Summer Training Report

On

“NEED FOR FINANICAL ADVISORS FOR MUTUAL FUND

INVESTORS”
Submitted By:
DEEP GAUR
B.B.A. 5TH Sem.
Roll No.1705465071016
Sub. Code.505
Under the Supervision of
Mr.UMESH GUPTA
(CHIEF MANAGER)

ALIGARH COLLEGE OF ENGINEERING AND TECHNOLOGY

ALIGARH,
AFFILATED BY B.R. AMBEDKAR, UNIVERSITY
 Declaration

I, Deep Gaur students of BBA Final year from ALIGARH COLLEGE OF

ENGINEERING AND TECHNOLOGY, ALIGARH hereby declare that the

Internship report entitled “A STUDY OF DEMAT ACCOUNT AND SHARE

MARKET WITH SPECIAL REFERENCE KARVY STOCK BROKING is

an original work. It has not been submitted to any other institute for the award of

any other degree or diploma. I also declare that the work is authentic and based

on Primary data.

( DEEP GAUR )
 Acknowledgement

The successful accomplishment of this project work is the outcome of the

contribution of a number of people, especially those who have given the time and
effort to share their thoughts and suggestions to improve this report. At the very
beginning I would like to express my deepest gratitude to Almighty for giving
me the strength and the composure to finish the task within the scheduled time.

I wish to extend my sincere thanks to all my teachers, who have bestowed me

with theIn particular I wish to extend my earnest and heartfelt thanks to Mr. D.K.
Singh (HOD) ACET, Aligarh, whose timely advice, sermonizing words of
wisdom and motivation inspired me into finishing this assignment successfully.

I would like to thank my my supervisor, Mr. Umesh Gupta and Mr Atul Gupta
(Aligarh), Karvy Stock Broking, Finance, KARVY, for rendering his valuable
time and providing me with various information which was very much needed
for the successful completion of this report.

I am also thankful to my fellow colleagues of KARVY STOCK BROKING CO.

who gave me their valuable time and enough information to successfully make
this report. I also want to thank my University for their encouragement and
support while making this report.

DEEP GAUR
 PREFACE

The growth of information technology has affected almost all sectors of life.
Internet has enabled us to get every information at our doorstep. When Internet
has affected all sectors he could “stock markets” the most important player of the
economy, has remained far behind? Like all other sectors Internet has set its feet
in the stock markets also.

Need for Financial Advisors for Mutual Fund Investors manage a lot of
transactions per day. Users can contact a client, via the Internet, and view or
revise investments, query the latest stock information, and purchase or trade
shares. The client software can ask for trade information from many sources.
Therefore, the client must stay to the distributed computing model to gain data
from external servers. Web services a technology that is used to realize these
tasks.

This project presents a simulation of the how trading companies can interface
with web services, and tap into external sources to get information. A fictitious
web-based trade system, Portfolio Manager, is introduced to exhibit how a client
and server can communicate. Finally findings and conclusion chapter includes a
summary of the results found in the analysis portion.
 TABLE OF CONTENTS

Certificate

Declaration

Acknowledgement

Preface

CHAPTER-1

 ORGANIZATION PROFILE 1-12

CHAPTER-2

 INTRODUCTION TO THE TOPIC 13-39

CHAPTER-3 40-43

 RESEARCH METHODOLOGY 41

 OBJECTIVE OF THE STUDY 42

 SCOPE OF THE STUDY 43

CHAPTER-4

 DATA ANALYSIS AND INTERPRETATION 44-54

CHAPTER-5 55-60

 FINDING 56

 SUGGESTIONS 57-58

 CONCLUSION 59

 LIMITATIONS OF THE STUDY 60

BIBLIOGRAPHY 61

Annexure (Questionnaire) 62-64

CHAPTER-1

ORGANIZATION PROFILE
 1. Organizational Profile

Karvy is a financial services company headquartered in Hyderabad, India. Headquartered in

Hyderabad, it offers a range of financial services including stock broking, distribution of
financial products, depository participant, commodities broking, wealth management, and more.
It is ranked among the top five in the country across its business segments. Other than India, it
also has a presence in Bahrain, Dubai, Malaysia, Philippines and the United States.

Karvy Group, an indomitable player in the financial realm since 3 decades with rich
experience provides a wide range of services. Well known for its integrity, quality service and
customer centric approach, Karvy has created a niche for itself. The Group offers stock broking,
Registrar and Transfer services, Data Analytics, Data management among others. We are proud
to be associated with you in each and every sphere of your life by way of our gamut of services.

Karvy Stock Broking, the broking arm of Karvy Group offers tangible and customized solutions
to corporate, institutions and individual investors. With cutting edge technology and
professional management, we always thrive to be the best in the industry. Our comprehensive
trading account helps clients approach various investment avenues in an integrated fashion
providing them the facility to transact with ease.

Karvy Data Management Services

 1.1 Company Overview

T he K a r v y g r o u p w a s fo r m e d i n 1 9 8 3 a t H yd e r a b a d , I nd i a . Ka r v y
r a nk s a m o n g t he top player in almost all t he fields i
t operates. Karvy Stock Brokers Limited, member of Nat
i o n a l S t o c k Exchange of India and the Bombay Stock Exchange, ranks among the top
5stock brokers in India. Wit h over 6,00,000 active accounts, it ranks among the top 5
Depositary Participant in India, registered with NSDL and CDSL.K a r v y C o mt r a d e ,
M e m b e r o f N C D E X a nd M C X r a nk s a mo n g t h e t o p 3 commodity brokers in the
country. Karvy Insurance Brokers is registered asa B r o k e r w i t h I R D A a n d r a n k s
a m o n g t h e t o p 5 i n s u r a n c e a g e n t i n t h e country. Registered wit h AMFI as
a corporate Agent, Karvy
isalsoamongt h e t o p M u t u a l F u n d m o b i l i z e r w i t h o v e r R s . 5
, 0 0 0 c r o r e s u n d e r m a na g e m e nt . Karvy R e a lt y S er vic e s, w hic h
s t a r t e d i n 2 0 0 6 , ha s q u i c k l ye s t a b l i s h e d it s e l f a s a br o k e r w ho a d d s va l u e ,
in t he r e a lt y sector.
Kar vyG l o b a l o f f e r s n i c h e o f f s h o r i n g s e r v i c e s t
o c l i e n t s i n t h e U S . Karvy has 575 offices over 375 locations across India
andoverseas at
Dubaia n d N e w Y o r k . O v e r 9 , 0 0 0 h i g h l y q u a l i f i e d p e o p l e
staff Karvy.

KARVY
 1.2 Evaluation of KARVY

It is well said that success is a journey not a destination and we can see it being proved by
Karvy. Under this section we will see that how this “Karvy and company” of 1980 became
“Karvy” of 2008. Karvy blossomed with the setting up of its first branch at Mumbai during
the year 1987-88. The turning point came in the year 1989 when it decided to enter into one
of the not only emerging rather potential field too i.e.; stock broking. It added the feather of
stock broking into its cap. At the same time it became the member of Hyderabad Stock
Exchange through associate firm Karvy securities ltd and then Karvy never looked back it
went on adding services one after another, it entered into retail stock broking in the year
1990. Karvy investor service centers were set up in the year 1992. Karvy which already
enjoyed a wide network through its investor service centers, entered into financial product
distribution services in the year 1993. One year more and Karvy was now dealing into
mutual fund services too in the year 1994 but it didn’t stopped there, it stepped into
corporate finance and investment banking in the year 1995.

