A

RESEARCH PROJECT

ON

“A STUDY OF MUTUAL FUND INDUSRTY”

Submitted in Fulfillment of the Requirement for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Session 2017-2019

I.K GUJRAL PUNJAB TECHNICAL UNIVERSITY,

JALANDHAR

Sri Sukhmani Institute of & Engineering & Technology

Department of Business Administration

Submitted To Submitted By

Prof. Jasleen Kaur Ringkhang Uzir

Course- MBA 4th Semester
University Roll No. 1711680

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 ACKNOWLEDGEMENT

With regard to my Project with Mutual Fund I would like to thank each and every

one who offered help, guideline and support whenever required.

I am extremely grateful to my guide, Prof. Jasleen Kaur for their

valuable guidance and timely suggestions. I would like to thank all faculty members

of Sri Shukmani Institute of Engineering and Technology for the valuable

guidance& support.

I would also like to extend my thanks to my members and friends for their

support.

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 DECLERATION

I Ringkhang Uzir, A student of 4rd semester MBA, hereby declare that this Project

Report entitled “STUDY OF MUTUAL FUND INDUSTRY” in the partial fulfillment

of the requirement of Master of Business Administration (MBA) of Sri Sukhmani

Institute Of Engineering And Technology is based on primary & secondary data

found by me in various departments, books, magazines and websites.

Date- Signature

Ringkhang Uzir

MBA 4th sem.

Roll No. 1711680

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EXECUTIVE SUMMARY

In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being.

Mutual Funds have not only contributed to the India growth story but have also helped

families tap into the success of Indian Industry. As information and awareness is rising

more and more people are enjoying the benefits of investing in mutual funds. The main

reason the number of retail mutual fund investors remains small is that nine in ten

people with incomes in India do not know that mutual funds exist. But once people are

aware of mutual fund investment opportunities, the number who decide to invest in

mutual funds increases to as many as one in five people. The trick for converting a

person with no knowledge of mutual funds to a new Mutual Fund customer is to

understand which of the potential investors are more likely to buy mutual funds and to

use the right arguments in the sales process that customers will accept as important

and relevant to their decision.

This Project gave me a great learning experience and at the same time it gave me

enough scope to implement my analytical ability. The analysis and advice presented in

this Project Report is based on market research on the saving and investment

practices of the investors and preferences of the investors for investment in Mutual

Funds. This Report will help to know about the investors’ Preferences in Mutual Fund

means Are they prefer any particular Asset Management Company (AMC), Which type

of Product they prefer, Which Option (Growth or Dividend) they prefer or Which

Investment Strategy they follow (Systematic Investment Plan or One time Plan). This

Project as a whole can be divided into two parts.

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The first part gives an insight about Mutual Fund and its various aspects, the Company

Profile, Objectives of the study, Research Methodology. One can have a brief

knowledge about Mutual Fund and its basics through the Project.

The second part of the Project consists of data and its analysis collected through

survey. For the collection of Primary data I made a questionnaire and survey. This

Project covers the topic “STUDY OF MUTUAL FUND INDUSTRY.” The data collected

has been well organized and presented. I hope the research findings and conclusion

will be of use.

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Sr. No Content Page No

1 ACKNOWLEDGEMENT 2

2 DECLARATION 3

3 EXECUTIVE SUMMARY 4-5

4 INTRODUCTION 8-30

5 OBJECTIVES AND SCOPE 32

6 RESEARCH METHODOLOGY 34-38

7 DATA ANALYSIS AND INTERPRETATION 40-48

8 FINDINGS AND CONCLUSIONS 50-52

9 SUGGESTIONS & RECOMMENDATIONS 54-55

10 BIBLIOGRAPHY 56

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Introduction

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1.1 Definition

SEBI (Mutual Fund) Regulations 1993 defines Mutual Fund as “a fund established in

the form of a trust by a sponsor to raise money by the trustees through the sale of units

to the public under one or more schemes for investing securities in accordance with

these regulations” The rationale behind a mutual fund is that there a large number of

investors who lack the time and or the skills to manage their money.

Hence, professional fund managers, acting on behalf of the Mutual Fund, manage the

investments (investor’s money) for their benefit in return for a management fee. The

organization that manages the investment is called the Asset Management Company

(AMC). Thus, a Mutual Fund is the most suitable investment for the common person as

it offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. Anybody with an investible surplus of as little as a

few thousand rupees can invest in mutual fund .Each mutual fund scheme has defined

investment objective and strategy.

