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With deep consent and pleasure, I would like to express my gratitude to all those who helped me in the preparation of this project. Without their co-operation the work would not have been possible.
It is matter of great pleasure to place on record and my sincere gratitude towards Mr. V.K Diwan, Director of Center for Management Training and Research (CMTR), for extending the facilities and giving me an opportunity to work on this project. I am deeply thankful to Dr. kapil dev for his kind cooperation and support in enhancing my knowledge. The discussion I had with him helped me clear a number of concepts and also make important decisions. His ever encouraging attitude and sincere advice made my task easier. I am also thankful to all my faculty members for providing me conceptual knowledge and information. Finally, I would also like to thanks to my colleague for their contribution and moral support. All of them are great source of inspiration and encouragement.
The mutual fund industry is a lot like the film star of the finance business. Though it is perhaps the smallest segment of the industry, it is also the most glamorous – in that it is a young industry where there are changes in the rules of the game every day, and there are constant shifts and upheavals. 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. This project is an empirical study which compares , analyses, explains the statistical aspects of mutual fund with the help of some of the most popular and high performing Indian funds. It also endeavors to bring out the consumer preferences in Indian mutual fund industry using quantitative methods. 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 done on 100 people. For the collection of Primary data I made a questionnaire and surveyed of 100 people. I also taken interview of many People those who were coming at the various banks of sector-8. The data collected has been well organized and presented. I hope the research findings and conclusion will be of use.
TABLE OF CONTENTS
Introduction to Mutual Funds
Objective & Scope of Research Methodology
Data analysis & Interpretation
Finding & Conclusion
INTRODUCTION TO MUTUAL FUNDS
CHAPTER 1 INTRODUCTION TO MUTUAL FUNDS
ABOUT MUTUAL FUNDS – AN INTRODUCTION
VARIOUS ASPECTS OF
Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and invest the money thus collected into asset classes that match the stated investment objectives of the scheme. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. DEFINITION :
The securities and exchange board of India regulations.1993 defines a mutual fund “A fund established in the form of a trust by a sponsor, to raise monies by the trustees through the sale of units to the public, under one or more schemes, for investing in securities in accordance with these regulations”. A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and invests the same on behalf of the investors/unit holders, in Equity shares, Government securities, Bonds, Call Money Markets etc, and distributes the profits. The flow chart below describes broadly the working of a Mutual Fund. M U T U A L FUND S C H E M E S
PROFIT/LOSS FOR INDIVISUAL
PROFIT/LOSS FROM PORTFOLIO
I N V E S T O R S
M A R K E T
The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities. When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund. 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 it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed.
• Net asset value
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 and is reflected on daily basis. NAV: Net Assets of the Scheme/ Number of Units Outstanding or (Market Value of Investment + Receivables + Other Accrued Income + Other Assets – Accrued Expenses – Other Payables – Other Liabilities)/Number of Units Outstanding on the Valuation Date For example: A. If the market value of the assets of a fund is Rs. 200,000 B. The total number of units issued to the investors is equal to 20,000. C. Then the NAV of this scheme = (A)/(B), i.e. 200,000/20,000 or 10.00 D. Now if an investor 'X' owns 5 units of this scheme E. Then his total contribution to the fund is Rs. 50 (i.e. Number of units held multiplied by the NAV of the scheme)
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ORGANISATION OF A MUTUAL FUND:
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A Mutual Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. There are many entities involved and the diagram below illustrates the organizational set up of a Mutual Fund In India Mutual Fund usually formed as trusts, three parties are generally involved viz. Settler of the trust or the sponsoring organization. The trust formed under the Indian trust act, 1982 or the trust
company registered under the Indian companies act, 1956 Fund mangers or The merchant-banking unit Custodians.
Thus, 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 investments are not totally risk free. In fact, investing in Mutual Funds contains the same risk as investing in the markets, the only
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difference being that due to professional management of funds the controllable risks are substantially reduced.
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OBJECTIVES OF MUTUAL FUNDS
To Provide an opportunity for lower income groups To acquire without Much difficulty, property in the form of shares.