Karvy’s strategy has always been being the first entrant in the market. Karvy again hit the
limelight by becoming the first registrar in the countr y to be awarded ISO 9002 in the year
1997. Then it stepped into the other most happening sector i.e.; IT enabled services by
establishing its own BPO units and at a gap of just 1 year it took the path of e-Business
through its website www.karvy.com . Then it entered into insurance services in the year
2001 with the launch of its retail arm “Karvy- the Finapolis: your personal finance advisor”.
Then in the year 2002 it launched its PCG (Private Client Group) which looks after its High
Networth Individuals .and maintain their portfolio and provides them with other financial
services. In the year 2003, it commenced secondary debt and WDM trading.

It was a decade which saw many Indian companies going global so why the largest
financial service provider of India should lag behind? Hence, Karvy launched “Karvy
global services limited” after entering into a joint venture with Computershare, Australia in
the year 2004.the year 2004 also saw Karvy entering into commodities marketing through
Karvy Comtrade.
Year 2005 saw Karvy establishing a separate branch for its insurance services under the
head “Karvy insurance broking ltd” and in the same year, after being impressed with the
rapid growth of Karvy stock broking limited, PCG group of Hong Kong acquired 25% stake
at KSBL.

In the year 2006, Karvy entered into one of the hottest sector of present time i.e. real estate
through Karvy realty& services (India) ltd. hence, we can see now Karvy being established
as the largest financial service provider of the country.

1.3 Success sutras of Karvy:

The success story of Karvy is driven by 8 success sutras adopted by it namely trust,
integrity, dedication, commitment, enterprise, hard work and team play, learning and
innovation, empathy and humility. These are the values that bind success with Karvy.

Mission statement:

“Our mission is to be a leading and preferred service provider to our customers, and we aim
to achieve this leadership position by building an innovative, enterprising , and technology
driven organization which will set the highest standards of service and business ethics .”

Vision of Karvy:

To achieve & sustain market leadership, Karvy shall aim for complete customer
satisfaction, by combining its human and technological resources, to provide world class
quality services. In the process Karvy shall strive to meet and exceed customer's satisfaction
and set industry standards.
1.4 The Success Ladder:

Now Karvy group consists of 8 highly renowned entities which are as follow:

1. :

The first securities registry to receive ISO 9002 certification in India. Registered with SEBI
as Category I Registrar, is Number 1 Registrar in the Country. The award of being ‘Most
Admired’ Registrar is one among many of the acknowledgements we received for our
customer friendly and competent services.

2. :

Karvy stock broking ltd. Consists of five units namely stock broking servics, depository
participant, advisory services, distribution of financial products, advisory services and
private client goups.
 3.

It is registered with SEBI as a category 1 merchant banker. Its clientele includesinclude

leading corporate, State Governments, foreign institutional investors, public and private
sector companies and banks, in Indian and global markets.

4. :

Karvy insurance broking ltd is also a part of karvy stock broking ltd. At Karvy Insurance
Broking Limited both life and non-life insurance products are provided to retail individuals,
high net -worth clients and corporates.

5.

The company provides investment, advisory and brokerage services in Indian Commodities
Markets. And most importantly, it offer a wide reach through our branch network of over
225 branches located across 180 cities.

6.

Karvy Global is a leading business and knowledge process outsourcing Services Company
offering creative business solutions to clients globally. It operates in banking and financial
services, inurance, healthcare and pharmaceuticals, media , telecom and technology. It has
its sales and business development office in New York, USA and the offshore global
delivery center in Hyderabad, India.
 7.

Karvy Realty (India) Limited is engaged in the business of real estate and property services
offering:

 Buying/ selling/ renting of properties

 Identifying valuable investments opportunities in the real estate sector
 Facilitating financial support for real estate and investments in properties
 Real estate portfolio advisory services

8. :

It is a joint venture between Computershare, Australia and Karvy Consultants Limited,

India in the registry management services industry.

1.5 Organization Structure of KARVY:

Talking about the organization structure of karvy, we have the board of directors as the
supreme governing body, the chairman being Mr. C. Parthasarthy, Mr. M.Yugandhar
as the managing director, Mr. M.S.Ramakrishna as directors.The board of diretors head
the karvy group, karvy computershares limited, karvy investors services ltd., karvy comtrade,
karvy stock broking ltd., and karvy global services ltd. Karvy group being the flagship
company looks after the functional departments such as corporate affairs, group human
resources, finance & accounting, training & development, technology services and
corporate quality.
The letters K, A, R, V and Y stands for 5 directors names

K- Mr.: V. Kutumba Rao

A- Mr.: K.Ajay Kumar.

R- Mr.: M.S. Ramakrishna.

V- Mr.: Vikram Singh

Y- Mr.: M. Yugandhar.

KARVY, is a premier integrated financial services provider, and ranked among the top five
in the country in all its business segments, services over 16 million individual investors in
various capacities, and provides investor services to over 300 corporate, comprising the who
is who of Corporate India. KARVY
covers the entire spectrum of financial services such as Stock broking, Depository
Participants, Distribution of financial products - mutual funds, bonds, fixed deposit,
equities, Insurance Broking, Commodities Broking, Personal Finance Advisory Services,
Merchant Banking & Corporate Finance, placement of equity, IPOs, among others.

Karvy has a professional management team and ranks among the best in technology,
operations and research of various industrial segments. Karvy computershare private limited
facilitates mutual fund services, share registry and issue registry whereas merchant banking
is looked after by karvy investor services ltd. Karvy stock broking ltd heads its another
branch too ie. Karvy insurance broking ltd. The services offered by KSBL are: stock
broking, depository, research, distribution, personal client group and institutional desk. And
finally the BPO services are managed by karvy global services ltd. Summarizing it in a
diagram, it can be presented as:
Source: Organization structure of karvy
Achievements:

 Among the top 5 stock brokers in India (4% of NSE volumes)

 India's No. 1 Registrar & Securities Transfer Agents

 Among the top 3 Depository Participants

 Largest Network of Branches & Business Associates

 ISO 9002 certified operations by DNV among top 10 Investment bankers

 Largest Distributor of Financial Products

 Adjudged as one of the top 50 IT uses in India by MIS Asia

 Full Fledged IT driven operations

1.6 QUALITY POLICY & QUA LITY OBJECTIVES

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial
services. In the process, Karvy will strive to exceed Customer's expectations.

As per the Quality Policy, Karvy will:

 Build in-house processes that will ensure transparent and harmonious relationships
with its clients and investors to provide high quality services.
 Establish a partner relationship with its investor service agents and vendors that will
help in keeping up its commitments to the customers.

 Provide high quality of work life for all its employees and equip them with adequate
knowledge & skills so as to respond to customer's needs.

 Continue to uphold the values of honesty & integrity and strive to establis h
unparalleled standards in business ethics.

 Use state-of-the art information technology in developing new and innovative

financial products and services to meet the changing needs of investors and clients.

 Strive to be a reliable source of value-added financial products and services and

constantly guide the individuals and institutions in making a judicious choice of
same.

 Strive to keep all stake-holders (shareholders, clients, investors, employees,

suppliers and regulatory authorities) proud and satisfied.

Graphic Era Hill University (GEHU) is ISO 9001: 2008 QMS Certified for imparting Education
along with Research facilities in School of Engineering and Technology, School of Management
Studies, School of Computer Application, School of Business Administration, School of Allied
Sciences and School of Humanities.

In line with the quality objectives and policy we, at GEHU, have been developing a rigorous
system of quality assurance for higher education, with a view to continuously assess ways to
protect and improve the quality of courses, curriculum, and research.
QUALITY POLICIES & QUALITY OBJECTIVES
CHAPTER-2

Introduction to the Topic

INTRODUCTION

A stock broker is someone who buys and sells stocks on the behalf of others for a
predetermined commission. The stock broker basically works as an agent coordinating the
activities of the buyers and sellers on the stock exchange. Along with the trading of stocks,
many stock brokers indulge in giving advice to the clients as to which stocks, mutual funds,
debentures etc. to buy or sell.

