bajaj capital innovative marketing strategies used by bajaj capital towards mutual funds

PUNJAB TECHNICAL UNIVERSITY, JALANDHAR

PROJECT REPORT ON

INNOVATIVE STRATEGIES ADOPTED BY BAJAJ CAPITAL TOWARDS MUTUAL FUNDS

Undertaken at

BAJAJ CAPITAL LTD.

Submitted in Partial Fulfillment of the Requirement for the Award of degree of

MASTER OF BUSINESS ADMINISTRATION

September, 2013Submitted By

Under the Guidance of

Subhash Chand Kumawat

Ashish Kumar SharmaRoll No-11208500004

Finance Manager

Batch July 2011-13

B-II/66, Sher Shah Suri Marg, MCIE, Mathura Road, Badarpur, New Delhi

LC -850

DECLARATION

I, Subhash Chand Kumawat, a bonafide student of MBA at IILM Business School, New Delhi, hereby declare that I have undergone the Internship on Innovative Strategies Adopted By Bajaj Capital Towards Mutual Funds under the guidance of Mr. Ashish Kumar Sharma and from 1st Nov. 2012 to 15th Dec. 2012.I also declare that the present project report is based on the above internship and is my original work. The content of this project report has not been submitted to any other university or institute either in part or in full for the award of any degree, diploma or fellowship.

Further, I assign the right to the College, subject to the permission from the organization concerned, use the information and contents of this project to develop cases, caselets, case leads, and papers for publication and/or for use in teaching.

Place: New Delhi


Date:

Roll No-11208500004ACKNOWLEDGEMENT

I take this opportunity to express my gratitude to Bajaj Capital Ltd. for providing me with an opportunity to do my training at their esteemed organization.

I am thankful to all the companies with which I communicated with reference to this project. I am thankful to all the staff members of Bajaj Capital Ltd. and all others who gave me their valuable guidance, encouragement, and support in completing this project.


TABLE OF CONTENTS

S. No TOPICPage. No

CHAPTER 1 INTRODUCTION

61.1. Overview of Industry as a whole

1.2. Profile of the Organization

Origin

Recent Achievements

Mission & Vision

Products

Organization Structure

1.3 Introduction to the Topic/Title/Problem Studied

CHAPTER 2 - OBJECTIVE & METHODOLOGY

512.1. Objectives of the Study

2.2. Research Methodology

Research Design

Sources of data

Sampling Technique

Sample size, if any

Methods of data collection

Tools and techniques of analysis

2.3. Limitations of the Study

CHAPTER 3 - DATA ANALYSIS & INTERPRETATION57CHAPTER 4 - FINDINGS

79CHAPTER 5 - RECOMMENDATIONS

82

ANNEXURES

87

Questionnaire/s

Tables/Graphs/ Annual Reports of Company/Industry etc.

Any other relevant documents

BIBLIOGRAPHY/REFERENCES

93CHAPTER-1INTRODUCTION

INTRODUCTION

1.1. Overview of Industry as a whole

Welcome to India's leading Financial Planning and Investment Advisory Company.Where dreams inspire us to excel. They ignite hope and kindle in us the passion to stretch our limits. At Bajaj Capital we believe that nothing can or should stop us from dreaming. And financial constraints should be the last thing to stop anyone from realizing them.

For over four decades now, Bajaj Capital has been helping people to realize their aspirations by making their wealth grow, and planning their financial lives. Bajaj Capital offers advice on Investments, Insurance, Tax Saving, Retirement Planning, Future Planning for Children and more. As India's largest distributors of financial products, Bajaj Capital brings for you a wide range of investment options - the entire gamut of financial instruments and investment products of almost all major public and private companies and the Govt. sector. These services and products are delivered through Bajaj Capital's network of over 200 branches located all over the country. The company is a SEBI-approved Category I Merchant Banker catering to Individual Investors, Corporates, HNI and NRI clients. The commitment of the company to create wealth for its clients with independent, need-based and research based advice has been recognized by 8, 00,000 individual investors and over 3000 institutional clients.

In a world full of 'ready-to-give-free-of-cost-advice' people it is necessary that you choose the one that works in your interest. You need help from a professional investment advisor, who sees investments from your perspective. That's what we do.

WE CREATE WEALTH:

45 years of experience as Investment Advisors and Financial Planners

We give you impartial, research-based and need-based advice

We offer a wide range of financial products and services

Personalized wealth management advice: We offer investment guidance and portfolio planning.

Prompt, courteous service, 24 x 7 online accessibility- www.bajajcapital.com

Countrywide network of over 200 branches

Strong team of qualified and experienced professionals including CAs, MBAs, MBEs, CFPs, CSs, Insurance Experts, Legal Experts and others

SEBI-Approved Category I Merchant Bankers

Group Co BCIBL is an IRDA-licensed Direct Insurance Broker

While choosing an advisor, consider the following factors:

YOUR ADVISOR MUST BE AN ORGANISATION:

Your advisor needs to outlive the life of your investments. This is possible only if your advisor is a company or institution rather than an individual advisor. Also a company has better resources, research expertise, standardized processes and qualified staff to render quality advice and services. It is much safer to deal with a company that has a reputation for honesty, integrity, transparency and ethical dealings than with an individual.

YOUR ADVISOR MUST BE EXPERINECED & REPUTED:

Find out the background and certifications of the firm you want to appoint as your investment advisor. The more the experience of your advisor, the better it is. Find out about the advisor's clientele. This will give you a better idea of what to expect as a client and learning about their security guarantees will give you confidence that you're making the right choice.

MUST HAVE AN ALL-INDIA PRESENCE:

In today's dynamic world, you never know which place or city you might be located at, in the future; an advisor with a national footprint will ensure that you do not miss his advice and service, irrespective of your location.

KNOW THE PRODUCTS AND SERVICES:

Decide what you need. Then choose invest advisory firm that caters to your needs and matches your expectations. Know the breadth and depth of the investment firm's products, the financial services it offers and the planning process it involves to make your wealth grow.

MUST HAVE A RESEARCH DEPARTMENT:

This ensures that you get quality advice on time and are update about the market trends and changes so that accordingly you can review your portfolio.

MUST HAVE AN ONLINE INVESTMENT PLATFORM:

Tech savvy investors will find this attribute very attractive as they will be able to keep track of and manage their investments at the click of a mouse from the comfort of their office or home, at any point of time.

