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Chapter 1

INTRODUCTION

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INTRODUCTION
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a Mutual Fund.

A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and invests the same on behalf of the investors/unit holders, in Equity shares, Government securities, Bonds, Call Money Markets etc, and distributes the profits. In the other words, a Mutual Fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time. Investors of mutual funds are known as unit holders. As we all know that mutual funds are pools of savings of investors,these investors in proportion to their investments share the profits or losses. Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share

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income and expenses.307 crores while Prudential ICICI being in the second position with Rs. A Mutual Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.37. losses.46. Today there are over 30 AMC’s offering a huge number of schemes giving the investor a huge horizon to choose from. Reliance Mutual Funds is the leading company in this sector with total assets under management being Rs. The market has become very competitive with the companies fighting tooth and nail to attract and keep the investor from investing in their competitor’s schemes. Today.of the fund’s gains. The following graph shows the composition of five of the top AMC’s in IndiaTOP 5 AMC's 13% 17% 27% Reliance Prud ICICI UTI MF HDFC MF 21% 22% Franklin Templeton 5 . The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time.870 crores.

Thereafter LIC itself came out with a Unit Linked Insurance Product known by name “BIMA PLUS “in the year 2001-02. Unit Linked Insurance Plans came into play in the 1960s and became very popular in Western Europe and Americas. ULIP attempts to fulfill investment needs of an investor with protection/insurance needs of an insurance seeker.INTRODUCTION TO ULIP’S A Unit Link Insurance Policy (ULIP) is one in which the customer is provided with a life insurance cover and the premium paid is invested in either debt or equity products or a combination of the two. In other words. as a mutual was taking care of investing the unit holders money in the capital market and giving them a fair return . It saves the investor/insurance-seeker the hassles of managing and tracking a portfolio or products. To put it simply. popularly known as ULIP – Unit Linked Insurance Plan in India was brought out by Unit Trust Of India in the year 1971 by entering into a group insurance arrangement with LIC o provide for life cover to the investors . In India The first unit linked Insurance Plan. More importantly ULIPs offer investors the opportunity to select a product which matches their risk profile. it enables the buyer to secure some protection for his family in the event of his untimely death and at the same time provides him an opportunity to earn a return on his premium paid. another Unit Linked Product was launched by the LIC Mutual Fund called by the name of “DHANARAKSHA” which was more or less on the line of ULIP of UTI. Subsequently in the year 1989. 6 . Presently a number of private life insurance companies have launched Unit Linked Insurance Products with a variety of new features. his nominees would normally receive an amount that is the higher of the sum assured or the value of the units (investments). while UTI . In the event of the insured person's untimely death.

policies are also changing day to day.1. qualification. because trend is changing. 7 . 1. This analysis give guidelines to Investors. And Investors are confused with the schemes of Mutual Funds. Many MF Companies are starting many schemes. • To study the approach of investors towards mutual funds and ULIPs.. • To know the Investment pattern in Mutual Funds through Analysis. • • • annual income. 1. Demographics include names. • To study the behavior of the investors whether they prefer mutual funds or ULIPs? • To review features of various Mutual Funds like Govt.1 NEED FOR THE STUDY Mutual fund Industry changing very fast.2 OBJECTIVES: • To study about the mutual funds industry. marital status and ulip’s. This study may brings solutions for selection of Company.3 SCOPE OF THE STUDY: • Subject matter is related to the investor’s approach towards mutual funds and People of age between 20 to 60 Area limited to HYDERABAD. investors are always at loss as to which fund to choose. Private. age. and schemes. occupation.

Customers and others (connected with subject) Data Analysis: Will include methods and tools such as: • • • Tabulation Charts Description 8 .4 METHODOLOGY OF STUDY Primary Data: Collected data through structured questionnaire. Employees.1. Secondary Data: Survey from following sources: • • • Internet Books News Papers Sampling: A Sample of 50 people from the Company Consultancy.

The study only covers the area of Chandigarh that may not be applicable to other areas.1. • • 9 . The limitations of this study can be: Sample size taken is small and may not be sufficient to predict the results with 100% accuracy. The result is based on primary and secondary data that has it’s own limitations.5 • LIMITATIONS: No study is free from limitations.

Chapter 2 REVIEW OF LITERATURE 10 .

11 .REVIEW OF LITERATURE MUTUAL FUND—STRUCTURE Sponsor Trustees Mutual fund ASSET MANAGEMENT COMPANY Custodian Registrar A mutual fund is structured as mentioned above. the investor invests his money in the fund. The registrar is an institution which maintains a register of all the unit holders of a fund along with their ownership. A person or a group of persons known as trustee is given an overall authority over the fund managers. Every mutual fund organization has a sponsor who is required to contribute a minimum of 40% of the net worth of the AMC. It is the duty of the sponsor to establish a fund and apply to SEBI for its registration. The fund is created which is managed by the AMC which is given the powers to take all decisions relating to the investment. who basically stocks a fund’s securities and other assets. Finally. Firstly. There is another entity known as the custodian. They basically safeguard the assets of the fund. the SEBI is the ultimate authority.

Though the risk associated is generally on the higher side of the spectrum. Moving up the risk spectrum. risk takers by their nature. balanced funds provide an easy route of investment. the return-potential compensates for the risk attached. One can avail of the benefits of better returns with added benefits of anytime liquidity by investing in open-ended debt funds at lower risk. Capital markets find their fancy more often than not.MUTUAL FUND—who invests? Investor Profile: An investor normally prioritizes his investment needs before undertaking an investment. there are people who would like to take some risk and invest in equity funds/capital market. However. they are likely to generate moderate returns even in pessimistic market conditions. Investments for specific goals normally find their way into the debt market as risk reduction is of prime importance. they would rather have some exposure to debt as well. because they have historically generated better returns than any other avenue. this risk of default by any company that one has chosen to invest in. provided. Mutual Funds are generally the best option. they can invest in equity as well as good quality debt thereby reducing risks and providing the investor with better returns than he could otherwise manage. 12 . Different goals will be allocated to different proportions of the total disposable amount. would not be averse to investing in high-risk avenues. For these investors. Since they can reshuffle their portfolio as per market conditions. this is the area for the risk-averse investors and here. can be minimized by investing in Mutual Funds as the fund managers analyze the companies financials more minutely than an individual can do as they have the expertise to do so. since their appetite for risk is also limited. armed with expertise of investment techniques. the money was judiciously invested. Next comes the risk takers.