To Cater mainly of the need of individual investors, whose means are small To Manage investors portfolio
provides regular income growth
tax advantage professional management
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Advantages of Mutual Funds
If mutual funds are emerging as the favorite investment vehicle, it is because of many advantages they have over other forms and avenues of investing, particularly for the investor who has limited resources available in terms of capital and ability to carry out detailed research and market monitoring. The following are the major benefits offered by mutual funds to all investors: i) Portfolio Diversification Mutual Funds spread the investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) by investing in a number of companies across a broad cross-section of industries and sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of your returns and reduces the risk with far less money than you can do on your own. For example during one period of time 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. ii) Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. iii) Professional Management Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. The investment professional 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.
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v) Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. v) Affordability Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. vi) 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. vii) Tax Benefits In case of Individuals and Hindu Undivided Families a deduction up to Rs. 9,000 from the Total Income will be admissible in respect of income from investments specified in Section 80L, including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax. viii) Transparency Open-ended mutual funds disclose their Net Asset Value (NAV) daily and the entire portfolio monthly. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument.
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DISADVANTAGE of Mutual Funds
While the benefits of investing through mutual funds far outweigh the disadvantages, an investor and his advisor will do well to be aware of few mutual fund as an investment vehicle. i) No Tailor-made-Portfolios Investing through funds means, the investor delegates the decision of investing through which securities to fund manager. The very high-net-worth individuals or large corporate may find this as a constraint in achieving their objectives. However this constraint can be overcome to some extent by offering families of schemes to investor ii) No control over costs Investor pays the investment management fees as long as he remains within the fund. Fees are usually payable as a percentage of the value of his investments, whether the fund value is rising or declining. The investor also pays the fund distribution cost, which he would not incur in direct investment. iii) Managing a Portfolio of Funds Availability of a large number of options from mutual funds can actually mean too much choice for the investor. He may again need advice on how to select a fund to achieve his objectives. shortcomings of using the
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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 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 18 | P a g e
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. Consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.
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CATEGORIES OF MUTUAL FUND:
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Mutual funds can be classified as follows : Based on their structure: Open-ended Funds
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices.
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. 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 they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. Closed-ended schemes are usually more illiquid and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme.
Interval funds combine the features of open-ended and close-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices.
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Based on their investment objective:
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: i) Index funds : In this case a key stock market index. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weight age. ii) Equity diversified funds : 100% of the capital is invested in 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) vi) Sector funds : Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks. ELSS- Equity Linked Saving Scheme provides tax benefit to the investors. equities
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Their investment portfolio includes both debt and equity. As a result, on the riskreturn 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.
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 i) ii) iii) iv) Liquid funds : These funds invest 100% in money market instruments, a large portion being invested in call money market. Gilt funds ST : They invest 100% of their portfolio in government securities of and T-bills. Floating rate funds : Invest in short-term debt papers. Floaters invest in debt instruments which have variable rate. Arbitrage fund : They generate income through arbitrage opportunities due to mispricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. v) vi) vii) viii) Gilt funds LT : They invest 100% of their portfolio in long-term government securities Income funds LT: Typically, such funds invest a major portion of the portfolio in long-term debt papers. MIPs : Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities. FMPs : fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.
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MUTUAL FUND INVESTING STRATEGIES
1. Systematic Investment Plans (SIPs)
These are best suited for young people who have started their careers and need to build their wealth. SIPs entail an investor to invest a fixed sum of money at regular intervals in the Mutual fund scheme the investor has chosen, an investor opting for SIP in xyz Mutual Fund scheme will need to invest a certain sum on money every month/quarter/half-year in the scheme.
2. Systematic Withdrawal Plans (SWPs)
These plans are best suited for people nearing retirement. In these plans, an investor invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at regular intervals to take care of his expenses
3. Systematic Transfer Plans (STPs)
They allow the investor to transfer on a periodic basis a specified amount from one scheme to another within the same fund family – meaning two schemes belonging to the same mutual fund. A transfer will be treated as redemption of units from the scheme from which the transfer is made. Such redemption or investment will be at the applicable NAV. This service allows the investor to manage his investments actively to achieve his objectives. Many funds do not even charge any transaction fees for his service – an added advantage for the active investor.
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Lock-in Period Options:
Mutual funds usually do not have lock-in periods, during which investors cannot exit the fund. Mutual funds may create products with lock-in periods. Repurchase information can be found in the offer document. There are 2 normal situations when investors are restricted from exiting the fund: • An open-ended fund may announce an initial offer period, during which time it will only sell units. There may be no repurchase during that period. The fund will announce a date from which further sales and repurchases will take place. • Some specific funds scheme can be designed to have a minimum period of investment. Example: Investments in special “Equity Linked Savings Scheme” are eligible for tax rebates. In order to enjoy the tax rebate, the investor is required to stay invested for a period of 3 years. In extra-ordinary situations, mutual funds can, with notice to the investors through a national daily, impose temporary lockin periods. Investors have to check the offer document to see if the mutual fund has sought such a right for itself.