1.2 COMPANY PROFILE OF THE BAJAJ CAPITAL

The Bajaj Group came into existence during the turmoil and the heady euphoria of India's freedom struggle. Jamnalal Bajaj, founder of the Bajaj Group, was a confidante and disciple of Mahatma Gandhi, and was deeply involved in the effort for freedom. The integrity, dedication, resourcefulness and determination to succeed which are characteristic of the Company today, are often traced back to its birth during those long days of relentless devotion to a common cause.

1.2.1 Origin:

Today, Rahul Bajaj is the Head of the Group. He has been the Chief Executive Officer of Bajaj since 1968 and is recognised as one of the most outstanding business leaders in India. As dynamic and ambitious as his illustrious predecessors, he has been recognised for his achievements at various national and international foray.

Bajaj is currently Indias largest two and three- wheeler manufacturer and one of the biggest in the world. They have long left behind their annual turnover of Rs. 70 million (1968), to currently register an impressive figure of Rs. 40 billion.

Welcome to India's leading Financial Planning and Investment Advisory Company.

Where dreams inspire us to excel. They ignite hope and kindle in us the passion to stretch our limits. At Bajaj Capital we believe that nothing can or should stop us from dreaming. And financial constraints should be the last thing to stop anyone from realizing them.

For over four decades now, Bajaj Capital has been helping people to realize their aspirations by making their wealth grow, and planning their financial lives. Bajaj Capital offers advice on Investments, Insurance, Tax Saving, Retirement Planning, Future Planning for Children and more. As India's largest distributors of financial products, Bajaj Capital brings for you a wide range of investment options - the entire gamut of financial instruments and investment products of almost all major public and private companies and the Govt. sector. These services and products are delivered through Bajaj Capital's network of over 200 branches located all over the country. The company is a SEBI-approved Category I Merchant Banker catering to Individual Investors, Corporates, HNI and NRI clients. The commitment of the company to create wealth for its clients with independent, need-based and research based advice has been recognized by 8, 00,000 individual investors and over 3000 institutional clients.

Chairman's Message

Dear Visitor,

Welcome to the cyber home of Bajaj Capital. Here, you can learn how to turn your dreams into reality by investing wisely.

For well over four decades now, we at Bajaj Capital have been helping millions of investors reach their financial goals, and live fuller, richer and more satisfying lives. Over these years, the Bajaj Capital family has seen tremendous growth. Now, with our online venture, we are all set to make our presence felt even beyond the geographical boundaries.

We remain committed to offer the best of our services, skills and expertise to all our valued investor clients and visitors. Seen from this perspective, our online venture is yet another effort at reaching out to you.

I hope that you will find this website useful. I welcome your suggestions to improve this site, and make it more useful to investors.

K.K. Bajaj

Chairman,

Bajaj Capital Ltd.

Bajaj Capital is among the pioneers of the investment advisory and financial planning industry in India. For over four decades, the Company has been serving Indian investors, and giving shape to the vision of its founder-chairman, Mr K.K. Bajaj.

Our Logo

Our logo depicts Lord Ganesha who is the source of all our values and ethics in business.

The large ears of Lord Ganesha remind us to hear more. We listen carefully to our clients to understand their needs.

The weight of the trunk on the mouth symbolises silence. We work silently, without blowing our own trumpet.

The long trunk symbolises continuous exploration. We explore all avenues to provide the best investment opportunities for our clients.

The heavy posture of Ganesha symbolises stability. We help our clients to attain financial stability through wise investments.

Lord Ganesha is known as the remover of obstacles and bestower of prosperity. We emulate His example and try our best to help our clients attain prosperity by proper financial planning.

Our logo has a yellow background. Yellow is the colour of gold, which symbolises wealth. According to Vedic lore, it is also the colour associated with Brihaspati, the guru and counsellor of the Gods. We offer our clients sage counsel to make their wealth grow.

The letters are in red. Red is the colour rajas symbolising power and incessant activity. It symbolises our aggressive quest for your well-being and happiness.

The white streak represents the trunk of Lord Ganesha. White is the colour of satva guna, and implies our selfless commitment to your life-long happiness.

Locate Branch

GREEN PARK

18, DDA Market, Yusuf Sarai Commercial Centre,

Yusuf Sarai

New Delhi - 110016

Phone : 011-26523166,26863789,41841143

Email : [email protected]

BHIKAJI CAMA PLACE

112,1st Floor,Ansal Chamber-1,

Bhikaji Cama Place

New Delhi - 110066

Phone : 011-26164343,26188644


KALKAJI

N - 10

Kalkaji , New delhi

New Delhi - 110019

Phone : 011-64640919,64736914,26223507


VASANT KUNJ

15, L.G.F. Central Market,

Masoodpur, Vasant Kunj

New Delhi - 110070

Phone: 011-26897632,64640940

Email: [email protected]

DEFENCE COLONY

F-1,First Floor,B 87,Defence Colony

New Delhi

New Delhi - 110024

Phone: 011-64736930, 64640912, 64640913Email : [email protected]

RAJENDRA PLACE

9, Ground Floor, Rajendra Bhawan,

Rajendra Place, (Opp. Rachna Cinema)

New Delhi - 110008

Phone : 011- 41538597,25734989,64736940, 64640938

Email : [email protected] ViharG-8&9, Ground Floor, Bhanot Tower,

A-Block Opp. Jawala Heri Market

New Delhi - 110063

Phone : 011-64736947,64640929


Malviya NagarC-50, Shivalik, Main Road,

Malviya Nagar

New Delhi - 110017

Phone: 011-64640923, 64736907Email : [email protected]

Yusuf Sarai18, DDA Market, Commercial Complex

Yusuf Sarai

New Delhi - 110016

Phone: 011-26523166, 26863789,41841143Email: [email protected]

REGISTERED HEAD OFFICE

97, Bajaj House

Nehru Place

New Delhi - 110019

Phone: 011-41693000, Call Center: 011-39881010

Email: [email protected]

Contact Us

Registered and Corporate Office

Bajaj Capital Ltd.Bajaj House, 97, Nehru Place,New Delhi - 110019Ph:011 -41693000,26410315, 26415672, 6418903/04/06Fax:011-26476638,66608888Call Centre:(+91 11)39881010Email: [email protected]

Regional Offices

Northern Region: Bajaj Capital Ltd.Bajaj House, 97, Nehru Place,New Delhi - 110019Phone:011 -41693000,26410315, 26415672,6418903/04/06Fax:011-26476638, 66608888Call Centre: (+91 11)39881010

