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State Bank of India was born on 1st July,1955 based on the recommendations of All India Rural Credit Survey Committee(1954) headed by Shri A.D Gorwala, through an Act of Parliament. The main objective of SBI is Extension of Banking facilities on a large scale, more particularly in rural and semi-urban areas, and for diverse other public purposes and to transfer to it the undertaking of the Imperial Bank of India and provide for other matters connected thereto or incidental thereto.SBI is the oldest, the largest and the highest profit making bank in India. Its evolution is not only intimately interwoven with the economic development of modern India but also with our nation building process to an extent perhaps unparalleled in the world. Moving like colossuses on the Indian financial turf, it has become a symbol of national pride and economic development. SBI with its extensive network of over 9000 branches has vast clientele and extends service not only on commercial basis but also on the basis of social considerations. The Bank is also on its way to introduce and absorb technology extensively at a rapid speed not only to remain customerfriendly and efficient for existing business but also to manage new business and services in an increasingly dynamic and global environment.

Operating Profit

Net Profit (Rs. In billions)



SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has grown immensely since its inception and today it is India's largest bank, patronized by over 80% of the top corporate houses of the country. SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset Management, one of the worlds leading fund management companies that manages over US$ 500 Billion worldwide. At SBI Mutual Fund, resources are considerably devoted to gain, maintain and sustain profitable insights into market movements. The trust reposed on SBI-MF by over 5.8 million investors is a genuine tribute to its expertise in Fund Management. SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. Thus SBI-MF believes in Proven skills in wealth maximization Exploiting expertise, compounding growth

In eighteen years of operation, the fund has launched thirty-eight schemes and successfully redeemed fifteen of them. In the process it has rewarded its investors handsomely with consistently high returns. A total of over 5.8 million investors have reposed their faith in the wealth generation expertise of the Mutual Fund. Schemes of the Mutual fund have consistently outperformed benchmark indices and have emerged as the preferred investment for millions of investors and HNIs. Today, the fund manages over Rs. 42000crores of assets and has a diverse profile of investors actively parking their 2

investments across 38 active schemes. The fund serves this vast family of investors by reaching out to them through network of 130 points of acceptance, 29 investor service centers, 59 investor service desks and 6 investor service point.

Products offered by SBI-Mutual Fund:

S.BI Mutual Fund






Magnum Balance

Magnum N.R.I

Magnum Equity Magnum Comma Magnum Tax Gain

F.M.C.G I.T Pharma Fund Contra Fund Emerging Business

Magnum MidCap Magnum Multiplier Plus S.B.I Blue Chip Magnum MultiCap Magnum Global

The above chart shows the various schemes offered by S.B.IMutual Fund but analysis is made on the three best performing schemes of S.B.I-M.F which are as follows: Magnum Tax Gain Scheme 3

Magnum Global Fund M.S.F.U-Contra Fund

The details of the above three schemes are as follows:

Magnum Tax Gain Scheme 1993

Structure: An Open Ended Equity Linked Saving Scheme Date of Allotment: March31, 1993

The portfolio of Magnum Tax Gain will comprise predominantly of Equity and Equity Related instruments and there would be Moderate to High risk on account of Price Fluctuations and Volatility. Since some portion of the portfolio may be invested in Debt and Money market securities, there would be moderate Credit risk and moderate to Low Interest rate/Price risk. SBI Magnum TaxGain performance continues to be impressive and it remains at the top of the charts among the tax-saving funds over one- and three-year periods. Over the past year, it has delivered a return of 110 per cent, almost matching the returns of its diversified counterparts such as Magnum Multiplier Plus and Magnum Global. Magnum TaxGain appears to have a flexible investment strategy. From being a largely mid-cap fund, it has over the year, increased its allocation to large-cap stocks, as have other funds in the Magnum fold. It now sports a blend of large- and mid-cap stocks and bears a risk 4

profile akin to that of a typical diversified fund. Investments in the fund will, however, be subject to a three-year lock-in period.

Asset Allocation:

35% 30% 25% 20% 15% 10% 5% 0% Large Cap Mid Cap
2% 32% 32% 34%

Small Cap

Other Current Assets

Sectoral Breakdown:

1% 2%

A utomobile
8% 4% 2%

cement Consumer Goods Fertiliz ers & Pes tic ides Indus. Manuf acturing Media & Ent.. Misc ellaneous Pharma Telecom Cash

Cons truc tion Energy Financ ial Serv ices

2% 3%

34% 6%

I.T Metals Paper

0% 3% 1 % 3% 1% 0%

11 %




Serv ices Textiles Chemic als

Investment Objective: The prime objective of scheme is to deliver the benefit of investment in a portfolio of equity shares, while offering tax rebate on such investments made in the scheme under section 80 C of the Income-tax Act, 1961. It also seeks to distribute income periodically depending on distributable surplus.Investments in this scheme would be subject to a statutory lock in of 3 years from the date of investment to avail section 80C benefits. Entry Load Not applicable Exit Load - Nil Minimum Investment: Rs. 500 Additional Purchase: Multiples of Rs.500 Options: Growth, Dividend Payout & Dividend Re-investment options Fund Manager: Mr. Jayesh Shroff Systematic Investment Plan Rs.500 per month 12 months Rs.1000 per month 6 months Rs.1500 per quarter 12 months

Performance: SBI Magnum Tax Gain Scheme 93 has exhibited a phenomenal performance since last few years. The scheme has generated an exceptional return of 123.24% in the 1 year period. The schemes benchmark - BSE 100 index as well as the peer group average was way behind at 42.57% and 55.43% respectively. Similarly, the return generated by the scheme in the three year period was more than twice the benchmark. The schemes corpus of Rs.237.94 crore has gone up by 48.5% compared to its last quarter. The scheme has a lower volatility and lower systematic risk as measured by the standard deviation and beta, when compared with that of its peer group. The scheme has given lesser negative returns than its peer group as indicated from the downside probability. The portfolio of the scheme is adequately diversified across 30 stocks, as per the latest portfolio of September 2005. The top ten holdings constitute 50.76% of the net assets. The top three sectors are Computers - Software & Education with 11.57%, Electrical & Electrical Equipments with 11.08% and Engineering & Industrial Machinery with 9.11% exposure.