A Draft offer documents is to be prepared for launching a fund. Typically, it specifies

the investment objectives of the fund, the risk associated, the cost involved in the

process and the broad rules for entry into and exit from funds and others areas of

operation. As you probably know, mutual funds have become extremely popular over

the last couple of decades what was once just another obscure instrument is now part

of daily lives. More than 80 million people or one half of the household in America

invest in mutual funds. That means that, in the United States alone, trillions of dollars

alone are invested in mutual fund. In fact, too many people, investing means buying

mutual funds After all, it’s common knowledge that investing in mutual fund is (or at
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least should be) better than simply letting cash waste away in a saving account but for

most people, that’s where the understanding of fund ends.

Mutual fund is a mechanism for pooling the resources by issuing unit to the investors

and investing funds in securities in accordance with the objective as disclosed in offer

document. Investment in securities is spread across a wide section of industry and

sector and the risk is reduced. Diversification reduces the risk because all stock may or

may not move in the same direction in the same proportion to their proportion at the

same time. Mutual fund issues units to the investors in accordance with quantum of

money invested by them. Investor of mutual are called unit holders.The profit or losses

are shared by the investors in proportion to their investment. The mutual fund usually

comes out with a number of schemes with different investment objectives which are

launched from time to time. A mutual fund is required to be registered with the SEBI,

which regulates securities markets before it can collect fund from the public.

A mutual fund is nothing more than a collective stock and /or bonds. You can think of a

mutual fund as a company that brings together a group of people and invests their

money in stock, bonds and other securities Each investors owns shares which

represent a portion of holding of the fund.

In India, SEBI (Mutual Fund) Regulations, 1996 regulates the structure of mutual funds.

Mutual funds in India are constituted in the form of a Public Trust created under The

Indian Trusts Act, 1882.

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1.2INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS ASPECTS.

Mutual fund is a trust that pools the savings of a number of investors who share a

common financial goal. This pool of money is invested in accordance with a stated

objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all

investors. The money thus collected is then invested in capital market instruments such

as shares, debentures and other securities. The income earned through these

investments and the capital appreciations realized are shared by its unit holders in

proportion the number of units owned by them. Thus a Mutual Fund is the most

suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost. A

Mutual Fund is an investment tool that allows small investors access to a well-

diversified portfolio of equities, bonds and other securities. Each shareholder

participates in the gain or loss of the fund. Units are issued and can be redeemed as

needed. The funds Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks

may not move in the same direction in the same proportion at the same time. Mutual

fund issues units to the investors in accordance with quantum of money invested by

them. Investors of mutual funds are known as unit holders.

When an investor subscribes for the units of a mutual fund, he becomes part owner of

the assets of the fund in the same proportion as his contribution amount put up with the

(the total amount of the fund). Mutual Fund investor is also known as a mutual fund

shareholder or a unit holder.

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Any change in the value of the investments made into capital market instruments (such

as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme.

NAV is defined as the market value of the Mutual Fund scheme's assets net of its

liabilities. NAV of a scheme is calculated by dividing the market value of scheme's

assets by the total number of units issued to the investors.

1.3 ADVANTAGES OF MUTUAL FUND

 Portfolio Diversification

 Professional management

 Reduction / Diversification of Risk

 Liquidity

 Flexibility & Convenience

 Reduction in Transaction cost

 Safety of regulated environment

 Choice of schemes

 Transparency.

DISADVANTAGE OF MUTUAL FUND

 No control over Cost in the Hands of an Investor

 No tailor-made Portfolios

 Managing a Portfolio Funds

 Difficulty in selecting a Suitable Fund Scheme

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1.4 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. Though the

growth was slow, but it accelerated from the year 1987 when non-UTI players entered

the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement,

both qualities wise as well as quantity wise. Before, the monopoly of the market had

seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The

private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993

and till April 2004; it reached the height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutual

fund industry can be broadly put into four phases according to the development of the

sector. Each phase is briefly described as under.

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

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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.

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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.

Fifth current Phase – since May 2014

Taking cognizance Taking cognizance of the lack of penetration of MFs, especially in tier
II and tier III cities, and the need for greater alignment of the interest of various
stakeholders, SEBI introduced several progressive measures in September 2012 to "re-
energize" the Indian Mutual Fund industry and increase MFs’ penetration.

In due course, the measures did succeed in reversing the negative trend that had set in
after the global melt-down and improved significantly after the new Government was
formed at the Center.

Since May 2014, the Industry has witnessed steady inflows and increase in the AUM as
well as the number of investor folios (accounts).