Regulations regarding Cutoff Timings: All funds except liquid funds
• Purchases :In respect of valid applications received up to 3 p.m. by the Mutual Fund, same day’s closing NAV shall be applicable. In respect of valid applications received after 3 p.m. by the Mutual Fund, the closing NAV of the next business day shall be applicable.
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Redemption : In respect of valid applications received up to 3 p.m. by the Mutual Fund, same day’s closing NAV shall be applicable. In respect of valid applications received after 3 p.m. by the Mutual Fund, the closing NAV of the next business day shall be applicable.
• Purchases :In respect of valid applications, closing NAV of the day
immediately before the day on which funds are available for utilization by the fund shall be applicable. However, in respect of any application received after 1 p.m. by the Mutual Fund and the funds are available for utilization by the fund on the same day, closing NAV of the same day shall be applied. • Redemption: In respect of valid applications received up to 10:00 a.m.
by the Mutual Fund, previous day’s closing NAV shall be applicable. In respect of valid applications received after 10:00 a.m.by the Mutual Fund, same day’s NAV shall be applicable.
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MUTUAL FUND CLASSES
When checking for different quotes on mutual funds, you might see different prices for classes of mutual fund shares that seem to be holding similar or identical products. These different classes - 'A', 'B' and 'C' - all are characterized by their different load structures. 'A' shares generally denote a front-load charge. This load is generally fixed for the duration of the fund and will vary depending on the different types of mutual funds. Fund companies recognize that the front load is a deterrent to investors, so to sweeten the attractiveness of the fund, they may reduce the management expense ratios (MER). Thus, some funds claim that, even though you are paying a large fee up front, you will end up saving money if you decide to hold this fund for a long duration. The 'B' shares normally are deferred-load funds. In many instances this deferred load will dissipate along a schedule so that the longer you hold the fund, the smaller the deferred load becomes. When the deferred fund no longer has back-end charges, it will normally be reclassified as an 'A' share The 'C' shares are constant-load funds. Regardless of the number of years
the fund is held, the load charge is present. Since this fund's load is lower than both the 'A' and 'B' classes, it generally also has a higher expense ratio to offset the fund company's lost revenue; Also, remember that loads don't automatically get you a higher return. In fact, most evidence suggests that no-load funds are almost always a better choice.
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Association of Mutual Funds in India (AMFI)
With the increase in mutual fund players in India, a need for mutual fund association in India was generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995. AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under the supervision and guidelines of its Board of Directors. Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders.
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The objectives of Association of Mutual Funds in India
This mutual fund association of India maintains high professional and
ethical standards in all areas of operation of the industry. It also recommends and promotes the top class business practices and code
of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association. AMFI interacts with SEBI and works according to SEBIs guidelines in the
mutual fund industry. Association of Mutual Fund of India do represent the Government of
India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. It develops a team of well-qualified and trained Agent distributors. It
implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. AMFI undertakes all India awareness programme for investors in order to
promote proper understanding of the concept and working of mutual funds. At last but not the least association of mutual fund of India also
disseminate information’s on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.
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MAJOR MUTUAL FUND PLAYERS IN INDIA
i) Kotak Mahindra Mutual Fund Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of Kotak Mahindra Bank Limited (KMBL). It is presently having more than 1,99,800 investors in its various schemes. KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. ii) HDFC Mutual Fund HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated June 30, 2000. HDFC Mutual Fund was setup with two sponsors namely Housing Development Finance Corporation Limited and Standard Life Investments Limited. iii) Unit Trust of India Mutual Fund UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crores. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporati on of India(LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds. iv) Prudential ICICI Mutual Fund The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993. 30 | P a g e
v) Reliance Mutual Fund Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities. vi) ABN AMRO Mutual Fund ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November 4, 2003. vii) Birla Sun Life Mutual Fund Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 crores. viii) Bank of Baroda Mutual Fund (BOB Mutual Fund) Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian. ix) HSBC Mutual Fund HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and capital Markets (India) Private Limited as the sponsor.