Magnum Global Fund:

Structure: An Open Ended Growth Scheme Date of Allotment: September30, 1994

The funds portfolio currently comprises more than 35% debt and other instruments, while the rest is in equities. Within the equity portfolio, over 93% consists of mid-cap stocks, with an emphasis on sectors like construction, engineering and technology. The fund has the BSE 100 as its benchmark. The fund is known for its aggressiveness and dynamic reshuffling between sectors to capture the opportunities in the market. It currently has assets worth Rs 1,362 crore. In our latest ET Quarterly MF Tracker, the fund house was adjudged the best equity fund house. It bagged the maximum number of Platinum ratings for its equity funds. Recently, the portfolio strategy of the fund has undergone some changes. While on one hand, the fund is looking at newly listed mid-cap companies as an investment avenue, on the other hand, it has expanded its portfolio base from 30-35 to 50-55 stocks. While the newly listed potential companies enable the fund to capture reasonable opportunities at the right time, Mr Sinha believes that diversification of the portfolio base will help to overcome problems of low liquidity, usually associated with mid-cap stocks, especially in a turbulent market. 8

Asset Allocation:

Magnum Global

50% 40% 30% 20% 10%

6% 9% 50% 36%


Large Cap

Mid Cap

Small Cap

Other Current Assets

Sectoral Breakdown:

2% 5% 9%

cement Consumer Goods Fertilizers & Pesticides Indus. Manufacturing Media & Ent.. Miscellaneous Pharma Telecom Cash

Construction Energy
4% 3% 3% 2%


Financial Services I.T Metals

1 4% 2% 3%

Paper Services Textiles



2% 2%2% 1 %


Investment Objective SBI Magnum Global is known for its aggressiveness and dynamic reshuffling between sectors. It is a strategically oriented mid-cap fund and is likely to post healthy returns over a longer term of 3-5 years The prime objective is to provide the investors maximum growth opportunity through well researched investments in Indian equities, PCDs and FCDs from selected industries with high growth potential and Bonds. Entry Load Not applicable Exit Load For exit within 1 year from the date of allotment -1% For exit after 1 year from the date of allotment- Nil Minimum Investment: Rs. 2000 Additional Purchase: Multiples of Rs.5,00 Options: Growth, Dividend Payout & Dividend Re-investment options Fund Manager: Mr. R.Srinivasan Systematic Investment Plan Rs.500 per month 12 months Rs.1000 per month 6 months Rs.1500 per quarter 4 quarter


Performance: SBI Magnum Global is probably the only mid-cap-oriented fund to have found a place in this highly coveted arena. As on March 31, 07, the fund gave a return of 16.9% over the past one year period, while for the three-year period, it witnessed a compounded annual growth rate(CAGR) of 65.4%. Compare this with the returns of the indices: Sensex - 15.9% and 32.7%, Nifty - 12.3% and 29.2% and BSE 100 11.6% and 30.5% for one year and three years, respectively. Even the equity diversified category average has failed to beat this funds performance with 5% and 35.3% returns for one-year and three-year periods, respectively. The portfolio of the scheme is adequately diversified across 30 stocks, as per the latest portfolio of September 2005. The top ten holdings constitute 50.76% of the net assets. The top three sectors are Computers - Software & Education with 11.57%, Electrical & Electrical Equipments with 11.08% and Engineering & Industrial Machinery with13.82% exposure.

Relative Performance (Fund Vs Category average)


MSFU - Contra Fund:

Structure: An Open Ended Growth Scheme Date of Allotment: July14, 1999 Corpus as on March 31, 2007: Rs.1499.10 crores Magnum Contra Fund is the flagship fund of SBI Mutual fund. Heres a fund that thinks differently, goes against the grain of market thought and takes the road less traveled. It is an open ended scheme. This fund invests in undervalued scrips, which may be currently out of favour but is likely to show attractive growth in the long term. This fund offers you a possibility to invest in growth scrips of the future. It is ranked CPR 1 by CRISIL which indicates Very good performance The portfolio of Magnum Contra is fairly diversified now with about 50 stocks in the portfolio as compared to 36 stocks a year back. The top 3 sectors contribute to 30% of the total portfolio while the top 10 stocks comprise of 37% of the portfolio. Industrial Manufacturing, Energy and Automobiles are the top 3 sectors the fund has invested in while Praj Industries, Reliance Industries, Hindustan Zinc, M & M, and Jaiprakash Associates form the top five stocks that the fund has bet upon. The fund has stuck to its investment theme of being a long term fund with most of the stocks remaining the same throughout the last one year without any bias towards a sector as has been the policy of most of SBI`s mutual fund schemes.


Asset Allocation:

9% 6%

1 2% 1 % 2% 2% 8% 1 %

cement Consumer Goods Chemicals Indus. Manufacturing


50% 40% 30% 20% 10% 0%

Construction Energy

53% 33%

Financial Services I.T Metals



Media & Ent..

Large Cap

Mid Cap
1 2%

Small Cap

1 0%

4% 0% 1 6% 2% 6%

Other Paper Current Assets Services


Telecom Cash

Sectoral Breakdown:


Investment Objective SBI`s Magnum Contra Fund, belonging to the Magnum sector funds umbrella, is one such fund that has fairly stuck to its investment objective and succeeded in giving good returns to the investors. The main objective of the fund is to provide the investors maximum growth opportunity through equity investments in growth oriented sectors. Launched in July 1999, the SBI Contra Fund is an open ended diversified equity scheme that can invest in large, mid and small cap stocks. Entry Load Not applicable Exit Load For exit within 1 year from the date of allotment 1% For exit after 1 year from the date of allotment Nil Minimum Investment: Rs. 2000 Additional Purchase: Multiples of Rs.5,00 Options: Growth, Dividend Payout & Dividend Re-investment options Fund Manager: Ms. Sohini Andani

Systematic Investment Plan Rs.500 per month 12 months Rs.1000 per month 6 months Rs.1500 per quarter 4 quarters

