savings.
The money you earn is partly spent and the rest saved for meeting future
expenses. Instead of keeping the savings idle you may like to use savings in
order to get return on it in the future. This is called Investment.
One needs to invest to and earn return on your idle resources and generate a
specified sum of money for a specific goal in life and make a provision for an
uncertain future One of the important reasons why one needs to invest wisely is
to meet the cost of Inflation. Inflation is the rate at which the cost of living
increases. The cost of living is simply what it costs to buy the goods and
services you need to live. Inflation causes money to lose value because it will
not buy the same amount of a good or service in the future as it does now or did
in the past. The sooner one starts investing the better. By investing early you
allow your investments more time to grow, whereby the concept of
compounding increases your income, by accumulating the principal and the
interest or dividend earned on it, year after year. The three golden rules for all
investors are:
Invest early

Invest regularly

Invest for long term and not short term

This project will also help to understand the investors facet before investing in
any of the investment tools and thus to scrutinize the important aspects for the

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investors before investing that further helped in analyzing the relation between
the features of the products and the investors requirements

EXECUTIVE SUMMARY

The project titled Analysis on different investment plans being carried out
for SUNDARAM FINANCE. Today an investor is interested in tracking the
value of his investments, whether he invests directly in the market or indirectly
through Mutual Funds, Insurance, and Sip etc. This dynamic change has taken
place because of a number of reasons. With globalization and the growing
competition in the investments opportunity available he would have to make
guided and rational decisions on whether he gets an acceptable return on his
investments in the funds selected by him, or if he needs to switch to another
fund.
In order to achieve such an end the investor has to understand the basis of
appropriate preference measurement for the fund, and acquire the basic
knowledge of the different measures of evaluating the performance of the fund.
Only then would he be in a position to judge correctly whether his fund is
performing well or not, and make the right decision.
This project title is undertaken to help the investors in tracking the performance
of their investments in Mutual fund, insurance, equity market, commodity
market, Pms etc. and has been carried out with the objective of giving
performance analysis of different investment plans.
The methodology for carrying out the project was very simple that is through
primary data and secondary data obtained through various mediums like survey
through questionnaire ,fact sheet of the funds, the Internet, Business magazines,
Newspaper, etc. the analysis of Funds has been done with respect to its various
parameters.

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COMPANIES PROFILE

The Company was incorporated in 1954, with the object of financing the purchase
of commercial vehicles and passenger cars.

The company was started with a paid-up capital of Rs.2.00 Lakhs and later went
public in 1972.

The Company's shares were listed in the Madras Stock Exchange in 1972 and in
the National Stock Exchange in January 1998.

Subsequently, the equity shares of the Company have been delisted from Madras
Stock Exchange Limited (MSE) with effect from January 27, 2004, in accordance
with SEBI (Delisting of Securities) Guidelines, 2003, for voluntary delisting

Sundaram Finance Limited is an India-based financial services company. The


activities of the Company include savings products like deposits and mutual funds,
car and commercial vehicle finance, insurance, home loans, software solutions,
business process outsourcing, tyre finance, fleet cards and logistics services. The
Companys subsidiaries include Sundaram BNP Paribas Home Finance Limited,
Sundaram BNP Paribas Asset Management Company Limited, Sundaram BNP
Paribas Trustee Company Limited, Infreight Logistics Solutions Limited,
Sundaram Finance Distribution Limited, Sundaram Infotech Solutions Limited,
Sundaram Business Services Limited, Professional Management Consultants
Private Limited and Sundaram Securities Services Limited.

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LATE MR. T. V. SANTHANAM SUNDARAM
SOUL OF SUNDARAM FINANCE GROUP.

Born on November 8, 1912, Mr.Santhanam had his education in Madurai


1930, he joined his father in business, and thus began a life-time involvem
in automobile and finance.

He moved to Chennai in 1936, and served parent company T.V. Sunda


Iyengar & Sons, in various capacities, gaining rich experience in r
transport, marketing of automobiles, manufacture of automobile compone
general insurance, banking and finance. In 1954, he founded Sundar
Finance, which together with its subsidiaries, now has an asset base of ab
Rs.6000 cr

He played a crucial role in the establishment of several auto component u


in the TVS Group, prominent among which were Wheels India, Brakes In
Sundaram Clayton and Lucas-TVS. He also promoted Madras Motor Gen
Insurance Company, which later merged into the United India Insura
Company. He was Managing Director of the T.V.Sundaram Iyengar & Sons
nearly a decade before becoming its vice-chairman, position he held till
death.

He was not only deeply involved in negotiations with foreign collaborators


the manufacture of quality auto components, but also in financial planning
project financing. His financial acumen was always regarded highly, not jus

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the TVS group, but outside as well. He served on the Government's Direct
Taxes Advisory Committee, and the study Group on Road Transport Financing
among others.

For Mr.Santhanam, quality was paramount. He ensured that his auto


component distribution companies provided transport operators genuine and
quality products at fair prices.

He was also the founder chairman of trade associations such as the Federation
of Automobile Dealers' Association and the South India Hire Purchase
Association.

He was an ardent supporter of sports, especially football, cricket and tennis. In


the late 1940s he promoted TVS Greens, which had several leading national
football players. A keen tennis player himself, he sponsored several leading
players during the early stages of their career. He was often spotted at
Wimbledon during the tennis fortnight cheering on India's maestro,
Ramanathan Krishnan.

He championed educational, religious and charitable causes and was


instrumental in donating large sums of money from the companies with which
he was associated.

T S Surendran, Vice-Chairman of Sankara Nethralaya, said Mr.Santhanam had


contributed liberally to "the cause of our foundation." He was associated with
the foundation for over 25 years. The Sundaram Medical Foundation and the
hospital managed by it stand testimony of his keen interest in charitable

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causes.

"Work was worship for him," according to officials in the TVS Group. "His
number sense was incredible," said a ranking official of Sundaram Finance,
who had worked with him closely. He knew his principal employees by name
and qualification. He kept himself updated on the happenings in the group
companies and attended meetings of the Sundaram Finance Board.

Mr.Santhanam, according to T T Srinivasaraghavan, Managing Director of


Sundaram Finance, was a "visionary."

Even in early 1950s, he had understood the need for a good road infrastructure.
"He tirelessly worked for the uplift of transport operators,"
Mr.Srinivasaraghavan said, and pointed to the travels Mr.Santhanam had
undertaken across the country often sipping tea with the drivers.

Mr.Santhanam brought to bear such involvement in the non-banking finance


business, encouraging small players to become corporate entities. "He never
saw anyone as a competitor," he said.

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HISTORY OF SUNDARAM FINANCE GROUP

1954 - The Company was incorporated on 11th August, and converted into a
Public Limited in 1961. The main object of the company carries on
Hire Purchase business and equipment leasing.

1971- 19,958 shares issued as bonus shares.

1972- First finance company to be listed on the Madras Stock Exchange

1976- 5, 00,000 Bonus shares issued in prop. 1:2 to shareholders on 29th


September.

1978- 5, 00,000 Bonus shares issued in prop. 1:3 to shareholders on 20th


December.

1981- The Company started equipment leasing operations. Formation of Lakshmi


General Finance

1982 - 10, 00,000 Bonus shares issued in prop. 1:2 to shareholders on 9th
February.

1986- The Company started Marketing Allwyn Nissan Vehicles.

1986 - 30, 00,000 Bonus shares issued in prop. 1:1.

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1989 - The Company proposed to extend financial services in a phased
Manner through a subsidiary.

1990 - GIC and State Bank of Mysore agreed to participate in the equity
Capital of the subsidiary. Application is being made for the Approval
of the Central Government.

1990 - India Equipment Leasing Ltd., is a subsidiary of the Company.


This subsidiary was promoted jointly by the Company and International
Finance Corporation, Washington, U.S.A. Sundaram Finance Securities
Ltd. and Sundaram Finance Securities Ltd. became subsidiary of the
company.

1990 - 60, 00,000 Bonus shares issued in prop. 1:2.

1990- Sundaram Finance Ltd. has promoted Sundaram Home Finance Ltd. and
Fiat Sundaram Auto Finance Ltd.

1993 - The Company issued 18.50% Non-Convertible debentures for Rs.8


crore, on private placement basis to GIC Mutual Fund and LIC Mutual Fund.
1994 - CRISIL's top P1+ rating, denoting the highest degree of safety for
issue of CPs, was awarded to the Company.