 The Industry’s AUM crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for
the first time as on 31st May 2014 and in a short span of two years the AUM
size has crossed ₹15 lakh crore in July 2016.

 The overall size of the Indian MF Industry has grown from ₹ 3.26 trillion as on 31st
March 2007 to ₹ 15.63 trillion as on 31st August 2016, the highest AUM
ever and a five-fold increase in a span of less than 10 years !!
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  In fact, the MF Industry has more doubled its AUM in the last 4 years from ₹
5.87 trillion as on 31st March, 2012 to ₹ 12.33 trillion as on 31st March,
2016 and further grown to ₹ 15.63 trillion as on 31st August 2016.

 The no. of investor folios has gone up from 3.95 crore folios as on 31-03-2014 to
4.98 crore as on 31-08-2016.

 On an average 3.38 lakh new folios are added every month in the last 2 years
since Jun 2014.

The growth in the size of the Industry has been possible due to the twin effects of the
regulatory measures taken by SEBI in re-energising the MF Industry in September 2012
and the support from mutual fund distributors in expanding the retail base.

MF Distributors have been providing the much needed last mile connect with investors,
particularly in smaller towns and this is not limited to just enabling investors to invest in
appropriate schemes, but also in helping investors stay on course through bouts of
market volatility and thus experience the benefit of investing in mutual funds.

In fact, even though FY 2015-16 was not a very good year for the Indian securities
market, the MF Industry witnessed steady positive net inflows month after month, even
when the FIIs were pulling out in a big way. This was largely because of the ‘hand-
holding’ of the investors by the MF distributors and convincing them to stay invested
and/or invest at lower NAVs when the market had fallen.

MF distributors have also had a major role in popularising Systematic Investment Plans
(SIP) over the years. In April 2016, the no. of SIP accounts has crossed 1 crore
mark and currently each month retail investors contribute around ₹3,500 crore via SIPs.

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1.5 Structure of the Indian mutual fund industry:

The Indian mutual fund industry is dominated by the Unit Trust of India and which has

a total corpus of Rs 700bn collected from more than 20 million investors .The UTI has

many fund /schemes in all categories i.e. equity, balanced, income etc with some being

open ended and some being closed ended. The United Scheme 1964 commonly

referred to as US64, which is a balanced fund, is the biggest scheme with a corpus of

about Rs 200bn URI was floated by financial institution and is governed by a special

act of the parliament. Most of its investors believe that the UTI is government owned

and controlled, which, while legally incorrect, is true for all practical purposes.

The second largest categories of mutual funds are the ones floated by nationalized

banks. Can bank Asset management floated by Canara Bank and SBI Funds

Management floated by the State Bank of India are the largest of these. GIC AMC

floated by General Insurance Corporation and Jeevan Bima Sahayog AMC floated by

the LIC are some of the prominent ones. The aggregate corpus of funds managed by

this category of AMC’s is about Rs 150 billion

The third largest categories of the mutual funds are the once floated by the private

sector and by the foreign asset management companies. The largest of these are

Prudential ICICI AMC and Birla SUN LIFE AMC. The aggregate corpus of the asset

managed by this category of AMC s is in excess of Rs 250bn.

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1.6 Recent trends in the mutual fund industry:

The most important in the mutual fund industry is the aggressive expansion of the

foreign owned mutual fund companies and the decline of the companies floated by the

nationalized bank and smaller private sector players. Many nationalized banks got into

the mutual fund business in the early nineties and go off to a good start due to the

stock market boom prevailing then. These banks did not really understand the mutual

fund business and they just viewed it as another kind of banking activity. Few hired

specialized staff and generally choose to transfer staff from the parent organization.

Some schemes had offered guaranteed returns and their patent organization had to

bail out these AMCs by paying large amount of money the difference between the

guaranteed and actual returns. The service level was also bad. Most of these AMCs

have not been able to retain staffs, float, and new schemes etc. and it is doubtful

whether barring a few expectations, they have serious plans of continuing the activity in

a major way.

The experience of some of the AMCs floated by private sector Indian companies was

also very similar. They quickly realized that the AMCs business is a business, which

makes money in the long term and requires deep pocketed support in the intermediate

years. Some have sold out to foreign owned companies, some have merged with the

others and there is general restructuring going on.

The foreign owned companies have deep pockets and have come in here with the

expectation of a long haul. They can be credited with introducing many new practices

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such as new product innovation, sharp improvement in the service standards and

disclosure, usage of technology, broker education etc. In fact, they have forced the

industry to upgrade itself and service levels of the organization like UTI have improved

dramatically in the last few years in response to the competition provided by these.

