SUMMER INTERNSHIP REPORT

Summer Internship Project

ON

A Study On Emerging Trends in Mutual Funds with

Sharekhan

Submitted in partial fulfillment of requirement of Bachelor of

Commerce Honours

B.Com (Hons) 5th Semester (Evening)

Batch 2017-2020
Submitted to: Submitted by:
Ms. Shilpa Lalwani Saurabh Kumar
Assistant professor 02024588817
JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL,
KALKAJI
 ACKNOWLEDGEMENT

I am using this opportunity to express my gratitude to everyone who supported me throughout

the course of this internship. I am thankful for their aspiring guidance, invaluable constructive
criticism and friendly advice during the internship. I am sincerely grateful to them for sharing
their truthful and illuminating views on a number of issues related to the project.

I express my warm thanks to Mr. Anil Sharma and Mr. Lalit Kumar for their support and
guidance at Sharekhan Limited and all the people who provided me with the facilities being
required and conductive conditions for my internship.

I would also like to thank my mentor Ms. Shilpa Lalwani for helping me and guiding me for the
summer internship project.

Saurabh Kumar

02024588817

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 UNDERTAKING

I hereby certify that this is my original work and it has never been submitted elsewhere.

(Saurabh Kumar)
02024588817

2
 Certificate of Completion
This is to certify that Mr. Saurabh Kumar of B.COM (H) has completed his summer internship
project on “A Study On Emerging Trends In Mutual Funds” of his own. His work is up to my
satisfaction.

Ms. Shilpa Lalwani

(Assistant Professor)

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 CONTENTS

Description Page No.

Acknowledgement 1
Undertaking 2

Certificate of Completion 4
Executive Summary 6
Introduction to The Topic 8
Objectives of the Study 15
Literature Review 17
Company Profile 58
Research Methodology 70
Data Analysis and Interpretation 76
Findings And Inferences 87
Limitations 89
Recommendations And Conclusions 91
Appendix 93
References 96

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EXECUTIVE SUMMARY

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The report gives an insight over various trends in different types of mutual funds.
Funds are chosen from different categories which can be briefly classified as:
 Risk Appetite
 Time Period
 Investment Objectives
 Annual Return
The report also discusses about everything related to Mutual Fund Industry as a whole.
It discusses about ratios calculated against Dow Jones Industrial Average, Nasdaq Composite,
S&P 500 Index, Sensex, Nifty50. To calculate returns.
The report shows the investors preferences for investment.
Sharekhan’s profile is also discussed. It shows the product mix of company andit’s direct
competitors.
The report briefly touches the share market and equities. Major concentration is on mutual fund
industry. It uses graphs based on historical data to show past results and make an estimate on
future trends.
Needs of various investors is taken care of and their interests are taken care in mind while
preparing the questionnaire.

Share market is gaining significant grounds with the onset of booming Indian Economy. The
project involved a “comparative study of share market and mutual fund”.

I had the privilege of doing my summer training with ShareKhan Ltd.Jhandewalan Branch, New
Delhi wherein I was responsible for the sales and distribution of the Demat Account and also was
appointed Team Leader. I also got the chance to learn to trade in different market segments i.e.
Equity, Derivatives (Options), Currency and Mutual Funds. I also learnt about technical and
fundamental analysis and how to use them to establish myself better in stock market. This had
been a great learning experience for me in terms of corporate culture, etiquettes and values.

The content of this project report was decided after a detailed survey and analysis of Share
market & mutual funds.

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INTRODUCTION TO THE TOPIC

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What are Mutual Funds?
A mutual fund is a type of financial vehicle made up of a pool of money collected from many
investors to invest in securities such as stocks, bonds, money market instruments, and other
assets. Mutual funds are operated by professional money managers, who allocate the fund's
assets and attempt to produce capital gains or income for the fund's investors. A mutual fund's
portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Mutual funds give small or individual investors access to professionally managed portfolios of
equities, bonds and other securities. Each shareholder, therefore, participates proportionally in
the gains or losses of the fund. Mutual funds invest in a vast number of securities, and
performance is usually tracked as the change in the total market cap of the fund—derived by the
aggregating performance of the underlying investments.

Types of Mutual Funds

Let's go over some of the many different flavors of funds. We'll start with the safest and then
work through to the more risky.

Equity Funds
The principally in stocks. Within this group is various sub-categories. Some equity funds are
named for the size of the companies they invest in small-, mid- or large-cap. Others are named
by their investment approach: aggressive growth, income-oriented, value, and others. Equity
funds are also categorized by whether they invest in domestic (U.S.) stocks or foreign equities.
There are so many different types of equity funds because there are many different types of
equities. A great way to understand the universe of equity funds is to use a style box largest
category is that of equity or stock funds. As the name implies, this sort of fund invests, an
example of which is below.

The idea here is to classify funds based on both the size of the companies invested in
(their market caps) and the growth prospects of the invested stocks. The term value fund refers to
a style of investing that looks for high quality, low growth companies that are out of favor with
the market. These companies are characterized by low price-to-earnings (P/E), low price-to-book
(P/B) ratios, and high dividend yields. On the other side of the style, spectrum are growth funds,
which look to companies that have had (and are expected to have) strong growth in earnings,
sales, and cash flows. These companies typically have high P/E ratios and do not pay dividends.
A compromise between strict value and growth investment is a “blend,” which simply refers to
companies that are neither value nor growth stocks and are classified as being somewhere in the
middle.

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The other dimension of the style box has to do with the size of the companies that a mutual fund
invests in. Large-cap companies have high market capitalizations, with values over $5
billion. Market cap is derived by multiplying the share price by the number of shares
outstanding. Large-cap stocks are typically blue chip firms that are often recognizable by
name. Small-cap stocks refer to those stocks with a market cap ranging from $200 million to $2
billion. These smaller companies tend to be newer, riskier investments. Mid-cap stocks fill in the
gap between small- and large-cap.

A mutual fund may blend its strategy between investment style and company size. For example,
a large-cap value fund would look to large-cap companies that are in strong financial shape but
have recently seen their share prices fall and would be placed in the upper left quadrant of the
style box (large and value). The opposite of this would be a fund that invests in startup
technology companies with excellent growth prospects: small-cap growth. Such a mutual fund
would reside in the bottom right quadrant (small and growth).

Fixed-Income Funds
Another big group is the fixed income category. A fixed income mutual fund focuses on
investments that pay a set rate of return, such as government bonds, corporate bonds, or other
debt instruments. The idea is that the fund portfolio generates interest income, which then passes
on to shareholders.

Sometimes referred to as bond funds, these funds are often actively managed and seek to buy
relatively undervalued bonds in order to sell them at a profit. These mutual funds are likely to
pay higher returns than certificates of deposit and money market investments, but bond funds
aren't without risk. Because there are many different types of bonds, bond funds can vary
dramatically depending on where they invest. For example, a fund specializing in high-yield junk
bonds is much riskier than a fund that invests in government securities. Furthermore, nearly all
bond funds are subject to interest rate risk, which means that if rates go up the value of the fund
goes down.

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Index Funds
Another group, which has become extremely popular in the last few years, falls under the
moniker "index funds." Their investment strategy is based on the belief that it is very hard, and
often expensive, to try to beat the market consistently. So, the index fund manager buys stocks
that correspond with a major market index such as the S&P 500 or the Dow Jones Industrial
Average (DJIA). This strategy requires less research from analysts and advisors, so there are
fewer expenses to eat up returns before they are passed on to shareholders. These funds are often
designed with cost-sensitive investors in mind.

Balanced Funds
Balanced funds invest in both stocks and bonds to reduce the risk of exposure to one asset class
or another. Another name for this type of mutual fund is "asset allocation fund." An investor may
expect to find the allocation of these funds among asset classes relatively unchanging, though it
will differ among funds. This fund's goal is asset appreciation with lower risk. However, these
funds carry the same risk and can be as subject to fluctuation as other classifications of funds.

A similar type of fund is known as an asset allocation fund. Objectives are similar to those of a
balanced fund, but these kinds of funds typically do not have to hold a specified percentage of
any asset class. The portfolio manager is therefore given freedom to switch the ratio of asset
classes as the economy moves through the business cycle.

Money Market Funds

The money market consists of safe (risk-free) short-term debt instruments, mostly
government Treasury bills. This is a safe place to park your money. You won't get substantial
returns, but you won't have to worry about losing your principal. A typical return is a little more
than the amount you would earn in a regular checking or savings account and a little less than the
average certificate of deposit (CD). While money market funds invest in ultra-safe assets, during
the 2008 financial crisis, some money market funds did experience losses after the share price of
these funds, typically pegged at $1, fell below that level and broke the buck.

Income Funds
Income funds are named for their purpose: to provide current income on a steady basis. These
funds invest primarily in government and high-quality corporate debt, holding these bonds until
maturity in order to provide interest streams. While fund holdings may appreciate in value, the
primary objective of these funds is to provide steady cash flow to investors. As such, the
audience for these funds consists of conservative investors and retirees. Because they produce
regular income, tax-conscious investors may want to avoid these funds.

Global/International Funds
An international fund (or foreign fund) invests only in assets located outside your home
country. Global funds, meanwhile, can invest anywhere around the world, including within your
home country. It's tough to classify these funds as either riskier or safer than domestic
investments, but they have tended to be more volatile and have a unique country and political
risks. On the flip side, they can, as part of a well-balanced portfolio, actually reduce risk by
increasing diversification since the returns in foreign countries may be uncorrelated with returns

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at home. Although the world's economies are becoming more interrelated, it is still likely that
another economy somewhere is outperforming the economy of your home country.

Specialty Funds
This classification of mutual funds is more of an all-encompassing category that consists of
funds that have proved to be popular but don't necessarily belong to the more rigid categories
we've described so far. These types of mutual funds forgo broad diversification to concentrate on
a certain segment of the economy or a targeted strategy. Sector funds are targeted strategy funds
aimed at specific sectors of the economy such as financial, technology, health, and so on. Sector
funds can, therefore, be extremely volatile since the stocks in a given sector tend to be
highly correlated with each other. There is a greater possibility for large gains, but also a sector
may collapse (for example the financial sector in 2008 and 2009).

Regional funds make it easier to focus on a specific geographic area of the world. This can mean
focusing on a broader region (say Latin America) or an individual country (for example, only
Brazil). An advantage of these funds is that they make it easier to buy stock in foreign countries,
which can otherwise be difficult and expensive. Just like for sector funds, you have to accept the
high risk of loss, which occurs if the region goes into a bad recession.