1994- Receivables crossed Rs. 1000 crore (Rs. 10 billion)

1995- Deposits crossed Rs. 500 crore (Rs. 5 billion)

1996 - The Company has been awarded with the highest rating of AAA

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(Triple A) by CRISIL for its debenture programme to the extent at Rs.50 cr.

1996 - The Company has been awarded a Certificate of Commendation by the


Government of India, Income-Tax Department under the scheme for
honouring Good Tax Payers in recognition of its meritorious record
in the payment of taxes and discharge of all obligations under the
direct tax laws and is the only non-banking financial company in the South
to receive this award since it was instituted.

1996 - The company issued bonus shares in the ratio of 1:3 and thereafter
rights shares in the ratio of 1:4 at a premium of Rs.25/- per share.

1996 - The Company has entered into a joint venture agreement with Newton
Management Limited, U. K. and Stewart Newton Holdings (Mauritius)
Limited for setting up an Asset Management Company.

1996 - The Company signed a letter of intent with Winterthur Swiss


Insurance Company on October 29, to set up a joint working group to prepare a
business plan as a precursor to forming a joint venture company to apply for a
licence to start general insurance business when themarket is deregulated.

1996 - Sundaram Finance Training Centre was inagurated on 9th September.

1997- Sundaram Finance, Chennai has entered into a deal with Winterthur,
A leading Swiss insurance firm, to set up a general insurance company In India.

1997- Receivables crossed Rs. 2000 crore (RS. 20 billion)

1997- Received Best Tax Payer Award


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1998- Promoted Fiat Sundaram Auto Finance Limited, a joint venture with Fidis
S.p.A., Italy

1999- Sundaram Finance had signed a memorandum of understanding with


Winterthur Swiss Insurance in October 1996 to enter the general
insurance business in India after the government would open up the
sector for the private sector

1999- The company issued Non-Convertible Debentures on private placement


basis to the tune of Rs. 123 cr. mainly to banks and institutions at
Competitive rates, for tenors ranging from 36 months to 60 months.

1999- Promoted Sundaram Home Finance Limited with equity participation from
International Finance Corporation (IFC), Washington, and FMO Netherlands

2000 - Sundaram Home Finance Ltd, (SHF) the newly-launched venture of


Sundaram Finance Ltd (SF), has entered into a strategic tie up with
United India Insurance to provide insurance cover for housing loans
At a low premium.

2000 - ICICI, ABN Amro and the company have emerged as the top three
Among automobile finance companies, the first of its kind for India.

2000 - India Equipment Leasing Ltd., Aparajita Finance Company Ltd.,


Balika Finance Co. Ltd. and Paramjyothi Finance Co. Ltd. have been
Amalgamated with the Company with effect from 01.04.1999.
2000- Promoted Royal Sundaram Alliance Insurance Company Limited, a joint venture
with Royal & Sun Alliance Plc, for Non-Life Insurance
2000- Promoted Sundaram Infotech Solutions - Infotech division of Sundaram Finance

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2000 - The `AA' rating assigned to the non-convertible debenture Programme
and `FAA+' rating assigned to the fixed deposit programme of Sundaram
Finance Ltd. have been reaffirmed by Crisil.

2000 - Sundaram Finance will be launching Royal Sundaram Alliance Insurance


Company Ltd. by January.

2001- The Company has initiated moves to merge its wholly-owned


Subsidiary Sundaram Finance Services Ltd with itself.

2001- Promoted Sundaram Business Services - BPO arm of Sundaram Finance

2002-SBI signed Memorandum of Understanding with the company for


Marketing the Insurance products.

2002-International Finance Corporation extends Rs.50cr loan.

2002 -Company holds 40% equity stake in transport postal infrieght.com.

2002-Wheels India Ltd and Sundaram Fin make second and final offer to all
the balance public equity shareholders of Axles India Ltd.

2002-Slashes interest rates by 50 basis points on fixed deposits.


Accordingly the company will offer 8% for 1 year , 8.5% for 2 years and 9% for 3 years.

2003-SHFL acquires Fiat arm from Joint Venture.

2003-Uses Direct Selling Agents to increase its fleet card business.

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2003-The Madras High Court permits the sale by Sundaram Finance Ltd,
Chennai, of machinery of Coimbatore Pioneer Mills Ltd by suspending
the operation of the order dated February 21, 2003 of the single judge, who
made absolute the interim stay granted on January 2 and January 10.

The First Bench, comprising Chief Justice, Mr B. Subhashan Reddy, and


Mr Justice K. Govindarajan, while suspending the stay directed that
the sale process of the machinery of the mills shall go on, but only
confirmation of the sale shall be kept in abeyance.

2003-Mandates Ogilvy & Mather to carve distinct identity for its brand
'Sundaram'.

2003-Mr T T Srinivasaraghavan and Mr G K Raman appointed as MD and


Wholetime Director.

2003- Sundaram Fin join hands wih SBI Life

2003-Sundaram Business Services (SBS), the BPO division of Sundaram


Finance Ltd has forayed into the overseas market by signing a three-year
contract with Australia-based Total Super Pty Ltd, a self managed
superannuation specialist firm.

2004-Sundaram Finance Ltd. has informed that the equity shares of the
Company have been delisted from Madras Stock Exchange in accordance
with SEBI (Delisting of Securities) Guidelines, 2003 for voluntary
Delisting, with effect from January 27, 2004.

2005-IKF Finance Ltd has informed that M/s Sundaram Finance Ltd, Chennai

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has tied up with the Company for purchase of HP/Lease Receivables
Portfolio

2005-Company's Chairman, Shri T S Santhanam expired on April 15, 2005.

2005- Merger with LGF making SF Billion dollar Balance sheet NBFC.

2006- BNP Paribas Asset Management Group, France acquires 49.90 % stake in Sundaram Asse
Management Company Ltd from SFL.

2008-Sundaram Finance Ltd. has informed that at the meeting of the Board
of Directors held on July 29, 2008, Sri S. Ravindran has been
appointed as an Independent Director on the Board.

2008 - Sundaram Finance Ltd has appointed Sri S. Prasad as an Independent


Director on the Board.
2008-The Company has issued Bonus Shares in the Ratio of 1:1.

2009- Sundaram Finance Ltd has informed BSE that the Board of Directors
of the Company at its meeting held on February 27, 2009, inter alia,
has appointed Sri Aroon Raman as an Independent Director on the Board.

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SUNDARAM FINANCE GROUP

SUNDARAM FINANCE LIMITED.

Sundaram Finance Limited, which was incorporated in 1954 with the


object of financing the purchase of commercial vehicles and passenger
cars, has grown today into one of the most trusted financial services
groups in India. Today, the activities of the Sundaram Finance Group span
Commercial Vehicle Finance, Car Finance, Insurance, Asset Management,
Home Loans, Equipment Finance, Fleet Card, InfoTech Solutions,
Business Process Outsourcing, Tyre Finance and Logistics Services.

Sundaram Finance has a Nation-wide presence with over 400 branches,


0.65 million depositors and nearly 100,000 commercial vehicle and car
finance customers.

Products / Services Offered

Deposits

Car Finance

Commercial Vehicle Finance

Equipment Finance

Fleet Card

Tyre Finance

Corporate Office

Sundaram Finance Limited, 21, Patullos Road, Chennai - 600 002,

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Phone : 91 44 2852 1181 , Fax : 91 44 2852 0456

SUNDARAM BNP PRIBAS ASSET MANAGEMENT

Sundaram BNP Paribas Asset Management is one of the largest and well established
fund houses in the country. The fund house is sponsored by two giants of the financial
services industry Sundaram Finance Group and BNP Paribas Asset Management.
Investment manager for Sundaram BNP Paribas Mutual Fund sponsored by
Sundaram Finance &Newton Group. Newton Group exited in 2002. The company iss
now a joint venture between Sundaram Finance (50.1% stake) and BNPP AM (49.9%
stake).

SUNDARAM BNP PARIBAS HOME FINANCE LIMITED

Sundaram Home Finance Limited was incorporated on July 2, 1999, under the
Companies Act 1956...

Sundaram Finance Limited (SFL) and Union de Credit pour le Batiment (UCB)
a wholly-owned subsidiary of BNP Paribas, France, had entered into an
agreement on 9th May 2007, regarding a strategic partnership in housing
finance in India whereby UCB will acquire a 49.9% stake in Sundaram Home
Finance Limited, a subsidiary of Sundaram Finance Limited. Consequent to the
completion of the regulatory approvals, the name of the Company has been
changed to Sundaram BNP Paribas Home Finance Limited effective 28 th
November 2007.