Southern RegionBajaj Capital Ltd.19, Wellington Plaza,Ground Floor, 90, Anna SalaiChennai-600002Phone:044-23451207,8 044-23451234Call Center:044-39881010

Eastern RegionBajaj Capital Ltd.507, 5th Floor, 7/1, Lord Sinha Road, Kolkata-700071Phone:033-22820383, 40034380-82Call center :033-39881010

Western RegionBajaj Capital Ltd.Unit no. 672, Building No. 6, 7th Floor,Solitaire Corporate Park, Andheri Kurla Road,Chakala, Andheri (E),Mumbai- 400 093Phone:022 - 40099999Call Centre:022-39881010

Milestones

Bajaj Capital has contributed to the growth of the Indian Capital Market at every step. In 1965, we were the first to innovate the Companies Fixed Deposit. Today, we are playing an active role in the growth of the Indian Mutual Fund industry. We are also working closely with private insurance companies to deepen India's insurance market.Here is a glimpse of our journey through the years.

1964: Bajaj Capital sets up its first Investment Centre in New Delhi to guide individual investors on where, when and how to invest.India's first Mutual Fund, Unit Trust of India (UTI) is incorporated in the same year.

1965: Bajaj Capital is incorporated as a Company. In the same year, the company introduces an innovative financial instrument the Company Fixed Deposit. EIL Ltd. (Oberoi Hotels, then known as Associated Hotels of India Ltd.) becomes the first company to raise resources through Company Fixed Deposits.

1966: Bajaj Capital expands its product range to include all UTI schemes and Government saving schemes in addition to Company Fixed Deposits.

1969: Bajaj Capital manages its first Equity issue (through an associate company) of Grauer & Wells India Ltd.; right from drafting the prospectus to marketing the issue.

1975: Bajaj Capital starts offering 'need-based' investment advice to investors, which would later be known as 'Financial Planning' in the investment world.

1981:SAIL becomes the first government company to accept deposits, followed by IOC, BHEL, BPCL, HPCL and others; thus opening the floodgates for growth of retail investment market in India. Bajaj Capital plays an active role in all the schemes as 'Principal Brokers'

1986:Public Sector Undertakings (PSUs) begin making public issues of bonds MTNL, NHPC, IRFC offer a series of Bond Issues. Bajaj Capital is among the top ranks of resource mobilisers.

1987:SBI leads the launch of Public Sector Mutual Funds in India. Bajaj Capital plays a significant role in fund mobilisation for all these players.

1991:SBI issues India Development Bonds for NRIs. Bajaj Capital becomes the top mobiliser with collections of over US $20 million.

1993:The first private sector Mutual Fund Kothari Pioneer is launched, followed by Birla and Alliance in the following years. Bajaj Capital plays an active role and is ranked among the top mobilisers for all these schemes.

1995:IDBI and ICICI begin issuing their series of Bonds for retail investors. Bajaj Capital is the co-manager in all these offerings and consistently ranks among the top five mobilisers on an all-India basis.

1997:Private sector players lead the revival of Mutual Funds in India through Open-ended Debt schemes. Bajaj Capital consolidates its position as India's largest retail distributor of Mutual Funds.

1999:Bajaj Capital begins marketing Life and General Insurance products of LIC and GIC (through associate firms) in anticipation of opening up of the Insurance Sector. Bajaj Capital achieves the milestone of becoming the top 'Pension Scheme' seller in India and launches marketing of GIC's Health Insurance schemes.

2000:Bajaj Capital implements its vision of being a 'One-stop Financial Supermarket.' The Company offers all kinds of financial products, including the entire range of investment and insurance products through its Investment Centres. Bajaj Capital offers 'full-service merchant banking' including structuring, management and marketing of Capital issues. Bajaj Capital reinvents 'Financial Planning' in its international sense and upgrades its entire team of Investment Experts into Financial Planners.

2002: The company focuses on creating investor awareness for Financial Planning and need-based investing. To achieve this goal, the company introduced the International College of Financial Planning. The graduates of this institute become Certified Financial Planners (CFPs), a coveted professional qualification.

2004:Bajaj Capital obtains the All India Insurance Broking Licence. Simultaneously, a series of wealth creation seminars are launched all over the country, making Bajaj Capital a household name.

2005:Bajaj Capital launches 360 Financial Planning, a software-based programme aimed at encouraging scientific and holistic investing.

2007:Bajaj Capital launches Stock Broking and Depository(Demat) Services.

2010:Bajaj Capital launches Just Trade, an online Platform for investing in Equities, Mutual Funds, IPO's

1.2.2: Achievements

Bajaj Finance Ltd is one of the few NBFCs in the country to be awarded a rating of FAAA/Stable for fixed deposits, indicating a very strong degree of safety with regard to timely payment of interest and principal on the instrument by the Credit Rating and Information Services India Limited (CRISIL).

In addition to this, we are also rated high in the following programs:

P1+ rating from CRISIL for Short-Term Debt Programme

AA+/Stable from CRISIL and LAA+ from ICRA for Long-Term Debt Programme

We have a network of over 2,500 Bajaj Auto and consumer durable dealerships and over 63 branch offices throughout the country to cater to all the requirements of our customers. We have earned the trust and loyalty of over 50 lac satisfied customers across the country.

Milestones

To achieve individual targets fixed by the Branch Head. Excel/Specialize in one or more products to market the same & also responsible for achievement of targets for the same.

To attend Retail Clients with main emphasis on addition of such clients.

To provide support for Gen. Branch administration & Back Office operations (e.g. maintaining records / Files / Database of Clients, sending mailers /Insertions and renewal reminders.

To Provide support function to CRM /ACRM (e.g. in preparing presentations, to provide after sales service & co-ordinate with Reg. /Head office for any requirement like forms, stationary etc)

1.2.3: Mission & Vision

Mission Statement

Bajaj Capital aims to be the most useful, reliable and efficient provider of Financial Services. It is our continuous endeavour to be a trustworthy advisor to our clients, helping them achieve their financial goals.

Our Aims

To serve our clients with utmost dedication and integrity so that we exceed their expectations and build enduring relationships.

To offer unparalleled quality of service through complete knowledge of products, constant innovation in services and use of the latest technology.

To always give honest and unbiased financial advice and earn our cilent's everlasting trust.

To serve the community by educating individuals on the merits of Financial Planning and in turn help shape a financially strong society.