Socially-responsible funds (or ethical funds) invest only in companies that meet the criteria of
certain guidelines or beliefs. For example, some socially responsible funds do not invest in “sin”
industries such as tobacco, alcoholic beverages, weapons or nuclear power. The idea is to get
competitive performance while still maintaining a healthy conscience. Other such funds invest
primarily in green technology such as solar and wind power or recycling.

Exchange Traded Funds (ETFs)

A twist on the mutual fund is the exchange traded fund (ETF). These ever more popular
investment vehicles pool investments and employ strategies consistent with mutual funds, but
they are structured as investment trusts that are traded on stock exchanges and have the added
benefits of the features of stocks. For example, ETFs can be bought and sold at any point
throughout the trading day. ETFs can also be sold short or purchased on margin. ETFs also
typically carry lower fees than the equivalent mutual fund. Many ETFs also benefit from
active options markets where investors can hedge or leverage their positions. ETFs also enjoy tax
advantages from mutual funds. The popularity of ETFs speaks to their versatility and
convenience.

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OBJECTIVES OF THE STUDY

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1. To study recent trends for capital appreciation of mutual funds on following basis:
- Historical Data
- Investors types
- Time Period
- Trend Analysis
2. To analyze investor behavior and their needs in respect of financial goals
3. To study risk appetite of different investors in various mutual funds
4. To analyze different mutual fund schemes like SIP and STP.
5. To formulate the plan and strategies to meet the needs of different types of investors.
6. To analyze the investment alternatives coming up in the financial market.

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LITERATURE REVIEW

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Share Market
A stock market, equity market or share market is the aggregation of buyers and sellers (a
loose network of economic transactions, not a physical facility or discrete entity) of stocks (also
called shares), which represent ownership claims on businesses; these may
include securities listed on a public stock exchange, as well as stock that is only traded privately.
Examples of the latter include shares of private companies which are sold
to investors through equity crowd funding platforms. Stock exchanges list shares of common
equity as well as other security types, e.g. corporate bonds and convertible bonds.

What is share?

In financial markets, a share is a unit used as mutual funds, limited partnerships, and real estate
investment trusts. The owner of shares in the corporation/company is a shareholder (or
stockholder) of the corporation. A share is an indivisible unit of capital, expressing the
ownership relationship between the company and the shareholder. The denominated value of a
share is its face value, and the total of the face value of issued shares represent the capital of a
company, which may not reflect the market value of those shares.
The income received from the ownership of shares is a dividend. The process of purchasing and
selling shares often involves going through a stockbroker as a middle man. There are different
types of shares such as equity shares, preference shares, bonus shares, right shares, and
employees stock option plan shares.

Investment Objectives

An investment objective, in regard to personal financial planning, is the purpose a particular

portfolio serves for the individual's or the investment advisory client's financial needs. Once the
objective is determined, it will then dictate what particular asset classes and security types are
needed to fulfill the purpose of the portfolio.

In different words, the investment objective is the fundamental reason you are investing. An
investment objective can also define how a mutual fund invests its portfolio. For example, with
regard to mutual funds, the stated investment objective indicates a particular fund’s investment
goals, based on the wording in a fund's prospectus.

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Income

The safest investments are also the ones that are likely to have the lowest rate of income return or
yield. Investors must inevitably sacrifice a degree of safety if they want to increase their yields.
As yield increases, safety generally goes down, and vice versa.

In order to increase their rate of investment return and take on risk above that of money market
instruments or government bonds, investors may choose to purchase corporate bonds or
preferred shares with lower investment ratings. Investment grade bonds rated at A or AA are
slightly riskier than AAA bonds, but generally also offer a higher income return than AAA
bonds. Similarly, BBB-rated bonds can be thought to carry medium risk, but they offer less
potential income than junk bonds, which offer the highest potential bond yields available but at
the highest possible risk. Junk bonds are the most likely to default.

Most investors, even the most conservative-minded ones, want some level of income generation
in their portfolios, even if it's just to keep up with the economy's rate of inflation. But
maximizing income return can be an overarching principle for a portfolio, especially for
individuals who require a fixed sum from their portfolio every month. A retired person who
requires a certain amount of money every month is well served by holding reasonably safe assets
that provide funds over and above other income-generating assets, such as pension plans.

Growth of Capital

Growth capital (also called expansion capital and growth equity) is a type of private
equity investment, usually a minority investment, in relatively mature companies that are looking
for capital to expand or restructure operations, enter new markets or finance a significant
acquisition without a change of control of the business.
Companies that seek growth capital will often do so in order to finance a transformational event
in their lifecycle. These companies are likely to be more mature than venture capital funded
companies, able to generate revenue and profit but unable to generate sufficient cash to fund
major expansions, acquisitions or other investments. Because of this lack of scale these
companies generally can find few alternative conduits to secure capital for growth, so access to
growth equity can be critical to pursue necessary facility expansion, sales and marketing
initiatives, equipment purchases, and new product development.
Growth capital can also be used to effect a restructuring of a company's balance sheet,
particularly to reduce the amount of leverage (or debt) the company has on its balance sheet.
Growth capital is often structured as preferred equity, although certain investors will use
various hybrid securities that include a contractual return (i.e., interest payments) in addition to

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an ownership interest in the company. Often, companies that seek growth capital investments are
not good candidates to borrow additional debt, either because of the stability of the company's
earnings or because of its existing debt levels.

Secondary Objectives

Tax Minimization: An investor may pursue certain investments in order to adopt tax
minimization as part of his or her investment strategy. A highly paid executive, for example, may
want to seek investments with favorable tax treatment in order to lessen his or her overall income
tax burden. Making contributions to an IRA or other tax-sheltered retirement plan, such as a
401(k), can be an effective tax minimization strategy.

Marketability/Liquidity: Many of the investments we have discussed are reasonably illiquid,

which means they cannot be immediately sold and easily converted into cash. Achieving a
degree of liquidity, however, requires the sacrifice of a certain level of income or potential for
capital gains.

Common stock is often considered the most liquid of investments, since it can usually be sold
within a day or two of making the decision to sell. Bonds can also be fairly marketable, but some
bonds are highly illiquid, or non-tradable, possessing a fixed term. Similarly, money market
instruments may only be redeemable at the precise date at which the fixed term ends. If an
investor seeks liquidity, money market assets and non-tradable bonds aren't likely to be held in
his or her portfolio.

The Bottom Line

Again, the advantages of one investment often comes at the expense of the benefits of another. If
an investor desires growth, for instance, he or she must often sacrifice some income and safety.
Therefore, most portfolios will be guided by one pre-eminent objective, with all other potential
objectives carrying less weight in the overall scheme.

Choosing a single strategic objective and assigning weightings to all other possible objectives is
a process that depends on such factors as the investor's temperament, his or her stage of life,
marital status or family situation. Each investor can determine an appropriate mix of investment

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opportunities. But you need to spend the appropriate amount of time and effort in finding,
studying and deciding on the opportunities that match your objectives.

Picking a Mutual Fund

With so many categories of mutual funds, fund houses, and schemes available, choosing a
mutual fund is not an easy task for many investors. The best way to begin is to decide on a
method to narrow down on the right fund for you. Rarely do investors who do something else for
a living employ a systematic checklist to evaluate a fund they are considering buying. Here is our
blueprint for a structured approach to fund selection. There are five areas that you must evaluate
to decide whether a particular fund is a good investment.

Performance: Performance comparisons must be used only to compare the same type of fund.
They are meaningless otherwise. Only when used within the same category of funds do
performance numbers tell you anything at all. By the time you reach the stage when you are
comparing performance numbers of different funds, you should already have a good idea of how
much you will invest in that category.
Risk: Almost all investing is risky, at least those investments that get you any meaningful
returns. In general it is said that the riskier a fund, the more its potential for earning high returns.
However, this is a simplified view that implies that a given amount of risk always gets you the
same returns. This is simply not true because not all funds are equally well-run.
The true measure of risk is whether a fund is able to give you the kind of returns that justify the
risk it is taking on. Evidently, this is not as easy to measure as returns. There are a wide variety
of statistical techniques that can be used to measure this. We distil a combination of performance
and risk measurement into the Value Research Fund Rating. When we say that a fund has a five-
or four-star rating, it means that the fund, compared to similar funds, performed better, given its
risk level.
Portfolio: Unlike performance and risk, portfolio is one of the 'internals' of a fund. It is internal
in the sense that the result of good, bad or ugly portfolios is already reflected in the first two
measures and it's perfectly okay for you to choose funds on the basis of those two measures
alone without actually bothering about what they own. Our basic analysis of portfolios measures
whether a fund (we are talking about equity funds here) holds mostly large, medium or small
companies. It also looks at whether a fund prefers companies that may be overpriced but which
are growing fast or whether it prefers low-priced stocks belonging to companies that are growing
at a more gentle pace. For fixed income funds, an analogous analysis tells one whether a fund

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prefers volatile but potentially high-return long-duration securities or stable and low-return short-
duration securities. Also, one can analyze whether a fund prefers safer (lower returns) securities
or riskier (higher returns) securities.
Management: Fund management is a fairly creative and personality-oriented activity. This may
not be true of some types of funds like shorter-term fixed-income funds and of course index
funds, but equity investment is more of an art than a science. When you are buying a fund
because you like its track record (and unless you can foresee the future, that's the only way to
buy a fund), what you are actually buying is a fund manager's (or sometimes a fund management
team's) track record. What you need to make sure is that the fund manager who was responsible
for the part of the fund's track record that you are buying into is still there. A high-performance
equity fund with a new manager is a like a new fund.
Cost: While the above are the most important points on which to evaluate a fund, there is one
more factor that is becoming increasingly significant, and that is cost. Funds are not run for free,
nor are they run at an identical cost. While the difference in different funds' cost is not large,
these can compound to significant variations, especially for fixed income funds where the
performance differential between funds is quite small to begin with. Even for equity funds, it
may not be worth buying a higher cost fund that appears to be only slightly better than a lower
cost one. Remember, there is no reason for one AMC to have much higher costs than others,
apart from the fact that it wants to have a higher margin, or that it wants to spend more on things
like marketing, which are of no relevance to you. If an AMC wants higher returns from its
business, then it must justify it by giving you higher returns on your investments.