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Sundaram BNP Paribas Home Finance Limited combines its expertise in Home
Finance with the service-orientation of its promoter Sundaram Finance.
Products / Services Offered

Home Loans Improvement Loans Extension


Loans Land Loans

Loans to Professionals NRI Loans

ROYAL SUNDARAM ALLIANCE INSURANCE COMPANY


LIMITED

Royal Sundaram brings to you the golden heritage and reliability of Sundaram
Finance (AAA), one of the most respected non-banking financial institution in
India, and RSA(formerly Royal & SunAlliance), one of the oldest and the
second largest general insurer in the UK.

The coming together of these two financial giants allows us to offer you the best
global practices in insurance industry, innovation in terms of products and
services, and unmatched, personalized customer service.

Products-
Select fund
Select midcap
Growth fund
S.M.I.L.E. fund
Tax saver fund
Balanced fund

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Sundaram Infotech Solutions

Sundaram Finance Distribution Limited


Board of directors
Chairman

Sri S Viji

Directors

Sri S Ram

Sri S Narayanan

Sri T R Seshadri

Sri S Ravindran

Sri S Prasad

Sri Aroon Raman

Sri Srinivas Acharya

Managing Director

Sri T T Srinivasaraghavan

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Company Secretary

Sri S Venkatesan, CFO & Secretary

Compliance Officer

Sri P Viswanathan, Deputy Secretary & Compliance Officer

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INTRODUCTION

OBJECTIVES OF THE PROJECT:

The purpose of the study was to determine the saving behavior and investment
preferences of customers. Customer perception will provide a way to accurately
measure how the customers think about the products and services provided by
the company. Todays trying economic conditions have forced difficult
decisions for companies. Most are making conservative decisions that reflect a
survival mode in the business operations. During these difficult times,
understanding what customers on an ongoing basis is critical for survival.
Executives need a 3rd party understanding on where customer loyalties stand.
More than ever management needs ongoing feedback from the customers,
partners and employees in order to continue to innovate and grow. The main
objective of the project is to find out the needs of current and future customers.
For this report , customer perception and awareness level will be measured in
many important areas like:

To understand all about different investment plans available in India.

To find out how the investors get information about the various financial
instrument

To find out how the investor wants to invest i.e. on his own or through a broker.

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To find out the saving habits of the different customers and the amount they
invest in various financial instruments.

In which type of financial instrument they like to invest.

How long they prefer to keep their money invested.

What is the return that they expect from the investment.

What are the various factors that they consider before investing.

To find out the risk profile of the investor.

To give a recommendation to the investors that where they should invest.

To give a suggestion to my company where our fund lacks in the market & how
it should be rectified.

POPULATION AND THE SAMPLE-


The population that we have taken for our study was the people in Delhi. The
sample from the above population for our study had consisted of around 100
individuals

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METHODOLOGY-
This methodology is based on Primary research which was carried out at Delhi.
The research involves:
1. Investors perception about the different investment solutions.
2. Finding out the awareness level of Investors.
3. Past investment patterns
4. Suggestion

METHODS-
The information and the perception of the individuals will be collected by
meeting personally with the help of structured questionnaire.

Data analysis with the help of excels and graphs: the collected data of
individuals will be analyzed with the help of Graphs.

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VALUE ADDITION TO THE COMPANY

This report will help the company to strengthen customer intimacy. The report
on various investment avenues available In India will help the company in many
areas like.

It will help the company to understand the expectations the customer have about
their company from the perspective of financial performance and corporate
social responsibility.

It will provide fresh insights which can help their business continue to flourish.
The company can identify the particular service requirements of different types
of customers.

The company can understand the problem areas.

The company can evaluate new services initiatives.

The study will help in gaining a better understanding of what an investor looks
for in an investment option.

It can be used by the financial sector in designing better financial instrument


customized to suit the needs of the investor.

It will help agents and brokers in marketing the existing instruments.

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It will provide knowledge to the customer about the various financial services
provided by the company to their customers.

It can help the company to understand what the requirement of the different
categories of customers is

This report will be developed in order to empower companies with


detailed primary market research needed to make well informed decisions and it
will provide independent measurement and validation of the health of
companys relationship with their customers. These are the various advantages
which will give some value addition to the company in understanding the
awareness level of the customer about the various investment options and what
is the perception of the investors with regard to the investments they want to
make.

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LIMITATIONS OF THE STUDY

The project is based upon various financial instrument that are available in India
and the perception level of the customer about these financial instruments. For
which there will be the need of information from the customers about their
knowledge of these financial products. The various limitations of the study are:

Total number of financial instrument in the market is so large that it needs a lot
of resources to analyze them all. There are various companies providing these
financial instruments to the public. Handling and analyzing such a varied and
diversified data needs a lot of time and resources .

As the project is based on secondary data, possibility of unauthorized


information cannot be avoided.

Reluctance of the people to provide complete information about themselves can


affect the validity of responses.

Due to time and cost constraint study will be conducted in only selected area of
Delhi.

The lack of knowledge in customers about the financial instruments can be a


major limitation.

The information can be biased due to use of questionnaires


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RESEARCH WORK

INVESTMENT-
The act of committing money or capital to an endeavor with the expectation of
obtaining an additional income or profit.

It's actually pretty simple: investing means putting your money to work for you.
Essentially, it's a different way to think about how to make money. Growing up,
most of us were taught that you can earn an income only by getting a job and
working. And that's exactly what most of us do. There's one big problem with
this: if you want more money, you have to work more hours. However, there is a
limit to how many hours a day we can work, not to mention the fact that having
a bunch of money is no fun if we don't have the leisure time to enjoy it. You
can't create a duplicate of yourself to increase your working time, so instead,
you need to send an extension of yourself - your money - to work. That way,
while you are putting in hours for your employer, or even mowing your lawn,
sleeping, reading the paper or socializing with friends, you can also be earning
money elsewhere. Quite simply, making your money work for you maximizes
your earning potential whether or not you receive a raise, decide to work
overtime or look for a higher-paying job.

There are many different ways you can go about making an investment. This
includes putting money into stocks, bonds, mutual funds, or real estate (among
many other things), or starting your own business. Sometimes people refer to

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these options as "investment vehicles," which is just another way of saying "a
way to invest." Each of these vehicles has positives and negatives, which we'll
discuss in a later section of this tutorial. The point is that it doesn't matter which
method you choose for investing your money, the goal is always to put your
money to work so it earns you an additional profit. Even though this is a simple
idea, it's the most important concept for you to understand.

Mutual Fund
Mutual fund is a pool of money collected from investors and is invested
according to stated investment objectives Mutual fund investors are like
shareholders and they own the fund. Mutual fund investors are not lenders or
deposit holders in a mutual fund. Everybody else associated with a mutual fund
is a service provider, who earns a fee. The money in the mutual fund belongs to
the investors and nobody else. Mutual funds invest in marketable securities
according to the investment objective. The value of the investments can go up
or down, changing the value of the investors holdings.NAV of a mutual fund
fluctuates with market price movements. The market value of the investors
funds is also called as net assets. Investors hold a proportionate share of the
fund in the mutual fund. New investors come in and old investors can exit, at
prices related to net asset value per unit.

Emergence of Mutual Funds:-


Mutual Funds now represent perhaps the most appropriate
investment opportunity for most small investors. As financial markets become
more sophisticated and complex, investor need a financial intermediary who
provides the required knowledge and professional expertise on successful
investing. It is no wonder then that in the birthplace of mutual funds-the U.S.A.-
the fund industry has already overtaken the banking industry, with more money
under Mutual Fund management than deposited with banks.
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The Indian Mutual Fund industry has already opened up many exciting
investment opportunities to Indian investors. Despite the expected continuing
growth in the industry, Mutual Fund is a still new financial intermediary in
India.
History of Mutual Funds:-
In the second half of 19th century, investor in UK
considered the stock market is good for the investment. But for small investor it
is not possible to operate in the market effectively. This led to establishment of
an investment company which led to the small investor to invest in equity
market. The first investment company was the Scottish-American Investment
Company, set up in London in 1860.

Mutual Fund Industry in India:-


Mutual Fund is an instrument of investing money. Nowadays, bank
rates have fallen down and are generally below the inflation rate. Therefore,
keeping large amounts of money in bank is not a wise option, as in real terms
the value of money decreases over a period of time. One of the options is to
invest the money in stock market. But a common investor is not informed and
competent enough to understand the intricacies of stock market. This is where
mutual funds come to the rescue. A mutual fund is a group of investors
operating through a fund manager to purchase a diverse portfolio of stocks or
bonds. Mutual funds are highly 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.
Also, one doesn't have to figure out which stocks or bonds to buy. But the
biggest advantage of mutual funds is diversification.