To create value for all stake holders by ensuring profitable growth.

To build an amicable environment that accords respect to every individual and permits their personal growth.

To utilize the power of teamwork to function as a family and build a seamless organization.

Our Vision

To be the most preferred financial planning and investment advisory company in India by providing consumers with informed choices of lasting value, create wealth for them to make their tomorrow better than today.

1.2. 4. Product range of the company

Financial Planning 360Financial Planning Investment Planning Insurance Planning Retirement Planning Tax Planning Children's Future Planning Cash Flow Planning Portfolio Tracker Financial Planning Tools Mutual Funds Top Funds Latest NAV Historical NAV Current NFOs Compare Funds Dividends Declared Fund Barometer

Insurance Life Insurance Products Term Insurance Premium General Insurance Products General Insurance Brochures Health Insurance Premium Insurance Policy Reminder ULIP Multimeter

Calculators Crorepati Calculator Child Education Planner Child Marriage Planner Pension / Retirement Planner Future Value Calculator Maturity Yield Calculator Human Life Value CalculatorFinancial Planning

The only thing permanent in life is change. Times change. People change. So does life. You expect life to be much better tomorrow than it is today. Tomorrow, you hope to fulfill all your dreams and aspirations.But what happens if things take an untoward turn? What if life doesnt happen the way you planned it for? At Bajaj Capital we understand this. We know that an unexpected change in your financial situation can be incredibly stressful. Hence we help you plan your financial life. We make sure that whatever be the situation; financially your life never goes unrestrained.So we bring for you the most preferred solution:

Insurance Planning

Insurance Planning is concerned with ensuring adequate coverage against insurable risks.Calculating the right level.

Tax Planning

Proper tax planning is a basic duty of every person which should be carried out religiously. Basically, there are three steps in tax.

Children's Future Planning

The purpose of Children's Future Planning is to create a corpus for foreseeable expenditures such as those on higher education.

Investment Planning

Investment Planning involves identifying your financial goals throughout your life, and prioritising them. Investment Planning is.

Retirement Planning

It is important to plan for your life post-retirement if you wish to retain your financial independence and maintain a comfortable standard.

Short Term Cash Flow

Cash Flow Planning refers to the process of identifying the major expenditures in future (both short-term and long-term)

Financial Planning Tools

Our financial tools, financial calculators, insurance calcualtors help our investors to do their financial and investment....

1.2.5 Organization Structure

Organization structure of the company

Fig. 1..1: Organization chart Market share & position of the company in the industry.

Fig. 1.2: share price 1.3 Introduction to the Topic/Title/Problem Studied

Competition Information MARKET SHARE STRUCTURE:

MARKET CAPITAL ( Rs Crore)

(FINANCIAL YEAR 2009-10)

PUNJAB NATIONAL BANK16,232

ICICI BANK79,378

UCO BANK3,241

IDBI BANK6,306

SBI96,082

INDIAN OVERSEAS BANK5,331

BANK OF INDIA14,999

UNION BANK7,779

ANDHRA BANK2,864

INNOVATIVE MARKETING STRATEGIES OF BAJAJ CAPITAL IN MUTUAL FUNDS INDUSTRY IN INDIA

Role in Innovation in Financial Products and Services

According to, Innovation in financial services: A McKinsey Global Survey, a recent McKinsey Quarterly survey found that financial-services executives see innovation as important to the performance of their companies. They view product innovation as most important and expect a growing role for business model innovation. It also found that a majority of executives say innovation is more challenging for financial-services firms than for other companies, mostly because of short-term financial pressure. Executives rate their companies as no better than adequate at fostering innovation through practices such as using consumer insights to drive new ideas and dedicating people, processes, and funds to innovation and most executives expect their companys spending on innovation to increase. Scott J. Edgett in The New Product Development Process for Commercial Financial Services outlines why the Financial Services need to focus on new product development and better process. He lists some of the aspects affecting the current situation which involves the combined pressures of:

Increased competition

Rapidly changing marketplace

New technology

New and pending legislative changes

The attention of senior executives in the financial services industry is increasingly being focused on how well the new product development process is working within their institutions. It is imperative to be able to design, develop, and launch new products that are winners [Edgett, Scott J.]. The study showed that a success rate of only 62.5% of projects launched were a commercial success, leaving significant room for improvement. The study also found that most companies take short cuts and the execution of the product process was never fully completed and generally only had a moderate quality of execution. It has been discovered that institutions that follow a systematic process have greater success. So it is imperative to look at this with regards to research and development, without a successful product development process RD&I will not be utilized to its full potential.

Constant innovation key to successA constant attempt at innovation, both in terms of product and service, holds the key for success of business in a competitive world, where consumer satisfaction is the main mantra, Mr V.R. Muthu, Chief Executive Officer, Idhayam Group of Companies, Virudhunagar, has said. Inaugurating the Business Line Club at the Alagappa University, here, Mr Muthu said innovation for improving the quality of the product is necessary, as consumers would reject an inferior product. Innovation helps make a difference and attracts a consumer to a particular brand. Advertisements are an effort towards reaching the consumer and the television has proved to be a powerful medium. Impressed by an advertisement a consumer might chose to buy a product initially but would not continue to do so if it is of inferior quality, he observed.

However, quality alone would not be enough in a competitive world. If the market is to be expanded, one must know the preferences of the consumers and provide the product/ service according to their needs. This has led to a search for value addition in every product that comes to the market today. It must be realised that innovation happens only when knowledge is acquired and the society that acquires the necessary knowledge becomes the leader in the field and the company that brings the same to application becomes the leader in the chosen field. Fundamentally, the research towards continuous improvement is the bedrock of development and success, he said.

A great deal of innovation in the industry takes place at the level of index providers such as Stoxx, which is now exploring the opportunities opened up its new ownership structure following the purchase of the stake previously held by Dow Jones by existing shareholders Deutsche Brse and Six Group. According to Konrad Sippel, responsible for global product development and sales at the firm, the change not only allows Stoxx to absorb the index businesses of its two shareholders into a combined business but will enable it to extend its focus, previously limited to Europe under the agreement with Dow Jones, to the global market. When developing new indices we usually work very closely with the market and with our in-house experts, he says. We have a group of financial engineers that continuously bring up innovative ideas, test them in the market and develop them further in collaboration with market participants. We also listen to what market participants need and create custom and branded solutions for our clients. The best example of that is probably the series of optimised sector indices launched in the past year.