Ten Tips on Buying Mutual Funds

1. Before you start looking at and comparing specific mutual funds, you need to answer some
fundamental questions, starting with:

 What is my overarching investment goal? This can range from building your first
portfolio to preparing for retirement in a few years.
 What is my time horizon? This goes hand in hand with the first question you ought to
be asking yourself.

The first step is often the most difficult one to take, so be sure to consult our list of 7 Questions
to Ask When Buying a Mutual Fund.

2. Have a clearly defined Asset Allocation Strategy. The trick here is to formulate a split between
stocks, bonds, and any other asset classes based on how long you’re planning to invest for, as
well as what degree of risk you are comfortable with.

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 3. Always read the prospectus of a mutual fund you’re interested in; it’s better to take the time to
uncover any blemishes and nuances associated with a product before you make an allocation to
it.

4. Take advantage of Free Online Tools as you take the time to educate and familiarize yourself
with mutual fund investing concepts.

5. Be sure you understand the basic mechanics behind mutual funds. Start by reading A Brief
History of Mutual Funds and then move on to The Benefits of Mutual Funds.

6. You can’t properly research a fund if you don’t know how to read an annual mutual fund
report.
7. Mutual fund expense fees have an impact on your bottom line returns. Be sure you
understand what comprises the management fee so that you can better compare seemingly
identical funds.

8. Before you start focusing too much on fund performance, be sure you understand the
actual duties of a mutual fund manager.

9. After you have a basic understanding of expenses, take the time to understand the more
nuanced fees and sales loads that you may encounter when researching potential investments.

10. Everyone has heard that past returns are not a guarantee of future performance. Nonetheless,
everyone still analyzes past returns when shopping for a fund, so be sure you know how to read a
mutual fund table.

Advantages of Mutual Funds

 Experience and expertise

One of the advantages of Mutual Funds is your access to expertise. Investing in equity or debt
requires good knowledge of either share price or interest rate movements. Small investors lack
the time and resources to get an in-depth understanding of the share and money markets, making
direct investments riskier. Mutual Funds offer you a way into these markets. Fund houses
employ experienced and knowledgeable managers who are backed by teams of analysts and
experts. Fund managers can buy shares at the right time, and hence maximize returns. They also
follow interest rate movements closely to ensure Debt Funds earn good returns for investors.

 Diversification

One of the most significant advantages of Mutual Funds is that when you invest in them, you are
not investing in a share of a single company but a portfolio of stocks and assets. Every rupee you
invest is spread across a range of securities, thereby reducing your risk. For example, if you had
Rs. 1,000 to invest in equity, you will be able to purchase one share or two for that amount. On

20
 the other hand, the same Rs. 1,000 invested in an Equity Fund will give you exposure to a larger
basket of shares.

Using Mutual Funds, you can invest in companies across sectors and market caps. You can
diversify across assets -- equity, debt, gold etc.

 Choice

Mutual Funds offer a wide range of investment options based on your risk appetite and goals.
Whether you are looking to build long-term wealth or seek capital protection; whether you want
to save taxes or get a regular income, you will find a Mutual Fund that meets your needs. For
example, if you are interested in capital protection, you could invest in a Debt Fund, which offers
lower returns but involves less risk as well. If you are interested in capital appreciation, Equity
Funds are your best bet. Even within these categories, there are many options, like Large-Cap
Funds, which invest in large mature companies and offer stable returns and less risk. Then there
are Mid-Cap Funds which involve more risk but can offer significantly higher yields.

 Ideal for small investors

Mutual Funds are best suited for small investors because you don’t need much to invest. For
example, if you go in for a Systematic Investment Plan (SIP), you can invest as little as Rs. 500 a
month. So you don’t have to wait to accumulate enough to make an investment and thus make
optimum use of your cash. There are also other advantages of investing through a SIP, and that is
Rupee cost averaging. Since you will be investing the same amount regardless of conditions in
the stock market, you will get more units when share prices are down, and less when prices are
high. Thus the average cost of acquiring units will be lower. You don’t have to worry about
getting the timing wrong and investing when share prices are high.

 Ease of investment

Mutual Fund Investment is simple, especially if you have an Online Investment Service
Account with HDFC Bank. You can invest in a fund of your choice in just a few clicks from the
comfort of your home or office. You can opt for a SIP and get a bank mandate to auto-debit from
your HDFC Bank Account.

 Long-term wealth

Mutual Funds, especially Equity Funds, are a great way to create long-term wealth. Equity has
been the best-performing asset class over the past several years and more tax-efficient than other
options. Over the longer term, the risk is lower, and compounding works its magic to ensure you
build a good corpus.

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Disadvantages of Mutual Funds

Costs to manage the mutual fund

The salary of the market analysts and fund manager basically comes from the investors. Total
fund management charge is one of the main parameters to consider when choosing a mutual
fund. Greater management fees do not guarantee better fund performance.

Lock-in periods
Many mutual funds have long-term lock-in periods, ranging from 5 to 8 years. Exiting such
funds before maturity can be an expensive affair. A certain portion of the fund is always kept in
cash to pay out an investor who wants to exit the fund. This portion in cash cannot earn interest
for investors.
Dilution
While diversification averages your risks of loss, it can also dilute your profits. Hence, you
should not invest in more than 7-9 mutual funds at a time.
As you have just read above, the benefits and potential of mutual funds can certainly override the
disadvantages, if you make informed choices. However, investors may not have the time,
knowledge or patience to research and analyze different mutual funds. Investing with Clear Tax
could solve this as we have already done the homework for you by hand-picking the top-rated
funds from the best fund houses in the country.

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Indian Mutual Fund Industry- An Overview
The first introduction of a mutual fund in India occurred in 1963, when the Government of
India launched Unit Trust of India (UTI). UTI enjoyed a monopoly in the Indian mutual fund
market until 1987, when a host of other government-controlled Indian financial companies
established their own funds, including State Bank of India, Canara Bank and by Punjab National
Bank.

Despite being available in the market less than 10% of Indian households have invested in
mutual funds. A recent report on Mutual Fund Investments in India published by research and
analytics firm, Boston Analytics, suggests investors are holding back from putting their money
into mutual funds due to their perceived high risk and a lack of information on how mutual funds
work. There are 46 Mutual Funds as of June 2013.
The primary reason for not investing appears to be correlated with city size. Among respondents
with a high savings rate, close to 40% of those who live in metros and Tier I cities considered
such investments to be very risky, whereas 33% of those in Tier II cities said they did not know
how or where to invest in such assets.

Key Trends and Opportunities

With lower bank interest rates and demonetization, the AUM of the Indian MF industry are
expected to touch 20 lakh crore INR sooner than expected.15 Investors are increasingly
concerned about keeping their surplus funds in savings bank accounts and the use of
digitalization has made the industry more appealing. The industry will see robust growth in the
next 2–3 years, driven by opportunities in the following areas:

1.Digitalisation and Digitization:

● Improved distribution efficiencies has enhanced reach across the country as distributors
can now provide ready analysis to customers on the field.
● Range of mobile and online apps for tracking and transacting—end-to end platforms have
enabled seamless customer experience.
● Mutual fund utility (MFU) has allowed investors to place orders with multiple AMCs and
transfer funds seamlessly, all through a single window.

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 ● e-KYC using Aadhar has proved to be a game changer for online investing; in the future,
technology platforms and Aadhar will be leveraged for various government schemes.
● Increasing use of robo-advisory has made it simpler for investors to make decisions.
● Redemption of MFs (ultra-short funds) using a debit card—offered by two popular robo-
advisory platforms, as well as top fund houses have made the transaction process more
convenient.

2. Government initiatives and regulatory push:

● Demonetization has created a surge of inflows into structured investments such as MFs.
● Advisory regulations have allowed investors to get into advisory-only arrangements with
financial advisors.
● Capping of MF commissions will help to prevent mis-selling; it also promotes innovation
in customer acquisition and enables cost efficiencies.
● Special commissions for MF distribution in below 15 cities will increase penetration.
● SEBI has proposed allowing the sale of MFs through leading e-commerce websites.
● Introduction of payments banks and small finance banks has improved financial
inclusion.
● For Budget 2017, SEBI had recommended that the period of holding in respect of long-
term debt fund units be reduced to one year from the existing 3 years, and an increase in
the investment limit for tax-saving MF schemes. However, this has been shelved till a
later date.

3. Consolidation, speciality products and alternative investment options:

● Debt funds dominate the Indian markets; however, with increasing investor education,
equity funds have witnessed an increase in the past 2 years.
● SEBI has taken the initiative to consolidate fund houses and schemes to facilitate better
understanding and increased investment.
● To promote investment in the semi-urban and rural parts of the country, fund houses are
focusing on specific schemes for customers in these parts of the country.

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● Within alternative investment funds (AIFs), exchange-traded funds (ETFs) are likely to
be one of the main products to drive significant growth, propelled by the deflationary
impact to rates from the blow of demonetization.
● Recently, SEBI has relaxed the norms for real estate investment trusts (REITs)—
allowing them to invest a larger portion of their funds (up to 20% from the current level
of 10%) in assets under construction, along with proposed changes to facilitate easier
entry for offshore fund managers.

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Emerging Products and New Capabilities

The past year has been significant for the Indian MF industry. Both retail and institutional AUMs
have shown strong growth numbers, with an increasing number of Indians now considering MFs
as part of their regular investment choices. Our analysis shows that several factors will boost the
growth of investable assets in MFs:
● The rise in retirement savings as the ageing of population continues
● The shift in emerging markets from savings to investing cultures
● The rise in wealth accumulated by High-net-worth individuals (HNWIs) and mass
affluent
● Greater demand for a shift towards alternative investments

In a heavily crowded Indian MF industry with more than 2,000 schemes, MF offerings are highly
commoditized. To create differentiation, the industry is looking to introduce new products. Since
the beginning of this year, draft papers for more than 6416 new fund offers (NFOs) have been
filed with SEBI to tap into the growing demand from retail investors. These filings include
offerings around hybrid funds, retirement-focused funds, fixed maturity plans (FMPs) and
simpler funds with Hindi names to connect with rural investments.

While the debate about Indian AMCs accessing the domestic pension corpus will continue, a
significant portion of global pension and insurance funds is allocated for investment in Asian
capital markets, including India. The opportunity to render investment advice to such fund
managers is immense. It is estimated that 17–20% of Indian market capitalization is held by
foreign funds. However, a remarkably small fraction of these funds is advised and managed by
Indian asset managers.