Diversification means spreading out money across many different types of

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investments. When one investment is down another might be up. Diversification
of investment holdings reduces the risk tremendously.
In 1963, the government of India took the initiative by passing the
UTI act, under which the Unit Trust of India (UTI) was set-up as a statutory
body. The designated role of UTI was to set up a Mutual Fund. UTIs first
scheme, called. In 1987 the other public sector institutions set up their Mutual
Funds. In 1992, government allowed the private sector players to set-up their
funds. In 1994 the foreign Mutual Funds arrives in Indian market. In 2001 there
is a crisis in UTI and in 2003 UTI splits up into UTI 1and UTI 2. The history of
Indian Mutual Fund industry can be explained easily by various phases:-

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Benefits of Investing in Mutual Funds

Professional Management: -

Mutual Funds provide the services of experienced and skilled professionals,


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

Diversification: -

Mutual Funds invest in a number of companies across a broad cross-section of


industries and sectors. This diversification reduces the risk because seldom do
all stocks decline at the same time and in the same proportion. You achieve this
diversification through a Mutual Fund with far less money than you can do on
your own.

Convenient Administration: -

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

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

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

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

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

Through features such as regular investment plans, regular withdrawal plans


and dividend reinvestment plans, you can systematically invest or withdraw
funds according to your needs and convenience.

31
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.

Choice of Schemes: -
Mutual Funds offer a family of schemes to suit your varying needs over a
lifetime.

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

32
Disadvantages of Investing Mutual Funds

Professional Management: -
Some funds doesnt perform in neither the market, as their management
is not dynamic enough to explore the available opportunity in the market, thus
many investors debate over whether or not the so-called professionals are any
better than mutual fund or investor himself, for picking up stocks.

Costs:
The biggest source of AMC income is generally from the entry & exit load
which they charge from investors, at the time of purchase. The mutual fund
industries are thus charging extra cost under layers of jargon.

Dilution:
Because funds have small holdings across different companies, high returns
from a few investments often don't make much difference on the overall return.
Dilution is also the result of a successful fund getting too big. When money
pours into funds that have had strong success, the manager often has trouble
finding a good investment for all the new money.
Taxes: -
When making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a
capital-gain tax is triggered, which affects how profitable the individual is from
the sale. It might have been more advantageous for the individual to defer the
capital gains liability.

Types of Mutual Funds

33
Mutual fund schemes may be classified on the basis of its structure and its
objective:-
By Structure:-
Open-ended Funds:-
An open-end fund is one that is available for subscription all through the year.
These do not have a fixed maturity. Investors can conveniently buy and sell
units at Net Asset Value ("NAV") related prices. The key feature of open-end
schemes is liquidity.
Closed-ended Funds:-
A closed-end fund has a stipulated maturity period which generally ranging
from 3 to 15 years. The fund is open for subscription only during a specified
period. Investors can invest in the scheme at the time of the initial public issue
and thereafter they can buy or sell the units of the scheme on the stock
exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the
Mutual Fund through periodic repurchase at NAV related prices. SEBI
Regulations stipulate that at least one of the two exit routes is provided to the
investor.

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

Money Market Funds:-

34
The aim of money market funds is to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer short-
term instruments such as treasury bills, certificates of deposit, commercial paper
and inter-bank call money. Returns on these schemes may fluctuate depending
upon the interest rates prevailing in the market. These are ideal for Corporate
and individual investors as a means to park their surplus funds for short periods.

Load Funds:-
A Load Fund is one that charges a commission for entry or exit. That is, each
time you buy or sell units in the fund, a commission will be payable. Typically
entry and exit loads range from 1% to 2%. It could be worth paying the load, if
the fund has a good performance history.

No-Load Funds:-
A No-Load Fund is one that does not charge a commission for entry or exit.
That is, no commission is payable on purchase or sale of units in the fund. The
advantage of a no load fund is that the entire corpus is put to work.

Tax Saving Schemes:-


These schemes offer tax rebates to the investors under specific provisions of the
Indian Income Tax laws as the Government offers tax incentives for investment
in specified avenues. Investments made in Equity Linked Savings Schemes
(ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income
Tax Act, 1961. The Act also provides opportunities to investors to save capital
gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital
asset has been sold prior to April 1, 2000 and the amount is invested before
September 30, 2000.

Various types of Mutual Funds:

35
Equity Funds: -
Equity funds are considered to be the more risky funds as compared to other
fund types, but they also provide higher returns than other funds. It is advisable
that an investor looking to invest in an equity fund should invest for long term
i.e. for 3 years or more. There are different types of equity funds each falling
into different risk bracket. In the order of decreasing risk level, there are
following types of equity funds:-
AGGRESSIVE GROWTH FUNDS:-
In Aggressive Growth Funds, fund managers aspire for maximum capital
appreciation and invest in less researched shares of speculative nature. Because
of these speculative investments Aggressive Growth Funds become more
volatile and thus, are prone to higher risk than other equity funds.

GROWTH FUNDS: -
Growth Funds also invest for capital appreciation (with time horizon of 3 to 5
years) but they are different from Aggressive Growth Funds in the sense that
they invest in companies that are expected to outperform the market in the
future. Without entirely adopting speculative strategies, Growth Funds invest in
those companies that are expected to post above average earnings in the future.

SPECIALTY FUNDS: -
Specialty Funds have stated criteria for investments and their portfolio
comprises of only those companies that meet their criteria. Criteria for some
specialty funds could be to invest/not to invest in particular regions/companies.
Specialty funds are concentrated and thus, are comparatively riskier than
diversified funds. There are following types of specialty funds:
Sector Funds:-

36
Equity funds that invest in a particular sector/industry of the market are known
as Sector Funds. The exposure of these funds is limited to a particular sector
(say Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving
Consumer Goods) which is why they are more risky than equity funds that
invest in multiple sectors.

Foreign Securities Funds:-


Foreign Securities Equity Funds have the option to invest in one or more
foreign companies. Foreign securities funds achieve international diversification
and hence they are less risky than sector funds. However, foreign securities
funds are exposed to foreign exchange rate risk and country risk.

Mid-Cap or Small-Cap Funds:-


Funds that invest in companies having lower market capitalization than large
capitalization companies are called Mid-Cap or Small-Cap Funds. Market
capitalization of Mid-Cap companies is less than that of big, blue chip
companies (less than Rs. 2500 crore but more than Rs. 500 crore) and Small-
Cap companies have market capitalization of less than Rs. 500 crore. Market
Capitalization of a company can be calculated by multiplying the market price
of the company's share by the total number of its outstanding shares in the
market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of
Large-Cap Companies which gives rise to volatility in share prices of these
companies and consequently, investment gets risky.

Option Income Funds:-


While not yet available in India, Option Income Funds write options on a large
fraction of their portfolio. Proper use of options can help to reduce volatility,
which is otherwise considered as a risky instrument. These funds invest in big,

37
high dividend yielding companies, and then sell options against their stock
positions, which generate stable income for investors.

DIVERSIFIED EQUITY FUNDS: -


Except for a small portion of investment in liquid money market, diversified
equity funds invest mainly in equities without any concentration on a particular
sector(s). These funds are well diversified and reduce sector-specific or
company-specific risk. However, like all other funds diversified equity funds
too are exposed to equity market risk. One prominent type of diversified equity
fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a
minimum of 90% of investments by ELSS should be in equities at all times.
ELSS investors are eligible to claim deduction from taxable income (up to Rs 1
lakh) at the time of filing the income tax return. ELSS usually has a lock-in
period and in case of any redemption by the investor before the expiry of the
lock-in period makes him liable to pay income tax on such income(s) for which
he may have received any tax exemption(s) in the past.
Equity Index Funds: -
Equity Index Funds have the objective to match the performance of a specific
stock market index. The portfolio of these funds comprises of the same
companies that form the index and is constituted in the same proportion as the
index. Equity index funds that follow broad indices (like S&P CNX Nifty,
Sensex) are less risky than equity index funds that follow narrow sectoral
indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are less
diversified and therefore, are more risky.