The main functions of Mutual Fund trust are as follows:  Planning and formulating Mutual Funds schemes. moving corporate actions involving declaration of dividends. which is the main body in the creation of Mutual Fund trust.  Seeking SEBI’s approval and authorization to these schemes.  Marketing the schemes for public subscription. Settler of the trust or the sponsoring organization. 1956 Fund mangers or The merchant-banking unit Custodians.etc to compensate investors for their investments in units. and 13 .  Seeking RBI approval in case NRI’s subscription to Mutual Fund is Invited  Attending to trusteeship function. This function as per guidelines can be assigned to separately established trust companies too. MUTUAL FUNDS TRUST:Mutual fund trust is created by the sponsors under the Indian trust act. FUND MANAGERS (OR) THE ASSET MANAGEMENT COMPANY (AMC) AMC has to discharge mainly three functions as under: Taking investment decisions and making investments of the funds through market dealer/brokers in the secondary market securities or directly in the primary capital market or money market instruments. Realize fund position by taking account of all receivables and realizations. 1982.ORGANISATION AND MANAGEMENT OF MUTUAL FUNDS:In India Mutual Fund usually formed as trusts. three parties are generally involved viz. 1982 or the trust company registered under the Indian companies act. The trust formed under the Indian trust act. Trustees are required to submit a consolidated report six monthly to SEBI to ensure that the guidelines are fully being complied with trusted are also required to submit an annual report to the investors in the fund.

BOI MF. the information about the listed schemes and the transactions of units in the secondary market. Besides. With the establishment of stock Holding Corporation of India the work of custodian for mutual funds is now being handled by it for various mutual funds. LIC MF. etc. AMC has to feed back the trustees about its fund management operations and has to maintain a perfect information system. etc RESPONSIBILITY OF CUSTODIANS: Receipt and delivery of securities  Holding of securities. Industrial investment trust company acts as sub-custodian for stock Holding Corporation of India for domestic schemes of UTI. CUSTODIANS OF MUTUAL FUNDS:Mutual funds run by the subsidiaries of the nationalized banks had their respective sponsor banks as custodians like Canara Bank.  Collecting income  Holding and processing cost  Corporate actions etc FUNCTIONS OF CUSTOMERS: Safe custody  Trade settlement  Corporate action  Transfer agents 14 .Maintaining proper accounting and information for pricing the units and arriving at net asset value (NAV). Foreign banks with higher degree of automation in handling the securities have assumed the role of custodians for mutual funds. SBI. PNB.

under all its schemes can own more than five percent of any company’s paid up capital carrying voting rights. 4. 5 crores. Each open-end scheme must have a Minimum corpus of Rs 50 crore 4. No mutual fund. 3. In the case of a Closed –End scheme if the Minimum amount of Rs 20 crore or 60% of the target amount. Mutual funds are to be established in the form of trusts under the Indian trusts act and are to be operated by separate asset management companies (AMC s) 2. whichever is higher is not raised then the entire subscription has to be refunded to the investors. Investment norms:1. Mutual funds are allowed to start and operate both closed-end and open-end schemes. Mutual funds dealing exclusively with money market instruments are to be regulated by the Reserve Bank Of India 5. No mutual fund. whichever is higher. AMC’s and Trustees of Mutual Funds are to be two separate legal entities and that an AMC or its affiliate cannot act as a manager in any other fund. 5. AMC’s shall have a minimum Net worth of Rs. 3. if the Minimum amount of Rs 50 crore or 60 percent of the targeted amount. under all its schemes taken together can invest more than 10 percent of its funds in shares or debentures or other instruments of any single company. 2. is no raised then the entire subscription has to be refunded to the investors. Mutual fund dealing primarily in the capital market and also partly money market instruments are to be regulated by the Securities Exchange Board Of India (SEBI) 6. 15 . In the case of an Open-Ended schemes. Each closed-end schemes must have a Minimum corpus (pooling up) of Rs 20 crore. 2.FORMATION AND REGULATIONS:1. All schemes floated by Mutual funds are to be registered with SEBI Schemes:1.

securitized debt. under all its schemes taken together can invest more than 15 percent of its fund in the shares and debentures of any specific industry. there are guidelines governing the operations of mutual funds in dealing with shares to comply with the guidelines.3. except those schemes which are specifically floated for investment in one or more specified industries in respect to which a declaration has been made in the offer letter. 16 . Mutual funds can invest only in transferable securities either in the money or in the capital market. and other unquoted debt instruments holding cannot exceed 10 percent in the case of growth funds and 40 percent in the case of income funds. SEBI can impose penalties on Mutual funds after due investigation for their failure Mutual funds are required to distribute at least 90 percent of their profits annually in any given year. SEBI has also been granted with powers to oversee the constitution as well as the operations of mutual funds. No individual scheme of mutual funds can invest more than five percent of its corpus in any one company’s share. 5. including a common advertising code. Besides. and other unquoted debt. Besides these. Distribution: and also seeking to ensure greater investor protection through detailed disclosure and reporting by the mutual funds. Privately placed debentures. No mutual fund. 4.

These companies sell new shares NAV plus a Loading or management fees and redeem shares at NAV. thus the pool of Funds can technically be kept constant. The price at which units can be sold or redeemed Depends on the market prices. Thus they influence market price of corporate securities. for their holdings in a closed end mutual Fund. Happen in the secondary markets. Such Mutual Fund Companies place their funds in the secondary securities market. which are fundamentally linked to the NAV. The asset management company (AMC) however. Any further transaction for buying the units or repurchasing them. In other words. The open-end Mutual Fund Company Buys or sells their shares. Therefore new investors buy from the existing investors. where closed end Funds are listed. OPEN-ENDED MUTUAL FUNDS:The holders of the shares in the Fund can resell them to the issuing Mutual Fund Company at the time. and existing investors can liquidate their units by selling them to other willing buyers. the target amount and the period both are indefinite in such funds. They receive in turn the net assets value (NAV) of the shares at the time of re-sale. in the secondary markets. Investors in closed end Funds receive either certificates or Depository receipts. after which further sales are closed. They do not participate in new issue market as do pension funds or life insurance companies. thus reducing the amount of funds held by outside investors. In a closed end Funds. can buy out the units from the investors. Open-end investment companies can sell an unlimited number of Shares and thus keep going larger. DIFFERENT MODES OF RECEIVING THE INCOME EARNED FROM MUTUAL FUND INVESTMENTS 17 . CLOSED-ENDED MUTUAL FUNDS:A closed–end Fund is open for sale to investors for a specific period.MUTUAL FUND—TYPES 1. 2.

the NAV increases over time due to such incomes and the investor realizes only the capital appreciation on redemption of his investment. the NAV only reflects the capital appreciation or depreciation in market price of the underlying portfolio. ♦ Income Plan:In this plan. instead. In other words. In other words. dividend is neither declared nor paid out to the investor but is built into the value of the NAV. dividend is declared but not paid out to the investor. the investor is given additional units and not cash as dividend. In other words. dividends are paid-out to the investor. it is reinvested back into the scheme at the then prevailing NAV.Mutual Funds offer three methods of receiving income: ♦ Growth Plan:In this plan. MUTUAL FUND INVESTING STRATEGIES: 18 . ♦ Dividend Re-investment Plan In this case.