Industry peers across the globe employ a more extensive solution offering and thus are able to
tap a wider basket of investors. Trends indicate that the real estate sector draws a lot of the
investible surplus from the HNWI segment. The potential introduction of the REITs and
infrastructure investment trusts is likely to permit investors to participate in the yield products of
the sector.

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Some Facts about Mutual Fund Industry:

Success Linked to ‘AUM’ and Not ‘Returns’: This is a sad reality of the fund
management industry. There is no strict alignment in the interest of the fund manager and the
investor. Return is the prime objective of the investor while garnering larger assets under
management (AUMs) is the prime objective of the fund manager. For the investor, an MF
scheme earns him money from his investment while, for the fund manager, earnings are linked to
the AUMs he manages. Yes, of course, if a scheme performs well, it would be able to garner
more assets and, thus, earn more return for the fund manager. However, notwithstanding this, the
fact is that, in their quest of garnering more assets, MF schemes end up with dubious practices,
such as pushing more schemes in a bull market or wrong kinds of products to take advantage of
savers’ lack of knowledge.

Launching NFOs: Today, with hundreds of existing schemes, is there really a need for a new
scheme for the investor? Is it really that the fund manager is able to offer something new through
a new fund offering (NFO). Take the example of equity schemes. Today, a plethora of funds is
available—large-cap, mid-cap, small-cap, multi-cap, diversified, sector schemes, theme schemes,
asset allocation schemes, growth-oriented schemes, value-oriented schemes and many more.
However, there is investor fatigue with the existing schemes as their performance is not up to the
mark.

It is difficult for MF distributors to continuously market the same old scheme. However, the fund
house has to somehow garner new funds because its return is linked to AUMs. The fund
distributor has to sell schemes because commissions and fees are dependent on the quantum of
schemes sold. So what is the solution out of this deadlock? Simple. Take an old product, give it a
new packaging, use difficult, yet impressive, financial jargon to lure the common investor and
then aggressively sell it through the loyal MF distributors.

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Trends in Product Innovation by Indian MFs

Among the various factors influencing fund choices of investors, fund performance continues to
hold the highest weightage. Indian fund houses are looking to introduce newer products or
variants as well as re-launch old schemes with different flavours so as to generate superior
returns and provide greater flexibility and convenience to investors.

SIPs, which have previously seen the most interest from retail investors, are also witnessing
some new variations.

Wealth managers and distributors are advising clients to invest in SIPs that work differently from
the current system of investing on the same day every month, as lump sum investments and SIPs
made in various equity scheme categories are showing losses. A number of similar SIP variations
are being offered by fund houses with the objective of improving fund performance for investors.

Linking of investments to debit cards has recently gained popularity. This innovation could
replace a customer’s bank account with a higher yielding liquid fund.
A debit card allows investors to spend the money that they have invested in MFs without going
through paperwork and the delays typically associated with withdrawal from a scheme.

The card allows both cash withdrawals as well as purchases at various points of sale in a manner
similar to debit cards linked to a bank account. The card can also be used at ATMs for checking
the balance or total value of investments. It can currently be linked to both equity and debt
schemes, and allows for withdrawals from the same subject to daily limits.

Product innovations in ETFs have also found traction amongst investors.

There is a specific product which allows investors to invest in a gold ETF even without a de-mat
account.

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Distributors selling ETFs often face an issue due to a dearth of de-mat accounts with investors, a
prerequisite to hold ETF units. The industry therefore developed a product which allows
investors to use the MF route to invest in gold, even in the absence of a de-mat account.

Such funds collect money from investors and act in the same manner as a feeder fund, investing
on behalf of investors into the ETF.

The investors put their money into these gold savings funds and are issued units. The fund in turn
holds the units issued by the ETFs. At the time of redemption, the fund can sell its ETF holding
and pay back the investor.

Some Facts About Indian MFs:

Cannot Practice What They Preach: A fund manager will educate an investor to be
patient with equities as they constitute ownership of a business which creates wealth over the
long term. But are they themselves able to actually follow what they preach? May be not always.
This is because the net asset value (NAV) of the scheme is declared on a daily basis and their
performance is measured on a weekly, monthly or quarterly basis. If the fund manager were to
follow his brain and do the right investments, his heart would bleed as he loses AUMs and,
probably, his job.

Advocate Market Timing Funds: Fund managers’ advice is that we should never try to
time the markets. Theories like superior returns from stocks are generated not by timing the
market but by ‘time in’ the market are propagated. But do these erudite fund managers
themselves follow such principles? Not always. If they believed that market cannot be timed,
why do they launch ‘market-timing schemes?’ Why do they churn their portfolio? The turnover
ratio of some schemes is as high as 90%, meaning the entire portfolio is churned fully within a
year. They create products like dynamic asset allocation schemes, low P/E schemes, etc. Kindly
note that historically we have seen that almost 90% of portfolio variability is due to asset
allocation while only 10% of the variability in portfolio performance is due to market timing and
stock selection. The only thing in our control is asset allocation and the good news is that 90% of

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portfolio variability is due to asset allocation. Therefore, instead of promoting asset allocation for
long-term wealth creation, many a times, schemes promote market-timing strategies.

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Valuable Information About Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank of India. The history of mutual funds in
India can be broadly divided into four distinct phases
First Phase - 1964-1987
Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development
Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The
first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700
crores of assets under management.
Second Phase - 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and
Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990.
At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004 crores.
Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting
up funds in India and also the industry has witnessed several mergers and acquisitions. As at the
end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The
Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other
mutual funds.
Fourth Phase - since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs. 29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of

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Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile
UTI which had in March 2000 more than Rs. 76,000 crores of assets under management and with
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund industry
has entered its current phase of consolidation and growth.
The graph indicates the growth of assets over the years.

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Top Trends in Mutual Funds

Investors rediscovered the stock market last year, reversing five years of little or no flows into
stock funds and enjoying the headiest gains since the Internet bubble. Most experts predict the
migration into stocks will continue and stocks will keep rising, though few expect anything close
to a repeat of the S&P 500′s 2013 total return of 32 percent—one of the best annual gains in
history.

The flood into stocks started 12 months ago as income-starved individuals wearied of low bond
yields and poured money from savings into dividend-paying blue chips. When interest rates
jumped in May and bond prices fell, it triggered a further exodus from bond funds, and many of
the proceeds also shifted to stocks.

Nothing stemmed the movement for long—not historical levels of political dysfunction and
uncertainty, or the Fed signaling it would wind down a massive bond-buying program. In all,
investors poured $437 billion into stock funds, including ETFs, while fleeing fixed income,
according to data from fund research firm Lipper. The shift paid off: The average U.S.
diversified large-cap stock fund matched the S&P 500 gain, while bond funds, which had
performed well in recent years, fell an average 2 percent.

The move into stocks was broad-based, but it was not indiscriminate. A lingering fear of sudden
market downdrafts, such as that in 2008, and of an aging population that cannot count on
outlasting another market cycle before retirement, shaped much of the reversal. Simply put,
many no longer see stocks for the long run as a viable strategy; they have been searching for
more income, but with safety. This approach is driving five investing trends that promise to
remain with us through 2014 and longer.

Going global

Fund investors used to construct their portfolio focusing on large- and small-cap U.S. stocks in
various categories like growth or value, adding a dollop of international stocks for diversification
and rounding it out with U.S. bonds and some cash. This home-based approach has fallen out of
favor since the financial crisis, which struck so hard in many developed economies but less so
elsewhere. Investors now want the safety of more global exposure.

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“Diversity was defined very differently five years ago,” said Robert Martorana, portfolio
manager at Right Blend Investing. Americans still have 50 to 70 percent of their portfolio in
home-based assets. Financial advisors are moving clients closer to 40 percent. This likely will be
a decade-long process, Martorana said, and is perhaps most evident in the cash flowing into
developed international market funds. Such funds saw inflows last year of $152.5 billion, about a
third of all money going to stock funds.

Favoring brand-name funds

As the investment climate turned hostile in the wake of the financial crisis, investors increasingly
sought the security of brand-name mega mutual funds. Three decades ago there were just a
handful of popular mega funds, including Fidelity Magellan, Janus and Vanguard 500 Index—all
large-cap and growth-oriented. Today there are one or two big go-to funds in every category, and
they are sucking up most of the assets. For example, Lipper data show that the two largest
developed international markets funds last year gathered 19 percent of all cash flowing into the
group; the 10 largest claimed half of the inflows.

“People want something they know,” said Martorana. “When they feel confused, they go with
the big brand.” It’s not about chasing returns, but a comfort level with the manager and strategy.
The Mainstay Market field fund, run by Michael Aronstein, returned just 16.9 percent—not

34
much more than half the S&P 500 gain. But it is a category killer among long-short funds that
seek to minimize downside risk. Mainstay saw net inflows of $10.3 billion, nearly tripling its
assets under management.

Blockbuster funds vacuuming up assets in other categories include Oakmark International, a

broad-based stock fund with net inflows last year of $12.2 billion, which boosted assets 77
percent to $28 billion; and Oppenheimer Senior Floating Rate, a bank loan participation fund
with net inflows of $3.8 billion, which boosted assets 115 percent to $7.1 billion.

Finding Alternatives

The flows into such category-killer funds point up another trend: the growth of mutual funds
with little correlation to market benchmarks. Called alternatives, these hedge fund–type
investments last year saw the biggest percentage inflows of any fund group as investors reached
for strategies that promised limited downside, low volatility and positive returns even in a market
that stalls or falls. Such funds may employ long-short strategies, while others—like risk
arbitrage, commodities futures and global macro economic—bets around things like interest rates
and currencies.

“These hedging strategies are popular with people over 55 and who want to manage their
downside,” says Robert Jenkins, global head of research at Lipper. The category saw inflows of
$51.7 billion, boosting assets 41 percent to $178.6 billion. Financial advisors increasingly
embrace these funds for pre-retirees, who don’t need to beat a benchmark but must earn
something before they call it quits. Investors in these funds have been willing to pay fees about a
half point higher than on traditional funds, valuing more certain, if less robust, gains.

This trend lies behind the near tripling of assets at Mainstay and large inflows at other alternative
funds, including AQR Managed Futures, which plays in commodities and other securities and
saw net inflows of $2 billion, boosting assets 60 percent to $4.5 billion; and GMO Benchmark
Free, an absolute return fund that saw inflows of $1.7 billion, boosting assets 155 percent to $2.8
billion.