Trends in Mutual Fund Investing: October 2014

Hybrid funds posted an outflow of $2.01 billion in October, compared with an inflow of
$1.84 billion in September.
November 28, 2014 12:23 IST | India Info line News Service
The combined assets of the nation's mutual funds increased by $196.67 billion, or 1.3
percent, to $15.76 trillion in October, according to the Investment Company Institute's
official survey of the mutual fund industry. In the survey, mutual fund companies report
actual assets, sales, and redemptions to ICI.

Total Net Assets of Mutual Funds

Oct 2014 Sep 2014 % change
Total long-term 13,131.8 12,954.3 1.4
Equity 8,296.3 8,137.4 2.0
Domestic equity 6,160.3 6,008.5 2.5
World equity 2,136.0 2,129.0 0.3
Hybrid 1,362.4 1,351.6 0.8
Bond 3,473.0 3,465.3 0.2
Taxable bond 2,916.9 2,913.9 0.1
Municipal bond 556.1 551.4 0.9
Total money market 2,623.2 2,604.1 0.7
Taxable money market 2,372.1 2,350.2 0.9
Tax-exempt money market 251.2 253.9 -1.1
Total 15,755.0 15,558.4 1.3

Net New Cash Flow of Mutual Funds

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 Oct 2014 Sep 2014 Jan-Oct 2014
Total long-term -3,004 -22,759 121,688
Equity 5,175 -5,234 51,157
Domestic equity 201 -13,409 -34,144
World equity 4,974 8,175 85,301
Hybrid -2,010 1,842 29,885
Bond -6,169 -19,367 40,646
Taxable bond -8,329 -22,384 20,052
Municipal bond 2,161 3,017 20,594
Total money market 19,070 22,351 -95,822
Taxable money market 21,734 24,253 -76,089
Tax-exempt money market -2,664 -1,902 -19,733
Total 16,066 -408 25,866

Highlights: Long-term funds--equity, hybrid, and bond funds--had a net outflow of $3.00
billion in October, versus an outflow of $22.76 billion in September.

Equity funds posted an inflow of $5.18 billion in October, compared with an outflow of
$5.23 billion in September. Among equity funds, world equity funds (U.S. funds that
invest primarily overseas) posted an inflow of $4.97 billion in October, versus an inflow of
$8.18 billion in September. Funds that invest primarily in the United States had an inflow
of $201 million in October, versus an outflow of $13.41 billion in September. The liquidity
ratio of equity funds (the percentage of liquid assets over total net assets) was 3.6
percent in October, unchanged from September.

Hybrid funds posted an outflow of $2.01 billion in October, compared with an inflow of
$1.84 billion in September.

Bond funds had an outflow of $6.17 billion in October, compared with an outflow of
$19.37 billion in September. Taxable bond funds had an outflow of $8.33 billion in
October, versus an outflow of $22.38 billion in September. Municipal bond funds had an
inflow of $2.16 billion in October, compared with an inflow of $3.02 billion in September.

Money market funds had an inflow of $19.07 billion in October, compared with an inflow
of $22.35 billion in September. In October funds offered primarily to institutions had an
inflow of $19.87 billion and funds offered primarily to individuals had an outflow of $800
million.

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1.7 Future scenario:

The asset base will continue to grow at an annual rate of about 30 to 35% over the

next few years as investor’s shift their asset from banks and other traditional avenues.

Some of the older public and private sector players will either close or be taken

over.Out of ten public sectors players five will sell out, close down or merge with strong

players in three to four years. In the private sector this trend has already started with

two mergers and one takeover. Here too some of them will down their shutter in the

near future to come.

But this does not mean there is no room for other players. The market will witness a

flurry of new players entering the area. There will be a large number of offers from

various asset management companies in times to come. Some big names like Fidelity,

Principal and Old Mutual etc. are looking at Indian market seriously.

The mutual fund industry is awaiting the derivation in India as this would enable it to

hedge its risk and this in turn would be reflected in its Net Asset Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund scheme to trade in

derivatives. Importantly, many market players have called on the Regulator to initiate

the process immediately, so that the mutual funds can implement the changes that are

required to trade in derivates.

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1.8 Role of SEBI in mutual fund:

In the year 1992 SEBI act was passed. The objectives of SEBI are – to protect the

interest of investors in securities, to promote the development of, and to regulate the

securities market. As far as mutual are concerned, SEBI formulates policies and

regulation the mutual fund to protect the interest of the investors. SEBI notified

regulation for mutual funds in 1993. Thereafter mutual fund sponsored by private

sector entities were allowed to enter the capital market. The regulations were fully

revised in 1996 and been amended. Therefore, from time to time SEBI has also issued

guidelines to the mutual fund from time to time to protect the interest of the investors.