Such redemption or investment will be at the applicable NAV. Systematic Withdrawal Plans (SWPs) These plans are best suited for people nearing retirement. 2. A transfer will be treated as redemption of units from the scheme from which the transfer is made. SIPs entail an investor to invest a fixed sum of money at regular intervals in the Mutual fund scheme the investor has chosen. MUTUAL FUNDS—RISK ASSOCIATED 19 . Many funds do not even charge any transaction fees for his service – an added advantage for the active investor. Systematic Investment Plans (SIPs) These are best suited for young people who have started their careers and need to build their wealth. Systematic Transfer Plans (STPs) They allow the investor to transfer on a periodic basis a specified amount from one scheme to another within the same fund family – meaning two schemes belonging to the same mutual fund. an investor opting for SIP in xyz Mutual Fund scheme will need to invest a certain sum on money every month/quarter/half-year in the scheme. This service allows the investor to manage his investments actively to achieve his objectives. an investor invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at regular intervals to take care of his expenses 3. In these plans.1.

nor can the price of its securities. which has invested in the equity of such a company. if an investor invests in a long-term debt Mutual Fund scheme and interest rates increase. 3) INFLATION RISK:Interest rate risk relates to future changes in interest rates. administered prices.Investing in Mutual Funds. One of the most basic economic principles is that risk and reward are directly correlated. as investors. etc are some of the many political factors that create market risk. and profitability of the issuer of the security. 2) POLITICAL RISK:Changes in the tax laws. we have virtually no control. 5) ECONOMIC RISK:20 . supply and demand. trade regulations. The types of risk commonly associated with Mutual Funds are: 1) MARKET RISK:Market risk relates to the market value of a security in the future. For instance. Market prices fluctuate and are susceptible to economic and financial trends. Adverse changes in business circumstances will reduce the market price of the company’s equity resulting in proportionate fall in the NAV of the Mutual Fund scheme. as with any security. Although collectively. the NAV of the scheme will fall because the scheme will be end up holding debt offering lower interest rates. In other words. Business risk is inherent in all business ventures. stability. we have indirect control through the power of our vote individually. the greater the potential risk the greater the potential return. 4) BUSINESS RISK:Business risk is the uncertainty concerning the future existence. The future financial stability of a company cannot be predicted or guaranteed. and many other factors that cannot be precisely predicted or controlled. as citizens. does not come without risk.

While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund. can have an adverse effect on a company’s business. equity stocks of agriculture-based companies will fall and NAVs of Mutual Funds.Economic risk involves uncertainty in the economy. a low and negative Treynor's Index is an indication of unfavorable performance. Ri represents return on fund. in turn. and Bi is beta of the fund. Symbolically. The most important and widely used measures of performance are: • • • • The Treynor’Measure The Sharpe Measure Jenson Model Fama Model 1) The Treynor Measure:Developed by Jack Treynor. which have invested in such stocks. which. during a given period and systematic risk associated with it (beta). if monsoons fail in a year. will fall proportionately. as there is no credit risk associated). Where. Rf is risk free rate of return. this performance measure evaluates funds on the basis of Treynor's Index. it can be represented as: Treynor's Index (Ti) = (Ri . This Index is a ratio of return generated by the fund over and above risk free rate of return (generally taken to be the return on securities backed by the government. For instance. All risk-averse investors would like to maximize this value.Rf)/Bi. 2) The Sharpe Measure :21 .

In this model. Rf is risk free rate of return. The surplus between the two returns is called Alpha. the model evaluates funds on the basis of reward per unit of total risk. and Bi is Beta deviation of the fund. While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund. Ri represents return on fund. This measure was developed by Michael Jenson and is sometimes referred to as the differential Return Method. it is the total risk of the fund that the investors are concerned about. Si is standard deviation of the fund. and Rf is risk free rate of return. which is a ratio of returns generated by the fund over and above risk free rate of return and the total risk associated with it. 22 . 3) Jenson Model:Jenson's model proposes another risk adjusted performance measure.Rf) Where. a low and negative Sharpe Ratio is an indication of unfavorable performance. So. performance of a fund is evaluated on the basis of Sharpe Ratio. Ri represents return on fund.Rf)/Si Where. Required return of a fund at a given level of risk (Bi) can be calculated as: Ri = Rf + Bi (Rm . According to Sharpe. it can be written as: Sharpe Index (Si) = (Ri . Symbolically. which measures the performance of a fund compared with the actual returns over the period. and Rm is average market return during the given period. This measure involves evaluation of the returns that the fund has generated vs. the returns actually expected out of the fund1 given the level of its systematic risk.

Ri represents return on fund. Sharpe measure and Fama model that consider the entire risk associated with fund are suitable for small investors. as it is the excess returns over and above the return required to compensate for the total risk taken by the fund manager. The Net Selectivity represents the stock selection skill of the fund manager. as his knowledge of market is primitive. Required return can be calculated as: Ri = Rf + Si/Sm*(Rm . measured in terms of returns.After calculating it. and Rf is risk free rate of return. This model compares the performance. The difference between these two is taken as a measure of the performance of the fund and is called Net Selectivity. Moreover. as the ordinary investor lacks the necessary skill and resources to diversify. of a fund with the required return commensurate with the total risk associated with it. Higher alpha represents superior performance of the fund and vice versa. the selection of the fund on the basis of superior stock selection ability 23 . Alpha can be obtained by subtracting required return from the actual return of the fund. Sm is standard deviation of market returns. Treynor measure and Jenson model use Systematic risk is based on the premise that the Unsystematic risk is diversifiable. The Net Selectivity is then calculated by subtracting this required return from the actual return of the fund. For them. a portfolio can be spread across a number of stocks and sectors. Limitation of this model is that it considers only systematic risk not the entire risk associated with the fund and an ordinary investor cannot mitigate unsystematic risk. Higher value of which indicates that fund manager has earned returns well above the return commensurate with the level of risk taken by him. 4) Fama Model:The Eugene Fama model is an extension of Jenson model. Among the above performance measures. two models namely.Rf) Where. Rm is average market return during the given period. These models are suitable for large investors like institutional investors with high risk taking capacities as they do not face paucity of funds and can invest in a number of options to dilute some risks. However.