Performance: 14

Being contrarian in nature to focus on out-of-favour stocks, the fund had a very low exposure to technology in 1999. So no great returns that year and in the next.But, it fell by just 5.52 per cent in 2001. The next year, it gave a return of 32.74 per cent (category average: 19.43 per cent). The year 2003 saw it dipping from the top-quartile position when it gave a return just above the category average. In 2004, it shot to fame as the second best-performing fund with a 64.49 per cent return (category average: 25.84 per cent). In 2005, it was the third best-performing fund with a 71 per cent return (category average: 46.70 per cent). Performance wise it has registered returns of 5.31% over a 6 months period and 15.77% over a year as compared to the category medians of 4.07% and 7.87% respectively. When looked at from a longer term horizon the fund has outperformed most of the funds in the equity diversified category with returns of 55.93% over a 3 year period and 51.85% over a 5 year period as compared to the benchmark (BSE 100 index) returns of 27.83% and 29.31%. When compared with other peer funds having the same investment objective, the fund has left behind every other fund in its category by miles. Relative Performance (Fund Vs Category average)

A brief history of mutual fund industry:





Formation of Unit Trust of India


Monopoly of U.T.I-M.F (Phase-I)


Entry of S.B.I-Mutual Fund


Entry of Public Sector Funds (Phase-II)


Entry of other Private Sector Funds (Phase-III)

Feb, 2003

Bifurcation of U.T.I into separate entities (Phase-IV)

Till now as

Increase in A.U.M through capturing of huge potential market shown below:





Definition: A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc.

Basics of Mutual Funds:

Net Asset Value (NAV) of a scheme Net Asset Value (NAV) denotes the performance of a particular scheme of a mutual fund. Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day-to-day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to 18

the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly

Mutual Fund Structure

The mutual fund structure consists of the following parties: Sponsor: Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. Trust: The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908. Trustees: Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The main responsibility of the Trustee is to safeguard the interest of the unit holders and inter alia ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 Asset Management Company: the Trustee as the Investment Manager of the Mutual Fund appoints The AMC. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund Registrar and Transfer Agent: The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar 19

processes the application form, redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor records. Custodian: It is often an independent organization, and it takes custody of securities and other assets of a mutual fund. Among public sector mutual funds, the sponsor or the trustee generally also acts as an custodian.

Figure 1: Structure of Mutual Fund

Benefits of Mutual Funds:


There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK is the range of benefits they offer, which are unmatched by most other investment avenues. The benefits have been broadly split into universal benefits available to the investors:

A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc.

depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.500/-. This amount today would get you less than quarter of an Infosys share! Thus, it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market. Diversification: The nuclear weapon in your arsenal for your fight against Risk. It simply means that you must spread your investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of your returns, for example during one period, equities might under perform but bonds and money market instruments might do well enough to offset the effect of a slump in the equity markets. Similarly, the information technology sector might be faring poorly but the auto and textile sectors might do well and may protect your principal investment as well as help you meet your return objectives. Variety: Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity. For example, an investor can invest his money in a Growth Fund (equity scheme) and Income Fund (debt scheme) depending on his risk appetite and thus create a balanced portfolio easily or simply just buy a Balanced Scheme. 21

Professional Management: Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. When you buy in to a mutual fund, you are handing your money to an investment professional that has experience in making investment decisions. It is the Fund Manager's job to (a) find the best securities for the fund, given the fund's stated investment objectives; and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio, as and when required. Low Transaction Costs: The transactions of a mutual fund are generally very large. These large volumes attract lower brokerage commissions and other costs, as compared to the smaller volumes of the transactions entered into by the individual investors. Tax Benefits: Investment in mutual funds also enjoys several tax advantages. Dividends from Mutual Funds are tax-free in the hands of the investor (This however depends upon changes in Finance Act). Also, capital gain accrued from mutual funds investments for period of over one year is treated as long term capital appreciation and is taxed at a lower rate of 10% without benefit of indexation or 20% with benefit of indexation.

Regulations: Securities Exchange Board of India (SEBI), the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration, and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors


Limitations of Mutual Funds:

It is not true that the fund managers are dumb; this under performance is largely the result of limitations inherent in the concept of mutual funds. These limitations are as follows:

Entry and exit costs: Mutual funds are a victim of their own success. When a large body like a fund invests in shares, the concentrated buying or selling often results in adverse price movements ie at the time of buying, the fund ends up paying a higher price and while selling it

realizes a lower price. This problem is especially severe in emerging markets like India, where, excluding a few stocks, even the stocks in the Sensex are not liquid, let alone stocks in the NSE 50 or the CRISIL 500. So, there is simply no way that a fund can beat the Sensex or any other index, if it blindly invests in the same stocks as those in the Sensex and in the same proportion. For obvious reasons, this problem is even more severe for funds investing in small capitalization stocks. However, given the large size of the debt market, excluding UTI, most debt funds do not face this problem. Wait time before investment: It takes time for a mutual fund to invest money. Unfortunately, most mutual funds receive money when markets are in a boom phase and investors are willing to try out mutual funds. Since it is difficult to invest all funds in one day, there is some money waiting to be invested. Further, there may be a time lag before investment opportunities are identified. This ensures that the fund under performs the index. For open-ended funds, there is the added problem of perpetually keeping some money in liquid assets to meet redemption. The problem of impracticability of quick investments is likely to be reduced to some extent with the introduction of index futures.


Fund management costs: The costs of the fund management process are deducted from the fund. This includes marketing and initial costs deducted at the time of entry itself, called "load". Then there is the annual asset management fee and expenses, together called the expense ratio. Usually, the former is not counted while measuring performance, while the latter is. A standard 2% expense ratio means that, everything else being equal, the fund manager underperforms the benchmark index by an equal amount. Cost of churn: The portfolio of a fund does not remain constant. The extent to which the portfolio change is a function of the style of the individual fund manager ie whether he is a buy and holds type of manager or one who aggressively churns the fund. It is also dependent on the volatility of the fund size i.e. whether the fund constantly receives fresh subscriptions and redemptions. Such portfolio changes have associated costs of brokerage, custody fees, registration fees etc. that lowers the portfolio return commensurately. Change of index composition: World over, the indices keep changing to reflect changing market conditions. There is an inherent survivorship bias in this process, with the bad stocks weeded out and replaced by emerging blue chips. This is a severe problem in India with the Sensex having been changed twice in the last 5 years, with each change being quite substantial. Another reason for change index composition is Mergers & Acquisitions. The weightage of the shares of a particular company in the index changes if it acquires a large company not a part of the index. Tendency to take conformist decisions: From the above points, it is quite clear that the only way a fund can beat the index is through investment of some part of its portfolio in some shares where it gets excellent returns, much more than the index. This will pull up the overall average return. In order to obtain such exceptional returns, the fund manager has to take a strong view and invest in some uncommon or unfenced investment options. Most people are unwilling to do that. They follow the principle "No fund manager ever got fired for investing in 24

Hindustan Lever" i.e. if something goes wrong with an unusual investment, the fund manager will be questioned but if anything goes wrong with the blue chip, then you can always blame it on the "environment" or "uncontrollable factors" knowing fully well that there are many other fund managers who have made the same decision. Unfortunately, if the fund manager does the same thing as several others of his class, chances are that he will produce average results. This does not mean that if a fund manager takes "active" views and invests in heavily researched "uncommon" idea the fund will necessarily outperform the index. If the idea does not work, it will result in poor fund performance. But if no such view is taken, there is absolutely no chance that the fund will outperform the index.