ORIGIN

The history of stock brokers can be traced back to the origins of the first stock exchange in
1602 at Amsterdam. Even before that brokers are said to have existed in France dealing with
government securities. The Amsterdam Stock Exchange was involved in buying and selling
of shares for the Dutch East India Company.

However, the first real stock exchange came up in Philadelphia in the United States during
the late 18th century. Later it was the New York stock exchange which saw a rise in its
popularity. Wall Street, as it was called, became the hub of brokerage activities. Earlier
stock brokers were largely unorganized, but later most of them joined hands to form instit
utes and organizations.

Till the 1980's stock broking services were used only by the wealthy class who could afford
them. Later with the advent of the Internet, stock broking became very easy. Thus, the price
tag on stock brokers lowered considerably and their services became available even to the
common man. Stock broking firms have also been allowed to be market makers as long as
the appropriate Chinese walls are put in place. With the advent of automated stock broking
systems on the Internet the client often has no personal contact with his/her stock broking
firm. The stockbroker's system performs all the stock broking functions: it obtains the best
price from the market and executes and settles the trade. Today, most of the once well-known
corporate brand names including mid-sized firms such as Smith Barney have been
swallowed up by global financial conglomerates. Discount brokers (such as E-Trade,
Scottrade, and Ameritrade) have taken a large share of the business by offering highly
discounted commissions, but the companies do not offer investment advice in return all they
do is execute orders.
Growth, Development & Present status of the industry:

Stage 1 Beginning:

During the 11th century, the French began regulating and trading agricultural debts on
behalf of the banking community, creating the first brokerage system. In the 1300s, houses
began to be set up in major cities like Flanders and Amsterdam in which commodity traders
would hold meetings. Soon, Venetian brokers began to trade in government securities,
expanding the importance of the firms. In 1602, the Dutch East India Company became the
first publicly traded company in which shareholders could own a portion of the business.
The stocks improved the size of companies and became the standard bearer for the modern
financial system.

Stage 2 Significance

The earliest brokerage firms were established in London coffee houses, enabling
individuals to purchase stocks from a variety of organizations. They formally founded the
London Stock Exchange in 1801 and created regulations and memberships. The system was
copied by brokerage firms across the world, most notably on Chestnut Street in
Philadelphia, which was the center of American finance during the first forty years of the
new United States. Soon, the US exchange was moved to New York City and for more than
one hundred and fifty years Wall Street has been synonymous with the stock brokerage
business. Various firms like Morgan Stanley and Merrill Lynch were created to assist in the
brokering of stocks and securities. The firms limited themselves to researching and trading
stocks for investment groups and individuals.

Stage 3: Considerations

During the 1900s, stock brokerage firms began to move in a direction of market makers.
They adopted the policy of quoting both the buying and selling price of a security. This
allows a firm to make a profit from establishing the immediate sale and purchase price to an
investor. The conflict with brokerage firms setting prices creates the concern that insider
trading can result from the sharing of information.
Regulators have enforced a system called Chinese Walls to prevent communication
between different departments within the brokerage company. Since the 1980s stock-
broking firms have also been allowed to be market makers as long as the appropriate
Chinese walls are put in place. This has resulted in increased profits and greater
interconnection within the financial industry.

In the 1980s and 1990s, deposit growth slowed as more people invested in equity shares and
mutual funds. Rather than allowing depositors to withdraw their funds and invest them
elsewhere, however, many banks (through the non- bank affiliates of their bank holding
companies) began aggressively offering brokerage services. In this way, banks were able to
generate non-interest fee income to help offset some of the increased interest costs of
relying on borrowed funds o finance their growth. Until the 1980s, commercial banks didn’t
emphasize their brokerage powers or solicit business, except to serve a few large accounts
in their trust departments. Beginning in the 1980s, commercial banks began to offer trading
services to retail customers. Some banks started their own brokerage operations from
scratch and others entered onto joint -venture arrangements, whereby the bank purchases
broker services from an established securies firm and markets the services under the name
of the bank. To date, more than 2000 banks are providing active brokerage services to their
customers.

Stage 4: Effects

The creation of high valued brokerage firms like Goldman Sachs and Bear Sterns created a
system of consolidation. Working with hundreds of billions of dollars, the larger firms
began to merge and take over smaller firms in the last half of the 20th century. Firms like
Smith Barney were acquired by Citigroup and other investment banks, creating massive
financial institutions that valued, held, sold, insured and invested in securities. This
conglomeration of the financial sector created an environment of volatility that caused a
chain reaction when other firms like Bear Sterns and Lehman Brothers filed for bankruptcy.
Trillions of dollars of assets were tied together in different companies and resulted in a large
economic collapse in late 2008.
Stage 5: Features

A large share of the brokerage firms has moved to an online format. Smaller brokers such
as E*Trade, TD Ameritrade and Charles Schwab have taken control of most individual
investors accounts. With the advent of automated stock-broking systems on the Internet, the
client often has no personal contact with his/her stock-broking firm. The stockbroker's
system performs all the stock- broking functions: it obtains the best price from the market
and executes and settles the trade. Settlement (of securities) is the process whereby
securities or interests in securities are delivered, usually against payment, to fulfill
contractual obligations, such as those arising under securities trades. The
added convenience and personal attention paid to the small investor has resulted in a
large influx of activity. In addition the fact that the online resources offer up to the minute
pricing and immediate trades makes their format appealing to the modern user as SEC
deregulated the brokerage industry and made negotiated commissions available to
individual investors around May 1975, a new type if brokerage firms has emerged – the so
called discount broker. They offer fewer brokerage services and pass the savings on to the
investors. Specially, most discount brokerage firms do not have a highly paid research staff
producing research reports or account executives soliciting business based on the firm’s
current recommendations to buy and sell. Instead, they hire telephone clerks to take
customers’ orders. These clerks do not sell, do not offer any investment advice, and work
for modest salaries. These and other savings are passed along to the investor in the form of
low commissions. Discount brokers, like TD Ameritrade, PTI Securities & Futures and E -
Trade, also provide advanced trading systems, which is why they appeal most to frequent and
active traders. Beginner investors may turn away from discounted brokers because of the
advanced systems and terms, and instead go to traditional brokers.
Leading competitors in the industry:

 Reliance Money
 Kotak Securities
 ICICIDirect
 5Paisa.com
 Advani Share Brokers
 Gandhi Securities
 Invest smart India
 Moneypore
 Stock Holding Corporation of India
 StockMarkit.com
 ICICIDirect

McKinsey 7-S framework:

According to waterman organizational change is not simply a matter of structure, although

structure is a significant variable in the management of change .Again it is not a simple
relationship between strategy and structure, although strategy is a critical aspect. In their
view effective organizational change may be understood to be a complex relationship
between strategy, structure, systems, style, skills, staff and subordinate goals.
Source: McKinsey 7-S framework

 The framework suggests that there is a multiplicity of factors that influence the
organizations ability to change and its proper mode of change. Because of in
connectedness of the variables it would be difficult to make significant progress in one
area without making progress in the others as well.
 Super-ordinate goals:
 In 7s framework there is one variable termed as “super ordinate goals” refer to a set
of values and aspirations that goes beyond the conventional format statement of
corporate objectives, super ordinate goals are the fundamental ideas around which
a business is built. They are its main values. They are the broad nations of future
direction.
 Super ordinate goals are:
 To open up franchisee (branches) all over India.
 To strive for excellence in management and other long range activities to ensure
leadership.
 To reach the greatest heights in their fields.
 Rendering activity more transparent and providing better services which can inspire
investor’s confidence in mutual funds.