38
VALUE FUNDS:-
Value Funds invest in those companies that have sound fundamentals and whose
share prices are currently under-valued. The portfolio of these funds comprises
of shares that are trading at a low Price to Earnings Ratio (Market Price per
Share / Earning per Share) and a low Market to Book Value (Fundamental
Value) Ratio. Value Funds may select companies from diversified sectors and
are exposed to lower risk level as compared to growth funds or specialty funds.
Value stocks are generally from cyclical industries (such as cement, steel, sugar
etc.) which make them volatile in the short-term. Therefore, it is advisable to
invest in Value funds with a long-term time horizon as risk in the long term, to a
large extent, is reduced.

EQUITY INCOME OR DIVIDEND YIELD FUNDS: -


The objective of Equity Income or Dividend Yield Equity Funds is to generate
high recurring income and steady capital appreciation for investors by investing
in those companies which issue high dividends (such as Power or Utility
companies whose share prices fluctuate comparatively lesser than other
companies' share prices). Equity Income or Dividend Yield Equity Funds are
generally exposed to the lowest risk level as compared to other equity funds.
DEBT / INCOME FUNDS:-
Funds that invest in medium to long-term debt instruments issued by private
companies, banks, financial institutions, governments and other entities
belonging to various sectors (like infrastructure companies etc.) are known as
Debt / Income Funds. Debt funds are low risk profile funds that seek to generate
fixed current income (and not capital appreciation) to investors. In order to
ensure regular income to investors, debt (or income) funds distribute large
fraction of their surplus to investors. Although debt securities are generally less
risky than equities, they are subject to credit risk (risk of default) by the issuer at
the time of interest or principal payment. To minimize the risk of default, debt

39
funds usually invest in securities from issuers who are rated by credit rating
agencies and are considered to be of "Investment Grade". Debt funds that target
high returns are more risky. Based on different investment objectives, there can
be following types of debt funds:-

Diversified Debt Funds: -


Debt funds that invest in all securities issued by entities belonging to
all sectors of the market are known as diversified debt funds. The best feature of
diversified debt funds is that investments are properly diversified into all sectors
which results in risk reduction. Any loss incurred, on account of default by a
debt issuer, is shared by all investors which further reduces risk for an
individual investor.

Focused Debt Funds: -


Unlike diversified debt funds, focused debt funds are narrow focus
funds that are confined to investments in selective debt securities, issued by
companies of a specific sector or industry or origin. Some examples of focused
debt funds are sector, specialized and offshore debt funds, funds that invest only
in Tax Free Infrastructure or Municipal Bonds. Because of their narrow
orientation, focused debt funds are more risky as compared to diversified debt
funds. Although not yet available in India, these funds are conceivable and may
be offered to investors very soon.

High Yield Debt funds: -


As we now understand that risk of default is present in all debt funds,
and therefore, debt funds generally try to minimize the risk of default by
investing in securities issued by only those borrowers who are considered to be
of "investment grade". But, High Yield Debt Funds adopt a different strategy

40
and prefer securities issued by those issuers who are considered to be of "below
investment grade". The motive behind adopting this sort of risky strategy is to
earn higher interest returns from these issuers. These funds are more volatile
and bear higher default risk, although they may earn at times higher returns for
investors.

Assured Return Funds: -


Although it is not necessary that a fund will meet its objectives or
provide assured returns to investors, but there can be funds that come with a
lock-in period and offer assurance of annual returns to investors during the lock-
in period. Any shortfall in returns is suffered by the sponsors or the Asset
Management Companies (AMCs). These funds are generally debt funds and
provide investors with a low-risk investment opportunity. However, the security
of investments depends upon the net worth of the guarantor (whose name is
specified in advance on the offer document). To safeguard the interests of
investors, SEBI permits only those funds to offer assured return schemes whose
sponsors have adequate net-worth to guarantee returns in the future. In the past,
UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI)
that assured specified returns to investors in the future. UTI was not able to
fulfill its promises and faced large shortfalls in returns. Eventually, government
had to intervene and took over UTI's payment obligations on itself. Currently,
Sundaram BNP Paribas AMC in India offers assured return schemes to
investors fund called million millionaires plan.
Fixed Term Plan Series: -
Fixed Term Plan Series usually are closed-end schemes having short
term maturity period (of less than one year) that offer a series of plans and issue
units to investors at regular intervals. Unlike closed-end funds, fixed term plans
are not listed on the exchanges. Fixed term plan series usually invest in debt /

41
income schemes and target short-term investors. The objective of fixed term
plan schemes is to gratify investors by generating some expected returns in a
short period.

GILT FUNDS:-
Also known as Government Securities in India, Gilt Funds invest in
government papers (named dated securities) having medium to long term
maturity period. Issued by the Government of India, these investments have
little credit risk (risk of default) and provide safety of principal to the investors.
However, like all debt funds, gilt funds too are exposed to interest rate risk.
Interest rates and prices of debt securities are inversely related and any change
in the interest rates results in a change in the NAV of debt/gilt funds in an
opposite direction.

MONEY MARKET / LIQUID FUNDS:-


Money market / liquid funds invest in short-term (maturing
within one year) interest bearing debt instruments. These securities are highly
liquid and provide safety of investment, thus making money market / liquid
funds the safest investment option when compared with other mutual fund
types. However, even money market / liquid funds are exposed to the interest
rate risk. The typical investment options for liquid funds include Treasury Bills
(issued by governments), Commercial papers (issued by companies) and
Certificates of Deposit (issued by banks).

HYBRID FUNDS:-
As the name suggests, hybrid funds are those funds whose
portfolio includes a blend of equities, debts and money market securities.

42
Hybrid funds have an equal proportion of debt and equity in their portfolio.
There are following types of hybrid funds in India:

Balanced Funds: -
The portfolio of balanced funds includes assets like debt
securities, convertible securities, and equity and preference shares held in a
relatively equal proportion. The objectives of balanced funds are to reward
investors with a regular income, moderate capital appreciation and at the same
time minimizing the risk of capital erosion. Balanced funds are appropriate for
conservative investors having a long term investment horizon.

Growth-and-Income Funds: -
Funds that combine features of growth funds and income funds are
known as Growth-and-Income Funds. These funds invest in companies having
potential for capital appreciation and those known for issuing high dividends.
The level of risks involved in these funds is lower than growth funds and higher
than income funds.

ASSET ALLOCATION FUNDS: -


Mutual funds may invest in financial assets like equity, debt, money
market or non-financial (physical) assets like real estate, commodities etc..
Asset allocation funds adopt a variable asset allocation strategy that allows fund
managers to switch over from one asset class to another at any time depending
upon their outlook for specific markets. In other words, fund managers may
switch over to equity if they expect equity market to provide good returns and
switch over to debt if they expect debt market to provide better returns. It
should be noted that switching over from one asset class to another is a decision
taken by the fund manager on the basis of his own judgment and understanding

43
of specific markets, and therefore, the success of these funds depends upon the
skill of a fund manager in anticipating market trends.

COMMODITY FUNDS:-
Those funds that focus on investing in different commodities (like metals, food
grains, crude oil etc.) or commodity companies or commodity futures contracts
are termed as Commodity Funds. A commodity fund that invests in a single
commodity or a group of commodities is a specialized commodity fund and a
commodity fund that invests in all available commodities is a diversified
commodity fund and bears less risk than a specialized commodity fund.
"Precious Metals Fund" and Gold Funds (that invest in gold, gold futures or
shares of gold mines) are common examples of commodity funds.

REAL ESTATE FUNDS:-


Funds that invest directly in real estate or lend to real estate developers or invest
in shares/securitized assets of housing finance companies, are known as
Specialized Real Estate Funds. The objective of these funds may be to generate
regular income for investors or capital appreciation.

FUND OF FUNDS:-
Mutual funds that do not invest in financial or physical assets, but do invest in
other Mutual Fund schemes offered by different AMCs, are known as Fund of
Funds. Fund of Funds maintain a portfolio comprising of units of other mutual
fund schemes, just like conventional mutual funds maintain a portfolio
comprising of equity/debt/money market instruments or non financial assets.
Fund of Funds provide investors with an added advantage of diversifying into
different mutual fund schemes with even a small amount of investment, which
further helps in diversification of risks. However, the expenses of Fund of Funds

44
are quite high on account of compounding expenses of investments into
different mutual fund schemes.

45
Top 10 mutual fund providers

1. HDFC Mutual Fund

Inception Date June 30th 2000

Trustee HDFC Trustee Company Ltd.