Sippel believes the shift toward ever-greater customisation is set to intensify. Index development trends are constantly moving toward individualisation, he says. The time of the big benchmarks has passed in some respects those areas of the market are well covered. However, we see increasing demand from clients seeking individual solutions in terms of risk/return profile, specific market exposure and specific risk exposure, and we are working hard to provide our clients with the right framework for these indices. Among the most active developers of new products is db x-trackers, the ETF business launched by Deutsche Bank. We have been very innovative over the past year, for instance with the launch of our hedge fund ETF, says Simon Klein, head of db x-trackers sales for continental Europe. We were the first ETF provider to launch a product based on hedge fund exposure, and we are now bringing leveraged long and short ETFs to the market. We will also focus on illiquid asset classes such as the EPRA real estate indices, and create more unique products such as our recently-launched China A-share ETF, which was the first Ucits III-compliant ETF investing on China A-shares. In addition, we also recently launched our exchange-traded commodity platform, and we plan to list another 30 ETCs by the end of the year.

Exchange-traded commodities have been a major growth area during the crisis period and more providers are coming into the market (another recent entrant is UBS). However, pride of place is held by ETF Securities, whose founders launched the ETC concept in Australia in the early 2000s and which now has an extensive commodities platform spanning Europe, the US, Japan and Australia. While its ETC platform continues to expand geographically, ETF Securities has also been active in other areas, such as the launch of ETF Exchange, an ETF platform backed by a consortium of banks. So far we have Barclays, Citibank, Merrill Lynch and Rabobank on the platform, says head of sales Scott Thompson. The banks increasingly want to get involved in the growth of ETFs, but its an expensive business with a high fixed cost base. Joining a platform allows those costs to be shared and the banks to leverage their distribution capabilities.

India's mutual fund market is booming, with new players and financial products entering the market. Existing players are introducing new investment avenues and innovations in existing schemes - the latest being facilities for free insurance. Service innovations include gold exchange traded funds, capital protection funds and funds focussing on real estate. "Service and product innovations are a must in today's scenario, as they not only help in attracting investors, but also increase sales of existing schemes," said R S Srinivas Jain, chief marketing officer, SBI Funds Management Pvt Ltd. Investors must also look at the quality of service provided by the mutual fund, he added. "The 70% of payments our clients have made electronically is the highest figure in the industry, according to available data. We aim to increase this to 85% this fiscal. Efforts are on to tie-up with other banks to make payments hassle-free and timely," Jain added.

SBI Funds claims the industry is still developing, and there is a lot of scope for new players as well as existing ones, since the total investments in the industry still lag behind that in developed and other developing countries. "Investments in the industry, as measured by assets under management, is less than 10% of GDP. This is less than half the figure in Japan and Korea. New players are not a serious threat, though existing players may witness a marginal fall in their share. The industry has enough scope for both to exist simultaneously," said Achal Kumar Gupta, managing director, SBI Funds Management. Quoting a recent McKinsey report, he said the industry was poised to grow at a compounded annual rate of 30-35% over the next five years. "The future of the industry looks good, but education and awareness among investors, is required, as these act as a hurdle to growth," he added.

Customer Orientation in Designing Mutual Fund ProductsThe mutual fund industry in India has evolved little over three decades but the real impetus has come after the changes in the mutual fund regulations in early 80s. Private and foreign mutual funds are operating in the Indian market and constitute a substantial portion of the mutual fund industry. Today the industry consists of Unit Trust of India, mutual funds sponsored by public sector banks and insurance corporations, private and foreign mutual funds. Investors are constantly being bombarded by questions concerning their risk profile. Either a money market or guilt fund is targeted for the risk averse or a low graded company offering a high return on its fixed deposits. Banks like Citibank , ANZ Grindlays, Deutsche bank, Hongkong bank, Commerze bank, Banque nationale de Paris and HDFC bank are not only aggressively marketing funds many are also planning to launch their own. The list of potential entrants includes ABN Amro, ANZ Grindlays, Hongkong bank and Jammu and Kashmir bank.

The Reserve Banks Currency and Finance report 1997-1998 shows that the investors appetite for risk has diminished considerably. As much as 46% of the financial savings of the household sector found its way back to bank deposits; 12% went in to Government savings plans and 18% in to provident funds. Only a miniscule 2% wound up in the capital market and 4% in company deposits. The mutual fund product designers have identified a strategic gap in the product offering in the capital market and now are fighting a loosing battle with government savings plans, bank deposits and provident funds. They are providing cheque facility on money market mutual funds to make them more enticing and guilt funds for the risk averse.

Product innovations and new product combinations have started rolling in to the Indian market. GIC mutual fund has launched an open-ended scheme named as GIC DMAT in which 71 demat scripts having a weight of nearly seventy- percent in the sensex and the Nifty are being marked for trading. The specialty of this new product is that investors will have an opportunity to exchange their holdings of scrips, which are available for dematerialization with units of this scheme. There are 252 mutual fund schemes and are likely to go higher in the future. The reason for launching of these large number of mutual fund products is the distributed pattern of investment behavior of Indian small investor .The purchase decision of a mutual fund is largely dependant upon investors level of savings, investment pattern and the risk profile.

Many managers are now taking interest in designing mutual fund products with multi feature options for investors. Customers are often benefited from the improvements that are offered by new features, for example by enhanced quality products [Garvin (1984)]. These additions of features also offer advantages to others in the value chain. For the mutual fund agents new features provide new sales arguments in seller buyer interaction. New features do not only infuse single products but also entire product categories periodically with new lease of life [Broadbent (1980), Dowdy W.L. (1986)]. Based on the literature [Kotler (2000), Nicholas, (1992), Sen. (1996), Starr(1992)] a product feature is defined as each identifiable aspect of the total offering that a critical reference group perceives and evaluates as an extra to a known standard among comparable products. The success of a mutual fund and its capacity largely depends on its ability to mobilize funds.