Searching for income

Low interest rates have led investors to all manner of income-producing investments: dividend
paying stocks, municipal bonds, corporate junk bonds, foreign debt and much more. But you
can’t just gobble up income across the globe and across the credit spectrum and call it
diversification. Emerging markets debt and junk bonds have a high correlation to U.S. equities.
Meanwhile, with rates set to rise long-term, government debt continues to look especially risky.
So there has been a push into things like bank participation funds, short-term bond funds and,
perhaps most notably, global macro funds that hunt for special situations around the world.

“It makes a lot of sense to go out there and try to find special opportunities in fixed income,” said
Jenkins. “Unconstrained bond funds can get at them a lot easier than benchmark products.” This
helps explain why Pimco Unconstrained, a global macro fund, saw inflows last year of $7.3
billion even though star manager Bill Gross’s fund fell 2.2 percent in a tough climate for fixed

35
income. Other alternative-income funds delivered: Oppenheimer’s Senior Floating Rate fund and
the Goldman Sachs Strategic Income fund, both among the biggest, returned more than 6
percent.

Again, fees may be a half point higher for these types of funds. But this investing is labor
intensive, wrapping in securities like master limited partnerships and bank loans and assessing
global economic trends and individual-issuer credit quality.

Flocking to ETFs

Exchange Traded Funds have been on a growth tear for more than a decade; assets in these funds
have grown from almost nothing at the turn of the century to $1.3 trillion. The rise of ETFs
continued through the recession with inflows of around $100 billion a year, and the pace
quickened more recently as investors came back to stocks.

Net inflows last year came to $151.3 billion on top of $155 billion in 2012, the biggest two years
of inflows in this group since the meltdown. Much of the action was in the biggest ETFs. The
$175 billion SPDR S&P 500 Trust had inflows of $15.3 billion.

“ETFs are transparent, tactical and tax effective,” said Martorana. “People like to invest this
way.” He believes assets will continue to flow to ETFs from traditional open-end mutual funds
for years to come. A popular approach is to use ETFs for broad low-cost exposure to the markets
and then tack on alternatives to limit your downside. After all, today’s fund investors value
safety above the potential to beat the market.

Association of Indian Mutual Funds

The Association of Mutual Funds in India (AMFI) is an industry standards organization

in India in the mutual funds sector. It was formed in 1995. Most mutual funds firms in India are
its members. The organization aims to develop the mutual funds market in India, by improving
ethical and professional standards. AMFI was incorporated on 22 August 1995. As of April
2015, there are 44 members.
A visible and ethical impact created by AMFI can be seen in advertisements of mutual funds
where the instructions concerning the risky nature of mutual funds investments is clearly
mentioned.

How Mutual Fund Companies Work

A mutual fund is a collection of investments, such as stocks, bonds and other funds owned by a
group of investors and managed by a professional money manager. The investment objective of
the mutual fund determines what types of securities it buys. A mutual fund can focus on specific
types of investments. For example, a fund may invest mainly in government bonds, stocks from
large companies, or stocks from certain countries. Or, it may invest in a variety of investments.

36
When you buy a mutual fund, you’re pooling your money along with other investors. You put
money into a mutual fund by buying units or shares of the fund. As more people invest, the fund
issues new units or shares.

The investments in a mutual fund are managed by a portfolio manager. They manage the fund on
a day-to-day basis, deciding when to buy and sell investments according to the investment
objectives of the fund.

4 things to know
1. Risk – The level of risk and return depends on what the fund invests in. Mutual funds are
not guaranteed or insured by the Canada Deposit Insurance Corporation (CDIC) or any other
government agency – even if you buy through a bank and the fund carries the bank’s name.
You can lose money investing in mutual funds.
2. Past performance – How a fund has performed in the past can’t tell you how it will perform
in the future. But past performance can help you determine how volatile or risky the fund’s
returns may be.
3. Price to buy and sell – You buy mutual funds at the fund’s net asset value (NAV) plus any
sales charges. Mutual funds are redeemable – you can sell your mutual funds at the current
NAV less any fees and charges for redemption.
4. Fees – All mutual funds have fees and expenses that reduce your investment return.

Net asset value (NAV)

When you purchase or redeem securities of a mutual fund, you pay or receive what is known as
the net asset value (NAV) of the security at the time of purchase, switch or redemption. Most
mutual funds report their NAV daily in the business section of many newspapers, or on the fund
manager’s website. NAV represents the mutual fund’s assets less its liabilities. NAV will
fluctuate with changes in the market value of the mutual fund’s particular investments.

2 ways to make money on a mutual fund

1. Capital gains – If you sell your mutual fund for more than you paid for it, you will have a
capital gain. If you sell your mutual fund for less than you paid for it, you will have a capital
loss.
2. Distributions – Depending on the type of fund you buy, you may also receive distributions
of dividends, interest, capital gains or other income the fund earns on its investments. You
can choose to receive distributions in cash or have them reinvested in the fund for you.
Unless you ask for the distributions to be paid in cash, the mutual fund will usually reinvest
the distributions for you.

How mutual funds are taxed

If you hold your mutual funds in a non-registered account, any money you make on them is
subject to tax. Distributions are taxable in the year you receive them, whether you get them in
cash or they are reinvested for you. Interest, dividends and capital gains are all treated differently
for tax purposes, and that will affect your return from an investment.

37
If you hold your mutual funds in a registered plan, like an RRSP, a RRIF or an RESP, you won’t
pay tax on the money you make as long as that money stays in the plan. When money is
withdrawn from the plan, it will be taxed as income.
With a TFSA, you don’t pay any tax on the money you make while it’s in the plan – or when you
take it out.

Where to buy mutual funds

 Banks and trust companies
 Life insurance companies
 Credit unions
 Mutual fund dealers
 Investment firms
 Mutual fund companies that sell directly to the public.
Most mutual funds are sold through financial advisors who are required to be registered with
their provincial regulator (for example, the Ontario Securities Commission). They must also
work for a company that is registered to sell funds. You can buy mutual funds without an advisor
if you use a discount brokerage.

Assets Under Management (AUM)

Assets under management (AUM) is the total market value of the investments that a person or
entity manages on behalf of clients. Assets under management definitions and formulas vary by
company.

In the calculation of AUM, some financial institutions include bank deposits, mutual funds, and
cash in their calculations. Others limit it to funds under discretionary management, where the
investor assigns authority to the company to trade on his behalf.

Overall, AUM is only one aspect used in evaluating a company or investment. It is also usually
considered in conjunction with management performance and management experience.
However, generally, investors can consider higher investment inflows and higher AUM
comparisons as a positive indicator of quality and management experience.

AUM refers to how much client's money a financial company—or financial professional—
handles regularly. AUM is the sum of the investments managed by a mutual fund or family of
funds, a venture capital firm, brokerage company or an individual registered as an investment
advisor or portfolio manager.

Used to indicate the size or amount, AUM can be segregated in many ways. It can refer to the
total amount of assets managed for all clients, or it can refer to the total assets managed for a
specific client. AUM includes the capital the manager can use to make transactions for one or all
clients, usually on a discretionary basis.

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For example, if an investor has $50,000 invested in a mutual fund, those funds become part of
the total AUM—the pool of funds. The fund manager can buy and sell shares following the
fund's investment objective using all of the invested funds without obtaining any additional
special permissions.

Within the wealth management industry, some investment managers may have requirements
based on AUM. It may be a measure to determine if an investor is qualified for a certain type of
investment, like a hedge fund. Wealth managers want to ensure the client can withstand adverse
markets without taking too large of a financial hit. An investor’s individual AUM can also be a
factor in determining the type of services received from a financial advisor or brokerage
company. In some cases, individual assets under management may also coincide with an
individual's net worth.

Calculating AUM

Fluctuating daily, AUM depends on the flow of investor money in and out of a particular fund.
Also, asset performance will impact this daily figure. Increased investor flows, capital
appreciation, and reinvested dividends will increase the AUM of a fund.

Adversely, decreased investor flows and market value losses will decrease the AUM of a fund.
In the United States, once a firm has more than US$30 million in assets under management, it
must register with the Securities and Exchange Commission (SEC).

Methods of calculating assets under management vary among companies. Total firm assets under
management will increase when investment performance increases or when new customers and
new assets are acquired. Factors causing decreases in AUM include decreases in market value
from investment performance losses, fund closures, and client redemptions. Assets under
management can be limited to all of the investor capital invested across all of the firm’s
products, or it can include capital owned by the investment company executives.

Why AUM Matters

Firm management will monitor AUM as it relates to investment strategy and investor product
flows in determining the strength of the company. Investment companies also use assets under
management as a marketing tool to attract new investors. AUM can help investors get an
indication of the size of a company's operations relative to its competitors.

AUM may also be an important consideration for the calculation of fees. Many investment
products charge management fees that are a fixed percentage of assets under management. Also,
many financial advisors and personal money managers charge clients a percentage of their total
assets under management. Typically, this percentage decreases as the AUM increases; in this
way, these financial professionals can attract high-wealth investors.

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Major Findings and Conclusion

Numerous findings have emerged from the analysis of growth and development of mutual
funds in India. First, the investors have now large number of schemes (609) with various
features to choose in. Second, open-end schemes have overtaken the close-end schemes
in all respects such as number of schemes, growth rate in number, amount mobilized, and
asset under management. Third, the percentage share of open-end schemes in total
number of schemes has remained above 87 percent for the years from 2003 to 2005, where
as the percentage share of close-end schemes varied from 8.2 percent to 12.6 percent in
this duration. Fourth, CAGR of the number of growth schemes is found marginally higher
(i.e. 10.9%) than that of income schemes (9.81%). However, total number of income
schemes launched by mutual funds operating in India as on 31st December 2006 is higher
(253) than growth schemes (207). Fifth, in terms of market share in total number of MF
schemes in India, income schemes have had an edge over growth schemes continuously
from the last ten years. In December 2006, the income schemes shared the highest
proportion (41.5%) followed by growth (34%), liquid/money market (8.2) balanced (5.9%)
and venture capital funds (5.7%). In 2006, the assets under management of growth
schemes were found the highest Rs. 11953 crore, followed by liquid (Rs.97775 crore) and
income schemes (Rs.86350 crore), and their market share in AUM stood at 36.94, 26.68
and 30.31 percent respectively.