Mutual Funds play a significant role in the development of the financial market and this has been proved in the developed countries like United States, United Kingdom and Japan. The mutual funds are emerging as a strong financial intermediary and playing a very important role in bringing stability to the financial system and efficiency to resource allocation. Mutual funds help corporate in raising funds for their financial needs and provide an avenue of investment to investors by parking their savings, which leads to over all growth of the economy. The Indian mutual fund industry is poised to become one of the largest and dominating constituents of the Indian financial service sector in future. The total asset under management of Indian mutual fund is about 152000 crores as on 31 March 2005. Presently, there are more than 31 mutual fund houses operating in India and actively managing 451 funds.

History of Indian mutual funds 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. The history of mutual funds in India can be broadly divided into four distinct phases.

First Phase (1964-87)

An Act of Parliament established Unit Trust of India (UTI) in 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964.

Second Phase (1987-1993) Entry of Public Sector Funds

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores. Third Phase 1993-2003 Entry of Private Sector Funds With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs.1, 21,805 crores.

Fourth Phase since February 2003 26

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. The total asset under management of Indian mutual fund is about 152000 crores as on 31 March 2005. Presently, there are more than 31 mutual fund houses operating in India and actively managing 451 funds.

INDUSTRY PERFORMANCE The mutual funds in India have emerged as strong financial intermediaries and are playing stability to the financial system and efficiency to resource allocation. Mutual funds help corporate in raising funds for their financial needs and provide an avenue of investment to investors by parking their savings. This leads to over all growth of the economy. The major chunk of household saving in India, which earlier went to bank deposit are now being taken by mutual funds. The active involvement of mutual funds in promoting economic development can be seen not only in terms of their participation in the saving market but also in their dominant presence in the money market and capital market. A developed financial market is critical to overall economic development, and mutual funds play an active role in promoting an active healthy market. Mutual funds increase liquidity in the money market. The assets holding pattern of mutual fund in India indicates the dominant role of mutual fund in the 27

money market and capital market. The asset growth of Indian mutual fund industry, which has increased from Rs97, 028 crore at the end of 1999 to Rs1, 40,093crore at the end of 2003, was primarily driven by bond funds. Continued interest rate cuts by RBI and down turn of equity market for last two years had forced mutual funds to invest in debt market to generate above normal return.

Indian MF by type of Fund; 2004 3% 35%


36% Equity Money Market Bond Mutual Funds have the potential for organic growth. Participants in Balanced must this markets
become the opportunity seeking missiles exploring path breaking initiatives to lead the revolution

These eight steps will take mutual fund industry to Nirvana: Migrate from Industry to Opportunity Zone Revisit MFs Core Competence Lead through Innovation Rebuild Investors Confidence Manage Risks through Derivatives Widen Geographical Spread Strategically 28

Educate Investors Aggressively Treat investors like Customers

The Indian mutual fund industry is in the development and consolidation stage. Having the wide variety of mutual fund schemes the only thing the funds need to do is to catch the discerning customers. Proper marketing and customer relationship strategies will play a great role in the development of the mutual fund industry in India. The mutual funds should think of widening their reach to the rural segment, which remains untapped in India. It is too early to say whether the asset management companies will be successful in making the mutual funds popular in India. For making the mutual funds successful investor education has to be at the top priority. Not only the regulators but also the asset management companies should take a step further in this regard. It is only time that will depict whether the mutual funds will be on the winners platform.

Types Of Mutual Funds

Schemes according to Maturity Period: A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open-ended Fund/ Scheme: An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices, which are declared on a daily basis. The key feature of open-end schemes is liquidity. Close-ended Fund/ Scheme: A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. These mutual funds schemes disclose NAV generally on weekly basis. 29

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

Schemes according to Investment Objective: A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended. Such schemes may be classified mainly as follows: Growth / Equity Oriented Scheme: The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preference. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. Income / Debt Oriented Scheme: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. Balanced Fund: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the 30

proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. Money Market or Liquid Fund: These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. Gilt Fund: These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as are the case with income or debt oriented schemes. Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms Sectoral funds: These are the funds/schemes, which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert. 31

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. E.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.

Systematic Investment Plan (SIP).

SIP or Automatic Investment Plan automatically enables you to invest a pre-set amount of money into the fund of your choice at regular intervals. You can decide on how often to invest and how much to invest, even as little as Rs. 500 can be invested every month. Here you are required to give at least 6 post-dated cheques (in case of monthly SIP) and 4 post-dated cheques (in case of quarterly SIP).

Systematic Withdrawal Plan (SWP).

SWP or Automatic Withdrawal Plan enables investors to receive regular amount from their mutual fund investment portfolio at fixed intervals without the need to contact the mutual fund each time. With SWP, investors have the facility of receiving a regular cheque on a monthly, quarterly or half-yearly basis. However, the investor himself can decide the frequency of SWP.


Introduction of Project
Purpose of the project: The project is an integration of learning both in the area of finance and marketing which, focuses on two most critical aspects related to fund management in India. Firstly understanding what are the prerequisites and legalities involved in the launch of mutual fund. Secondly Management of New Fund Offer of a scheme by a mutual fund company and various issues related to its management like educating investors, advertisement & promotion and distribution strategies for effective penetration.