On the total 252 mutual fund schemes are now available to the buyers out of which 103 are income schemes and 94 are growth schemes. The rest are hybrids. The total assets under all mutual funds are Rs. 90,685.25 crores. The share of Unit Trust of India continues to be stagnant at 71 percent (64,637.37 crore). Private players now command assets of 17041.34 crore (19%). Public sector funds are holding the least (10%) with Rs. 9006.54 crore assets. The Government owned banks and UTI have 32 assured return schemes where as no private sector mutual funds offer assured returns. The securities scam, unprecedented boom and the slow down in the economy saw the Indian stock market enters through a prolonged phase of instability. Therefore investors preferences shift from equity funds to fixed income and debt instruments. Due to the reduction in the interest rate in USA the Indian bond market rallied in expectation of a similar cut, debt funds staged a come back. Investors realize that an interest rate cut reduces the market yield and hence, increases the demand for long term debt papers bearing high coupon rates. The average annualized return for the quarter in debt funds was 14.64 which were much higher than the returns posted by any other debt based investment instruments on a post tax basis.

The new mutual fund product launches had seen many of the equity based funds in the market during this period, primarily to attract investors who would like to take advantage of the low prices in the stock market but majority of the funds launched were debt funds. The budget has also supported the cause of debt fund rather than equity due to a lower dividend distribution tax. The investors hesitate to invest in the equity fund when the market is down but the marketing and distribution cost of these incurred during this period does not reflect a rise in the investors choice. As a product manager one is ought to design mutual fund products, which shall combine an optimal mix of return, risk liquidity and safety for the small investors.

Loading of Selected Variables on Key Factors

It is evident from the analysis that the changing preferences of the investor create many new needs, which may be controlled by key determinants. Table- V depicts that the first factor identified with product features are awareness of attribute of the product, hassle free trading, exclusivity for small investors, ownership of the product, technology, lock in period and brand name. These attributes can be grouped under Factor- 1 and termed as Core Product. These are the core part of a mutual fund product, which are common expectation of any customer while making a purchase decision. The second factor is designated Performance Factor on the basis of the loaded variables. The data set of the Factor-2 loading indicates that among various product feature variables, performance of the fund, safety, liquidity, regular income, tax benefit, emergency need fulfillment attributes are found to be important by customers for making a brand choice. This is an indicator that by sheer name of the company no mutual fund product is going to survive and grow in the market. This is supported by the recent series of poor performances of UTI in the Indian Market. People are no more looking in to the name for making decision. The market has moved purely from a market of single choice to a competitive choice.

This kind of consumer orientation is good for the Indian market. It not only offers a basket of products to choose from but also makes the fund managers to think and take prudent decision regarding the investment and market capitalization. Unless the fund provides growth equipped with assured return and high liquidity the market response is going to be poor. While designing a mutual fund product the product manager has to be concerned about offering a mix of combination in risk return and liquidity. Thus performance factor of the fund expressed in its NAV details is an influential variable in the purchase decision of the investor making it the most tangible component visible to the investor in the offering.

It shows the significance for transparency, service behaviors and delivery schedule. This factor suggests that the process of delivery should be prompt and on time. An investors service expectation statement should be the vision for the organization to aspire for. This component of service augmentation or Augment Part of the product makes it mandatory on the part of the fund manager to provide services in a continuous basis so that the customer stays loyal and happy with the fund and responds to changing need of the customers

It includes attributes such as sponsor reputation, advertisements, Broker/Agents recommendations, friend/ relative suggestion. This element is more important in a competitive market where most of the product offerings are similar and the customer finds it difficult to take a decision. In an advanced and matured market like that of urban India what needs to be done for the success of a mutual fund is a high degree of persuasive communication than the current practice. Present communication and promotions about various mutual fund products in India are informative only. As the market has advanced to a higher level what needs to be done is to promote own brands than promoting the category only for attracting investors of mutual fund. The concept of brand image and market goodwill generated out of past performance of mutual fund is explained by the term sponsor reputation.

It clearly indicates the combination of three attributes such as performance guarantee, assured return and degree of capital appreciation. This factor is termed as investors confidence factor, which is built over a period of time due to consistency in performance and transparency in market behavior. The five factors explained above are the proposed product combinations of a mutual fund offering to the investors. If the product designers will be careful about these key issues while designing a brand of mutual fund then only the brand will see a higher customer response and enjoy market success.

The Whole Mutual Fund Product

Where F1: -Core Expectations

F2: -Tangible Product (Market Performance)

F3: -Augment Product (Service Behavior)

F4: -Persuasive Communication

F5: - Confidence Factor

Critical Risk Factors of Product Innovation

For financial institutions, product innovation entails both opportunity and risk. Opportunities are numerous and include, for example: providing better service offerings to respond to increasingly dynamic markets, deregulation and shifting industry boundaries to eliminate the traditional barriers of market entry; and learning new ways to narrow the gap to the world leading competitors. At the same time, product innovation is extremely risky. Unfortunately, the rate of success tends to be low, and the outcome tends to be poor. The risk of innovation is additionally magnified by the own risk attribute of financial services industry. To control the risk and achieve better performance of product innovation, financial institutions should identify the critical risks and enrich the methods of risk management.

Compared with abundant studies for the risk management of technological innovation for manufacturing sector, only in recent years have studies on new product success factors been undertaken in the financial services sector. As same as the development course of studies for technological innovation, the studies for risk in financial product innovation firstly begin with the determinant factors to success and failure, for the failure is the highest risk in innovation. An important conclusion drawn from these studies is that how companies orchestrate their development activities has a significant impact on new service performance. In other words, successful new services rarely happen by chance. Rather, they are the result of a well-designed organizational effort and a carefully coordinated new service development process. Edgett also suggests that the new product process impacts the success rates of new commercial financial services, and success is manageable on the basis of a rigorous new product process, early upfront marketing and quality of execution. Over time, financial institutions should be in a position to reap the competitive benefits of a high quality new product process. For success factors of financial product innovation, Easingwood and Storey reveal these key factors as internal marketing and synergy, communications strategy, overall quality, technological advantage, use of market research, distribution support, direct mail support, and responsiveness. By further study, they suggest that the success of a new financial product should owe to not a unique factor, but at least four factors as overall quality, discrepant product, product synergy, and use of technology. De Brentani uncovers six factors appear to provide a good description of the key dimensions that encompass the development of new industrial services in financial firms including formal up-front design and evaluation, formal and extensive launch programme, supportive and high-involvement NSD environment, marketing-dominated NSD process, customer-driven NSD, and expert-driven NSD. Edgett and Parkinson abstract eleven interpretable factors as organizational factor, resource allocation, formalization, preliminary assessment, market research, design testing, business/financial analysis, product launch effectiveness, project updates, market synergy, and market potential. Harrison reckons the material factors which determines the success of a new financial service include formal preliminary design and assessment, formal and elaborate launch process, supportive and highly compatible environment, strong market orientation, customer orientation ensuring idea steps from the customer, importance of internal experts in the process of idea generation and new product plan, product with significant different from other products in the marker. Moreover, for imitative innovation, speed of response and control of cost are necessary. Avlonitis et al. proposes the determinant factors in the development activities as idea generation and screening, business analysis and marketing strategy, technical development, testing, and launching.