All mutual funds whether promoted by public sector or private sector entities including

those promoted by foreign entities are governed by the same set of regulation. There is

no distinction in regulatory requirement of the mutual fund and all are subject to

monitoring and inspecting by SEBI. The risks associated with the scheme launched by

mutual funds sponsored by these entities are of similar type.

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1.9 CATEGORIES OF MUTUAL FUND:

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1.10 Mutual funds can be classified as follow :

 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 can not 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:

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 i) 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 weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading

across different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except that they

invest in companies offering high dividend yields.

iv) 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.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector

fund will invest in banking stocks.

vi) 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:

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

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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.

i) Liquid funds- These funds invest 100% in money market instruments, a large

portion being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-

bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt

instruments which have variable coupon rate.

iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-

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.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government

securities.

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in

long-term debt papers.

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vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an

exposure of 10%-30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that

of the fund.

1.11 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.

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1.12 RISK V/S. RETURN:

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 1.13 MAJOR PLAYERS

1. Bank Sponsored

1. Joint Ventures - Predominantly Indian

1. SBI Funds Management Private Ltd.

2. Others

1. BOB Asset Management Co. Ltd.

2. Canbank Investment Management Services Ltd.

3. UTI Asset Management Co. Private Ltd.

2. Institutions

1. Jeevan Bima Sahayog Asset Management Co. Ltd.

3. Private Sector

1. Indian

1. Benchmark Asset Management Co. Private Ltd.

2. Cholamandalam Asset Management Co. Ltd.

3. Credit Capital Asset Management Co. Ltd.

4. Escorts Asset Management Ltd.

5. J. M. Financial Asset Management Private Ltd.

6. Kotak Mahindra Asset Management Co. Ltd.

7. Reliance Capital Asset Management Ltd.

8. Sahara Asset Management Co. Private Ltd

9. Sundaram Asset Management Co. Ltd.

10. Tata Asset Management Ltd.

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2. Joint Ventures - Predominantly Indian

1. Birla Sun Life Asset Management Co. Ltd.

2. DSP Merrill Lynch Fund Managers Ltd.

3. HDFC Asset Management Co. Ltd.

4. Prudential ICICI Asset Management Co. Ltd.

3. Joint Ventures - Predominantly Foreign

1. ABN AMRO Asset Management (India) Ltd.

2. Deutsche Asset Management (India) Private Ltd.

3. Fidelity Fund Management Private Ltd.

4. Franklin Templeton Asset Management (India) Private Ltd.

5. HSBC Asset Management (India) Private Ltd.

6. ING Investment Management (India) Private Ltd.

7. Morgan Stanley Investment Management Private Ltd.

8. Principal Pnb Asset Management Co. Private Ltd.

9. Standard Chartered Asset Management Co. Private Ltd

29 | P a g e
1.14 Who can invest?

Who can invest in Mutual Funds in India:

First of all, distributors need to be aware of who mutual fund units.

Mutual funds in India are open to investment by

1) Residents including:

a) Resident Indian Individuals.

b) Indian Companies/Partnership Firms.

c) Indian Trust/Charitable Institutions.

d) Banks/Financial Institutions.

e) Non-Banking Finance Companies.

f) Insurance Companies.

g) Provident funds.

h) Mutual funds.

2) Non-Residents including:

 Non-Resident Indians, and Persons of Indian Origin.

 Overseas Corporate Bodies (OCBs) and

3) Foreign entities, viz.

 Foreign Institutional Investors(FII) registered with SEBI.

Foreign citizens/ entities are not allowed to invest in mutual funds in India.

30 | P a g e
Objectives and

scope

31 | P a g e
2.1 OBJECTIVES OF THE STUDY

1. To find out the Preferences of the investors for Asset Management Company.

2. To know the Preferences for the portfolios.

3. To know why one has invested or not invested in Mutual fund

4. To find out the most preferred channel.

5. To find out what should do to boost Mutual Fund Industry.

2.2 Scope of the study

A big boom has been witnessed in Mutual Fund Industry in resent times. A large

number of new players have entered the market and trying to gain market share in this

rapidly improving market.

The research was carried on in Aurangabad. I had been sent at one of the branch of

ANGEL BROKING (SMART MONEY) where I completed my Project work. I surveyed

on my Project Topic “A study of Mutual Fund Industry ” on the visiting to individual &

government offices employee.