Top Performing Schemes AUM as on 30th April 09

+ HDFC Top 200 (2338 cr)


+ HDFC Equity (2759.30 cr)
+ HDFC MIP Long-term (887.90 cr)

2. Tata Mutual Fund

Inception Date June 30th 1995

Trustee Tata Trustee Company Pvt. Ltd.

Top Performing Schemes AUM as on 30th April 09

+ Tata Pure Equity (269.95 cr)


+ Tata Index Nifty (6.77 cr)
+ Tata Short-term Bond (292.08 cr)

3. SBI Mutual Fund

Inception Date June 29th 1987

46
Trustee SBI Mutual Fund Trustee Company Pvt. Ltd.

Top Performing Schemes AUM as on 30th April 09

+ Magnum Contra (1,958.50 cr)


+ Magnum Balanced (333.11 cr)
+ Magnum Multiplier Plus (687.15 cr)

4. Reliance Mutual Fund

Inception Date - June 30th 1995

Trustee Reliance Capital Trustee Company Ltd.

Top Performing Schemes AUM as on 30th April 09

+ Reliance MIP (168.52 cr)


+ Reliance Banking Retail (681.25 cr)
+ Reliance Diversified Power Sector Fund (3809.57 cr)

5. DSP Black Rock Mutual Fund

Inception Date December 16th 1996

Trustee DSP Merrill Lynch Trustee Company Pvt. Ltd.

Top Performing Schemes AUM as on 30th April 09

47
+ DSPBR top 100 Equity (1167.08 cr)
+ DSPBR Equity (919.77 cr)
+ DSPBR GSF Longer Duration (425.67 cr)

6. Kotak Mutual Fund

Inception Date June 23rd 1998

Trustee Kotak Mahindra Trustee Company Ltd.

Top Performing Schemes AUM as on 30th April 09

+ Kotak Bond Reular (445.69 cr)


+ Kotak 30 (688.14 cr)
+ Kotak opportunities (658.50 cr)

7. Principal Mutual Fund

Inception Date November 25th 1994

Trustee Principal Trustee Co. Pvt. Ltd

Top Performing Schemes AUM as on 30th April 09

+ Principal Child Benefit (19.81 cr)


+ Principal Index (21.88 cr)
+ Principal Personal Tax Saver (332.53 cr)

48
8. Sundaram BNP Paribas Mutual Fund

Inception Date August 24th 1996

Trustee Sundaram BNP Paribas Trustee Company Limited

Top Performing Schemes AUM as on 30th April 09

+ Sundaram BNP Paribas taxsaver (703.54 cr)


+ Sundaram BNP Paribas Select Focus Fund (880.78 cr)
+ Sundaram BNP Paribas Bond Saver (59.12 cr)

9. Franklin Templeton Mutual Fund

Inception Date February 19th 1996

Trustee Franklin Templeton Trustee Services Pvt. Ltd.

Top Performing Schemes AUM as on 30th April 09

+ Franklin India Blue Chip Fund (1642.87 cr)


+ Templeton IGSF PF (32.68 cr)
+ Franklin India Prima Plus (1153.20 cr)

49
10. Birla Sun Life Mutual Fund

Inception Date - December 24th 1994

Trustee Birla Sun Life Trustee Co. Ltd.

Top Performing Schemes AUM as on 30th April 09

+ Birla GSF Long Term (10.48 cr.)


+ Birla Frontline Equity (481.14 cr)
+ Birla'95 (127.12 cr)

50
EQUITY SHARES
ABOUT SHARES:-
At the most basic level, stock (often referred to as shares) is ownership, or
equity, in a company. Investors buy stock in the form of shares, which represent
a portion of a company's assets (capital) and earnings (dividends).
As a shareholder, the extent of your ownership (your stake) in a company
depends on the number of shares you own in relation to the total number of
shares available For example, if you buy 1000 shares of stock in a company that
has issued a total of 100,000 shares, you own one per cent of the company.
While one per cent seems like a small holding, very few private investors are
able to accumulate a shareholding of that size in publicly quoted companies,
many of which have a market value running into billions of pounds. Your stake
may authorize you to vote at the company's annual general meeting, where
shareholders usually receive one vote per share.
In theory, every stockholder, no matter how small their stake, can exercise some
influence over company management at the annual general meeting. In reality,
however, most private investors' stakes are insignificant. Management policy is
far more likely to be influenced by the votes of large institutional investors such
as pension funds.
a) STOCKS SYMBOLS:-
A stock symbol, or 'Epic' symbol, is the standard abbreviation of a stock's name.
You can find stock symbols wherever stock performance information is
published - for example, newspaper stock listings and investment websites.
Company names also have abbreviations called ticker symbols. However, it's
worth remembering that these may vary at the different exchanges where the
company is quoted.

51
b) PERFORMANCE INDICATORS:-
Here is a list of the standard performance indicators
Performance Indicator Definition

Closing price The last price at which the stock was bought or
sold
High and low The highest and lowest price of the stock from the
previous trading day
52 week range The highest and lowest price over the previous 52
weeks
Volume The amount of shares traded during the previous
trading day High and low
Net change The difference between the closing price on the last
trading day and the closing price on the trading day
prior to the last

THE STOCK EXCHANGES:-


A marketplace in which to buy or sell something makes life a lot easier.
The same applies to stocks. A stock exchange is an organization that provides a
marketplace in which investors and borrowers trade stocks. Firstly, the stock
exchange is a market for issuers who want to raise equity capital by selling
shares to investors in an Initial Public Offering (IPO). The stock exchange is
also a market for investors who can buy and sell shares at any time.
a) Trading shares on the stock exchange:
As an investor in the INDIA, you can't buy or sell shares on a stock exchange
yourself. You need to place your order with a stock exchange member firm (a
stockbroker) who will then execute the order on your behalf. The NSE AND

52
BSE are the leading stock exchange in the INDIA. Trading is done through
computerized systems.

b) The trading process:-


If you decide to buy or sell your shares, you need to contact a stockbroker who
will buy or sell the shares on your behalf. After receiving your order, the
stockbroker will input the order on the SETS or SEAQ system to match your
order with that of another buyer or seller. Details of the trade are transmitted
electronically to the stockbroker who is responsible for settling the trade. You
will then receive confirmation of the deal.

c) Types of shares available on the stock exchange:-


You cannot trade all stocks on the stock exchange. To be listed on a stock
exchange, a stock must meet the listing requirements laid down by that
exchange in its approval process. Each exchange has its own listing
requirements, and some exchanges are more particular than others. It is possible
for a stock to be listed on more than one exchange. This is known as a dual
listing.

53
FIXED DEPOSITE

A fixed deposit is best suited for those investors who want to invest a lump sum
of money at a low risk and are comfortable committing it for a fixed period of
time, and earn a rate of interest on th same.

Some of the salient features of a bank deposit are:

Flexible Deposit Terms : The tenure of fixed deposits can vary from as
low as 7, 15, 30 or 45 days to 3, 6 months, 1 year, 1.5 years to 5 years.
The minimum deposit amount also varies with each bank. It can range
from as low as Rs. 100 to an unlimited amount with some banks. The
amounts can be in multiple of Rs. 100.

Great Deals: The banks are free to offer varying rates of interest for
products of different maturities. If you are flexible in terms of deposit
tenures, you might find differential interest rates in odd tenures like 390
days or 200 days.

Safe Investments: Bank deposits are generally safe investments because


they are insured under the Deposit Insurance & Credit Guarantee Scheme
of India.

Flexible Interest Payment Terms : A Bank Fixed Deposit gives you the
option of taking the interest income, as a lump-sum amount on its
maturity as well as every quarter (quarterly interest payment) or every
month (monthly interest payment)

Electronic Clearing: The Interest payable on Fixed Deposit can also be


transferred directly to Savings Bank or Current Account of the customer.

54
Compounding: Compounding of fixed deposit interest rate is available
for all deposits more than 3 months.

Tax implications

The interest income earned on a deposit is taxable at the same tax slab as the
customer is in. It will be added to his income in the year under the head Other
Income.

Fees and Charges

Normally, there are no charges for a plain vanilla fixed deposit account. Charges
are usually levied on premature withdrawal of the deposit or taking additional
features like a debit card against it.

Alternatives to Fixed Deposit Accounts

FMP- Fixed Maturity Plans ( A type of mutual fund)


The similarity first: Both have fixed tenures.

The differences:

1. Returns: A fixed deposit in India gives assured returns. You know what

you are getting and when. An FMP will give an indicative, but not
assured, return.

2. Investment Amount: You will be expected to invest a minimum of Rs


5,000 in an FMP. Not so in the case of a bank deposit, which can be less.