Along with the simple standard of success and failure in innovation further measured by quantitative dimensions of innovation performance, the emphases of study turns to innovation performance and the corresponding risk factors. According to the framework provided by Cooper et al., new product performance in financial services sector can be viewed on three different and independent performance dimensions financial performance, relationship enhancement, and market development. The numerous characteristics or variables that capture the nature of new financial service are reduced to eleven underlying factors marketing synergy, a market-driven new product process, effective marketing communications, customer service, managerial and financial synergy, launch preparation, product responsiveness, product advantage, innovative technology, reputation, proficient operating and delivery systems. Each of these eleven factors is then tested for its impact on new product performance, against each of the three performance dimensions. Storey and Easingwood measure new service performance as three dimensions sales performance, enhanced opportunities, and profitability. Factor analysis is used to reduce the large number of attributes of new service to a more manageable number of underlying dimensions. Seven critical factors are found to be closely associated with outstanding performance in new services overall company/product fit, compatibility/importance, staff: skills and support, distribution strength, effective communication, product/tangible quality, quality of service delivery.

S.W.O.T ANALYSIS OF BAJAJ CAPITAL

Strengths:

1. Bajaj Capital draws strength from years of experience in handling the ever changing financial scenario strong customer relationships.

2. Ability to provide the cutting edge technology at best-value for money.

3. An excellent service and support infrastructure.

Weakness:

1. The company needs to evolve a comprehensive plan and strategy to make inroads into a part of middle class.

2. Lack of R & D centers also makes it difficult to launch new products over here.

Opportunities:

1. The present rate of growth of the financial industry and a large potential available in these areas provides excellent opportunities for the company to widen its market.

2. With the fast growing economy the pricing strategy needs to be tackled with care as it can decide upon long term decisions of the company.

Threats:

1. It is natural that threats from the existing as well as new entrants will affect the present turnover and market share.

2. The nearest competition having the identical product range are the greatest threat to the companyCHAPTER- 2

OBJECTIVE & METHODOLOGY

OBJECTIVE & METHODOLOGY

2.1: RESEARCH OBJECTIVE

The broad objectives of the present study are as follows:

To study the mutual fund industry in general and its various facets.

To understand various product innovation techniques used by Bajaj Capital To understand the applicability of product innovation techniques used by Bajaj Capital in the financial sector.

To analyze the feasibility, advantages and limitations of product innovation in the mutual fund sector.

2.2: Research Methodology

Research Design

A Research Methodology defines the purpose of the research, how it proceeds, how to measure progress and what constitute success with respect to the objectives determined for carrying out the research study. The appropriate research design formulated is detailed below.

Exploratory research: this kind of research has the primary objective of development of insights into the problem. It studies the main area where the problem lies and also tries to evaluate some appropriate courses of action. The research methodology for the present study has been adopted to reflect these realties and help reach the logical conclusion in an objective and scientific manner. The present study contemplated an exploratory research

Nature of DataPrimary Data: Data which is collected through direct interviews and by raising questionnaires. For the present study, data is restricted to secondary data only.

Primary data:Interviews and Questionnaires with the Officials of Bajaj Capital, and Customers in this segment in New DelhiTools:

Bar Diagrams, pie-charts, tabulation

Sampling method:

Random sampling methodSample size:

100Target audience:Officials of Bajaj Capital and Customers in this segmentSecondary Data: Secondary data that is already available and published .it could be internal and external source of data. Internal source: which originates from the specific field or area where research is carried out e.g. publish broachers, official reports etc. External source: This originates outside the field of study like books, periodicals, journals, newspapers and the Internet.

Secondary data have been collected through the following sources:-

Articles,

Reports,

Journals,

Magazines,

Newspapers and

Internet

QUESTIONNAIRE DESIGN / FORMULATION

Questionnaires: - A questionnaire consists of a set of questions presented to respondent for their answers. It can be Closed Ended of Open Ended

Open Ended: - Allows respondents to answer in their own words & are difficult to Interpret and Tabulate.

Close Ended: - Pre-specify all the possible answers & are easy to Interpret and Tabulate.

TYPES OF QUESTIONS USED IN THIS PROJECT

Close ended Questions To know the choice of the people regarding various matters.

Dichotomous Questions

This has only two answers Yes or No.

Multiple Choice Questions

Where respondent is offered more than two choices. This is done to know the choice of the customers regarding different matters.

Sample Extent

Central Delhi

Time Frame

8 weeks

2.3 : Limitations of the Research

To analyze the feasibility, advantages and limitations of product innovation in the mutual fund sector. The mutual fund industry started in India in a small way with the UTI Act creating what was effectively a small savings division within the RBI. Over a period of 25 years this grew fairly successfully and gave investors a good return, and therefore in 1989, as the next logical step, public sector banks and financial institutions were allowed to float mutual funds and their success emboldened the government to allow the private sector to foray into this area. The major limitation show that the concentration has declined and competition increased in the mutual fund industry in terms of both funds and schemes. The regression coefficient for funds indicates that the concentration has declined and the large firms lost their share to small firms. Sector wise (among the public sector, private and foreign sectors and also within sectors) analysis of competition among mutual funds has also being attempted.

CHAPTER 3DATA ANALYSIS & INTERPRETATION

DATA ANALYSIS AND INTERPRETATION1. Are you aware about the present boom in the investment Market? Yes --------------------------------------------------

82 per cent

No. --------------------------------------------------

12 per cent

Do not know/ Can not say -----------------------

06 per cent

Interpretation: As regard to market boom and the respondents awareness level about this, nearly 82% of the respondents are aware about the market boom in the present economy, while the rest 12% are not aware about any market boom. The awareness level is high among the middle and the upper middle class, and particularly among the business class and the traders. One of the interesting finding of the study was that many respondents confuse between inflation and market growth. Respondents belonging to lower middle and middle class confuse whether price rise has anything to do with investment scenario.

About the reasons, 65% of the respondents who are aware about the market boom feel that it reflects the resilience of the Indian economy and reflects a true picture of it. This they attribute to the persistent increase in Sensex and continuing economic growth rate which is somehow near the double digit mark. 27% of the respondents who are aware about the market boom feel that this is a temporary situation which is likely to recede. Rest of the respondents could not attribute any concrete causal relationship for the market boom.