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x) ING Vysya Mutual Fund ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya & ING. The AMC, ING Investment Management Pvt. Ltd. was incorporated on April 6, 1998. xi) Sahara Mutual Fund Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid up capital of the AMC stands at Rs 25.8 crore. xii) State Bank of India Mutual Fund State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18 schemes. xiii) Tata Mutual Fund Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and Tata Trustee Company Pvt. Ltd. Tata Asset Management Limited's is one of the fastest in the country with more than Rs. 7,703 Crores (on April 30, 2005). xiv) Standard Chartered Mutual Fund Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20, 1999. 32 | P a g e
xv) Franklin Templeton India Mutual Fund The group, Franklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. xvi) Morgan Stanley Mutual Fund India Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investment management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset management services and products to governments, corporations, pension funds and nonprofit organizations. xvii) Escorts Mutual Fund Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited. xviii) Alliance Capital Mutual Fund Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsor. The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India Private Ltd. xix) Chola Mutual Fund Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.
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xx) LIC Mutual Fund Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. .The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund. xxi) GIC Mutual Fund GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Government of India undertaking and the four Public Sector General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882. xxii) DSP MERILLYNCH: DSP HMK Holdings Pvt. Ltd. and DSP ADIKO Holdings Pvt. Ltd. are companies incorporated in 1983 under the Companies Act, 1956 and are also registered with the Reserve Bank of India as non deposit taking Non-banking Finance Companies. These companies have been functioning as investment companies DSP BlackRock Investment Managers Pvt. Ltd. is the investment manager to DSP BlackRock Mutual Fund.The philosophy of DSP BlackRock Investment Managers Pvt. Ltd. has been grounded in the belief that experienced investment professionals, using a disciplined process and sophisticated analytical tools, can consistently add value to client portfolios.
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CHAPTER 2 COMPANY PROFILE
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P.K.VASUDEVA & CO.
Name of the Firm Occupation Date of Establishment Constitution Partners Staff : P.K. Vasudeva & CO, : Practising Chartered Accountants : November,1972 : Partnership Firm : Five : a) Company Secretary b) CA intern , CA trainees & Supervisors c) Three computer operators Specialization Clients : Auditing, Income Tax & Business Solutions : Micro, Medium & Small Enterprises, builders/infrastructure developers, schools/ colleges & other educational institutions , hospital/ medical care enters, hotels , resorts amusement/ entertainment parks, travel agents, transporters, C & F agents & Retail stores and leading commercial Houses .
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It is a professionally managed firm with a globally experienced and capable team of Accountants & Supervisors. The day-to-day operations of the firm are looked after by P.K. Vasudeva one of the owners of the firm assisted by a senior management team, under the overall supervision and control of the Mr. J.D. Sohal, partner of the firm.
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Chapter – 3
Objectives Scope Research methodology
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1. To study which kind of investment people prefer. 2. To study in which type of investment scheme people have invested the most. 3. To study for how much time people invest their money. 4. To study mutual funds are to be considered safe investment.
SCOPE OF STUDY
Time The has been collected from 1st July 2010 to 20th July 2010. Area The study covers the respond from different banks of sector-8. Respond The study includes 100 respond of all age group who has made investment of any kind. 39 | P a g e
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This report is based on primary as well secondary data, however primary data Collection was given more importance .I have executed the project after prior discussion with our guide and structured in the following steps: a) b) c) funds. d) e) This questionnaire was primarily aimed to respondents who The questionnaires were discussed through personal belong to the service and business class people interface with the respondents Collecting all relevant data of top performing funds(past 12 Preparation of a questionnaire The focal point of the designing the questionnaire was to months)
measure the preference & perception of people towards mutual
1 2 3 Information available through internet is relevant, and correct It has been assumed that sample of hundred represents the whole Population. The information given by the customer is unbiased.
For the purpose of the present study, data from two sources has been gathered namely, primary and secondary
PRIMARY DATA: The primary data is collected through a
structured questionnaire SECONDARY DATA: The secondary data was collected from
Websites, Magazines, factsheets, Text books.
Duration of Study: The study was carried out for a period of two weeks 41 | P a g e
• Sampling procedure:
The sample was selected from customers/visitors to different banks in sector-8. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared.
• Sample size:
The sample size of my project is limited to 100 people only. Out of which only 62 people had invested in Mutual Fund. Other 38 people did not have invested in Mutual Fund.