Scope of the project:

The project involved managing various issues related to launch of Classic equity Fund N.F.O. My work involved coordinating with marketing strategies for publicity, creating awareness among retail investors and coordinating with various branches, which were cross-selling mutual fund schemes. It included visiting prospective investors in the various areas of the city explaining about technicalities of the new issue. The project also involved creating awareness regarding mutual funds among retail investors, which we did by organizing Investor Service Camp and Investor Service Desk at important places during the N.F.O and we were successful in educating investors about mutual fund as an investment option. 33

The main objective of this project is:

To study marketing strategies involved during the launch of fund during an N.F.O (New Fund Offer) by a mutual fund company.

To make a comparison of various promotional tools used for promoting the product.

Research Methodology:
The present study was undertaken TO REVIEW THE LAUNCH OF EQUITY MUTUAL FUND IN LUDHIANA. This chapter gives as the research design, data collection methods, sampling techniques, fieldwork carried out, analysis and interpretation, limitations inherent in the project and finally coverage of the research work.

Research Design
The research design is the pattern or an outline of a research project working. It is a statement of only the essentials of a study being conducts follows a descriptive search design.

Type of Data Collection Method

1.The primary data was collected by personally interviewing the investors and employees. Personal interview method was adopted, taking into consideration the availability of the time and other resources, whenever need arouse various 34

supplementary questions were also asked to gain maximum information from the respondents. Questionnaire was prepared to study the role of promotional tools in launch its and impact on investors. A survey was conducted keeping in view the objective of the study. The questionnaire contained both open-ended and close-ended questions. 2.The secondary data means data that is already available. It is collected through published data. Published data was collected from books, magazines, reports and publications. Data was also collected from various Internet.

Sampling Plan Sampling is an effective step in collection of primary data and has a great influence on the quality of results. The sampling plan includes the population, sample size and sampling design. Universe All the investors who are investing in equity and mutual funds. Population All the investors who are investing in equity and mutual funds and are residents of Ludhiana. Sample Unit An investor who is investing in equity and in mutual funds is a resident of Ludhiana. Sampling Technique For conducting the study, convenience-sampling method was adopted because the respondent investors were chosen from those who already invested in mutual funds and in equity. The respondents were interviewed with help of a structured questionnaire.


Sample Size The sample size for research was 100 investors. Data Analysis and Interpretation For the purpose of analyzing, raw data was summarized into different tables and from these tables the results were derived. The questions, which had alternative choices, were analyzed by taking percentage. In case of open-end questions, the general suggestions were summarized and presented with the help of bar diagrams.

Review of launch
Why launch now? India climbs into top 10 economies written in bold in one of the leading business newspaper dated 13th July. It is official now that India has arrived on the global scene. The Indian economy happens to be the tenth largest economy in the world in terms of absolute GDP size that is growing above 6%. It is also one of the few markets in the world that offers high prospects for growth and earning potential in practically all areas of business. Even CII president Y.C Deveshwar forecast setting its eyes on growth more than 8 %. This rapid growth has been made possible by reform minded government, strong legal framework which happens to be best in Asia, abundant technical and managerial talent to start with as one of the few reasons India being closely watched as an investment destination. We have seen a drastic shift from India as an agrarian economy where the cycle was Agrarian manufacturing service sector, which has shifted to service gaining more momentum. Services sector constitute a major 56% of the economy, as opposed to very small percentage years back. CII figures denoted a growth of 8.3% for service, 8.1% for the manufacturing and 3% for agriculture sector. From this it is very clear that services have been the major driver in the economic momentum of the country. So the new trend seen now is: Service Manufacturing Agriculture 36

The economy is on a sound platform even if there is failure of monsoons or any unrest the Sensex seems unjittered which shows that market is being driven more on the sound fundamentals than driven on the basis of emotions. Gone are the days when government toppled the Sensex fallen badly. It was quite evident from firm figures despite family feud of Indias leading industrial house, which happens to be the backbone of Indian economy. There has been a significant change-taking place in the demographic profile of the country. 70% of the Indians are less than 35 years of age, which makes India as one of the youngest countries in the world. And fortunately its working population will continue to increase for next two decades at least while in case of china it is now beginning to decline. In todays global economy demographics drive growth, as there is positive correlation between longterm growth rates and low dependency associated with youthful population. This consuming class creates a great opportunity for the banks and will drive financial services for some years to come. In addition there are an increasing number of affluent Indian consumers with the disposable incomes needed to make India itself more of an attractive marketplace. On the basis of income we have seen that there has been large-scale migration from low level to middle income level, middle-income level, middle-income level to affluent income level. Recent figures showed that there are expected to be six million household classed rich by 2005-06 up from three million households. So it is making more money available at the hands of the consumer coupled with the fact that interest rates are also half from last five years. Retail credit has been growing at 30 to 40percent.In the past few years consumer demands has picked up significantly due to low interest regime and growing average per capita income which has enabled the consumers to take personal and home loans at lower level. The sectors which have been benefited from this has been the consumer non-durable such as electronics. So while talking of technology there has been a spur in mobile phone sales that will exceed one billion handsets a year by 2009 this device is set to gain ground with a base of 2.6bn people even leaving behind consumption of PCs and TVs The rising influx of money in India from last 2 years has been attributed mainly to the foreign institutional investors (FIIs). The pool of money invested by FIIs has been 37

increasing with every single passing day. After Blackstone, a host of players are in the process of raising dedicated India, China and Korea funds. The combined corpus is expected to be in the region of around $1.3bn. So not only us FII but also Japanese have arrived with their bag of money for claiming their share of Indian buck with the biggest investors with over$1.5bn mark and following this bandwagon are Koreans too. Interestingly hearing of Australians players like common wealth bank of Australia has invested over $900m in India. A combination of various factors has made India the preferred destination by FIIs fears of a slowdown in the world economy, higher unemployment in European Economies, affirmation of quality of management of Indian companies as well as opportunities they face. According to a recent study by KPMG, the return on every dollar spent in India is better than the return in other emerging markets such as China, Brazil and Mexico that have more favorable business environment. Free trade agreements are opening up new vistas for Indian business, making access to global markets easier for Indian goods and services. While over 45% of Indias total exports are having with FTA countries/region, this makes India a prime mover in FTA in south East Asia. Growth has been attributed to its tact in integrating with Singapore, which happens to be one of the emerging economies. India expressing its shift in focus on economic component is of sheer importance to India. US investments in India on a historical cost basis were flat between 1999-2001 and there has been sluggish US exports to India partly reflected sluggish industrial growth due to political reasons. Flowing of investments from the superpower will boost the trade and thus building a strong economy. So from all this we have seen that India is on the growth trajectory with increasing role of FIIs, an increasing flow of money and associated good returns. That probably made standard chartered classic equity fund wake up to the world of equities and to enjoy their share of profit from Indian market