Strategy:

The strategy in 7s framework includes purposes, mission, objectives, goals and major action
plans and policies of the company. A company of Karvy’s stature cannot afford to work
without objectives. An overall group objective is already set and all the employees are
driven towards Karvy’s believes that ‘no individual is big as the organizational itself.’
Competition is the key to survival and for giving diversification for the given product as such
competition is always good. Karvy updates itself to the surroundings competition and bring
out changes are services and related products to be in competition. In the distribution
business KARVY enjoys 40% market, which is healthy from the industry standard. Survival
of the company as well as the growth of the company over the past 22years, has been
effectively overcoming competition. After diversifying into various services providing
activities it has become KARVY’S prerogative to be leader in the business.
KARVY has a network of 150 branches across the country and over 2500 employees.
Today KARVY is providing services to over 100000 customers all over the country with a
leadership position in over all distribution business.

The following are the some of the strategies adopted by the organization:

PRICE: KARVY caters to marketing service products and there is no pricing involved. I
depository participant and registry department KARVY has maintained a very competitive
pricing structure in the line with contemporary markets.

PRODUCT DIFFERENTIATION: KARVY caters to various financial products like DP,

Registry, Stock Broking, Insurance and Mutual funds products. Each product is headed by a
skilled manager and also made as a separate profit center.

MARKETINC STRATERCY: Being sales oriented organization regular sales promotion

events are conducted with various principles agencies and time to time advertising releases
are done depending upon the requirements. KARVY relies mostly on word of mouth
publicity than advertising which is worked wonders from them.

Organization structure:

 In Karvy, for the purpose of smooth flow of its function it is divided into four sections:
 Stock broking services

 Depository participation section

 Tin section

 Mutual fund section

 Branch Manager

Stock broking Depository Tax Information Mutual

participation Network Funds

Dealing Back Office Front Office Marketing Executive

Source: Organization structure at KSBL in Davangere

It’s all about mutual funds

Mutual funds: A mutual fund is a professionally-managed firm of collective investments that

pools money from many investors and invests it in stocks, bonds, short-term money market
instruments, and/or other securities. In other

words we can say that A Mutual Fund is a trust registered with the Securities and Exchange
Board of India (SEBI), which pools up the money from individual / corporate investors and
invests the same on behalf of the investors /unit holders, in equity shares, Government
securities, Bonds, Call money markets etc., and distributes the profits.

The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly
calculated daily based on the total value of the fund divided by the number of shares
currently issued and outstanding. The value of all the securities in the portfolio in calculated
daily. From this, all expenses are deducted and the resultant value divided by the number of
units in the fund is the fund’s NAV.

NAV = Total value of the fund……………….

No. of shares currently issued and outstanding

Advantages of mutual funds

 Professional management and research to select quality securities.

 Spreading risk over a larger quantity of stock whereas the investor has limited to buy
only a hand full of stocks. The investor is not putting all his eggs in one basket.
 Ability to add funds at set amounts and smaller quantities such as $100 per month.
 Ability to take advantage of the stock market which has generally outperformed
other investment in the long run.
 Fund manager are able to buy securities in large quantities thus reducing brokerage
fees.

Disadvantages of mutual funds

 The investor must rely on the integrity of the professional fund manager.
 Fund management fees may be unreasonable for the services rendered.
 The fund manager may not pass transaction savings to the investor.
 The fund manager is not liable for poor judgment when the investor's fund loses
value.
 There may be too many transactions in the fund resulting in higher fee/cost to the
investor - This is sometimes call "Churn and Earn".
 Prospectus and Annual report are hard to understand.
 Investor may feel a loss of control of his investment dollars.
 There may be restrictions on when and how an investor sells/redeems his mutual
fund shares.
History of the Indian mutual fund industry:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at
the initiative of the Government of India and Reserve Bank. The history of mutual funds in
India can be broadly divided into four distinct phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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)

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. As at the end of January 2003, there were 33 mutual
funds with total assets of Rs. 1, 21,805 crores.

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 second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations consolidation and
growth. As at the end of September, 2004, there were 29 funds, which manage assets of
Rs.153108 crores under 421 schemes.

Types of mutual funds

Most funds have a particular strategy they focus on when investing. For instance, some
invest only in Blue Chip companies that are more established and are relatively low risk. On
the other hand, some focus on high-risk start up companies that have the potential for
double and triple digit growth. Finding a mutual fund that fits your investment criteria and
style is important.
Categories of mutual funds:

Source: Types of mutual funds

Mutual funds can be classified as follows:

 Based on their structure:

 Open-ended funds: Investors can buy and sell the units from the fund, at any point
of time.
 Close-ended funds: These funds raise money from investors only once. Therefore,
after the offer period, fresh investments cannot be made into the fund. If the fund is
listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley
Growth Fund). Recently, most of the New Fund Offers of close-ended funds
provided liquidity window on a periodic basis such as monthly or weekly.
Redemption of units can be made during specified intervals. Therefore, such funds
have relatively low liquidity.
 Based on their investment objective:

 Equity funds: These funds invest in equities and equity related instruments. With
fluctuating share prices, such funds show volatile performance, even losses.
However, short term fluctuations in the market, generally smoothens out in the long
term, thereby offering higher returns at relatively lower volatility. At the same time,
such funds can yield great capital appreciation as, historically, equities have
outperformed all asset classes in the long term. Hence, investment in equity funds
should be considered for a period of at least 3-5 years. It can be further classified as:
 Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their portfolio mirrors the benchmark index both in terms of composition
and individual stock weight age.
 Equity diversified funds- 100% of the capital is invested in equities spreading
across different sectors and stocks.
 Dividend yield funds- it is similar to the equity diversified funds except that they
invest in companies offering high dividend yields.
 Thematic funds- Invest 100% of the assets in sectors which are related through
some theme. e.g. -An infrastructure fund invests in power, construction, cements
sectors etc.
 Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector
fund will invest in banking stocks.
 ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

 Balanced fund: Their investment portfolio includes both debt and equity. As a result,
on the risk-return ladder, they fall between equity and debt funds. Balanced funds
are the ideal mutual funds vehicle for investors who prefer spreading their risk
across various instruments. Following are balanced funds classes:
 Debt-oriented funds -Investment below 65% in equities.
 Equity-oriented funds -Invest at least 65% in equities, remaining in debt.
  Debt fund: They invest only in debt instruments, and are a good option for investors
averse to idea of taking risk associated with equities. Therefore, they invest
exclusively in fixed-income instruments like bonds, debentures, Government of
India securities; and money market instruments such as certificates of deposit (CD),
commercial paper (CP) and call money. Put your money into any of these debt funds
depending on your investment horizon and needs.
 Liquid funds- These funds invest 100% in money market instruments, a large portion
being invested in call money market.
 Gilt funds ST- They invest 100% of their portfolio in government securities of and
T-bills.
 Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
 Arbitrage fund- They generate income through arbitrage opportunities due to miss-
pricing between cash market and derivatives market. Funds are allocated to equities,
derivatives and money markets. Higher proportion (around 75%) is put in money
markets, in the absence of arbitrage opportunities.
 Gilt funds LT- They invest 100% of their portfolio in long-term government
securities.
 Income funds LT- Typically such funds invest a major portion of the portfolio in
long-term debt papers.
 MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure
of 10%-30% to equities.
 FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of
the fund.

Investment strategies:

1. Systematic Investment Plan: under this a fixed sum is invested each month on a
fixed date of a month. Payment is made through post dated cheques or direct debit
facilities. The investor gets fewer units when the NAV is high and more units when
the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)
2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and
give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of
the same mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund
then he can withdraw a fixed amount each month.

4. Risk vIs. return:

5. Working of a Mutual Fumd:

The entire mutual fund industry operates in a very organized way. The investors, known as
unit holders, handover their savings to the AMCs under various schemes. The objective of
the investment should match with the objective of the fund to best suit the investors’ needs.
The AMCs further invest the funds into various securities according to the investment
objective. The return generated from the investments is passed on to the investors or
reinvested as mentioned in the offer document.