• Sample design:
Data has been presented with the help of bar graph, pie charts, line graphs, TABLES etc.
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• • •
Certain contradicting information was available on different websites 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.
Sample size is limited to 100 visitors of banks of sector-8
CHANDIGARH out of these only 62 had invested in Mutual Fund.
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 part of CHANDIAGRH
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Chapter – 4
Data Analysis & Interpretation
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SHOWING PEOPLE MAKING INVESTMENTS IN MUTUAL FUNDS REGULARLY YES NO TOTAL 62 38 100
INTERPRETATION : From the above graph it is evident that in general 62% of respondents do make regular investments
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TABLE : 2 TABLE SHOWING DIFFERENT AGE GROUP OF THE RESPONDENTS
Age Group No. of Investors >= 18 0 18-30 54 30-40 37 40-50 8 50 &above 1
The majority of the respondents i.e. 54% are from the age group of 18-30. And the second largest age group is 30-40. And the remaining investors are from 40-50 age & 50&above group.
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TABLE : 3 Occupation of the investors
Occupation Govt. Service Pvt. Service Business Retired Home Maker TOTAL No. of Investors 19 60 21 0 0 100
The graph shows that the people employed in private enterprises form the main target group while retired and home maker are not interested.
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TABLE : 4 PREFERRED FUND STRUCTURE
Structure of the fund Open – ended fund Close – ended fund Interval funds Total No of investors 55 25 20 100
Inference: It is observed that 55 out of 100 that are 55% of investors are interested to
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TABLE : 5
INVESTORS SCHEME PREFERENCE
Preferred fund scheme Growth scheme Income scheme Balanced scheme Total
No of investors preferred 20 61 19 100
Inference: In the above given graph it is showed that 20 out of 100 that are 20% of customers are interested to invest in growth schemes. 19% of customers are interested to invest in Balanced schemes and the remaining 61% customers are preferred to invest in Income schemes.
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INVESTORS FUND PREFERENCE
Type of fund Tax saver funds Index funds Sectorial funds Total No of investors preferred 56 21 23 100
Inference: Out of 100 investors 56 that is 56% of customers are preferred to invest in Tax saver funds. 21 that is 21% of investors are preferred to invest in index funds which give returns based upon respective indexes.. 23 that is 23% of investors are interested to invest in sectorial funds that means they are ready to take high risk but want high returns.
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TIME SPAN OF INVESTMENT
3-5 years 6-10 years 11-15 years More than 15 years 52 10 11 27
The above table and chart reveals that when the investor with drawing
money from their investments. Majority of the investors i.e. 52% wants to with draw money from their investments 3 to 5 years while others wants to with draw above five years
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SHOWING REPEATION OF INVESTMENTS MADE BY THE RESPONDENTS.
YES NO TOTAL
NO OF RESPONDENTS
60 40 100
Inference: Out of 100 respondents 60 customers have already reinvested in the company, while the rest are waiting for a correct time to enter in the market for the second time.
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IMPORTANCE OF VALUE ADDED SERVICES WHILE CHOOSING FUND ECS DIVIDEND ONLINE TRANSACTION 60 27 13
Inference: Thus provision of ecs facility is of crucial importance,
Table -10 Most preferred investment by investors
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Investment Saving account Fixed deposits Insurance Mutual funds Post office,NSC etc Share/Debenture Gold/silver
Preferred 70 57 41 62 9 12 31
Most of the investor preferred to invest in saving account, after that investor preferred to invest in mutual funds and post office ,nsc are least preferred by the investors,
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Null- There is no relation between age of the respondent and investment scheme in which investment is made.
Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio 2.546a 2.894 df 6 6 1 sided) .863 .822 .406
Linear-by-Linear Association .690 N of Valid Cases 100
The null hypothesis is accepted.
There is no relation between the age and type of investment scheme in which respond has invested money. So the age does not affect the investment objective.
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Null- There is no difference in the perception of people of various occupations about mutual funds investment.
ANOVA summated Sum of Squares df Between Groups Within Groups Total 7.137 339.613 346.750 2 97 99 Mean Square 3.568 3.501 F 1.019 Sig. .365
The null hypothesis is accepted.