The study will help to know the interest & preferences of the customers, which

company, portfolio, mode of investment, option for getting return and so on they prefer.

This project report may help the company to make further planning and strategy.

32 | P a g e
 Research

Methodology

33 | P a g e
3.1 RESEARCH METHODOLOGY

This report is based on primary as well secondary data, however primary data

collection was given more importance since it is overhearing factor in attitude studies.

One of the most important users of research methodology is that it helps in identifying

the problem, collecting, analyzing the required information data and providing an

alternative solution to the problem .It also helps in collecting the vital information that is

required by the top management to assist them for the better decision making both day

to day decision and critical ones.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the

reference. Research has been done by primary data collection, and primary data has

been collected by interacting with various people. The secondary data has been

collected through various journals and websites.

Sampling:

 Sampling procedure:

The sample was selected of them who are the Businessman/govt. employee,

irrespective of them being investors or not or availing the services or not. It was also

collected through personal visits to persons, by formal and informal talks and through

filling up the questionnaire prepared. The data has been analyzed by using

mathematical/Statistical tool.

34 | P a g e
 Sample size:

The sample size of my project is limited to 100 people only. Out of which only 10

people had invested in Mutual Fund. Other 90 people did not have invested in Mutual

Fund.

 Sample design:

Data has been presented with the help of bar graph, line graphs etc.

35 | P a g e
3.2 SWOT Analysis of the organization:-

SWOT analysis of organizations to provide recommendations on their performance and

growth potential. It is a powerful tool for analyzing both complex qualitative and

quantitative facets of an investment decision.

The results of this analysis have been fed into marketing and organizational strategic

plans and have been highly successful in strategy formulation.

Through our SWOT analysis, our clients have been able to take advantage of niche

markets and focus on product innovation which allows them to capture greater

margins.

Our SWOT analysis identifies strengths and weaknesses and relates them with forward

looking opportunities and threats. This helps to identify company and industry specific

critical drivers and catalysts.

SWOT Analysis identifies your company’s:

Strengths - to build on

Weaknesses - to cover

Opportunities - to capture

Threats - to defend against.

SWOT Analysis

Strengths:

* Rich experience of the management.

* Good brand equity

* Giving the very good return from inception

36 | P a g e
* Stabilized and loyal clients.

* Well combination of new energetic and experienced employees.

* Wide variety of investment product to match with every level of customer

* Giving the mutual fund exposure

Weakness:

* People is not interested to invest in mutual fund & equity because risk & trust.

* People not detail knowledge about mutual funds.

* Not very popular in rural area.

Opportunities:

* Stability through increased brand awareness, market penetration and

Service offerings.

* Across all categories of financial services.

* Increase in customer’s wallet share.

* 6 pay commission.

Threats;

* Increasing interest rate scenario.

* Execution risk.

* Competition from local players.

* Rising inflation could reduce savings and investments

37 | P a g e
3.3 Limitation:

 Some of the persons were not so responsive.

 Possibility of error in data collection because many of investors may have not

given actual answers of my questionnaire.

 The sample size may not adequately represent the whole market.

 Some respondents were reluctant to divulge personal information which can

affect the validity of all responses.

 The research is confined to a certain Govt. Dept. & part of Aurangabad.

38 | P a g e
Data Analysis

&

Interpretation

39 | P a g e
4.1 ANALYSIS & INTERPRETATION OF THE DATA

1. On the basis of Age of the Investors:

Age <= 31-35 36-40 41-45 46-50 >50

Group 30

No. of 0 4 3 2 1 0

Investors

4.5
Investors invested in Mutual Fund

4
3.5
3
2.5
2 4
1.5 3
1 2
0.5 1
0 0 0
<=30 31-35 36-40 41-45 46-50 >50
Age group of the Investors

Interpretation: According to this chart out of 10 Mutual Fund investors of Derabassi

the most are in the age group of 31-35 yrs. i.e. 40%, the second most investors are in

the age group of 36-40yrs i.e. 30% and the least investors are in the age group of

below 46-50 yrs.

40 | P a g e
2. Occupation of the investors of Derabassi.

Occupation No. of Investors

Govt. Service 3
.
Pvt. Service 4

Business 2

Agriculture 0

Others 1

5
No. of Investors

4
3
2 4
3
1 2
1
0 0
Govt. Pvt. Service Business Agriculture Others
Service
Occupation of the customers

Interpretation:

In Occupation group out of 10 investors, 40% are Pvt. Employees, 20% are

Businessman, 30% are Govt. Employees, 0% are in Agriculture and 10% are in others.