Regulatory Authorities :

To protect the interest of the investors, SEBI formulates policies and regulates the mutual
funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time
to time. SEBI approved Asset Management Company (AMC) manages the funds by
making investments in various types of securities. Custodian, registered with SEBI, holds
the securities of various schemes of the fund in its custody. According to SEBI Regulations,
two thirds of the directors of Trustee Company or board of trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual
funds that the mutual funds function within the strict regulatory framework. Its objective is
to increase public awareness of the mutual fund industry. AMFI also is engaged in
upgrading professi onal standards and in promoting best industry practices in diverse areas
such as valuation, disclosure, transparency etc.

Documents required (PAN mandatory):

Proof of identity:

1.Photo PAN Card.

2.In case of non-photo PAN card in addition to copy of PAN card any one of the following:
driving license/passport copy/ voter id/ bank photo pass book.

3.Proof of address (any of the following): latest telephone bill, latest electricity bill,
Passport, latest bank passbook/bank account statement, latest Demat account statement,
voter id, driving license, ration card, rent agreement.
Offer document:

An offer document is issued when the AMCs make New Fund Offer (NFO). It’s advisable to
every investor to ask for the offer document and read it before investing. An offer
document consists of the following:

 Standard Offer Document for Mutual Funds (SEBI Format)

 Summary Information
 Glossary of Defined Terms
 Risk Disclosures
 Legal and Regulatory Compliance
 Expenses
 Condensed Financial Information of Schemes
 Constitution of the Mutual Fund
 Investment Objectives and Policies
 Management of the Fund
 Offer Related Information.

Key Information Memorandum:

 A key information memorandum, popularly known as KIM, is attached along with

the mutual fund form. And thus every investor gets to read it.
 Its contents are:
 Name of the fund.
 Investment objective
 Asset allocation pattern of the scheme.
 Risk profile of the scheme
 Plans & options
 Minimum application amount/ no. of units
 Benchmark index
 Dividend policy
Distribution channels:

Mutual funds posses a very strong distribution channel so that the ultimate customers doesn’t
face any difficulty in the final procurement. The va rious parties involved in distribution of
mutual funds are:

Direct marketing by the AMCs: the forms could be obtained from the AMCs directly. The
investors can approach to the AMCs for the forms. some of the top AMCs of India are;
Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, Sundaram, ICICI,
Mira Assets, Canara Robeco, Lotus India, LIC, UTI etc. whereas foreign AMCs include:
Standard Chartered, Franklin Templeton, Fidelity, JP Morgan, HSBC, DSP Merrill Lynch,
etc.

Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/sub-broker
to popularize their funds. AMCs can enjoy the advantage of large network of these brokers
and sub brokers.eg: KARVY being the top financial intermediary of India has the greatest
network. S o the AMCs dealing through KARVY has access to most of the investors.

Individual agents, Banks, NBFC: investors can procure the funds through individual agents,
independent brokers, banks and several non - banking financial corporations too, whichever
he finds convenient for him.

How do investors choose between funds?

When the market is flooded with mutual funds, it’s a very tough job for the investors to
choose the best fund for them. Whenever an investor thinks of investing in mutual funds, he
must look at the investment objective of the fund. Then the investors sort out the funds
whose investment objective matches with that of the investor’s. Now the tough task for
investors start, they may carry on the further process themselves or can go for advisors like
KARVY. Of course the investors can save their money by going the direct route i.e.
through the AMCs directly but it will only save 1-2.25% (entry load) but could cost the
investors in terms of returns if the investor is not an expert. So it is always advisable to go
for MF advisors. The mf advisors’ thoughts go beyond just investment objectives and rate of
return. Some of the basic tools which an investor may ignore but an mf advisor will always
look for are as follow:
Rupee cost averaging:

The investors going for Systematic Investment Plans (SIP) and Systematic Transfer Plans
(STP) may enjoy the benefits of RCA (Rupee Cost Averaging). Rupee cost averaging
allows an investor to bring down the average cost of buying a scheme by making a fixed
investment periodically, like Rs 5,000 a month and nowadays even as low as Rs. 500 or Rs.
100. In this case, the investor is always at a profit, even if the market falls. In case if the
NAV of fund falls, the investors can get more number of units and vice-versa. This results
in the average cost per unit for the investor being lower than the average price per unit over
time.

The investor needs to decide on the investment amount and the frequency. More frequent the
investment interval, greater the chances of benefiting from lower prices. Investors can also
benefit by increasing the SIP amount during market downturns, which will result in
reducing the average cost and enhancing returns. Whereas STP allows investors who have
lump sums to park the funds in a low- risk fund like liquid funds and make periodic
transfers to another fund to take advantage of rupee cost averaging.

Rebalancing:

Rebalancing involves booking profit in the fund class that has gone up and investing in the
asset class that is down. Trigger and switching are tools that can be used to rebalance a
portfolio. Trigger facilities allow automatic redemption or switch if a specified event
occurs. The trigger could be the value of the investment, the net asset value of the scheme,
level of capital appreciation, level of the market indices or even a date. The funds redeemed
can be switched to other specified schemes within the same fund house. Some fund houses
allow such switches without charging an entry load.

To use the trigger and switch facility, the investor needs to specify the event, the amount or
the number of units to be redeemed and the scheme into which the switch has to be made.
This ensures that the investor books some profits and maintains the asset allocation in the
port folio.
Diversification:

Diversification involves investing the amount into different options. In case of mutual funds,
the investor may enjoy it afterwards also through dividend transfer option. Under this, the
dividend is reinvested not into the same scheme but into another scheme of the investor's
choice.

For example, the dividends from debt funds may be transferred to equity schemes. This
gives the investor a small exposure to a new asset class without risk to the principal
amount. Such transfers may be done with or without entry loads, depending on the MF's
policy.

Tax efficiency:

Tax factor acts as the “x-factor” for mutual funds. Tax efficiency affects the final decision of
any investor before investing. The investors gain through either dividends or capital
appreciation but if they haven’t considered the tax factor then they may end loosing. Debt
funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and education
class) on dividends paid out. Investors who need a regular stream of income have to choose
between the dividend option and a systematic withdrawal plan that allows them to redeem
units periodically. SWP implies capital gains for the investor. If it is short -term, then the
SWP is suitable only for investors in the 10-per-cent-tax bracket. Investors in higher tax
brackets will end up paying a higher rate as short-term capital gains and should choose the
dividend option.

If the capital gain is long-term (where the investment has been held for more than one year),
the growth option is more tax efficient for all investors. This is because investors can
redeem units using the SWP where they will have to pay 10 per cent as long-term capital
gains tax against the 12.50 per cent DDT paid by the MF on dividends. All the tools
discussed over here are used by all the advisors and have helped investors in reducing risk,
simplicity and affordability. Even then an investor needs to examine costs, tax implications
and minimum applicable investment amounts before committing to a s ervice.
Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then we can find the
market flooded with a variety of investment options which includes mutual funds, equities,
fixed income bonds, corporate debentures,company fixed deposits, bank deposits, PPF, life
insurance, gold, real estate etc. , all these investment options could be judged on the basis of
various parameters such as- return, safety convenience, volatility and liquidity.