Inference The people of different occupation think that mutual funds investment is a safe, liquid, provide high return. People believe that there are various type of mutual fund schemes available to them according to their need
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Findings And Conclusion
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The findings for the above research are as follows:• It was found that out of 62% people investing in mutual funds it was found that majority of the investors are from the age group of 18-30. This is the group of young age people who deserve to invest for their future financial needs. • It was found that Out of 100 respondents 55 customers have already were interested in open ended funds followed by 25 % in close ended funds, while 24%people seemed interested in interval funds. • It was found that 20% investors preferred growth schemes, followed by 61% investors in balanced schemes and 19% were interested in income schemes. • It was observed that Out of 100 investors 56 that is 56% of customers are preferred to invest in Tax saver funds. It 21 that is 21% of investors are preferred to invest in index funds which give returns based upon respective indexes.23 that is 23% of investors are interested to invest in sectoral funds that means they are ready to take high risk but want high returns. • It was found out that 52% of investors were with short horizon of 3 to 5 years and 27% investors with a long horizon of more than 15 years.
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It was observed that Out of 100 respondents 60 investors have reinvested due to better returns and performance of funds
60% of respondants voted for ECS as the most desirable and necessary value added service.
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Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors in connection with the preferences of schemes, Products, Channels etc. This study focuses of preferences of consumers mostly in 18-30, their mode off investment in mutual fund schemes, preferences in terms of return ,liquidity etc. Tax saving too is one of the most crucial factor of investment and thus more such tax saving products need to be introduced in the market. It is hoped that this study will help AMC understand the pivotal deciding factors which play an important role when an investors chooses a particular mutual fund. It is thus hoped that it will be instrumental in helping companies bring out more customized products which will help achieve consumer satisfaction as well as leverage profits.
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I Vishal Dadwal student of Centre for Management Training & Research, Kharar on behalf of P.K. Vasudeva & Company is conducting a survey about Preference & Perception of people towards Mutual Funds and you are one of the selected respondent to participate in this survey. All the information given by you will be kept confidential and will only be used for research purpose. QUESTIONNAIRE 1. What kind of investments you prefer most? Pl tick (√). All applicable □ Savings account □ Mutual fund shares/debentures □ Gold/Silver □ fixed deposits □ insurance □ Post office, NSC etc. □
2. Have you ever invested in Mutual Funds? □ Yes □ No
3. By structure in which type of schemes did you invested? □ Open - Ended Schemes □ Close - Ended Schemes □ Interval Schemes
4. By investment objective in which type of schemes have you invested? □ Growth Schemes □ Income Schemes □ Balanced Schemes
5. In which type of fund you want to invest? □ Tax saver funds □ Index funds □ Sectorial fund
6. When do you plan to withdraw your money? Pl tick (√). □ 3- 5 yrs □ 6-10 yrs □ 11-15 yrs □ >15 yrs
7. Did you repeat your investment after your initial investments? 63 | P a g e
□ Yes 8. Which value added service you are using? □ Online transaction □ Ecs
□ No □ Direct investment
9. Please read each item carefully and consider how much you agree/disagree with each statement. There is no Right or Wrong answers to any of these statements, so please give your honest reviews. and opinion. Kindly indicate your response by ticking the appropriate response using the following scale. SD- STRONGLY DISAGREE A- AGREE D- DISAGREE SA- STRONGLY AGREE CS- CAN’T SAY
Statements Mutual funds investment is considered to be liquid investments.
SD D CS A SA
Mutual funds provide high return on investment. Mutual fund investment is considered to be less risky.
There is no tailor made portfolio in mutual funds. Mutual funds are considered to be safe investment.
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__________________________________________ □ Male □ Below 18 □40-50 □ Govt.service □ retired □ Female □ 18-30 □ 30-40 □ Above 50 □Private □ Business □Others □ Post
Gender: Age (in years):
□ Home Maker □ Graduate
□ Any other, please specify _____________
Annual household income of your family (in Rs) □ 1-3 lac □ 3-5 lac □ 5-7 lac
□ more than 7 lac
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Khan & Jain www.mutualfundindia.com www.amfiindia.com www.tatamutualfund.com www.pruiciciamc.com www.principleindia.com www.bobmf.com www.jpmorganmf.com www.hdfcfund.com www.taurusmutualfund.com www.reliancemutual.com www.moneycontrol.com www.valueresearchonline.com www.investopedia.com www.wikipedia.com Mutual Fund Insight magazine Capital market magazine
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