Sixth, UTI’s share in total asset under management has come down to 11.77 percent in
2006 from 82.54 percent in 1998. Contrarily, private sector’s share has risen to 79.33
percent from less than 7.57 percent in 1998. CAGR in AUM is found at the highest level
(68.4%) in case of liquid schemes followed by growth schemes (29.64%) and ELSS (11.5
%).Open-end schemes have succeeded to find double digit CAGR (i.e. 25.1%) and 91.67
percent share in total AUM of all mutual funds. Seventh, despite many problems faced by
UTI in recent years, it has dominated the market in terms of number of schemes as well as
net asset under management. Reliance Capital Asset AMC has reached to 2nd rank in 2006
from 7th in March 2004.
Thus, the emerging dimensions of MFs are:
 Open-end schemes have emerged more favorable than close-end in recent years.
 Growth, income and liquid funds are more popular than the other types of schemes.

40
  Private sector funds have snatched a lion’s share of market from UTI and other
public sector mutual funds both in terms of number as well as assets under
management
 Both domestic private sector and foreign dominated (joint venture) MFs have
performed better than public sector in recent years in all dimensions of analysis.
 On the whole, MFs are adding a lot to the India shining story by ensuring a
significant CAGR in cumulative funds mobilization.

Mobilization of Gross Resources by Indian Mutual Fund Industry (During

1998-2006)
(Rs.crore)

Year Private Sector UTI Public Total

Sector
1974 9100 332 11406
1997-98 (17.30) (79.78) (2.91) (100)
7846.50 13192.89 1671.34 22710.73
1998-99
(34.55) (58.1) (7.36) (100)
43725.66 13698.44 3817.13 61241.23
1999-00
(71.40) (22.37) (6.23) (100)
75009.11 12413.00 5535.28 92957.39
2000-01
(80.69) (13.35) (5.95) (100)

147798.26 4643 12081.91 164523.17

2001-02
(89.83) (2.82) (7.34) (100)

284095.49 7095.82 23514.88 314706.19

2002-03
(90.27) (2.25) (7.47) (100)
534649.28 23992.40 31548.19 590189.87
2003-04
(90.59) (4.07) (5.35) (100)

736463.30 46656.08 56588.99 839708.37

2004-05
(87.70) (5.56) (6.74) (100)

41
 914703.26 73127.42 110318.63 1098149.31
2005-06
(83.29) (6.66) (10,05) (100)

Sector-wise Amount of Assets Under Management of Mutual Funds in India

(Rs. crore)
UTI Public Sector Private Sector Pre-Dominated Total
Foreign
Year No. %∆ No. %∆ No. %∆ No. %∆ No. %∆
1998 54339.0 6501.0 4988.0 1986.0 65828.0
1999 67207 23.7 10289 58.3 19532 291.6 9330 369.8 97028 47.4
2000 64239.0 -4.4 7051.0 -31.5 28036.0 43.5 14831.0 59.0 99326.0 2.4
2001 51181 -20.3 8385 18.9 42256 50.7 21145 42.6 101822 2.5
2002 45899.0 -10.3 12393.0 47.8 64308.0 52.2 35279.0 66.8 122600.0 20.4
2003 19059 -58.5 14343 15.7 106689 65.9 50037 41.8 140091 14.3
2004 20976 10.1 10670 -25.6 118891 11.4 61506 22.9 150537.0 7.5
2005 25228 20.3 18760 75.8 155260 30.6 50974 -17.1 199248 32.4
2006 38109.0 51.1 28764.0 53.3 256724.0 65.4 80833.0 58.6 323597.0 62.4
CAGR -11.8** 16.4* 53.7* 48.3* 17.5*

42
COMPANY PROFILE

43
 S. S. KANTILAL ISHWARLAL SECURITIES PVT. LTD.
(sharekhan.com):

Sharekhan, India’s leading stock broker is the retail arm of SSKI, and offers you depository
services and trade execution facilities for equities, derivatives and commodities backed with
investment advice tempered by decades of broking experience. A research and analysis team is
constantly working to track performance and trends. That’s why Sharekhan has the trading
products, which are having one of the highest success rates in the industry. Sharekhan is having
2800 outlets in 575 cities
; the largest chain of retail share shops in India is of Sharekhan.In future, Sharekhan is planning
to enter in Mutual funds, Insurance sector and banking sector to expand beyond the market
currently covered by it. And it has started MF (Mutual Funds) on priority basis but wants to grow
in it.
It was founded 18 years ago. It now has 1.7 million customers with 46,900crore customer assets.
Sharekhan is now a fully owned subsidiary of BNP Paribas, it was rebranded as Sharekhan by
BNP Paribas.

Sharekhan is the largest standalone retail brokerage in the country and the third largest in terms
of customer base after ICICI Direct and HDFC Securities. Sharekhan is one of the pioneers of
online trading in India. It offers a broad range of financial products and services including
securities brokerage, mutual fund distribution, loan against shares, ESOP financing, IPO
financing and wealth management.

History
Sharekhan was founded by Mumbai-based entrepreneur Shripal Morakhia in 2000. Sharekhan
pioneered the online retail broking industry and leveraged on the first wave of digitization, when
dematerialization (de-mat) of securities came into effect and electronic trading was introduced in
the stock exchanges.

44
 In India, Sharekhan has over 4800+ employees, and is present in over 575 cities through
153 branches, more than 2,500 business partners. The company has 1.4 million customer
base and on an average, executes more than 4 lakh trades per day.

About Organization

Founded in 2000 and a subsidiary of BNP Paribas since November 2016, Sharekhan was
one of the first brokers to offer online trading in India. With 16 lakh customers, 153
branches and more than 2400 business partners spread across over 575 locations,
Sharekhan is one of the largest brokers in India. Sharekhan offers a wide range of savings
& investment solutions including equities, futures and options. currency trading, portfolio
management, research and mutual funds and investor education. On an average,
Sharekhan executes more than 400,000 trades daily.

Key Management Personnel

CEO- Mr. Jaideep Arora
Parent- BNP Paribas
Founded- 2000
Acquisition- 2005

Organization Structure
● Registered with NSE and BSE for capital market, futures and options and currency
segments and CDSL and NSDL for depository services.

● A full-service stock broking firm providing online services right from online account
opening to trading and investments.

● Created India’s best online trading platforms: Website (www.sharekhan.com), Trade

Tiger (the ultimate desktop trading software), Sharekhan App (available for Android and

45
 iOS devices) and Sharekhan Mini (a low bandwidth website especially for mobile
browsers)

● A strong brick-and-mortar network with over 2600 outlets in 575+ cities

● Research-based financial advice on all asset classes to suit all investing and trading styles

● Dedicated Education and training courses for investors and traders in association with
Online Trading Academy.

Product Mix

1. Trade Tiger
If you believe in trading like a professional, experience the power of a broker's terminal
with our advanced online desktop trading platform – Trade Tiger.
What's more, navigation around the software is a piece of cake which gives you more
time to formulate winning trading strategies. Plus, with Trade Tiger you can trade easily
in multiple segments from a single platform, gain access to advanced trading tools like
Trade from Excel and Heat Map, and obtain real-time market feeds without any hiccups.
Experience Trade Tiger now to take your trading to the next level.

Features

● Fast and Reliable Feeds

● Access to Research Calls

● Multiple Exchange Platform

● Best in Class Charting

● Advance Tools

● Advance Orders

● Personalization

46
 ● Free Online Trading

● Online Support Desk

2. Sharekhan Website

Investing can be fun and engaging, that too at the click of a button with the Sharekhan
website

Features:
● Explore the all new website
The new Sharekhan website is revamped to help you trade efficiently. Watch the demo to
find the new features and locate your sections.
● My Portfolio
My Portfolio gives a detailed & a comprehensive view of your investments. Watch the
demo to find out the new features of My Portfolio.
● Check all the Reports
Check various Reports to check the capital gains for tax calculation purposes in a better
way and all other reports related to orders and open and closed financial positions
● Segmentation
Website is divided in four segments with easy navigation to differentiate profits from
different segments of market.

3. Sharekhan App
The new Sharekhan App is user friendly and has been redesigned keeping user’s
requirements in mind. Along with its fresh new look, it also offers extensive features for
both traders and investors alike. Now, you can initiate trade easily, keep track of your
stocks and manage portfolio, all in one place. Sharekhan would surely become your
preferred trading and investment app for the features mentioned below.

App Features:
● Navigate easily across the app with user friendly design

47
 ● Stay updated with global and domestic market info
● Save the effort of typing user id and password again & again by perpetual login feature
● Trade, view charts & detailed quote, add to market watch& virtual portfolio directly from
scrip search page
● Introduction to powerful multi exchange streaming market watch with enhanced details
about scrips and contracts

Features for Traders:

● Trade smart with enhanced live charts (Line, Candlestick, Bar, Area)
● Trade in advanced orders (Bracket Order) and track the orders in enhanced report section
● Extensive and in–depth analysis using advanced charts and studies like Candle Stick,
Retracement Line, Bollinger Band, RSI, Moving Average etc
● Search for your favourite stock easily with Advanced Future & Option search

Features for Investors:

● Track your investments with newly introduced portfolio
● Enhanced global markets to keep you update about market news around the world
● Stay informed with the latest market news & updates
● Get access to domestic market news, top gainer, top loser, top traded volume, top traded
turnover, 52 week high, 52 week low

4. Sharekhan Mini
Sharekhan Mini is designed for mobile phone users and users who want to access Sharekhan on
low bandwidth.
Sharekhan Mini is low bandwidth website, which works both on smart-phone as well as on a
basic 2G phone. Anyone who has a basic phone and 2G network can trade through Sharekhan
Mini without any hassle.
Sharekhan Mini is packed with amazing features, some of which are mentioned below:
● Track as well as trade in all segments with multi exchange streaming watch list
● Trade seamlessly in NSECURR & MCXCURR and also invest in Mutual Fund
● Track Equity and MF portfolio on the go

48
 ● Access charts for scrips in NSE and BSE segments
● Get updates on Sharekhan Research calls and latest news
● Stay updated with information of global indices as well as domestic markets
● Single touch access to Market Watch, Order page, Charts and Futures & Options
● Keep an eye on your favorite stocks through watch list
● View all Call & Put contracts for a particular scrip with the help of Option Chain
● Know your contract information like Span Margin, Greeks etc. with help of Span
Calculator
● Transfer funds securely from Bank to Trading A/c, MF A/c, IPO A/c & vice versa

5. Dial N Trade
Free with your Sharekhan Trading Account, the Dial-N-Trade service enables you to
place orders for buying and selling shares, futures & options and currencies through your
telephone. All you have to do is dial any one of our dedicated numbers (1-800-270-7050
or 1-800-22-7050 or 30307600), enter your TPIN number (which is provided at the time
of opening your account) and on authentication, you'll be given an option to select either
Equity or Currency segment. Then, you'll be directed to a telebroker who will place the
orders on your behalf.