Return Safety Volatility Liquidity Convenie

nce

Equity Bonds High Low High High Moderate

Co.
Moderate High Moderate Moderate High
Debenture s
Moderate Moderate Moderate Low Low
Co. FDs Bank
Deposits PPF

Life Moderate Low Low Low Moderate

Insurance
Low High Low High High
Gold

Real EstateModerate High Low Moderate High

Mutual
Low High Low Low Moderate
Funds
Moderate High Moderate Moderate Gold

High Moderate High Low Low

High High Moderate High High

Source: Performance of mutual funds

which We can very well see that mutual funds outperform every other investment option. On
three parameters it scores high whereas it’s moderate at one. comparing it with the other
options, we find that equities gives us high returns with high liquidity but its volatility too is
high with low safety doesn’t makes it favorite among persons who have low risk- appetite.
Even the convenience involved with investing in equities is just moderate.

Now looking at bank deposits, it scores better than equities at all fronts but lags badly in the
parameter of utmost important i.e. it scores low on return , so it’s not an happening option for
person who can afford to take risks for higher return. The other option offering high return is
real estate but that even comes with high volatility and moderate safety level, even the
liquidity and convenience involved are too low. Gold have always been a favorite among
Indians but when we look at it as an investment option then it definitely doesn’t gives a
very bright picture. Although it ensures high safety but the returns generated and liquidity
are moderate. Similarly the other investment options are not at par with mutual funds and
serve the needs of only a specific customer group. Straightforward, we can say that mutual
fund emerges as a clear winner among all the options available.

The reasons for this being:

Mutual funds combine the advantage of each of the investment products: mutual fund
is one such option which can invest in all other investment options. Its principle of
diversification allows the investors to taste all the fruits in one plate. Just by investing in it,
the investor can enjoy the best investment option as per the investment objective.

Dispense the shortcomings of the other options: every other investment option has more
or less some shortcomings. Such as if some are good at return then they are not safe, if some
are safe then either they have low liquidity or low safety or both likewise, there exists no
single option which can fit to the need of everybody. But mutual funds have definitely
sorted out this problem. Now everybody can choose their fund according to their
investment objectives.

Returns get adjusted for the market movements: as the mutual funds are managed by
experts so they are ready to switch to the profitable option along with the market movement.
Suppose they predict that market is going to fall then they can sell some of their shares and
book profit and can reinvest the amount again in money market instruments.

Flexibility of invested amount: Other then the above mentioned reasons, there exists one
more reason which has established mutual funds as one of the largest financial
intermediary and that is the flexibility that mutual funds offer regarding the investment
amount. One can start investing in mutual funds with amount as low as Rs. 500 through SIPs
and even Rs. 100 in some cases.

Performance Measures of Mutual Funds:

Mutual Fund industry today, with about 34 players and more than five hundred schemes, is
one of the most preferred investment avenues in India. However, with a plethora of schemes
to choose from, the retail investor faces problems in selecting funds. Factors such as
investment strategy and management style are qualitative, but the funds record is an
important indicator too. Though past performance alone cannot be indicative of future
performance, it is, frankly, the only quantitative way to judge how good a fund is at present.
Therefore, there is a need to correctly assess the past performance of different mutual
funds.

Worldwide, good mutual fund companies over are known by their AMCs and this fame is
directly linked to their superior stock selection skill s. For mutual funds to grow, AMCs
must be held accountable for their selection of stocks. In other words, there must be some
performance indicator that will reveal the quality of stock selection of various AMCs.

Return alone should not be considered as the basis of measurement of the performance of a
mutual fund scheme, it should also include the risk taken by the fund manager because
different funds will have different levels of risk attached to them. Risk associated with a
fund, in a general, can be defined as variability or fluctuations in the returns generated by it.
The higher the fluctuations in the returns of a fund during a given period, higher will be the
risk associated with it. These fluctuations in the returns generated by a fund are resultant of
two guiding forces. First, general market fluctuations, which affect all the securities, present
in the market, called market risk or systematic risk and second, fluctuations due to specific
securities present in the portfolio of the fund, called unsystematic risk

In order to determine the risk-adjusted returns of investment portfolios, several eminent

authors have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class. The most
important and widely used measures of performance are:
 1. The Treynor Measure
2. The Sharpe Measure
3. Jenson Model
4. Fama Model

The Treynor Measure

Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fu nd over and above risk
free rate of return (generally taken to be the return on securities backed by the government,
as there is no credit risk associated), during a given period and systematic risk associated
with it (beta). Symbolically, it can be represented as:

Treynor's Index (Ti) = (Ri - Rf)IBi

Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the fund.
All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative
Treynor's Index is an indication of unfavorable performance.

The Sharpe Measure:

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a
ratio of returns generated by the fund over and above risk free rate of return and the total
risk associated with it. According to Sharpe, it is the total risk of the fund that the investors
are concerned about. So, the model evaluates funds on the basis of reward per unit of total
risk. Symbolically, it can be written as:

Sharpe Index (Si) = (Ri - Rf)ISi

Where, Si is standard deviation of the fund.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a
fund, a low and negative Sharpe Ratio is an indication of unfavorable performance
Jenson Model:

Jenson's model proposes another risk adjusted performance measure. This measure was
developed by Michael Jenson and is sometimes referred to as the Differential Return
Method. This measure involves evaluation of the returns that the fund has generated vs. the
returns actually expected out of the fund given the level of its systematic risk. The surplus
between the two returns is called Alpha, which measures the performance of a fund
compared with the actual returns over the period. Required return of a fund at a given level
of risk (Bi) can be calculated as: Ri = Rf + Bi (Rm - Rf)

Where, Rm is average market return during the given period. After calculating it, alpha can
be obtained by subtracting required return from the actual return of the fund.

Higher alpha represents superior performance of the fund and vice versa. Limitation of this
model is that it considers only systematic risk not the entire risk associated with the fund and
an ordinary investor cannot mitigate unsystematic risk, as his knowledge of market is
primitive.

Fama Model:

The Eugene Fama model is an extension of Jenson model. This model compares the
performance, measured in terms of returns, of a fund with the required return commensurate
with the total risk associated with it. The difference between these two is taken as a measure
of the performance of the fund and is called net selectivity.

The net selectivity represents the stock selection skill of the fund manager, as it is the excess
return over and above the return required to compensate for the total risk taken by the fund
manager. Higher value of which indicates that fund manager has earned returns well above
the return commensurate with the level of risk taken by him.

Required return can be calculated as: Ri = Rf + SiISm*(Rm - Rf)

Where, Sm is standard deviation of market returns. The net selectivity is then calculated by
subtracting this required return from the actual return of the fund.

Among the above performance measures, two models namely, Treynor measure and Jenson
model use systematic risk based on the premise that the unsystematic risk is diversifiable.
These models are suitable for large investors like institutional investors with high risk
taking capacities as they do not face paucity of funds and can invest in a number of options
to dilute some risks. For them, a portfolio can be spread across a number of stocks and
sectors. However, Sharpe measure and Fama model that consider the entire risk associated
with fund are suitable for small investors, as the ordinary investor lacks the necessary skill
and resources to diversified. Moreover, the selection of the fund on the basis of superior
stock selection ability of the fund manager will also help in safeguarding the money
invested to a great extent. The investment in funds that have generated big returns at higher
levels of risks leaves the money all the more prone to risks of all kinds that may exceed the
individual investors' risk appetite.
Chapter-3

RESEARCH METHODOLOGY
 Objective of the study

 The main objective of this project is to collect the opinion of

people regarding mutual funds.
 Objective is to know the opinion of the investors about the
services of financial advisors.
 I have tried to explore the general opinion about mutual funds.
It also covers why/ why not investors are availing the services
of financial advisors.
 Objective is to know from where the investors purchase mutual
funds.
 To know the most suitable stage to invest in mutual funds.
 Scope of the study

The research was carried on in Davangere, have

visited people randomly nearby locality, small
brokers etc.
Research Methodology

For the overall research design, the data collection method and analysis

procedures, I did my survey in Aligarh. For data collection n it was scheduled prior to

survey work, like whom to get feedback. The primary and secondary source of data

collection were:

 Universe - Aligarh (Finite)

 Sampling unit - The sample unit consist the Consumer of Karvy limited.
Data Collection:
1. Primary Data

 Questionnaire

2. Secondary Data

 Journals & Magazines

 Companies Reports and

 Companies Websites

 Internet

 Newspaper

 Size of the sample - 100

 Research Design - Descriptive

 Region - Aligarh

 Sampling Method - Convenience

Chapter-4

DATA ANALYSIS AND

INTERPRETATION
1 Analysis and Interpretation of Data

Ques 1 : Where from do you purchase mutual funds?