3. Tax Treatment: An FMP gets preferential tax treatment making it a better


option then Fixed deposits for returns on a post tax basis. While fixed

55
deposits are taxed at the normal tax rate FMP dividends are tax free in
the hands of the investor ( there is a 14.26% Dividend distribution tax
deducted at source). And in case the investor opts for the growth option
for tenures more than one year, his gains will be taxed as long term
capital gains on debt investments. The tax rate under which is 10%
without indexation and 20% with indexation benefit.

56
Insurance

People need insurance in the first place.An insurance policy is primarily meant
to protect the income of the familys breadearners. The idea is if any one or both
die their dependents continue to live comfortably.The circle of life begins at
birth follower by education , marraige and eventually after a lifetime of work
we look forward to life of retirement . Our finances too tend to change as we go
through the various phases of life. In the first twenty of our life, we are
financially and emotionally dependents on our parents and their are no financial
committments to be met.In the next twenty years we gain financial
independence and provide financial independence to our families. This is also
the stage when our income may be unable to meet the growing expenses of a
young household. In the next twenty as we see our investments grow after our
children grow and become financially independent. Insurance is a provision for
the distribution of risks that is to say it is a financial provision against loss from
unavoidable disasters. The protection which it affords takes form of a gurantee
to indemnify the insured if certain specified losses occur. The principle of
insurance so far as the undertaking of the obligation is concerned is that for the
payment of a certain sum the gurantee will be given to reimburse the insured.
The insurer in accepting the risks so distributes them that the total of all the
amounts is paid for this insurance protection will be sufficient to meet the losses
that occur. Insurance then provide divided responsibilty. This principle is
introduced in most stores where a division is made between the sales clerk and
the cashiers department the arrangement dividing the risks of loss. The
insurance principle is similarly applied in any other cases of divided
57
responsibilty. As a business however insurance is usually recognized as some
form of securing a promise of indemnity by the payment of premium and the
fulfillment of certain other stipulations

Types of insurance

Term insurance plans


Term insurance is the cheapest form of life insurance available. Since a term
insurance contract only pays in the event of eventuality the life cover comes at
low premium rates . Term insurance is a usefu tool to purchase against risk of
early death and protection of an asset.

Endowment plans
Endowment plans are savins and protection plans that provide a dual benifit of
protection as well as savings. Endowment plans pay a death benifit in the event
of an eventuality should the customer survive the benifit period a maturity
benifit is paid to the life insured.

Whole of life plans


A whole of life plan provides life insurance cover to an individua upto a
specified age . A whole of life plan is suitable for an individual who is looking
for an extended life insurance cover and /or wants to pay premium over as long
as tenure as possible to reduce the amount of upfront premium payment.

Pension plans
Pension plans allow an individual to save in a tax deffered manner. An
individual can either contribute through regular premiums or make a single
premium investments. Savings accumulate over the deferment period. Once the
contract reaches the vesting age , the individual has the option of choosing an

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annuity plan from a life insurance company. An annuity is paid till the life the
lifetime of the insured or a pre-determined period depending upon the annuity
option chosen by the life insured.

Unit Linked Insurance Plans


Unit linked insurance plan (ULIP) is life insurance solution that provides for the
benefits of risk protection and flexibility in investment. The investment is
denoted as units and is represented by the value that it has attained called as Net
Asset Value (NAV). The policy value at any time varies according to the value
of the underlying assets at the time.
In a ULIP, the invested amount of the premiums after deducting for all the
charges and premium for risk cover under all policies in a particular fund as
chosen by the policy holders are pooled together to form a Unit fund. A Unit is
the component of the Fund in a Unit Linked Insurance Policy.

The returns in a ULIP depend upon the performance of the fund in the capital
market. ULIP investors have the option of investing across various schemes, i.e,
diversified equity funds, balanced funds, debt funds etc. It is important to
remember that in a ULIP, the investment risk is generally borne by the investor.

In a ULIP, investors have the choice of investing in a lump sum (single


premium) or making premium payments on an annual, half-yearly, quarterly or
monthly basis. Investors also have the flexibility to alter the premium amounts
during the policy's tenure. For example, if an individual has surplus funds, he
can enhance the contribution in ULIP. 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). ULIP investors can shift their
investments across various plans/asset classes (diversified equity funds,
balanced funds, debt funds) either at a nominal or no cost.

59
60
Expenses Charged in a ULIP

Premium Allocation Charge:

A percentage of the premium is appropriated towards charges initial and


renewal expenses apart from commission expenses before allocating the units
under the policy.

Mortality Charges:

These are charges for the cost of insurance coverage and depend on number of
factors such as age, amount of coverage, state of health etc.

Fund Management Fees:

Fees levied for management of the fund and is deducted before arriving at the
NAV.

Administration Charges:

This is the charge for administration of the plan and is levied by cancellation of
units.

Surrender Charges:

Deducted for premature partial or full encashment of units.

Fund Switching Charge:

61
Usually a limited number of fund switches are allowed each year without
charge, with subsequent switches, subject to a charge.
Service Tax Deductions:
Service tax is deducted from the risk portion of the premium.

Top insurance companies

Life Insurance Corporation of India :

This leading Insurance company of India was established in the year 1956 by
the alliance of 16 non-Indian companies,154 Indian Insurance Companies and
75 provident. It has 100 divisional offices,2048 computerized branches,7 zonal
offices and the company's corporate office. It has introduced new strategies for
the facilitation of the customers like the IVRS,ECS,ATM Premium payment
facility and the company's Info centers in Mumbai, Delhi, Chennai, Kolkata and
many others cities.

Bajaj Allianz Life Insurance:

This Indian Insurance company is a joint venture of Alliance AG,which is one


among the largest Life Insurance companies and Bajaj Auto,one among the
biggest 2- & 3 wheeler producers in the world. The Company has various plans
for the customers like the Pension,Retirement,Life Time Care,Health Care,Life
Insurance Online,Life Insurance Saving Plans, and online services like the
Address change,Renewal Premium Payment etc.

Tata AIG Life :

This renowned life Insurance company in India offers a wide array of products
related to life insurance for associations,individuals and businesses. The
company offers high quality solutions to its corporate Indian clients. It renders

62
services like the AIG Health First,AIG Health Life Protector, Tata AIG Life
Hospi Cash Back, Tata AIG Life Maha Gold, Tata AIG Life Assure 10 Years and
many others. The company is a joint venture of America International Group
and TATA group.

Birla Sun Life Insurance:

It is one of the major insurance companies in India and a joint venture of Sun
Life Financials and Aditya Birla group. The company provides Life Insurance
Solutions to meet the needs of Protection, Retirement and Saving .It has
recently launched the Money back Plus Plan and offers Insurance programs like
the Children,NRI,Riders,Health etc.

SBI Life :

This renders premium Insurance solutions like SBI Life-Smart ULIP,SBI Life-
Group Criti9, SBI Life-Unit Plus Child Plan etc. It also offers services like the
NRI services,Premium Payment Procedure,ECS Facility,RPI/RFI and many
others. SBI Life is a joint venture of BNP Paribas Assurance and SBI.

Max New York Life:

This Life Insurance company in India provides the best solutions related to life
insurance like children's plan, retirement solution, Investment, Protection,
Health,Savings etc. The company has 14 corporate agency tie ups, 33
bankassurance relationships and direct sales force at 14 locations. It is now
covering 36 products related to life and health insurance.

Kotak Life Insurance:

This premier Insurance company in India offers insurance facilities related to


Savings,Investments,Child,Retirement,Protection, Kotak Long Life Secure

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Plus,Kotak Long Life Health Plus etc. It opens up services like Insurance
Guide, NAV, Premium Payment Options and many others.

HDFC Standard Life:

This is one of the major market leaders in the insurance sector in India. The
company offers Insurance services like the Group Plans,Health Plans,Protection
Plans,Retirement Plans,Savings and Investment Plans etc. The customer base of
the company is about more than 7 million who depend on the company for
pension,investment,banking needs.

Reliance Life :

The company based in India offers the best plans for Life Insurance in India.
Reliance Capital Limited's associate company is Reliance Life which is one of
the leading private sectors in India. The company provides the Protection
Plans,Child Plans,Retirement Plans and Investment plans and is also the
ultimate solver of solutions for Groups and Individuals.

