Cover | Mutual Funds | Investing

A PROJECT REPORT ON

PROSPECTING CUSTOMERS FOR INVESTMENT IN MUTUAL FUND- AHMEDABAD MARKET
(Undertaken at Cholamandalam Distribution Services Ltd, Ahmedabad)

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE COURSE IN THE MASTERS OF BUSINESS ADMINISTRATION PROGRAMME

By BHUMIKA PATEL BHRANTI DESAI UVESH LALIWALA MBA-I N.R. INSTITUTE OF BUSINESS MANAGEMENT GUJARAT UNIVERSITY YEAR-2004

PREFACE
Summer trining provides an opportunity to the MBA students to apply their theoritical concepts, which they have been studying in the business school to the practicle world. As we all know that practicle world is far different than the theoritical, every MBA student is required to acquire both theoritical as well as practicle knowledge in order to survive the increasing competition in the field of management. The period of summer training is very important for a student, as he has to acquire the knowledge about his field of interest chosen for the summer training and is required to show his talent within a very limited time. As my area of interst from beginning is Finance, I was interested, to undergo my summer training in some prestigious financial institution. My wish was fulfilled by Mr. Mehul Ved, the Regional Manager who gave me an apportunity to work with Cholamandalam Distribution Services Ltd. (CDSL), Ahmedabad. It is a great learning experience while working with different people who are experts of their field. Such training has given a very good insight og the corporate world and displayed the real picture of the matket. At present mutual fund is doing very well in India. It has given a safe option to the investors when the bank and other institutions are loosing faith amongst the people. Many companies having realised mutual fund sector provides the market potential and opportunity for growth this has given more employment opportunity in this sector, which is deadly required by Indian Economy. Due to presence of large no of mutual funds in the market there is a very healthy competition among them, this provides better investment options and services to its investors. Investors have been considered as the prospective client for mutual fund industry and this has been diverted investment even from RBI Bonds to them.

AHMEDABAD 2004

BHUMIKA PATEL BHRANTI DESAI UVESH LALIWALA

ACKNOWLEDGEMENT
I have the opportunity to express my sincere gratitude towrds all the people who have helped me in the successful completion of the summer training. First of all, I would like to thank our project guide Mr. Mehul Ved, Regional Manager of Cholamandalam Distribution Services Ltd (CDSL), Ahmedabad and Mr. Vrajesh Kirtania without whose guidance and constant help, this project would never have been completed. Moreover, I would like to take the opportunity to thank all staff members of CDSL, Ahmedabad and also Marketing Managers of fund houses like HDFC Aseet Management Company Ltd, Birla Sunlife Asset Managemet Company Ltd and ICICI Prudential Asset Management Ccompany Ltd who helped me in undertaking present market scenario and imparted valuable expert knowledge. At the end I would like to thank my colleagues Bhranti Desai and Uvesh Laliwala who worked on this project with me.

BHUMIKA PATEL BHRANTI DESAI UVESH LALIWALA

EXECUTIVE SUMMARY
The project “Prospecting Custmors for investment in Mutual Fund – Ahmedabad Market” is an integrated project, which through light on the present market scenario of Mutual Fund industry, its history and future outlook. At present Mutual Fund is doing very well in India. It has given a safe option to the investors when bank and other institutions are loosing faith amongst the eople. Many companies having realised the market potential and opportunity for growth have entered in the mutual fund sector. Due to this many employment opprtunities are generated in this sector. Cholamandalam Distribution Services Ltd. is a distribution company which deals with many mutual fund schemes as well as provides best investment solutions to its clients. This project has been divided into two main parts information regarding mutual funds in general and marketing as well as research survey. The following are the findings derived from the responses of clients to whom we met during our summer training, • Some of the chartered accountants were not at all willing to invest or even advise their clients to invest in mutual funds because of their bitter experience about US-64. • Generally salaried employees, retired ones and small businessmen who have not lost the trust on mutual funds and who wants low risk, safety, liquidity and transperancy were willing to invest in mutual funds. • As I entred in the market after such a huge crash with 800 points, means after Black Monday (dated 17th May) market had crashed by anything so that it became very difficult to convince clients to invest in such a down market senario. In that senario market had seen without any direction as the Budget for the financial year 2004-2005 was being announced on 8 th July. In this uncertain condition we recommended our clients to go for SIPs to avoid market risk and to absorb thecurrent volatility. • clients who wanted to invest were generally adviced to invest in Monthly Income Plans due to the present condition of equity market. • We had suggested Systematic Investment Plans to most of the clients who were salaried employees or having very small amount of savings, as SIPs absorbe market volatility it gives good returns on investment even in falling market. • As market was very volatile and falling no client was ready to invest in equity schemes. • As mutual fund return are based on NAV and not fixed like FDs it is comparatively very difficult to convince a person for mutual fund than FD.

The second part contains the findings and analysis of the survey. This was undertaken with an objective of knowing the preferences of investors regarding various investment avenues, to study the most likely place for investment when respondents’ bank term deposits are likely to mature, to study attributes considered by investors while making investments, to study degree of risk that investors are likely to take while selecting investment instrument etc. We have also analyzed various mutual fund schemes offered by different fund houses. The findings of this survey are as follows:
• Investors are more preferred Bank deposits and NSC/KVP/PPF as an investment instrument than any other and their preference level is around 24% to 26%. For the mutual fund awareness level among the investors is quite low. It is around 2% to 3% only.

• • • • • •

Bank Deposits are most likely place for investors to park their funds. Safety of Capital is the most important attribute considered by investors. It weights about 72% against rate of return and liquidity. Investors are more risk aversive and more concern about safety of their capital. For safety of capital they even sacrifice high returns at relatelavely high risk. Franklin Templeton is the leading mutual fund in Ahmedabad. Internet,telephone and letters are widely accepted as a means of communication. Due to complusion of the AMFI test this sector is going to have a more professional approach than the others.

TABLE OF CONTENTS CONTENT
Preface Acknowledgement Executive Summary 1. Introduction to the Company- Cholamandalam Distribution Sevices Ltd. 2. The Indian Financial System • Financial Market 7 8 9 12 14 15 18 24 28 30 32 35 37 39 49 54 61 • Financial Intermediaries 3. Mutual Funds – an introduction 4. The history of Mutual Fund 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. • Mutual Fund in India Mutual Fund – a globally proven investment Other investment options and comparision with mutual fund Mutual Fund for whom? Why Mutual Fund? Classification of Mutual Fund Schemes Other investment plans and services in Mutual Funds Mutual Fund constituents Basic principles on which a Mutual Fund operates Regulations for Mutual Fund in India Tax aspects of Mutual Fund Rights and duties of a investor Marketing of Mutual Funds Findings during Summer Training at Cholamandalam Distribution Services Ltd., Ahmedabad Research Analysis Bibliography

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