41 | P a g e
(3) Investors invested in different kind of investments of Derabassi.

Priority of Investments No. of Respondents %

Saving A/C 98

Fixed deposits 50

Insurance 99

Mutual Fund 10

RD 45

Real Estate 35
priority of investment

35
RD 45
10
Insurance 99
50
Saving A/c 98

0 20 40 60 80 100 120
No.of Respondents%

Interpretation: From the above graph it can be inferred that out of 200 people, 98 %

people have invested in Saving A/c, 91.6% in Insurance, 51.6% in Fixed Deposits, 11%

in Mutual Fund, 43% in RD and 21.6% in Real Estate.

42 | P a g e
4. Educational Qualification of investors of derabassi.

Educational Qualification Number of Investors

Graduate/ Post Graduate 5

Under Graduate 2

Others 3

Total 120

30%

50%

20%

Graduate/Post Graduate Under Graduate Others

Interpretation:Out of 120 Mutual Fund investors 50% of the investors in Derabassi are

Graduate/Post Graduate, 20% are Under Graduate and 30% are others (under HSC).

43 | P a g e
5. Preference of factors while investing

Factors (a) Liquidity (b) Low Risk (c) High Return (d) Trust

No. of 10 31 40 19

Respondents

19% 10%

31%

40%

Liquidity Low Risk High Return Trust

Interpretation:

Out of 100 People, 40% People prefer to invest where there is High Return, 31%

prefer to invest where there is Low Risk, 10% prefer easy Liquidity and 19% prefer

Trust

44 | P a g e
 6. Awareness about Mutual Fund and its Operations

Response Yes No

No. of Respondents 35 55

39%

61%

Yes No

Interpretation: From the above chart it is inferred that 39% People are aware

of Mutual Fund and its operations and 61% are not aware of Mutual Fund and its

operations.

45 | P a g e
7. Channel Preferred by the Investors for Mutual Fund Investment

Channel Financial Advisor Bank AMC

No. of Respondents 6 1 3

30%

60%
10%

Financial Advisor Bank AMC

Interpretation:

Out of 10 Investors 60% preferred to invest through Financial Advisors, 30%

through AMC and 10% through Bank.

46 | P a g e
8. Preference of Investors for future investment in Mutual Fund

Name of AMC No. of Investors

SBIMF 30
UTI 14
HDFC 10
Reliance 20
ICICI Prudential 16
Kotak 6
Others 4

Others 4

Kotak 6
Name of AMC

ICICI Prudential 16

Reliance 20

HDFC 10

UTI 14

SBIMF 30

0 5 10 15 20 25 30

No. of Investors

Interpretation:

Out of 100 investors, 20% prefer to invest in Reliance, 16% in ICICI Prudential,

30% in SBIMF, 4% in others, 6% in Kotak, 16% in UTI and 10% in HDFC Mutual

Fund.

47 | P a g e
9. Source of information for customers about Mutual Fund

Source of information No. of Respondents

Advertisement 13

Peer Group 25

Bank 30

Financial Advisors 42

50
No. of Respondents

40
30
20 42
25 30
10
13
0
Advertisement Peer Group Bank Financial
Advisors
Source of Information

Interpretation:

From the above chart it can be inferred that the Financial Advisor is the most

important source of information about Mutual Fund. Out of 100 Respondents,

42% know about Mutual fund Through Financial Advisor, 30 % through Bank,

25% through Peer Group and 13% through Advertisement.

48 | P a g e
Findings and

Conclusion

49 | P a g e
5.1 Findings

 In Derabassi in the Age Group of 36-40 years were more in numbers.

 The second most Investors were in the age group of 41-45 years and the

least were in the age group of below 45-50 years.

 In Occupation group most of the Investors were Private employees., the

second most Investors were Govt. employees

 About all the Respondents had a Saving A/c in Bank, 98% Invested in

Fixed Deposits,50% Invested in insurance, Only 99% Respondents

invested in Mutual fund 10%.

 Among 100 Respondents only 10% had invested in Mutual Fund.

 Out of 90 Respondents 61% were not aware of Mutual Fund, 39% told

there is not any specific reason for not invested in Mutual Fund.

 For Future investment the maximum Respondents preferred SBI Mutual

Fund, the second most preferred Reliance , ICICI Prudential has been

preferred after them.

 Mostly Respondents preferred High Return while investment, the

second most preferred Low Risk then trust and the least preferred

Liquidity.

 Only 61% Respondents were aware about Mutual fund and its

operations and 39% were not.