The investment in funds that have generated big returns at higher levels of risks leaves the money all the more prone to risks of all kinds that may exceed the individual investors' risk appetite. the Philippines. 10. Recently it crossed AUM of Rs. 1992. 2003.of the fund manager will also help in safeguarding the money invested to a great extent. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5. was incorporated on November 4. the US. Deutsche Bank AG is the custodian. Japan. Ltd. Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund:Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. 2000 with two sponsorers nemely Housing Development Finance Corporation Limited and Standard Life Investments Limited. ABN AMRO Asset Management (India) Ltd. HSBC Mutual Fund:HSBC Mutual Fund was setup on May 27. 2004 with ABN AMRO Trustee (India) Pvt.000 crores. as the Trustee Company. Major Mutual Fund Companies in India:ABN AMRO Mutual Fund:ABN AMRO Mutual Fund was setup on April 15. Bank of Baroda Mutual Fund (BOB Mutual Fund):Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund. 1992 under the sponsorship of Bank of Baroda. The AMC. 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Sun Life Financial is a golbal organisation evolved in 1871 and is being represented in Canada. ING Vysya Mutual Fund:24 . HDFC Mutual Fund:HDFC Mutual Fund was setup on June 30. Board of Trustees. HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment.

and Tata Investment Corporation Ltd. was incorporated on April 6. State Bank of India Mutual Fund:State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshor fund. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. 225 cr.ING Vysya Mutual Fund was setup on February 11.500 Crores as AUM. 1998. ING Investment Management (India) Pvt. 1993. Now it has an investor base of over 8 Lakhs spread over 18 schemes. State Bank of India Mutual Fund has more than Rs. as the sponsor. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. 1995 works as the AMC of Sahara Mutual Fund. Limited. Prudential ICICI Mutual Fund was setup on 13th of October. and ICICI Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June. The Trustee Company formed is Prudential ICICI Trust Ltd. Today it is the largest Bank sponsored Mutual Fund in India. Sahara Mutual Fund:Sahara Mutual Fund was set up on July 18.. one of the largest life insurance companies in the US of A. 2005) of AUM. 7. 5. Tata Mutual Fund:Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act. of America. 1993 with two sponsorers. Tata Asset Management Limited's is one of the fastest in the country with more than Rs.8 crore. the India Magnum Fund with a corpus of Rs. Prudential Plc. The paid-up capital of the AMC stands at Rs 25. 1996 with Sahara India Financial Corporation Ltd. It is a joint venture of Vysya and ING. Kotak Mahindra Mutual Fund:25 . 1882. approximately. 1999 with the same named Trustee Company. Ltd. Prudential ICICI Mutual Fund:The mutual fund of ICICI is a joint venture with Prudential Plc. The sponsorers for Tata Mutual Fund are Tata Sons Ltd.703 crores (as on April 30. Sahara Asset Management Company Private Limited incorporated on August 31. The AMC.

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. 1999. It was registered on June 30. Ltd. 1995 as Reliance Capital Mutual Fund which was changed on March 11.20000 Crore. Punjab National Bank (PNB). is the AMC which was incorporated with SEBI on December 20. UTI Asset Management Company presently manages a corpus of over Rs. The Trustee is Standard Chartered Trustee Company Pvt. Reliance Mutual Fund:Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act. and Life Insurance Corporation of India (LIC). Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk . Asset Management Funds.return profiles. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. manages the UTI Mutual Fund with the support of UTI Trustee Company Privete Limited. State Bank of India (SBI). 2003. Index Funds. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securit Standard Chartered Mutual Fund:Standard Chartered Mutual Fund was set up on March 13. Limited is the Trustee. Franklin Templeton India Mutual Fund:26 . 2004. It is presently having more than 1. The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB). Standard Chartered Asset Management Company Pvt. The schemes of UTI Mutual Fund are Liquid Funds. Unit Trust of India Mutual Fund:UTI Asset Management Company Private Limited. Ltd. Income Funds.99. Equity Funds and Balance Funds. established in Jan 14. It was the first company to launch dedicated gilt scheme investing only in government securities. KMAMC started its operations in December 1998. 1882. 2000 sponsored by Standard Chartered Bank.818 investors in its various schemes.

This is the first close end diversified equity scheme serving the needs of Indian retail investors focussing on a longterm capital appreciation. Its AMC was incorporated on December 1. Open end Hybrid schemes. Chola Mutual Fund:27 . pension funds and nonprofit organisations. Canbank Investment Management Services Ltd. 1993 is the AMC. Ltd. (as of April 30. the Alliance Capital Asset Management India (Pvt) Ltd. Open end Income and Liquid schemes. 1994 with Alliance Capital Management Corp. Alliance Capital Mutual Fund:Alliance Capital Mutual Fund was setup on December 30. Closed end Income schemes and Open end Fund of Funds schemes to offer. It provides customized asset management services and products to governments. Frnaklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.The group. 1987 with Canara Bank acting as the sponsor. with the corporate office in Mumbai. They have Open end Diversified Equity schemes. corporations. investmenty management and credit services. The Trustee Company is Escorts Investment Trust Limited. Its services are also extended to high net worth individuals and retail investors. and AMC. Morgan Stanley Investment Management (MISM) was established in the year 1975. Open end Tax Saving schemes.2 bn. Canbank Mutual Fund:Canbank Mutual Fund was setup on December 19. Open end Sector Equity schemes. of Delaware (USA) as sponsorer. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). Escorts Mutual Fund:Escorts Mutual Fund was setup on April 15. Morgan Stanley Mutual Fund India:Morgan Stanley is a worldwide financial services company and its leading in the market in securities. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. incorporated on March 2. 1996 with Excorts Finance Limited as its sponsor. The Trustee is ACAM Trust Company Pvt. 1995 with the name Escorts Asset Management Limited. The Corporate Office of the AMC is in Mumbai. 2005). It is one of the largest financial services groups in the world.

Cholamandalam Trustee Co. balanced and equity funds. was setup on January 3.KEY FEATURES • Premiums paid can be single. 1882. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund. the risk charge (mortality rate) varies with age. • The costs in ULIP are higher because there is a life insurance component in it as well. balanced to debt or gilt to equity.Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. • The maturity benefit is not typically a fixed amount and the maturity period can be advanced or extended. ULIP . The risk cover can be increased or decreased. USP of ULIPS HURDLES OF ULIP 28 . • As in all insurance policies. • The policyholder can switch between schemes. regular or variable. for instance. balanced funds. 1997. in addition to the investment component. . growth funds or bonds. • Insurance companies have the discretion to decide on their investment portfolios. • The maturity benefit is the net asset value of the units. • Being transparent the policyholder gets the entire episode on the performance of his fund. is the Trustee Company and AMC is Cholamandalam AMC Limited. The payment period too can be regular or variable. LIC Mutual Fund:Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. etc. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act. • Investments can be made in gilt funds. • • • • ULIP products are exempted from tax and they provide life insurance. Ltd. The Company started its business on 29th April 1994. Investor gets an option to choose among debt. Provides capital appreciation. money market funds. It contributed Rs.