Features:
● A quick and secure 3-step process to place your orders. Just enter your phone ID and
TPIN and select the segment you want from our varied offering [1 for Equity; 2 for
Currency]
● Availability of all Sharekhan research advice on all segments:
○ Intraday
○ Momentum Call
○ Smart Chart Calls
○ Fundamental Calls
● Facility to discuss and understand trends and factors affecting the markets
● Guidance and education on market concepts
● Pan-India accessibility

49
 ● No limit on calls made for trading
● Complete recording infrastructure for all calls
● 2 toll-free numbers

6. Pattern Finder
Sharekhan brings you Pattern Finder - a tool that analyzes stocks and indices, extracts
profitable opportunities from them and delivers the information piping hot to you

How Does it Work?

● Scans stocks in all supported markets every night, based on standards of Technical
Analysis
● Throws up charts, patterns and forecasts prices
● Delivers this information, via SMS and email alerts, before the market opens the next day

How Does it Help Investor?

● Saves you a lot of time and effort as Pattern Finder does all the analysis
● Equips you with critical pattern recognition information and trading ideas
● Delivers profitable trading opportunities

What do I do?
● Just log into your Sharekhan account
● Click on the 'Pattern Finder' link to subscribe for all the updates and alerts
● Intimation will be sent to you via email/SMS confirming your subscription

7. PMS- Wealth Optimizer

The Indian equity market presents an excellent opportunity for long-term investors.
Sharekhan offers you solutions to meet your financial objectives. Wealth Optimizer is a
portfolio management product that involves enhancing wealth over the long term. The
goal is not only to outperform the market but also to generate superior returns.

50
 Strategy:
● To identify undervalued growth stocks on the investment day
● Automated decision making system performs fundamental analysis and assigns a fair
value to each stock on the basis of reported financial performance
● Stocks with higher scope to grow are selected

How The Product Works

● Fundamental analysis is performed on more than 5,000 companies
● Stocks with sound fundamentals are picked, subject to strategy conditions
● Top 10 stocks are selected each day based on the maximum scope to grow
● No particular sector forms more than 20% of the client’s portfolio
● Fundamentals of stocks held are reviewed every quarter based on quarterly results
● Automated decision making system for transparent and disciplined investing

Key Product Specifications

● Minimum Investment Amount: Rs 25 Lacs.
● Recommended Investment Duration: 2 years or more.

51
Direct Competitors

FIRMS NAME HDFC ICICI RELIGARE INDIABULLS SHAREKHA

FACTS N
OPENING RS.750/- Rs.750/- Rs.500/- Rs.1250/500 Nil/-
CHARGES
AMC Rs. 750/- Rs. 750/- Rs .16 per Rs.16per Rs. 400/-
transaction transaction

RESEARCH NO NO R. M. R.M. DAILY

REPORT BASIS
DIAL N TRADE Rs.20per call Rs.20per call NO NO FREE
chargeable chargeable

BROKERAGE INT 0.15% INT 0.15% INT 0.10% INT 0.10% INT 0.02%
DEL0.75% DEL0.75% DEL0.50% DEL 0.50% DEL 0.15%

LIVE NO NO YES YES YES

TERMINAL
EXPOSURE NO NO 8timeonly 8time only 5time
trading trading 2days+tradin
g

TRADING 9:15to3:30 9:15to3:30 9:15to3:30 9:15to3:30 9:15to3:30

TIMING

Systematic Investment Plan

A systematic investment plan (SIP) is an investment vehicle offered by mutual funds to
investors, allowing them to invest small amounts periodically instead of lump sums. The
frequency of investment is usually weekly, monthly or quarterly.

52
Why should you invest in SIP?
Do thorough checks on the fund you want to invest so that you can assess a historical
performance of the mutual funds. After talking to your fund manager start investing on a mutual
fund for 10 years with a monthly investment of 5000 rupees or you can pay as low as 1000
rupees. There is no need to monitor your investment or check market fluctuations constantly. The
higher money returns would be ensured at the end of the term period.

What are the other benefits of SIPs?

The power of compounding :

If you are investing 1000 rupees for 30 years in a mutual fund which will give you an expected
return of 6 percent per year, then you have a chance of getting 10 lakhs at the end of the term
period,. But if you choose mutual funds investment with an expected return of 15 percent per
annum, then you can get 70 lakhs at the end of 30 years. Reinvesting in the same mutual funds is
called compounding which is one of the biggest sip benefits.

Lighter on your wallet :

Most people will not belief that investing in sip on a monthly basis can be as low as 500 rupees.
This breaks the myth regarding mutual funds that says that only with larger amount of money
can mutual fund investments be done.

How much money do I need to start an SIP?

You can start investing in a mutual fund scheme via SIP with a minimum of Rs 500.

Can I customize my SIP?

Yes, you can customize your SIP. In fact, you can start with an amount as small as Rs. 500 (Rs.
6000 per year). Did you know you can even start a fortnightly, weekly or even daily SIPs? This
is how customization works and you can use this to your advantage.

Many AMCs allow this to make it easier and convenient for their customers. Aside from this,
there are also step-up SIPs that let you increase your SIP contribution. For instance, if you invest
Rs. 5000 per month, you can increase the amount by 10% or 20% in the following year. This
combined with the power of compounding will build your savings at a faster pace. In the recent
years, SIPs have been generating 15% to 18% returns.

53
Systematic Transfer Plan (STP)
An STP is a plan that allows investors to give consent to a mutual fund to periodically transfer a
certain amount / switch (redeem) certain units from one scheme and invest in another scheme of
the same mutual fund house. Thus at regular intervals an amount/number of units you choose is
transferred from one mutual fund scheme to another of your choice. This facility thus helps in
deploying funds at regular intervals.

STP and its importance

Systematic Transfer Plan is of two types; fixed STP, and capital appreciation STP. A fixed STP
is where investors take out a fixed sum from one investment to another. A capital appreciation
STP is where investors take the profit part out of one investment and invest in the other.

Example of STP
Suppose you have invested 5 lakhs in debt funds because you thought market is trading at close
to peak. The PE ratio of the market is 25 and hence you think that fall is imminent. Hence you
invested your money in debt fund. Now assume that your prophecy was right and the market
indeed fell to a level where you can make entry to equities. However, there are overall weak
sentiments which may push market further down. What is the best strategy in this case?

You can take out 5 lakhs out of debt fund and invest in equity oriented mutual fund. The risk is
that if the market goes further down, your fund value will also fall. This is a risky strategy.
Moreover, if the weak sentiments prolong for some time, you will lose on the opportunity cost
because your money is stuck with an investment which has gone down in value.
There is other way which can really minimize the risk. The way is called STP. In this case, you
can withdraw a fixed amount from your debt fund investment and invest in equity oriented fund.
This can go on for several months depending upon your choice. For example, if you want to
continue STP for 3 years, you can direct your fund to do this and the fund will withdraw money
automatically from your debt fund and put into equity oriented fund every month.

54
RESEARCH METHODOLOGY

55
Research refers to the systematic investigation into and study of materials and sources in order to
establish facts and reach new conclusions. Research comprises "creative work undertaken on a systematic
basis to increase the stock of knowledge, including knowledge of humans, culture and society, and the use
of this stock of knowledge to devise new applications." It is used to establish or confirm facts, reaffirm
the results of previous work, solve new or existing problems, support theorems, or develop new theories.
In the broadest sense of the word, the definition of research includes any gathering of data, information,
and facts for the advancement of knowledge. It is a process of steps used to collect and analyze
information to increase our understanding of a topic or issue". It consists of three steps: pose a question,
collect data to answer the question, and present an answer to the question.

The process used to collect information and data for the purpose of making business decisions is called as
Research Methodology. The methodology may include publication research, interviews, surveys and
other research techniques, and could include both present and historical information.

The purpose of Methodology is to describe the purpose involved in the Research Work. This includes the
overall Research Design, the data collection method. Research Methodology refers to the various
sequential steps to be adopted by a Researcher in studying a problem with certain object or objective in
view.

Research Design
A research design is the set of methods and procedures used in collecting and analyzing measures of the
variables specified in the research problem research. The design of a study defines the study type
(descriptive, co-relational, semi-experimental, experimental, review, meta-analytic) and sub-type (e.g.,
descriptive-longitudinal case study), research problem, hypotheses, independent and dependent
variables, experimental design, and, if applicable, data collection methods and a statistical analysis plan.
Research design is the framework that has been created to find answers to research questions. There are
many ways to classify research designs, but sometimes the distinction is artificial and other times
different designs are combined. Nonetheless, the list below offers a number of useful distinctions between
possible research designs. A research design is an arrangement of conditions or collections.

A research design is a systematic approach that a researcher uses to conduct a scientific study. It
is the overall synchronization of identified components and data resulting in a plausible
outcome. To conclusively come up with an authentic and accurate result, the research

56
design should follow a strategic methodology, in line with the type of research chosen. To have a
better understanding of which research paper topic, to begin with, it is imperative to first identify
the types of research.

Types of Research Design:

 Exploratory Research
Exploratory research, as the name implies, intends merely to explore the research questions
and does not intend to offer final and conclusive solutions to existing problems. This type of
research is usually conducted to study a problem that has not been clearly defined yet.
 Descriptive Research
Descriptive research can be explained as a statement of affairs as they are at present with the
researcher having no control over variable. Moreover, “descriptive studies may be
characterized as simply the attempt to determine, describe or identify what is, while
analytical research attempts to establish why it is that way or how it came to be”

Data Collection
Data collection is the process of gathering and measuring information on variables of interest, in an
established systematic fashion that enables one to answer stated research questions, test hypotheses, and
evaluate outcomes. A formal data collection process is necessary as it ensures that the data gathered are
both defined and accurate and that subsequent decisions based on arguments embodied in the findings are
valid. The process provides both a baseline from which to measure and in certain cases an indication of
what to improve.

Methods of Data Collection

There are two types of data collection methods namely primary data collection and secondary data
collection.