Pre launch requirements: As it has already been seen that its just the beginning that India has stepped on the its growth trajectory with inflow of money into the market which is mainly attributed to rising influx of 38

foreign institutional investors, rising per capita income .as a result of which every individual wishes to direct his surplus towards investment opportunities where they can foresee growth and their money multiplying. Talking of investments, mutual fund, as an option is much hyped and gaining ground due to good rate of returns over fixed deposits, PO schemes, Insurance. In the last couple of months there has been a flood of New Fund Offers (NFO) by various asset management companies. There are over 30 AMCs currently operational in India. Thus with the rise in Mutual Fund Industry in India there needs to be a governing body so that UTI history doesnt repeat itself. In India Securities and Exchange Board Of India (SEBI) and Association Of Mutual Funds of India (AMFI) happen to be the bodies that regulate the MF Industry. Proper code of conduct has to be followed which consists of filing offer document and issuance of the dates for NFO by SEBI. ABOUT SEBI

In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution, and was subsequently upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992. In place of Government Control, a statutory and autonomous regulatory board was established with defined responsibilities, to cover both development & regulation of the market, The basic objectives of the Board were identified as: To protect the interests of investors in securities; To promote the development of Securities Market; To regulate the securities market; For matters connected therewith or incidental thereto.


The Securities and Exchange Board of India Act, 1992 the SEBI Act governs all the Stock Exchanges and the Securities Transactions 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 issued guidelines from time to time for MF either promoted by public or by private sector entities SEBIs approval of an 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. They should not be associated with the sponsors. 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. Section 11 of the SEBI Act provides that to protect the interest of investors in securities and to promote the development of and to regulate the securities market by such measures, is the duty of the Board. It has given power to the Board to regulate the business in Stock Exchanges, register and regulate the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers, etc., also to register and regulate the working of collective investment schemes including mutual funds, to prohibit fraudulent and unfair trade practices and insider trading, to regulate take-over, to conduct inquiries and audits. All the stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deed, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediary who may be associated with the Securities Markets are


to register with the Board under the provisions of the Act, under Section 12 of the SEBI Act. The Board has the power to suspend or cancel such registration.


AMFI, the apex body of all the registered Asset Management Companies was incorporated on August 22, 1995 as a non-profit organization. As of now, all the 30 Asset Management companies that have launched mutual fund schemes are its members.


To define and maintain high professional and ethical standards in all areas of operation of mutual fund industry. To recommend and promote best business practices and code of conduct to be followed by members and others engaged in the activities of mutual fund and asset 41

management including agencies connected or involved in the field of capital markets and financial services. To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all matters concerning the mutual fund industry. To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry. To develop a cadre of well-trained Agent distributors and to implement a programme of training and certification for all intermediaries and other engaged in the industry. To undertake nation wide investor awareness programme so as to promote proper understanding of the concept and working of mutual funds. To disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies. The Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas with a view of protecting and promoting the interests of mutual funds and their unit holders. The intermediaries/distributors have to take on the role of financial advisors to investors, a role for which they need preparation. AMFI Mutual Fund Certification and Registration Programme has been put together to give the fund distributors the knowledge and insights required for them to become both better intermediaries and more informed as mutual fund advisors. Even mutual fund employees need to understand the complexities of how the funds functions internally and externally Certification is Mandatory. In case of firms and corporate the requirement of certification is applicable to persons engaged in sales and marketing. What is an Offer Document? It is a booklet that sets forth concisely the information that a prospective investor ought to know before investing. An Investor must read offer document before making an investment 42

decision. Particulars of the scheme have to be prepared in accordance to SEBI guidelines specified in (mutual funds) regulation, 1996. It contains at length describing the name of the scheme, what is the investment objective, structure of the scheme. It gives information on what should be the minimum subscription amount to be raised like in case of SCMF it was 1crore. It briefs on the options i.e. growth, dividend payout or reinvestment, What are the initial issue expenses under SEBI regulations, shareholding pattern of the AMC, what are the restrictions on investment schemes, initial offer price which was Rs.10, what will be the minimum redemption amount, load structure, details on the flexibility for shifting from one scheme to another, scheme specific risk factors. What is the constitution of the fund that is the registrar, custodian, and auditors? What is the role of sponsors, trustees, and Transfer agent? The document also contains definitions and terms used in mutual fund like what is an AMC, NAV, loads (entry exit), trust, Repo, reverse repo, SIP, STP. Another most important part is a brief note on the tax benefits of investing into mutual funds, which are key personnel, involved in an AMC, who is the fund manager, his qualifications and his involvement in previous projects. Finally DUE DILIGENCE CERTIFICATE is awarded after fulfilling legal requirements connected with launching, guidelines, instructions issued by the government of India and any other competent authority have been duly complied with. The certificate is granted after seeing that the disclosures made in the offer document are fair and adequate, to enable the investors to make well-informed decisions regarding investment in the proposed scheme. Custodian, Collecting banker, Registrar, Transfer Agent and Computer Age Management Service (P) Limited are registered with SEBI.

New Product Launches Many new products are launched into the marketplace with little prior Analysis of the current market scenario, Major competitors doing appropriate segmentation, targeting the customers, creating a sales strategy, developing a distribution strategy, training the sales force and integrating the competitive strategy. This mistake significantly reduces or eliminates any potential profit the product may have and greatly increases the sales 43

development time. These problems must be avoided if a company wants to survive in today's competitive marketplace.