But there are costs. so each company also gives a post-cost return at the 10 per cent illustration. some companies are not using any benchmark at all. they are. EARLY EXIT OPTIONS: 29 . If one company calculates administration cost by a formula. INTERNALLY MADE SALES ILLUSTRATION: During the process of collecting information. on most counts. some companies were not including the mortality cost while calculating the yield.NO STANDARDIZATION All the costs are levied in ways that do not lend to standardisation. calling it the yield. another levies a flat rate. it was found that the sales benefit illustration shown was not conforming to the Insurance Regulatory and Development Authority (Irda) format. in many locations30 per cent return illustrations are still rampant NOT ALL SHOW THE BENCHMARK RETUR: To talk about returns without pegging them to a benchmark is misleading the customer. or the measuring rod of performance. Though most companies use Sensex. However. These rely on a multiplier that is fixed by the insurer OVERSTATING THE YIELD: Insurance companies work on illustrations. BSE 100 or the Nifty as the benchmark. some insurance companies do not allow the individual to fix the life cover that he needs. They are allowed to show you how much your annual premium will be worth if it grew at 10 per cent per annum. This amounts to overstating the yield. If one company allows a range of the sum assured (SA). another allows only a multiple of the premium. There was also the problem of a varying cost structure with age LACK OF FLEXIBILITY IN LIFE COVER ULIP is known to be more flexible in nature than the traditional plans and.

there are plans that charge this amount. CREEPING COSTS: Since the investors are now more aware than before and have begun to ask for costs. ULIPs can be termed as mutual fund schemes with an insurance component. While most insurance companies charge an annual fee of about Rs 600 as administration costs. Generally speaking. However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs. There are plans that are able to say 92 per cent will be invested. There are others that charge a multiple of this amount and that too grows COMPARISON BETWEEN ULIPS AND MUTUAL FUNDS: Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning. the worse off is the investor since he ends up redeeming a high-front-load product and is then encouraged to move into another higher cost product at that stage. that is.e. Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain. An early exit also takes away the benefit of compounding from insured. Points of difference between the two: 30 . diversified equity funds. that stay fixed over time. As is the case with mutual funds. i. will have a front load of just 8 per cent. What they do not say is the much higher policy administration cost that is tucked away inside (adjusted from the fund value).The Ulip product works over the long term. some companies have found a way to answer that without disclosing too much. investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis. but it grows by as much as 5 per cent a year over time. The earlier the exit. People are now asking how much of the premium will go to work. balanced funds and debt funds to name a few.

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 also have the choice of investing in a lump sum (single premium) or using the conventional route. The minimum investment amounts are laid out by the fund house. either is applicable). For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested. In ULIPs.5% per annum on a recurring basis for all their expenses. 31 . i. ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure. making premium payments on an annual. Similarly funds also charge their investors entry and exit loads (in most cases. quarterly or monthly basis. administration among others are subject to pre-determined upper limits as prescribed by the Securities and Exchange Board of India. This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter.e. determining the premium paid is often the starting point for the investment activity. any expense above the prescribed limit is borne by the fund house and not the investors. sales and marketing. The freedom to modify premium payments at one's convenience clearly gives ULIP investors an edge over their mutual fund counterparts. Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale. 2. expenses charged for various activities like fund management. half-yearly. Expenses In mutual fund investments.1. For example equity-oriented funds can charge their investors a maximum of 2. Mode of investment/ investment amounts Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons.

This explains the complex and at times 'unwieldy' expense structures on ULIP offerings. Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated. regular portfolio disclosures on the other hand can enable investors to make timely investment decisions. If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house. the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand. There is lack of consensus on whether ULIPs are required to disclose their portfolios. offerings in both the mutual funds segment and ULIPs segment are largely comparable. i. ULIP-related expenses have been dealt with in detail in the article "Understanding ULIP expenses". the Insurance Regulatory and Development Authority. he could have to bear an exit load and/or entry load. However the lack of transparency in ULIP investments could be a cause for concern considering that the amount invested in insurance policies is essentially meant to provide for contingencies and for long-term needs like retirement. 32 . 3. While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory. Portfolio disclosure Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis.Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator. During our interactions with leading insurers we came across divergent views on this issue. albeit most fund houses do so on a monthly basis. Some insurance companies do declare their portfolios on a monthly/quarterly basis.e. The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings. a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds. 4 Flexibility in altering the asset allocation As was stated earlier. Investors get the opportunity to see where their monies are being invested and how they have been managed by studying the portfolio. For example plans that invest their entire corpus in equities (diversified equity funds).

while a short-term capital gain is taxed at the investor's marginal tax rate. debt-oriented funds attract a long-term capital gains tax @ 10%. Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner. Maturity proceeds from ULIPs are tax free. if the investments are held for a period over 12 months. it is vital for investors to be aware of the nuances in both offerings and make informed decisions. Similarly. for example in a bull market when the ULIP investor's equity component has appreciated. As always. Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of advantages to offer. conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%. In case of equity-oriented funds (for example diversified equity funds. 5.On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually. Tax benefits ULIP investments qualify for deductions under Section 80C of the Income Tax Act. only investments in tax-saving funds (also referred to as equitylinked savings schemes) are eligible for Section 80C benefits. he can book profits by simply transferring the requisite amount to a debt-oriented plan. This can prove to be very useful for investors. irrespective of the nature of the plan chosen by the investor. a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches). balanced funds). the gains are tax free. 33 . On the other hand in the mutual funds domain. This holds good.

ULIP's usually have following charges built into it : a) Up-front Charges b) Mortality Charges (Charges for providing the risk cover for life) c) Administrative Charges d) Fund Management Charges Mutual Fund's have the following charges : a) Up-front charges ( Marketing. Advertising.) b) Fund Management Charges ( expenses for managing your fund) 34 . distributors fee etc.

Chapter 3 COMPANY PROFILE 35 .

In the process it has rewarded it’s investors handsomely with consistently high returns. the fund has launched 38 schemes and successfully redeemed fifteen of them. one of the world’s leading fund management companies that manages over US$ 500 Billion worldwide. The institution has grown immensely since its inception and today it is India's largest bank.4 million investors have reposed their faith in the wealth generation expertise of the Mutual Fund.COMPANY PROFILE STATE BANK OF INDIA MUTUAL FUND Proven Skills in Wealth Generation SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. 31. The fund traces its lineage to SBI . Today. Schemes of the Mutual fund have consistently outperformed benchmark indices and have emerged as the preferred investment for millions of investors and HNI’s. A total of over 5.794 crores of assets and has a diverse profile of investors actively parking their investments across 36 active schemes. patronised by over 80% of the top corporate houses of the country. the fund manages over Rs.India’s largest banking enterprise. Exploiting expertise. compounding growth In twenty years of operation. 36 . SBI Mutual Fund is a joint venture between the State Bank of India and Société Générale Asset Management.