 Among 100 Respondents only 10% had invested in Mutual Fund and

40% did not have invested in Mutual fund.

50 | P a g e
  Most of the Investors had invested in SBI or Reliance Mutual Fund,

ICICI Prudential has also good Brand Position among investors.

 60% Investors preferred to Invest through Financial Advisors, 30%

through AMC (means Direct Investment) and 10% through Bank.

5.2 Conclusion

Running successful Mutual Funds requires complete understanding of the peculiarities

of the Indian Stock Market and also the psyche of the small investors. This study has

made an attempt to understand the financial behavior of Mutual Fund investors in

connection with the preferences of Brand (AMC), Products, Channels etc. I observed

that many of people have fear of Mutual Fund. They think their money will not be

secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms.

Many of people do not have invested in mutual fund due to lack of awareness although

they have money to invest. As the awareness and income is growing the number of

mutual fund investors are also growing.

“Brand” plays important role for the investment. People invest in those Companies

where they have faith or they are well known with them. There are many AMCs in

Derabassi but only some are performing well due to Brand awareness. Some AMCs

are not performing well although some of the schemes of them are giving good return

because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc.

they are well known Brand, they are performing well and their Assets Under

51 | P a g e
Management is larger than others whose Brand name are not well known like Principle,

Sunderam, etc.

Distribution channels are also important for the investment in mutual fund. Financial

Advisors are the most preferred channel for the investment in mutual fund. They can

change investors’ mind from one investment option to others. Many of investors directly

invest their money through AMC because they do not have to pay entry load. Only

those people invest directly who know well about mutual fund and its operations and

those have time.

52 | P a g e
Suggestions And

Recommendations

53 | P a g e
6.1 Suggestions and Recommendations

 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 bliss 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. So 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.

 Mutual Fund Company needs to give the training of the Individual Financial

Advisors about the Fund/Scheme and its objective, because they are the main source

to influence the investors.

 Before making any investment Financial Advisors should first enquire

about the risk tolerance of the investors/customers, their need and time (how long they

want to invest). By considering these three things they can take the customers into

consideration.

 Younger people aged under 35 will be a key new customer group into the

future, so making greater efforts with younger customers who show some interest in

investing should pay off.

 Systematic Investment Plan (SIP) is one the innovative products launched by

Assets Management companies very recently in the industry. SIP is easy for monthly
54 | P a g e
salaried person as it provides the facility of do the investment in EMI. Though most of

the prospects and potential investors are not aware about the SIP. There is a large

scope for the companies to tap the salaried persons.

55 | P a g e
 BIBLIOGRAPHY

 NEWS PAPERS

 TELEVISION CHANNEL

 MUTUAL FUND HAND BOOK

 FACT SHEET AND STATEMENT

 WWW.SBIMF.COM

 WWW.MONEYCONTROL.COM

 WWW.AMFIINDIA.COM

 WWW.ONLINERESEARCHONLINE.COM

 WWW. MUTUALFUNDSINDIA.COM

”MUTUAL FUND INVESTMENT IS SUBJECT TO MARKET

RISKS. PLEASE READ THE OFFER DOCUMENT

CAREFULLY BEFORE INVESTING”

56 | P a g e
Questionnaire
Dear Sir/Madam
I am a student of Master of Business Administration, Sri Sukhmani Institute of
Engineering & Technology, currently doing a survey on “A study of Mutual Fund
Industry”. We request you to kindly fill the questionnaire below and assure you that the
data generated will be strictly used for research purpose and shall be kept confidential.
Name …………………………………… Ph.No. ……………………………
Date ……………….
1.Age : <30 31-35 36-40 41-45 46-50 50

2.Qualification: Graduate/ post Graduate Under Graduate Others

3.Occupation: A. Gvt. Service B. Pvt. Service Business Agriculture

Others

4. Which type of Investment Priority do you have?

A. Saving A/C B. Fixed deposits C. Insurance D. Mutual Fund

E. RD F. Real Estate

5. Which type of Preferences of factors do you have investing?

A. Liquidity B. Low Risk C. High Return D. Trust

6. Are you aware of the service operation of mutual Fund?

A. Yes B. No
7. Channel Preferred by the Investors for Mutual Fund Investment

A. Financial Advisor B. Bank C. AMC

8. Preference of Investors for future investment in Mutual Fund

A. SBIMF B. UTI C. HDFC D. Reliance E. ICICI Prudential F. Kotak G.

Others

9. Source of information for customers about Mutual Fund

A. Advertisement B. Peer Group C. Bank D. Financial Advisors

57 | P a g e