Study your competition. Many business-marketing classes teach participants how to perform a SWOT (strengths, weaknesses, opportunities and threats) analysis. We have to start by taking a serious look at your competitors. Make a list of the businesses that offer products or services similar to the one you plan to launch. Even if one thinks that my new product or service is entirely unique and without existing competition, it's important to put ourselves in our prospective customers' shoes and imagine what they might buy in lieu of what we plan to offer. Once it is decided who all are our competitors, its important to review their marketing materials, including their ads, brochures and websites. We must evaluate how new product or service will stand up against what's already being offered, in what ways we'll excel, and which companies or their offerings pose the greatest threats to our success. 2. Target the ideal customer. To successfully launch a new product or service with minimum financial outlay, it's essential to focus exclusively on the prospects who are most likely to purchase from us. These may be customers who are currently buying something similar and will appreciate the additional features our new product or service provides. Once our best prospects have a perceived need for what we offer, can afford to buy it and have demonstrated a willingness to do so--probably by purchasing from competition. Since its rightly said, it's always easier to fill a need than to create one. 3. Create a unique value proposition. At this stage, one should have a clear understanding of what he must offer in order to stand apart from the competition and who will want to take advantage of our offer. But we also have to be aware as to why customers will want to buy from us vs. the vast field of competitors out there? What benefits and features we can provide that our prospective customers will value most? The bottom line is that our product or service "bundle" should be unique and meet the needs and desires of our best prospects. 4. Define your marketing strategy and tactics. Next, choose your sales and marketing channels. Will we market online, via catalog or through dealers? Generally, multichannel 44

marketers achieve the greatest success because customers who can shop when and however they like tend to spend more and shop more often. Suppose our strategy is to market a low-cost workout device to people who can't afford gym memberships or highpriced home equipment. We might choose traditional direct marketing plus online sales as major primary channels, and employ tactics including direct-response TV spots and online ads and e-mail solicitations that link to your website. 5. Test your concept and marketing approach. With all the money it takes to bring a new product or service to market, it's foolhardy to rush headlong into the launch phase prior to testing. What should you test? It's best to examine your product or service bundle plus marketing message and marketing materials. Depending on what the plan is, one must decide on the market and marketing budget, one can use formal focus groups (or simply host roundtable discussions with members of the target audience), employ online research or mall intercept studies, or distribute the product to a select group of users for testing. Only after testing is complete, should one proceed to the final creation of marketing tools and materials. 6. Roll out your campaign. Public relations often play a vital role in the launch of a product or service. One can use media relations tactics to place articles and win interviews, get coverage by allowing key press to review the product, hold a launch event, or use grass roots marketing to build buzz. But no matter what publicity route we choose, we must make sure that our product or service is completely ready and available for purchase in order to maximize returns from the coverage receive. And other marketing efforts should follow closely on the heels of your press roll out. Monitor the results from all media, and in the first weeks and months, be prepared to adjust your campaign to take advantage of what's working best. Thus in nutshell 7 Ways Market Engineering Can Help Make New Product Launches More Successful 1. 2. 3. expense. 45 Identifying the best customer segments for penetration. Positioning the product successfully against competition. Creating a system to maximize sales leads while minimizing marketing

4. 5. 6. 7.

Basing sales strategy on customer benefits rather than features. Making the team market-driven. Setting sales goals based on market potential. Identifying optimal mix of marketing tools and distribution channels to

maximize sales.

Present Scenario: Ludhiana: Major Players Franklin Templeton Principal Pnb Prudential ICICI Standard Chartered HFDC Kotak Reliance Birla Sun life ING Vysya Market Share: Ludhiana

Franklin Templeton HDFC Mutual Fund Prudential ICICI Reliance Standard Chartered Mutual Fund ING Vysya Kotak Birla Sun Life

150 Cr. 100 Cr. 90 Cr. 11 Cr. 40 Cr. 10 Cr. 18 Cr. 40 Cr. 46

Management of N.F.O: Learning from Equity Fund

There are various issues, which needs to be analyzed while handling a mutual fund N.F.O some of which are investor awareness, advertisement and publicity and distribution channels that are followed by a fund house. Success of an N.F.O depends how effectively fund management companies handle these issues. I had the chance to work in Mutual Fund and handle their N.F.O where these issues were looked into and proper strategies were made to handle them effectively and are explained in the subsequent part of the report. Investors Guide To Mutual Fund

In this we tried to create awareness among the investors to understand the nuances of mutual fund and Investors Service camp were organized like ET Retail Investors Forum and Investors Service Desk were put up at important places so as to educate investors. Also investors often tend to think of fund N.F.Os in the same vein as they do of stock IPOs. We educated them on the fundamental differences between the two. In case of mutual funds, a separate unit is created at the time of investment and it is destroyed at the time of redemption. Thus, the supply of mutual fund units is unlimited and so any appreciation in the value of a 47

fund's NAV can never be due to an increase in the demand for a fund's units. Moreover, in the case of funds, your gains depend on how well the fund manager invests. A new fund is an untested entity without any track record. Your investment call will have to be made purely by looking at the fund manager and the AMC. A discerning investor should absorb this information carefully and invest taking into consideration all these factors.


Steps In developing Effective Communication

Identify Target Audience

Establish Budget

Select Channels

Design Message

Decide On Media Mix

Measure The Results


1. Investment options where the investors invest their surplus. Table 1: showing the investment options where the investors invest their surplus: Options Bank Deposits Real Estate Mutual Fund Post Office LIC Others Total No of responses 32 16 68 16 22 12 166 Percentage 19.27% 9.64% 40.96% 9.64% 13.25% 7.24% 100%

Figure 1: showing the investment options where the investors invest their surplus:

70 60 No of responses 50 40 30 20 10 0 Bank Deposits Real Estate Mutual Fund Post Office LIC Others

Interpretation: From the above data collected it was found that majority of the investors invested their surplus in mutual funds with no. of 68 or 40.96%, followed by bank deposits and LIC with no. Of 32 and 22 respectively. Out of 168 16 each are invested in post office and real estate. Rest 12 are invested in other schemes like shares. 50

2. People influencing the investment decision of the investors. Table 2: Showing the people influencing the investment decision of the investors. Options Yourself Financial Advisors Business Colleagues Family Members Banking Executives Total No of responses 78 22 16 14 12 142 Percentage 54.93% 15.49% 11.27% 9.86% 8.45% 100%

Figure 2: Showing the people influencing the investment decision of the investors.