Aparna Nirgude Chief Risk Officer Mr.Customer Service. Sanjay Sinha Chief Investment Officer Mr. 46 investor service desks and 56 district organisers. Ashwini Kumar Jain Chief Operating Officer Mr. C A Santosh Chief Manager . Ashutosh P Vaidya Company Secretary & Compliance Officer Mr. Didier Turpin Dy. Mr. SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent India Opportunities Fund. 28 investor service centers. KEY PERSONNEL: Mr. Achal K. Parijat Agrawal Head – Fixed Income 37 . Growth through innovation and stable investment policies is the SBI MF credo. Chief Executive Officer Ms.The fund serves this vast family of investors by reaching out to them through network of over 130 points of acceptance. Gupta Managing Director & Chief Executive Office Mr.

Awards and achievements: • SBI Mutual Fund (SBIMF) has been the proud recipient of the: ICRA Online Award .18 Crisil Mutual Fund of the Year Award 2007 CNBC AWAAZ CONSUMER AWARDS 2007 38 .8 times The Lipper Award (Year 2005-2006) CNBC TV .

IT Fund MSFU . Sectoral Funds and Index Funds.Contra Fund MSFU . Index Funds invest passively only in the stocks of a particular index and the performance of such funds move with the movements of the index • • • • • • • • • • • • • • • • • • Magnum COMMA Fund Magnum Equity Fund Magnum Global Fund Magnum Index Fund Magnum MidCap Fund Magnum Multicap Fund Magnum Multiplier Plus 1993 Magnum Sector Funds Umbrella MSFU . Diversified Equity Funds invest in various stocks across different sectors while sectoral funds which are specialized Equity Funds restrict their investments only to shares of a particular sector and hence. However they are also exposed to the volatility and attendant risks of stock markets and hence should be chosen only by such investors who have high risk taking capacities and are willing to think long term. Equity Funds include diversified Equity Funds.Pharma Fund MSFU .Emerging Businesses Fund MSFU .Series I SBI Magnum Taxgain Scheme 1993 SBI ONE India Fund 39 . are riskier than Diversified Equity Funds.PRODUCTS EQUITY FUNDS: The investments of these schemes will predominantly be in the stock markets and endeavor will be to provide investors the opportunity to benefit from the higher returns which stock markets can provide.FMCG Fund SBI Arbitrage Opportunities Fund SBI Blue chip Fund SBI Infrastructure Fund .

Hence they are safer than equity funds. Government Securities and Money Market instruments either completely avoiding any investments in the stock markets as in Income Funds or Gilt Funds or having a small exposure to equities as in Monthly Income Plans or Children's Plan. • • • • • • • • • • • • • • • • • • • • Magnum Children`s Benefit Plan Magnum Gilt Fund Magnum Gilt Fund (Long Term) Magnum Gilt Fund (Short Term) Magnum Income Fund Magnum Income Plus Fund Magnum Income Plus Fund (Saving Plan) Magnum Income Plus Fund (Investment Plan) Magnum Insta Cash Fund Magnum InstaCash Fund -Liquid Floater Plan Magnum Institutional Income Fund Magnum Monthly Income Plan Magnum Monthly Income Plan Floater Magnum NRI Investment Fund SBI Capital Protection Oriented Fund .• SBI TAX ADVANTAGE FUND . At the same time the expected returns from debt funds would be lower.Short Term Fund 40 .Series I SBI Premier Liquid Fund SBI Short Horizon Fund SBI Short Horizon Fund .SERIES I DEBT SCHEMES Debt Funds invest only in debt instruments such as Corporate Bonds.Liquid Plus Fund SBI Short Horizon Fund . Such investments are advisable for the risk-averse investor and as a part of the investment portfolio for other investors.

BALANCED SCHEMES Magnum Balanced Fund invest in a mix of equity and debt investments. • • Magnum Balanced Fund Magnum NRI Investment Fund . Hence they are less risky than equity funds. but at the same time provide commensurately lower returns.FlexiAsset Plan 41 . They provide a good investment opportunity to investors who do not wish to be completely exposed to equity markets. but is looking for higher returns than those provided by debt funds.

MAJOR FUNDS OF SBI MF (EQUITY FUND) Investment Objective The objective of the scheme would be to generate opportunities for growth along with possibility of consistent returns by investing predominantly in a portfolio of stocks of companies engaged in the commodity business within the following sectors . Metals. Materials & Agriculture and in debt & money market instruments Asset Allocation Instrument Equity and equity related instruments of commodity based companies Foreign Securities/ADRs/GDRs of commodity based companies Fixed/Floating Rate Debt instruments including derivatives Money Market instruments* % of Portfolio of Plan A&B within 65% – 100% 0% .10% 0% . Asset Allocation 42 .30% 0% .30% Risk Profile High High Medium Low Magnum Balanced Fund Investment Objective To provide investors long term capital appreciation along with the liquidity of an open-ended scheme by investing in a mix of debt and equity.Oil& Gas. The scheme will invest in a diversified portfolio of equities of high growth companies and balance the risk through investing the rest in a relatively safe portfolio of debt.

Instrument Equities Debt Instruments bonds. Securitized Debt Money Market Instruments % of Portfolio of Plan A&B At least 50% like debentures. Scheme open for Resident Indians. on a fully repatriable basis for NRIs and. Indian Corporates. Up to 40% Not more than 10% of investments in debt Balance Risk Profile Medium to High Medium to High Low Scheme Highlights An open-ended scheme investing in a mix of debt and equity instruments. Switchover facility to any other open-ended schemes of SBI Mutual Fund at NAV related prices.khokhas.25% to the NAV. On an ongoing basis. Trusts. Investors get the benefit of high expected-returns of equity investments with the safety of debt investments in one scheme. Facility to reinvest dividend proceeds into the scheme at NAV available. Sale and repurchase price on a daily basis. 2. 4. 5. Entry Load Exit Load 43 . 3. Overseas Corporate Bodies. 6. etc. magnums will be allotted at an entry load of 2. The scheme will declare NAV. Nomination facility available for individuals applying on their behalf either singly or jointly upto three. 7.

between 6 months & 12 months from the date of allotment – NIL 0. Chapter 4 DATA ANALYSIS AND INTERPREATION 44 .2. whereby investors can withdraw a minimum amount of Rs. 5 crore.25% Investments date of allotment – 1%.5%.6months be withdrawn every month or quarter by issuing advance Rs. 500/. 5 Investments below Rs. exit of Rs. exit within 6 months from the crores .5 crores and above . Investments below Rs.1500/quarter months 12 instructions to the Registrars at any time. 5 crore. 5 crore.Investments below Rs. There is also a facility of a Monthly Pension Plan.500/month . 5 crore and above– Nil SIP SWP Rs. Investments below Rs. exit after 12 months from the date of allotment – Nil. Investments of Rs. 500 can Rs.every month.12 months Systematic Withdrawal Plan (SWP): A minimum of Rs.1000/month .

DATA ANALYSIS AND INTERPREATION COMPARATIVE ANALYSIS OF MUTUAL FUNDS AND ULIPS : What do investors prefer? • Do you invest in Mutual Funds ? response Frequenc Yes No total y 19 31 50 Percentage 62% 38% 100 45 .