Particulars Number of respondents Percentage %

Directly from the 12 24%
AMCs
Brokers only 23 46%
Brokers/ sub-brokers 12 24%

Other sources 03 6%

TOTAL 50 100%

Source: primary data

METHOD OF PURCHASE OF MUTUAL FUNDS

50% 46%

45%
Direc ly fr m he M
40%
Br ker nly
24% 24%
35%
Br ker / ub-br ker
30%
O her urce
25% 6%

20%

15%

10%
Source: Ques 1
5%
Analysis:
0%
From the above table it is evident that 24% of responders were
purchase mutual funds from directly from the AMCs, 46% of responders
were purchase mutual funds from Brokers only, 24% of responders were
purchase mutual funds from Brokers/ sub-brokers and 6% of responders were
purchase mutual funds from other sources.
Ques 2 : According to you which is the most suitable stage to
invest in mutual funds?

Particulars Number of respondents Percentage %

Young unmarried stage 39 78%

Young Married 09 18%

with children
stage
Pre-retirement stage 01 2%

Old age stage 01 2%

TOTAL 50 100%

Source: primary data

DIAGRAM SHOWING AGE GROUP FOR INVESTMENT

Ol age age 2%

Pre-re iremen age 2%

Young Marrie wi h chil ren age 18%

Young unmarrie age 78%

Source: Ques 2
Analysis:
From the above table it is evident that 78% of responders said that
suitable stage to invest in mutual funds is at Young unmarried stage, 18% of
responders said that suitable stage to invest in mutual funds is at Young
Married with children stage, 2% of responders said that suitable stage to
invest in mutual funds is at Pre-retirement stage and 2% of responders said
that suitable stage to invest in mutual funds is at Old age stage.
Ques 3 : Which feature of the mutual funds influence you most?

Particulars Number of Percentage %

respondents
Diversification 19 38%

Professional management 11 22%

Reduction in risk and 08 16%

transaction cost
Helps in achieving long 12 24%
term goals
TOTAL 50 100%

Source: primary data

FEATURES OF THE MUTUAL FUNDS INFLUENCE THE INVESTOR

Helps i achievi g lo g term goals 24%

Re uctio i risk a tra sactio cost 16%

Pro essio al ma ageme t 22%

Diversi icatio 38%

0% 10% 20% 30% 40%

Source: Ques 3
Analysis:
From the above table it is clear that 38% of responders said that the feature
of the mutual funds influence most is Diversification, 22% of responders said
that the feature of the mutual funds influence most is Professional
management, 16% of responders said that the feature of the mutual funds
influence most is Reduction in risk and transaction cost, and 24% of
responders said that the feature of the mutual funds influence most is helps in
achieving long term goals.
Ques 4: Where do you find yourself as a mutual fund investor?

Particulars Number of respondents Percentage %

Totally ignorant 05 10%

Partial knowledge of mutual funds 21 42%

Aware only of any specific scheme 17 34%

in which you invested
Fully aware 07 14%

TOTAL 50 100%

Source: primary data

DIAGRAM SHOWS INVESTOR AWARENESS

42%
45%
Totally ignorant
40% 34%

35% Partial knowl dg of mutual

30% fund
14% Awar only of any p cific
25% 10%
ch m in which you inv t d
20%
Fully awar
15%

10%

5%
Source: Ques 4
0%
Analysis:
From the above table it is evident that 10% of responders said that they find
themselves as a mutual fund investor as totally ignorant, 42% of responders
said that they find themselves as a mutual fund investor have Partial
knowledge of mutual funds, 34% of responders said that they find themselves
as a mutual fund investor have Aware only of any specific scheme in which
you invested and 14% of responders said that they find themselves as a
mutual fund investor have fully aware.
Ques 5: Are you availing the services of personal financial advisors?

Particulars Number of respondents Percentage %

Yes 41 82%

No 09 18%

TOTAL 50 100%

Source: primary data

NEED OF PERSONAL FINANCIAL ADVISORS

8%

Yes

82% No

Source: Ques5

Analysis:
From the above table it is evident that 82% of responders said Yes and 18% of
responders said No to avail the services of personal financial advisors.
Ques 6 : Which expertise of the personal financial advisor is
demanded most?
Particular Number of Percentage %
s respondents
Portfolio review & 07 14%
investment
recommendation
Planning to achieve specific financial goals 20 40%
Managing assets in retirement 04 8%
Access to specialist in areas such as tax 19 38%
planning
TOTAL 50 100%
Source: primary data

EXPERTISE OF THE PERSONAL FINANCIAL ADVISOR IS

DEMANDED MOST
Portfolio review & investment
38%
recommendation
8%
Planning to achieve specific
40%
financial goals
14%
Managing assets in retirement
Access to specialist in areas
0% 10% 20% 30% 40% such as tax planning

Source: Ques 6

Analysis:
From the above table it is evident that 14% of responders said that
expertise of the personal financial advisor is demanded most is Portfolio
review & investment recommendation, 40% of responders said that expertise
of the personal financial advisor is demanded most is planning to achieve
specific financial goals, 8% of responders said that expertise of the personal
financial advisor is demanded most is Managing assets in retirement, and
38% of responders said that expertise of the personal financial advisor is
demanded most is Access to specialist in areas such as tax planning.
Ques 7 : What is the major reason for using financial advisors?

Particulars Number of Percentage %

respondents
Want help with asset allocation 12 24%

Don’t have time to make my 08 16%

own investment decision
To explain various investment 13 26%
options
Want to make sure I am investing 17 34%
enough to meet my financial goals
TOTAL 50 100%

Source: primary data

MAJOR REASON FOR USING FINANCIAL ADVISORS

5% Want help with asset allocation

34%
0% 26%
24%
25%
Don’t have time to make my
20% 6%
own investment decision
15%

10%
5% To explain various investment
options
0%
Source: Ques 7

Analysis:
From the above table it is clear that 24% of responders said that the
major reason for using financial advisors is that they Want help with asset
allocation, 16% of responders said that the major reason for using financial
advisors is that they Don’t have time to make my own investment decision,
26% of responders said that the major reason for using financial advisors is
that they want to explain various investment options and 34% of responders
said that the major reason for using financial advisors is that they want to
make sure I am investing enough to meet my financial goals.
 Ques 8 : What is the major reason for not using financial advisor?

Particulars Number of respondents Percentage %

Have access to all resources 12 24%

needed to invest on own
Advisors are too expensive 17 34%

Unsure how to find a 09 18%

trustworthy advisor
Want to be in control of 12 24%
own investment
TOTL 50 100%

Source: primary data

MAJOR REASON FOR NOT USING FINANCIAL ADVISOR

35%
Have acce o all re ource
34%
30% nee e o inve on own
24% 24%
5%
18% vi or are oo expen ive
0%
Un ure how o fin a
15%
rustworthy a visor
10%
5% Want to e in control of own
0% investment

Source:Ques 8

Analysis:
From the above table it is clear that 24% of responders said that the
major reason for not using financial advisors is that they have access to all
resources needed to invest on own, 34% of responders said that the major
reason for not using financial advisors is that believe advisors are too expe
nsive, 18% of responders said that the major reason for not using financial
advisors is that Unsure how to find a trustworthy advisor and 24% of
responders said that the major reason for not using financial advisors is that
want to be in control of own investment.
Q9: What is the basic purpose of your investment?