57
Primary data
Primary Data is the data which is originally collected by an investigator or agency for the first time for
specific purpose. The source from which the primary data is collected is called the primary source. Such
data is original in character as it is collected for the first time. It is first-hand information. Primary Data
once collected and published becomes Secondary Data. There are many methods to collect primary data
and the main methods include:
 Questionnaires
 Interviews
 Focus group interviews
 Observation

Secondary data
The data which is not directly collected but rather obtained from the published or unpublished sources is
known as Secondary Data. It is also known as Second Hand Data. These are not original data since the
enumerators or investigators themselves do not collect these data. They simply make use of the data
collected by the others. Common sources of secondary data include:
 Census
 Large surveys
 Internet
 Journals
 Books
 News papers
 Organizational records

Thus, the data for is collected through primary sources ( questionnaire ) and the research is
descriptive in nature. The study was conducted among 50 individuals. The data has been collected
in the form of questionnaire from these 50 respondents on various factors that can help me
determine the investment strategy

How do we know something exists? There are a numbers of ways of knowing…

 -Sensory Experience
 -Agreement with others
 -Expert Opinion

58
  -Logic
 -Scientific Method (we’re using this one)

The Scientific Process (replicable)

1. Identify a problem
2. Clarify the problem
3. Determine what data would help solve the problem
4. Organize the data
5. Interpret the results

General Types of Educational Research

 Descriptive — survey, historical, content analysis, qualitative
 Associational — co-relational, causal-comparative
 Intervention — experimental, quasi-experimental, action research (sort of)

Methods Used

Primary and Secondary methods are used in the collection of data for the report.
Primary data includes the responses taken from the market survey, from the personal interaction
with the clients of the company and data about various funds from the sharekhan’s portal and
other various sites.

Secondary data includes the analysis taken from the various news articles and other various
websites from the internet. It also includes the advisor recommendations from the investment
advisors from sharekhan.

Primary Data used:

Market Survey was done with a sample size of 50 respondents at Connaught Place, New Delhi.

59
Research Design Used:

This research is based on descriptive research design. It shows the current sentiment of investors
in mutual fund segment. The survey was done to check the emerging trends in mutual fund
segment.

RESEARCH PROCESS IN THIS PROJECT/STUDY

 Research Type : Exploratory and Descriptive

 Data Collection :Primary Data and Secondary both
 Population : Investors (Individual)
 SAMPLE SIZE: 50
 REASEARCH AREA : New Delhi – New Friends colony
 RESEARCH TOOLS : Pie Chart& Bar Graphs
 TOOLS OF ANALYSIS : Percentage and Ratios

60
DATA ANALYSIS AND INTERPRETATION

61
Q.1 What kind of investment you prefer most?

preference

Mutual fund
Equity
Bank fd
Bank rd
Gold
Real estate

Interpretation:

1. Majority of the investors are inclined towards Mutual Funds and Equity
2. Gold and real estate form the middle range for investment preference
3. Bank RD and Bank FD are least preferable investment options

62
Q.2 Have you ever invested your money in Mutual Funds?

35

30

25

20

15

10

0
yes no

Interpretation:

1. 31 of the total sample surveyed had invested in any type of investment

2. Other 19 did not preferred to make any investment

63
Q.3 Are you aware that you can save taxes by investing in Mutual Funds?

30

25

20

15

10

0
yes no

Interpretation:

1. 28 of the people in the sample about tax saving mutual fund schemes
2. Other 22 either didn’t knew or didn’t invested at all

64
Q.4 Do you think investment in Mutual Funds has given better returns
compared to other investment alternatives?

40

35

30

25

20

15

10

0
yes no

Interpretation:

1. 36 of the sample believed that returns in mutual funds were more than those in equity
2. Other 14 invested in equity

65
Q.5 Would you be interested to know more about Mutual Fund investments?

35

30

25

20

15

10

0
yes no

Interpretation:

1. Majority of the people were interested in learning about investment instruments

2. College students were mostly open for learning about the investment alternatives

66
Q.6 Do you prefer high risk investments in hope for high returns?

35

30

25

20

15

10

0
yes no

Interpretation:

1. Most investors prefer to play safe rather than going for high returns
2. Risk appetite of investors is low

67
Q.7 What should be the average time period of your investment?

18

16

14

12

10

0
Less than 1 year 1-3 year 3-5 year more than 5 year

Interpretation:

1. General sentiment is long term investment

2. Investors are investing for long term targets

68
Q.8 Which type of Mutual Fund scheme would you prefer investing
in?
types of mutual fund scheme

Debt fund
Hybrid fund
Balanced fund
Large cap funds
Thenatic fund
Mid and small cap fund
Multi cap fund
Money market fund

Interpretation:

1. Investors usually prefer money market, large cap and debt funds.
2. New schemes have usually less investment

69
Q.9 Do you keep a specific investment objective before investing?

30

25

20

15

10

0
yes no

Interpretation:

1. Majority of the investors have a specific investment objective before investing

2. Others usually invest for the general purpose of creating wealth

70
Q.10 Do you do your own research before investing or prefer to
consult from an investment advisor?

40

35

30

25

20

15

10

0
own research professional advisor

Interpretation:

1. Most investors prefer to take professional advice before making any kind of investment
2. Investors generally prefer to collect information other reliable sources before investing

71
FINDINGS AND INFERENCES

72
1. People are inclined towards Equity and Mutual Funds related investment tools
2. College students are more open to learning about new investment opportunities
3. More women are investing money in financial markets
4. Equity Linked Saving Schemes(ELSS) offers good opportunity for safe investors and
those who are looking for saving tax.
5. People generally believe Mutual Funds are safer than Equity to park money.
6. People also think Equity for being risky also provides more returns to the investors.
7. Real Estate is the least trusted place for investment since the recent slowdown in the
realty sector
8. Bank RDs have become less popular since SIP plan came up in Mutual Funds.
9. Bank FDs and Gold are preferred by old age investors or as a second alternative to Equity
and Mutual Funds.
10.Equity and Mutual Funds have become popular to excessive campaigning by government
bodies asking people to invest in financial markets.
11.Most investors prefer to go safe for their investments
12.Preferably investors like to invest in Large Cap and MultiCap Funds due to the fact of
recognizing companies in which the money is currently invested.
13.Professional advice is taken by investors before investing in any type of mutual fund
14.Investors generally prefer to do objective based investments rather than general motive of
creating wealth
15.Investors generally prefer to for long term of more than 5 years to generate high returns.

73
LIMITATIONS

74
Though the present study aims to achieve the earlier-mentioned objectives in full earnest and
accuracy, it was hampered due to certain limitations. Some the limitations of this study may be
summarized as follows:

 There was time constraint as the time period of internship was only 2 months to analyse
all aspects of Mutual Funds.
 Certain data was not available for effective study.
 Confidential data of company was not provided for research.
 Mutual Funds data was not available directly from asset management companies which
increased dependency on other sources.
 Sharekhan’s contracts with Mutual Fund AMCs were not available which has made
report favouring some particular funds.
 Audited financial statements of the company were not available for proper study.
 Sample size was limited and there were geographical boundations which hampered data
collections for research.

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RECOMMENDATIONS AND CONCLUSIONS

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1. Investors should be educated about various investment tools which can help them
build wealth.

2. Facilitation of the channelization of idle money to financial markets.

3. Making people understand about fundamental and basic knowledge about financial
wealth

4. Aware people about tax saving schemes and schemes in a mutual fund.

5. Enlighten people about the high risk and high return strategy.

6. Make people understand about different investment alternatives.

7. Give information about changes happening in the mutual funds.

8. Meet the trends coming up in the markets with consumer needs.

9. Investors should understand the need of taking professional advice before taking any
investment decision

10. Investors preferably invest in schemes in which they are able to recognise majority
of the companies in which the fund has done investment

11. Objective based investing is done to meet some futures targets of the investors
12. Investments are usually done for a longer period of time which shows investors are
aware of long term benefits of investing

13. Investors do not prefer to go for high risk investment

14. Professional advice largely influences the way of investing for investors.

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APPENDIX

78
 Questionnaire

Name: Age:
Gender: Contact No.:
Occupation: Location:

Q.1 What kind of investment you prefer most?

a. Equity b. Mutual Funds c. Insurance d. Bank FD e. Bank RD
f. Gold g. Real Estate

Q.2 Have you ever invested your money in Mutual Funds?

a. Yes b. No

Q.3 Are you aware that you can save taxes by investing in Mutual Funds?
a. Yes b. No

Q.4 Do you think investment in Mutual Funds has given better returns
compared to other investment alternatives?
a. Yes b. No

Q.5 Would you be interested to know more about Mutual Fund investments?
a. Yes b. No

Q.6 Do you prefer high risk investments in hope for high returns?
a. Yes b. No

Q.7 What should be the average time period of your investment?

a. Less than 1 year b. 1-3 years c. 3-5 years d. More than 5 years

Q.8 Which type of Mutual Fund scheme would you prefer investing
in?
a. Debt Fund b. Hybrid Fund c. Balanced Fund d. Large Cap Fund
e. Thematic Fund f. Mid and Small Cap Fund g. MultiCap Fund
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h. Money Market Fund

Q.9 Do you keep a specific investment objective before investing?

a. Yes b. No

Q.10 Do you do your own research before investing or prefer to

consult from an investment advisor?
a. Own Research b. Investment Advisor

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REFRENCES

81
1. Ansari, MNA, (1993),”Mutual Funds in India-Emerging Trends”, The Chartered
Accountant, August 1993, pp 88-90, 93.
2. Dr. Bernadette D’ Silva 2012, “A study of factors influencing mutual fund investment in
India” , The International Journal’s Research journal of commerce and behavioural
science –ISSN:2251-1547, Vol.1.( March 2012)pp.24-26Gupta, L.C., (1994), ‘Mutual
Funds and Asset Preference, Society for Capital Market Research and Development’,
Delhi. p.123.
3. Gupta O.P. and Gupta Amitabh (2004), “Performance Evaluation of Select Indian
Mutual Fund Schemes: An Empirical study”, The ICFAI Journal of Applied Finance, Vol
No.-4 pp.81-98.
4. Gupta, Amitabh (2001), Mutual Funds in India, Anmol Publications Pvt. Ltd. New Delhi.
5. J.R. Kale and V. Pachapagesan, “India mutual fund industry: Opportunities and
Challenges” Peer Reviewed journal IIMB Management Review (2012) 24, 245e258.
6. Jambodekar M. V., "Marketing Strategies of Mutual Funds – Current Practices and
Future Directions", Working Paper, UTI – IIMB Centre for Capital Markets Education
and Research, Bangalore, 1996.
7. Vijay C, “Mutual Funds an Overview”, Journal On Banking And Finance, Vol.XVII(4),
(April 2004), pp.24 - 27.

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