98 10. Options frequency percentages Fixed deposits 11 45.5 -.25 12.5 (observedexpected)² 90.5 options Advertisements Agents Seminar Workshop Total Frequency 22 12 7 9 50 (observedexpected 9.64 .66 Total 24 100 What is the mode of information that you use for insurance companies? a) Advertisement b) Agents c) Seminar d) Work shops expected frequency= 50/4= 12.25 .25 30.22 .42 . please specify.5 46 -5. • If not.5 Recurring deposits 4 16.83 Post office schemes 9 37.38% yes no 62% INTERPRETATION: 62% of the people invest in mutual funds.25 133 (observedexpected)²/e 7. then what other option(s) do you prefer to invest? Fixed deposits  Recurring deposits  post office schemes  Others If others.02 2.5 -3.

64 expected at 3 degree of freedom. Hence.chi square= ∑ │observed-expected│² = 10. thus the calculated value is greater than the table value.815. H0 is rejected 18% 44% 14% 24% advertisement agents seminar workshops Interpretation: It means that all the modes of information are not the same. df(3)=7. Advertisement is more popular In which sector do you prefer to invest your money? Options Frequenc Percentages 54 46 100 y Government sector 27 Private sector 23 total 50 frequency 46% 54% government sector private sector 47 .

H0 is accepted.32 expected at df(1).32 sector Private sector 23 total 50 chi square= ∑ │observed-expected│² = 0.16 0. Hence. Interpretation: People prefer both the sectors equally. At which rate do you want your investment to grow? options Steadily At an average rate fast total frequency 17 13 20 50 percentages 34 26 40 100 48 .841 which is greater than the calculated value.Options Government Frequency 27 Observedexpected 2 -2 -2 (Observedexpected)² 4 4 8 (observedexpected)²/e 0.16 0. the table value is 3.

frequency 40% 34% steadily at an average rate fast 26% Interpretation: 40% of the respondents want their investments to grow fastly Which factor do you consider before investing in mutual fund or ULIPs (tick) Options Safety of principal Low risk Higher returns Maturity period Terms and conditions Total 8% 6% frequency 14 15 14 4 3 50 28% frequency percentages 28 30 28 8 6 100 safety of principal low risk high returns 28% 30% maturity period terms and conditions 49 .

6 4.2 expected at df(4).5 1.6 2. 50 .9 conditions total 50 142 14.6 3.488 which is less than the calculated value.Options Safety of principal Low risk Higher returns Maturity period Terms and frequency Observed14 15 14 4 3 expected 4 5 4 -6 -7 (Observedexpected)² 16 25 16 36 49 (observedexpected)²/e 1. the table value is 9. Hence .2 chi square= ∑ │observed-expected│² = 14. H0 is rejected Interpretation: people prefer low risk as the most important factor before investing in mutual funds or ULIPs.

Imagine that stock market drops immediately after you invest in it then what will you do? Options Wait and watch Invest more in it frequency 26 16 Withdraw your money 8 frequency 32% 16% withdraw your money wait and watch invest more in it 52% Interpretation: 26% of the respondents will wait and watch even if the share market drops. 51 .

Do you have any other investment/insurance policy? Options Yes No Total frequency 34 16 50 Percentages 68 32 100 frequency 32% Yes No 68% Interpretation: 68 % of the people had bought other investment policies. How often do you monitor your investment? Options Daily Monthly frequency 15 25 Occasionally 10 52 .

50% prefer monitoring their investment on monthly basis. 20% of the people monitor their investment occasionally. Do you invest your money in share market? Annual Income Below Share Market 1.000 3 6 Above 4.000 3 4 2.0002.0004.00.000 6 13 24 26 Total 53 .50.frequency 20% 30% daily monthly occasionally 50% Options Daily Monthly total frequency Percentages 15 25 50 30 50 20 100 Occasionally 10 Interpretation: It shows that most of the people .000 No 12 Yes 3 1.e.50.50.i.00.50.

25 42.815 which is less than the calculated value.50. H0 is rejected.Total 15 7 9 19 50 Annual income Below 1.000 1.0002.5 0 (Observedexpected)² 12.25 6.25 0.000 2.000 Above 4.50.5 9.00. Interpretation: it states that with the rise in income.038 6.5 -2.5% 5-10% 10-15% total Frequency 26 13 11 50 percentages 52 26 22 100 54 .000 total Frequency(yes ) 3 4 6 13 26 Observedexpected -3.25 61 (observedexpected)²/e 1. What percentage of your income do you invest? Options 0.0004.50. the table value is 7.961 0.383 Expected=26/4= 6.5 chi square= ∑ │observed-expected│² = 9.38 expected at df(3). the percentage of people investing in share market also increases.5 6.00.5 -. Hence.884 0.50.

5 12.5+ -15/20 * 5= 6% INTERPRETATION: people invest around 6% of their income.5 Dx=MV-7. How long have you been investing in mutual funds? Options 1-5 years 5-10 years 10-15 years total Frequency 22 17 11 50 Percentages 4455 34 12 100 .frequency 22% upto 5% 52% 26% 5-10% 10% % above Options 0-5 5-10 10-15 total Frequency 26 13 11 50 Mv 2.5 7.5/5 -1 0 1 FdX -26 0 11 -15 MEAN= 7.

33 19 (Observedexpected)² 7.4489 11. you have invested mostly in (choose one)?: 56 . the table value is 5.9479 chi square= ∑ │observed-expected│² = 2.67 3 3. There’s not much of a difference between the various time periods.67 7 0. Hence.991 which is greater than the calculated value.9479 expected at df(2). Interpretation: This shows that people normally tend to invest for longer term.1289 0.0889 18.6667 (observedexpected)²/e 1.751 2.0709 1.frequency 22% 44% 1-5 years 5-10 years 10-15 years 34% Options 1-5 years 5-10 years 10-15 years total Frequency Observedexpected 9 2.126 0. In the past. H0 is accepted.

Somewhat unstable.options Savings A/cs & PO schemes Mutual funds investing in bonds Mutual funds investing in stocks Balanced mutual funds Individual stocks & bonds ULIPs Other instruments like real estate. gold total frequency 18 6 3 1 5 4 13 50 Percentages 36 12 6 2 10 8 26 100 Interpretation: In the past maximum percentage of the respondents i. gold You would describe your financial situation as being: Very unstable. frequency Savings A/cs & PO schemes Mutual funds investing in bonds Mutual funds investing in stocks Balanced mutual funds Individual stocks & bonds Ulips 18% 6% 50% 3% 1% 5% 4% 13% Other instruments like real estate. 57 .e 36% of the respondents have invested in saving a/c’s and po’s.

Moderately stable.

Stable.