(a) Liquidity 10

(b) Return 25

(c) Risk covering 25

(d) Capital appreciation 20

( e ) Tax benefits 20

Liquidity Return Risk covering Capital appreciation Tax Benefits

20% 10%

25%

20%

25%

Source: Ques 9

Analysis:

In the above graph we show that 10% respondents have basic purpose of their
investment is liquidity, 25% respondents have basic purpose of investment is
easily returning, 25% respondents have basic purpose of investment is risk
covering, 20% respondents have basic purpose of investment is capital
appreciating and remaining 20% respondents have basic purpose of investment is
tax benefits.
 Q 10: Have you invested / are you interested to invest in mutual fund?

Particulars Number of respondents Percentage %

Yes 41 82%

No 09 18%

TOTAL 50 100%

Source: primary data

NEED TO INVEST MUTUAL FUND

8%

Yes

82% No

Source: Ques10

Analysis:
From the above table it is evident that 82% of responders said Yes and 18% of
responders said No to avail the services of personal financial advisors.
Chapter-5

Finding, Recommendations, Suggestions and

Conclusion
 Research findings:
Survy of investors:

At the survey conducted upon 50 people, all are already mutual fund investors. So there is
enough scope for the advisors.

Investors knowledge about various mutual funds schemes:

Out of the 50 persons who already have invested in mutual funds/ are interested to invest,
only 14% have sound knowledge of MFs, 34% people are aware of only the schemes in
which they have invested. 42% possess partial knowledge whereas 10% stands nowhere in
knowledge about MF s.

Method of purchase of mutual funds:

24% participants buy forms directly from the AMCs, 46% from brokers only, 24% from
brokers and sub-brokers even then 6% people buy from other sources. The brokers have the
maximum reach so they should try to make those investors aware of the happenings, even
the AMCs should follow it.

Factors that influence investors go for mutual funds:

When asked about the most alluring feature of MFs, most of them opted for diversification,
followed by reduction in risk, helps in achieving long term goals and helps in achieving
long term goals respectively.

Most preferred time of investors to invest in mutual fund:

Most of the investor preferred to invest at a young unmarried stage. Even 18% persons were
ready to invest at a stage of young married with children, person with older age investing
due to profit there grandson. But again the number rise to 2% at pre -retirement stage.

Availing the services of financial advisors:

Out of 50 responders, 82% were already availing the services of financial advisors whereas
18% do not availing the services of financial advisors.
The major reason for availing the service of financial advisors:

24% participants regarded asset allocation as the major reason for going for financial
advisors. 26% of them needed them to explain them the various investment options
available.34% of them wanted to make sure that they were saving enough to meet their
financial goals. While just 16% gave the reason- lack of time.

The major reason investors are not availing the service of financial advisors:

When asked about one reason for not availing the services of financial

advisors, 34% of them pointed the advisors as expensive. 24% of them wished to be in
control of their own assets.18% of them said that they find it difficult to get trustworthy
advisors. Whereas 24% of them said they have access to all the necessary resources required.
 Suggestions:
The most vital problem spotted is of ignorance. Investors should be made aware of the
benefits. Nobody will invest until and unless he is fully convinced. Investors should be made
to realize that ignorance is no longer and what they are losing by not investing. Mutual funds
offer a lot of benefit which no other single option could offer. But most of the people are not
even aware of what actually a mutual fund is? They only see it as just another investment
option.

Preferences to young investors:

The advisors should try to change their mindsets. The advisors should target for more and
more young investors. Young investors as well as persons at the height of their career
would like to go for advisors due to lack of expertise and time.

Value added benefits:

The advisors may try to highlight some of the value added benefits of MFs such as tax benefit, rupee
cost averaging, and systematic transfer plan, rebalancing etc. these benefits are not offered by
other options singlehandedly. So these are enough to drive the investors towards mutual funds.
Investors could also try to increase the spectrum of services offered.

Reduce cost of service charges:

Now the most important reason for not availing the services of advisors was spotted was
being expensive. The advisors should try to charge a nominal fee at the beginning. But if
not possible then they could go for offering more services and benefits at the existing rate.
They should also maintain their code of ethics so that the investors could trust upon them.

Thus the advisors should try to attract more and more persons and turn them into investors
and finally their clients.
 Conclusion
If we take a look at the recent scenario in the Indian financial market then we
can find the market flooded with a variety of investment options which
includes mutual funds, equities, fixed income bonds, corporate debentures,
company fixed deposits, bank deposits and etc., Mutual Fund industry today,
with about 34 players and more than five hundred schemes, it is one of the
most preferred investment avenues in India. Mutual Fund Advisors give
emphasis on mutual funds than other investment options. Investment is the
stepping stone to achieving one's financial dreams. Mutual funds offer an
opportune way to long- term wealth creation. However, with more and more
funds flooding the market, the task of selecting the most suitable scheme gets
even more complicated.

Mutual Fund Advisory Service at Karvy guides you through this network and
ensures that your investments are backed by their quality research. The
financial advisors can tap upon these people by educating them about mutual
funds. After Giving advice to the customers the Advisers should communicate
with the clients so there will be better relationship between the Company and
the Clients.
 Limitation of the study

 The sample extent for research is only Aligarh city.

 Some of the respondents may be based in giving response.
 My experiences in research area might have affected results.
 Data analysis and interpretation done may not be that strong
due to small sample and conveyance skill in me.
 Due to limitation of time and cost constrains a sample size of
only 50 respondents are chosen.
 BIBILIOGRAPHY

 www.mutualfundindia.com
 Business Line Newspaper.
 Economic Times Newspaper.
 www.thefinapolis.com
 www.karvy.com
 www.mutualfundsindia.com
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Q 1 . Where from do you purchase mutual funds?

a. Directly from the AMCs [ ]

b. Brokers only [ ]
c. Brokers/ sub-brokers [ ]
d. Other sources [ ]

Q 2. According to you which is the most suitable stage to invest in mutual

funds?

a) Young unmarried stage [ ]

b) Young Married with children stage [ ]

c) Pre-retirement stage [ ]

d) Old age stage [ ]

Q 3. Which features of the mutual funds allures you most?

a. Diversification [ ]
b. Professional management [ ]
c. Reduction in risk transaction cost [ ]
d. Helps in achieving term goals [ ]

Q 4: Where do you find yourself as a mutual fund investor?

a) Totally ignorant [ ]
b) Partial knowledge of mutual funds [ ]
c) Aware only of any specific scheme in which you invest [ ]
d) Fully aware [ ]

Q 5: are you availing the services of personal financial advisors?

a. Yes [ ] b. No [ ]

Q 6 : which expertise of the personal financial advisor is demanded most?

a. Portfolio review & investment recommendation [ ]

b. Planning to achieve specific financial goals [ ]
c. Managing assets in retirement [ ]
d. Access to specialist in areas such as tax planning [ ]
Q 7: what is the major reason for using financial advisors?

a) Want help with allocation [ ]

b) Don’t have time to make my own investment decision [ ]
c) Want to make sure I am investing enough to meet my financial goals
[ ]
d) To explain various investment option [ ]

Q 8: what is the major reason for not using financial advisors?

a) Have access to all resources needed to invest on own [ ]

b) Believe advisors are too expensive [ ]
c) Unsure how to find a trustworthly advisor [ ]
d) Want to be in control of own investment [ ]

Q 9: What is the basic purpose of your investment?

a) Liquidity

b ) Return

c) Risk covering

d) Capital appreciation

( e ) Tax benefits

Q 10: Have you invested / are you interested to invest in mutual fund?

a) Yes [ ] b) No [ ]