ICICI Prudential:

This major Insurance Company in India provides health Insurance,life


insurance,ULIPs,ULIP,Retirement Plans and many others. Life Insurance Plans
of the company covers Premium Guarantee Plans,Education Insurance Plans
etc. Pension Plans encompass LifeStage Pension,Forever Life. Health Insurance
Plans cover Hospital Care,MediAssure.

ROYAL SUNDARAM :
Royal Sundaram brings to you the golden heritage and reliability of Sundaram
Finance (AAA), one of the most respected non-banking financial institution in

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India, and RSA(formerly Royal & SunAlliance), one of the oldest and the
second largest general insurer in the UK.

65
ANALYSYS

Do you know about the following Investment plans?

120
100
80
60 YES
40 Column1

20
0
EQUITY SHARES MUTUAL FUNDS INSURANCE FIXED DEPOSIT

The sample size consists of 100 respondents and out of which almost all the
people are fully aware about investment avenues like gold and fixed deposits
and almost 95 are aware about equity shares and mutual funds

How do you get information about the following investment avenues?

66
INFORMATION
ADVERTISEMENT
EXECUTIVE
FRIENDS
MAGAZINES

Out of the 100 respondents about 50% of them get the information from
advertisements on the television and internet and the rest from the magazines ,
company sales executives and friends and relatives.

Rate the following according to your preference?

90
80
70
60
50 MORE PREFERRED
40 MODERATE
30 LESS PREFERRED
20
10
0
MUTUAL FUND INSURANCE EQUITY SHARESFIXED DEPOSIT

Out of the 100 respondents asked the most preferred financial instrument is
fixed deposits and the then the rest like equity shares with 70 % and insurance.

What is your age?

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AGE

20-30
31-40
41-50
51-60
60 ABOVE

Out of the respondents that were surveyed the maximum were of the age group
of 31-40.
What are the factors that you consider while investing in any financial
instrument?

60

50

40

30
Column1
20

10

0
RETURN TAX SAVING REGULAR INCOME SAFETY

Out of the respondents 50% were of the opinion that return and safety are the
main reasons behind their investment decisions .

What is your annual income?

68
INCOME
LESS THEN 1LAKH
1-2.5LAKHS
2.5-3.5LAKHS
3.5-5LAKH
ABOVE 5LAKH

Out the total respondents around 40 %were in the income group of 2.5- 3.5lakhs
and 20% in the 3.5-5lakhs bracket

How much of your money you invest in financial instruments?

60

50

40

30
Column1
20

10

0
10%to20% 20%to30% 30%to50% MORE THAN 50%

Most of the respondents surveyed were mostly those people who invest 10 to 30
% of their money in these instruments.

How long do you prefer to keep your money invested?

69
70
60
50
40 65 Column1
30 35
20
10
0
LONG TERM SHORT TERM

Out of the 100 respondents mostly were of the view that they invested there
money for short term

How much return do you expect from your investments?

Column1
50
45
40
35
30 Column1
25
20
15
10
5
0
10 TO 20% 20 TO 30% 30 TO 50% MORE THAN 50%

70
71
CONCLUTION AND RECOMMENDATIONS

CONCLUTION

After completing the survey and watching the analysis I come to this
conclusiion that the before investment investors do have focus on Tax savings,
Income, Capiatal preservation etc. They also have a predetermination of the
time period of investment.
According to my view the age group of 21-30 can be a great potential investors
for the company as the has high risk profile, more disposible income, and the
time horizon is perfect 3-7 years ( short term).

72
RECOMMENDATION

company must follow up these high potential customers, they can be offered
Equity shares because this group of people have a high risk profile and they can
afford to takes risks which is usually associated with equity shares. This group of
customers can also be offerd Mutual funds because in that also the exposure is in
equities. ULIPS can also be offered to this group.The ULIP has a 20%-22% return
which good enough for investment. The main focus should be to reach to the
customer, these customers are aware of ULIPs and aware of other product.
Company should try to reach them and tap the investor.

Mutual Funds can also be offered as they have high risk profile. Company
should take initiative to get demat account of these customers.

The age group of 31-40 years, investors are with Moderate risk profile, most
of the investors are from the 10,000-15,000 Rs per month disposible income.
Company will get a good investor with diluted risk profile. Company can offer
them ULIPs,and Fixed Deposits as investment instrument. Mutual funds can be
an option but that must be a

debt fund to invest.

The age group of 41-50 years, investors are from the 15,000-20,000 Rs
disposible income group. Investor in this group are invested in Insurance sector,
the primary focus of these investors are retirement and time horizon is likely to be
above 10years. This is also good potential group for the retirement plan in ULIPs.
Fixed deposits can be a good option for them.

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For the age group of above 50 years, the rish profile would be low moderate,as
the term is not more than 3 years. Investors have invested in insurance sector but
in this age insurance would not be a good option for investor. Company should
try to minimise the risk tolerence by offering Fixed deposits.

In the survey there were lot of people who were in the age group of above 60.
For this group of people the company can target Fixed deposits which gives
continues return like monthly interests so that they can keep on getting returns.

74
OCCUPATION
If we see the survey data it will seen that respondents are majorly Service
peopole and Business Class. Depending upon the data I conclude that the srevice
class has a time horizon of 3-7 years and risk tolerence Low- Moderate. They
invested in FDs, Equity shares, Mutual Fund and ULIPs.

Recommendation company shoul tap these class by innovative marketing


strategies as they already invested, and offer FDs, ULIPs. Mutual fund can be a
lucrative offer if the Fund is any moderate fund or debt fund.

For the business class, the risk profile is high-very high. Most investor are with
negative return acceptability and time horizon is < 3 years. Company should offer
Mutual funds with risk profile High to very high thus investor can get a high
return. Apart from this company should offer to open demat account with them.

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Disposible Income
The disposible income bracket less than Rs.5000 per month are basically
safe investors and have not and do not prefer investing in mutual funds
and ULIP. Thus positioning of these products should be such that people
are attracted towards this scheme. Emphasis on marketing of the products
should be given.

Respondents under disposible income bracket Rs.5,000-Rs.10,000 have


mainly invested in insurance and real estate. But when survey was done
and their preferences was asked these respondents strongly preferred
investing in these strategies.

Disposible Income Bracket of Rs.15,000-Rs.20,000 are the strong


contenders for investing their money and these people have invested in
real estate, insurance and fixed deposits. Moreover there is mixed
preferences for their investments thus proper segmentation of the sample
should be done accordingly marketing strategies should be adopted.

Though there is a small percentage of respondents in disposible income


bracket above Rs.20,000 who least prefer investing in mutual fund. But
this is the segment which can be well targeted and their portfolio should
be such that gives them more returns. The case of ULIP is different as
people strongly prefer investing in this investment strategy. Thus
emphasis for selling ULIP in this income bracket.

76
Questionnaire
Name : ______________________________________________________
Contact No :________________ Occupation_____________________
E mail !d:______________________________
Age : _____________________ Gender : ____________________ (M/F)
Add : ________________________________________________________
______________________________________________________________

Q1. Which type of investment mode you are willing to invest?

Long term investment plans


Short term investment plans

Q2. In which type of Investment Plan you have invested or interested to invest?

Mutual funds
Fixed deposit
Stocks/Shares
Insurance
Other _________________

Q3. Your purpose of investment?

Saving Taxes
Wealth maximization
Future security

77
Q4. Annual income index?

Less than Rs. 100000


Rs. 100000-250000
Rs. 250000-350000
Rs. 350000-500000
Rs. 500000 and above

Q5. Which Investment plan you think is more risky?

Mutual funds
Fixed deposit
Stocks/Shares
Insurance
Other ___________________

Q6. What factor you concentrating while investing?

Return
Risk
Both

Q7. Give rank to the investment plans according to risk and return factor

Mutual funds
Fixed deposit
Stocks/Shares
Insurance
Other ____________________
Q8. Are you aware with the Equity funds and Debt funds?

Yes No

Q9. Which plan is more precious for investment?

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Mutual fund
Insurance
Stock/share

Q10. In which company, you are interested to invest your money?

LIC
HDFC
SUNDARAM
SBI
ICICI
KOTAK MAHINDRA
BAJAJ ALLIANCE

DATE: ____________________
Signature ___________________

BIBLIOGRAPHY

http://www.licindia.com/download_forms.htm

www.amfiindia.com

www.mutualfundsindia.com

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www.mutualfundsindia.com

www.ask.com

www.faq.com

www.bseindia.com

www.amfiindia.com/mutual funds/nav/about funds/open ended schemes.com

www.investopedia/aboutus/html

sundaramfinance.com/companyinfo/sfl.asp

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