Very stable

Options (X) Very unstable(1) Somewhat unstable(2) Moderately stable(3) Stable(4) Very stable(5) total

Frequency ( ƒ) 11 12 9 10 8 50

ƒX 11 24 27 40 40 142

ƒ x² 11 48 81 160 200 500

Sample mean = ∑Fx = 142 = 2.84 ∑f 50 = 2.675 2.675 = 0.3783 ∑ƒ √n Z= │Xs - Xp│= │2.84-3│= 0.4229 S.E i.e 1.96, Ho is accepted. INTERPRETATION: the financial situation is moderately stable. 0.3783 SINCE THE CALCULATED VALUE IS LESSER THAN THE TABLE VALUE AT (.05) ∑ƒ 7.07 Standard deviation, σ = √ ∑ ƒ x² - ∑ƒx

Standard error = standard deviation =

58

Your comfort level in making investment decisions can best be described as:? Options Low Moderate High Total frequency 14 18 12 50 Percentages 32 41 27 100

frequency

27%

32% Low Moderate high 41%

INTERPRETATION: 41% of the respondents are moderately comfortable in making investment decisions.

59

If in the near future if you ever plan to invest in your money in any of the mutual fund company, which would be your choice? Options Sbi mutual fund HDFC mutual fund Reliance mutual fund ABN AMRO mutual fund Others Total frequency 7 8 14 11 10 50 percentages 14 16 28 22 20 100

frequency

20%

14% 16%

Sbi mutual fund HDFC mutual fund Reliance mutual fund ABN AMRO mutual fund

22% 28%

others

60

488 which is greater than the calculated value. 61 .4 1. H0 is accepted.1 3.6 0. Interpretation: People mostly prefer all the brands equally for their future investments.9 0. Hence.0 chi square= ∑ │observed-expected│² = 3.Options Sbi mutual fund HDFC mutual fund Reliance mutual fund ABN AMRO mutual fund Others Total Frequency (O) (O7 8 14 11 10 50 E) -3 -2 4 1 0 0 (OE)² 9 4 16 1 0 30 (O-E)²/E 0.0 expected At df(4). the table value is 9.

Chapter 5 FINDINGS AND SUGGESTIONS 62 .

Most of the people have been investing their money n the share market belong to Rs. Mostly investors prefer monitoring their investment on monthly basis.FINDINGS AND SUGGESTIONS FINDINGS • • • • • • Highest number of investors comes from the salaried class.400000 and above income group. 63 . Most of the people invest upto 6% of their annual income in mutual funds. Highest number of investors comes from the age group of 25-35. Most of the people between the age group of 25– 35 invest their money in share market.

64 . The AMC should launch more diversified funds so that the risk becomes minimum. administration charges and other charges which helps to invest more funds in the security market and earn good returns. So. 3. 6. Try tp reduce fund charges. The people do not want to take risk. companies should give regular dividends as it depicts profitability. 4. All schemes are doing well. the AMC (Asset under Management Companies) should take the following steps: 1. So. Diffferent campaigns should be launched to educate people regarding mutual funds. But the future is uncertain. 5. Companies should give handsome brokerage to brokers so that they get attracted towards distribution of the funds. 2. This will lure more and more people to invest in mutual funds. Mutual funds should concentrate on differentiating the portfolio of their MF than their competitors MF 7.SUGGESTIONS The performance of the mutual fund depends on the previous years Net Asset Value of the fund. the portfolio of the fund should be prepared taking into consideration the expectations of the people. The expectation of the people from the mutual funds is high.

real estate. Also in the coming times. that is around 10 years and above. ULIPs will grow faster. Today each and every person is fully aware of every kind of investment proposal. Markets for equity shares. which entitled of low risk. In my opinion before investing in mutual funds.CONCLUSION CONCLUSION: A mutual fund is the ideal investment vehicle for today’s complex and modern financial scenario. derivatives and other assets have become mature and information driven. high returns and easy redemption. one should be fully aware of each and everything. It is good for people who were investing in ULIP policies of insurance companies as their investments earn them a better return than the other policies. Everybody wants to invest money. ULIPs are actually being publicized more and also the other traditional endowment policies are becoming unattractive because of lower interest rate. 65 . bonds and other fixes income instruments. At the same time ULIPs as an investment avenue is good for people who has interest in staying for a longer period of time.

com www.BIBLIOGRAPHY MUTUAL FUND IN INDIA .sbimf.H.investorsguide.mutualfundsindia.in 66 .co.SADHAK • • • • • • • www.com www.principalindia.com www.moneycontrol.com www.amfiindia.sebi.com www.com www.

Which factor do you consider before investing in mutual fund or ULIPs? (tick) • • • • b) Government Sector ( ) 5. If others. Do you invest your money in share market? Yes ( ) no( ) 67 . Your response would be kept strictly confidential and would be used only for academic research. Do you invest in Mutual Funds or ULIPs? If not. How do you get the information of the various Insurance Companies? a) Advertisement b) Agents c) Seminar d) Work shops  4. 1. 3. At which rate do you want your investment to grow? Safety of principal Low risk High returns Maturity period Terms and conditions 7. Hyderabad. please specify. Kindly help me in the same by filling the Questionnaire.QUESTIONNAIRE I am Prmeela pursuing MBA from Princeton Pg college. As a part of the curriculum I am doing research on “COMPARATIVE ANALYSIS OF MUTUAL FUNDS AND ULIPS”. then what other option(s) do you prefer to invest? Fixed deposits  Recurring deposits  post office schemes  Yes  No  2. In which sector do you prefer to invest your money? a) Private Sector ( ) o Steadily o At an average rate o Fast 6.

How often do you monitor your investment? Mutual funds investing in bonds ( ) Balanced mutual funds ( ) ULIPs ( ) Very unstable. you have invested mostly in (choose one): Savings A/cs & PO schemes ( ) Mutual funds investing in stocks ( ) Individual stocks & bonds ( ) Other instruments like real estate. What percentage of your income do you invest? 0-5% ( ) 5-10% ( ) 10-15% ( ) 12. In the past. How long have you been investing in mutual funds? o For the last 1-5 years o For the last 5-10 years o For the last 10 – 15 years 13. If in the near future if you ever plan to invest in your money in any of the mutual fund company. which would be your choice? Sbi mutual fund ( ) Reliance mutual fund ( ) HDFC mutual fund ( ) ABN AMRO mutual fund ( ) 68 .8. Do you have any other investment/insurance policy? 10. Imagine that stock market drops immediately after you invest in it then what will you do?    Yes ( ) o Daily o Monthly o Occasionally 11.   Very stable ( ) ( ) ( ) Somewhat unstable ( ). Stable. gold ( ) 14. ( ) Moderately stable. Your comfort level in making investment decisions can best be described as Low ( ) moderate ( ) high ( ) 16. 15. You would describe your financial situation as being: Withdraw your money Wait and watch Invest more in it No ( ) 9.

others ( ) 69 .