80 70 No of responses 60 50 40 30 20 10 0 Yourself Financial Advisors Business Colleagues Family Members Banking Executives


Interpretation: The data reveals that 56% of the investors took decisions on their own. After that 15% of them relied on their financial Advisors, as they are more experienced, 11% from business colleagues, Finally 10% and 8% by family members and banking executives resp. Table 3: Showing the sources of information for the investors about mutual fund. Options Hoarding Banners Newspapers Road show T.V ads Sales People IFAs Bankers Any other Total No of responses 22 26 34 2 8 52 9 14 2 169 Percentage 13% 15% 20% 1% 5% 32% 5% 8% 1% 100%

Figure 3: Showing the sources of information for the investors about the mutual fund.
60 50 No of responses 40 30 20 10 0 Hoarding New spapers T.V ads IFAs Any other


Interpretation: The data revealed that most of the investors came to know about M.F. 9.76% through sales staff (32%) and just few by means of newspaper (20%) followed by the ones who were made aware through banners and hoarding accounted 15% and 13% resp. employees also gave information to their customers. 14% of the customers came to know about M.F. 4. Types of newspaper/magazines read by the investors. Table 4: Showing the types of newspaper/magazines read by the investors. Options Financial Non financial Both Total No of responses 36 12 52 100 Percentage 36% 12% 52% 100%

Figure 4: Showing the types of newspaper/magazines read by the investors.

60 50 No of responses 40 30 20 10 0 Financial Non financial Both


Interpretation: When asked about the investors preference in case of reading newspaper and magazines. It was observed that 36% of investors liked to read financial newspaper/magazines and only 12% likes to read non-financial newspaper/magazines, and the rest remaining big chunk of 52% investors liked to read both types of newspaper/magazines.

5. Commemoration of ads by the investors Table 5: Showing the Commemoration of ads by the investors Options Yes No Total Figure 5: No of responses 44 56 100 Percentage 44% 56% 100%

Showing the Commemoration of ads by the investors

Yes 44%

No 56%

Interpretation: When asked about the recalling of ads then 56% investors gave negative response and 44% gave positive response. 54

6. Things investors can commemorate about the ads.

Table 6: Showing the Things investors can commemorate about the ads.

Options Color Message Brand name No Total

No of responses 22 6 22 56 106

Percentage 20.75% 5.66% 20.75% 52.83% 100%

Figure 6: Showing the Things investors can commemorate about the ads.

60 50 No of responses 40 30 20 10 0 Color Message Brand name No

Interpretation: When asked about what they recalled in ads, 21% investors gave the answer color and brand name and as described in last answer 53% investors answer was no and 5% investors answer was message content. 7.Adequacy of the information given by the ads. Table 7: Showing the Adequacy of the information given by the ads. 55

No. of responses Yes No Total 62 38 100

Percentage 62% 38% 100%

Figure 7: Adequacy of the information given by the ads.

No 38%

Yes 62%

Interpretation: It has been seen that the maximum no. of investors (62%) were satisfied with information given in the ads and only 38% were not satisfied.

8. Rating of the promotional tools by the investors. Table 8: Showing the rating of the promotional tools by the investors. 56

Options Newspaper T.V ads Sales staff Banner/Hoarding IFAs Magazines

Total Scores 133 123 109 210 248 192

Mean Scores 1.33 1.23 1.09 2.1 2.48 1.92

Rank 3 2 1 5 6 4

Interpretation: - As it can be seen from the above table that mean scores were calculated of various options and then the ranking was done i.e. the one having lowest mean score was given ranked 1st and the highest mean score has given last rank. So Sales staff with lowest mean score was given rank1 followed by T.V ads which were ranked second, Newspapers were ranked 3rd , Magazines rank 4th , Banners/Hoarding rank 5th and with highest mean score last rank is to IFAs.



Findings of Study 1. The findings revealed that almost 41% of the investors invest in mutual fund. 2. It was found that most of investors made their investment decisions on their own.. 3. About 32% of the investors came to know about mutual fund through sales staff and 20% by newspaper. 4. 52% of the investors read both type of newspaper financial as well as nonfinancial. 5. Color and Brand name remained major features behind the recalling of the ads. 6. It was found that majority of investors were satisfied with information given in the ads.

The investors gave the no.1 rank to sales staff amongst all the promotional tools. In case of no.2 rank investors preference was T.V ads and again T.V ads were at 3rd rank along with newspaper.

Recommendations of the study 1. on investors. 2. 3. More advertisement is required in newspapers and also in TV. To use the promotional tools in effective way surveys and Sales staff needs more attentions because they have good influence

researches are required before the launch. Conclusion The study was conducted to have an in-depth knowledge of the launch of mutual fund. A survey with the help of the questionnaire was carried out to know the role of the promotional tools in launch. Various points and ideas came into light after the survey are that majority of the investors were aware of mutual fund and advertisement proves to be an effective promotional tool.


6.4 Limitations 1. Lack of sufficient time. 2. Unwillingness of respondents to reveal the information. 3. The sample taken was very small due to lack of time. 4. As the survey was conducted at the time of trading, so the brokers and employees might have not filled the questionnaire with so much attention. 5. Inability of the respondent to answer open-ended questions. 6. As the sampling procedure used was convenience sampling, so the error may script in. 7. All the data was collected through interview and questionnaire method so some facts could have been ignored.


Investment Management First Edition, Himalya Publishing House, New Delhi. Mutual Funds in India- The Emerging Scenario, R.B.S.A Publishers, Jaipur. Mutual Funds by ICMR AMFI (Advisors Module) Mutual Funds in India by H. Sadhak



To Study The Role of Promotional Tools in launch of Mutual Fund in Ludhiana and its impact.

1. Where do you invest your surplus? a) Bank Deposits b) Real Estate c) Mutual Funds d) Post Office e) LIC Schemes f) Others (Please specify) 2. Who influences your investment decision? a) Yourself b) Financial Advisors c) Business Colleagues d) Family Members e) Banking Executives 3. Are you aware of New Types of Mutual Fund? a) Yes b) No 4. How did you come to know about it? a) Hoarding b) Newspapers c) Road Show 61

d) T.V ads e) Sales People f) Bankers g) Any other 5. Which newspaper/magazines do you read? a) Financial b) Non Financial c) Both 6. Do you recall any of the ads? a) Yes b) No 7.What can you recall? a) Color b) Message c) Brand Name d) No 8. How do you rate listed promotional tools in order of impact? a) Newspaper b) T.V ads c) Sales Staff d) Banners/hoarding e) IFAs f) Magazines

Name . Profession . 62