2. Which sectors or Any Particular Sector you look as market Performer?

IT-------------------------------------------------78 per cent

Engineering ----------------------------------05 per cent

Banking -----------------------------------------12 per cent

Telecom ----------------------------------------05 per cent

Interpretation:

More than78 percent of the investors were of the opinion that it is the Information Technology which is the main driving force behind the present market boom. They felt that IT combined by Engineering and Telecom can take the Indian investment scenario to a new high.

3. Do you agree that your company has a good financial standing in comparison with others in the market?

Agree ------------------------------------------------

73 per cent

Disagree --------------------------------------------

06 per cent

Do not know/ Can not say ------------------------

21 per cent

Interpretation:

Cutting across the companies, 73 per cent of the respondents rate their companies with better or at least sound financial position in comparison with their rivals in the market.

4. Why do you think the mutual funds of your company should be accepted among the investors?

It is more risk proof -------------------------------------16 per cent

Can stand against market volatility -------------------44 per cent

Design according to the investors needs ------------25 per cent

Other reasons ---------------------------------------------13 per cent

Do not know/ Can not say ------------------------------02 per cent

Interpretation:

Going by the respondents view, the company officials believe that the capability of their mutual funds to stand against the market volatility and risks make their mutual funds attractive to the customers.

5. Do you agree that strong management is an asset for better financial performance of mutual funds in the capital market?

Agree -----------------------------------------------92 per cent

No --------------------------------------------------00 per cent

Do not know/ Can not say ----------------------08 per cent

Interpretation:

Strong and efficient management can effectively contribute to better performance of mutual funds in the capital market in India.

6. Do you agree that private sector mutual funds and public sector mutual funds differ in terms of their financial performance and return?

Agree -----------------------------------------------

23per cent

No ---------------------------------------------------

70 per cent


07 per cent

Interpretation:

The result of our study gives an impression that public sector mutual funds and private sector mutual funds do not differ substantially in terms of their financial performance and returns.

7. Which types of mutual funds are better placed in terms of their return?

Unit linked growth funds ---------------------------

30 per cent

Equity linked growth funds -------------------------30per cent

Tax saving bonds ------------------------------------

38 per cent

Others --------------------------------------------------02 per cent

Interpretation:

Going by the response of the respondents, it is the tax saving bonds which gives better returns followed by the unit linked and equity linked growth funds.

8. How significant is portfolio diversification for better returns out of the mutual funds?

Very significant -------------------------------25 per cent

Significant -------------------------------------54 per cent

Less significant -------------------------------11 per cent

Not significant at all --------------------------05 per cent

Do not know/ Can not say --------------------05 per cent

Interpretation:

In the present market scenario, the respondents believe that portfolio diversification is important for getting better returns out of the mutual fund investment and management.

9. Are you satisfied with the returns you are getting from the mutual funds of your company present available in the market?

Very satisfied --------------------------------

27 per cent

Satisfied --------------------------------------

60 per cent

Less satisfied ---------------------------------04 per cent

Not significant at all -------------------------05 per cent

Do not know/ Can not say ------------------04per cent

Interpretation:

The result of our study says that the officials are satisfied with the returns they are getting from the mutual funds of their company.

10. Are you aware about product innovation techniques in the mutual fund sector?

Yes ---------------------------------------------------

97 per cent

No ----------------------------------------------------

03 percent

Interpretation:

The awareness level among the officials about the product innovation techniques in the mutual fund sector is quite high.

11.Does your company resort to product innovation methods?

Yes ----------------------------------------------------

76 per cent

No -----------------------------------------------------

20 percent

Do not know / Can not say -------------------------

04 percent

Interpretation:

The companies resort to product innovation methods to optimize their sales and profit figures.

12.Do you agree that product innovation can neutralize competition in the mutual fund sector?

Agree ----------------------------------------------30 percent

Strongly Agree ----------------------------------42 percent

Disagree ------------------------------------------10 percent

Strongly Disagree -------------------------------08 percent

Do not know / Can not say ---------------------10 percent

Interpretation:

If we go by the respondents views, product innovation can neutralize competition in the mutual fund sector.

13.Do you agree that product innovation is a difficult strategy for the small firms to adopt?

Agree --------------------------------------------40 percent

Strongly Agree ---------------------------------40 percent

Disagree -----------------------------------------10 percent

Strongly Disagree ------------------------------05 percent

Do not know / Can not say --------------------05 percent

Interpretation:

Small firms have their own advantages owing to their size and turn over, therefore, they face difficulties in adopting product innovation methods.

14.Do you agree that recruitment from rival companies can be a viable alternative to product innovation?

Agree ---------------------------------------------28 percent

Strongly Agree ----------------------------------32 percent

Disagree ------------------------------------------20 percent

Strongly Disagree -------------------------------12 percent

Do not know / Can not say ---------------------08 percent

Interpretation:

Recruitment from rival companies can be a viable alternative to product innovation, particularly for the small firms. 15.What future do you predict for the mutual funds of your company in the near future?

The profit scenario will continue --------------------------

46 per cent

Returns may not be so significant -------------------------

20 per cent

Returns will depreciate --------------------------------------

15 per cent

Do not know/ Can not say -----------------------------------

19 per cent

Interpretation:

While the performance of new funds needs to be evaluated over a longer term before fresh exposures can be considered, the good showing of theme-based funds is expected to continue.

16. With the given market valuations and most analysts making a hue and cry about Indian markets being expensive, do you still see untapped opportunities in the market?

Interpretation:

A summary of the response to this the Indian economy is in the midst of a structural shift. The primarily agrarian economy is shedding its old clothes to don new ones. The economy, which a decade ago was primarily dependent on agriculture, is now driven by the services and manufacturing sectors. Outsourcing as a theme, which was prevalent only in services, is now fast catching up even in the manufacturing sector. The GDP growth at >7%, and industrial growth of >10%, is one of the highest in the world. And the pace of change as well as the pace of growth is not expected to slow down too soon. Considering the above, we feel that the current market levels, more or less, reflect the fundamentals prevalent in the economy. The results declared, so far, by India Inc. also do not suggest any slow down in momentum. The strong economic growth, sustained corporate performance and ample liquidity in the system suggest that in the long run there is still money to be made in the market. While the journey to the current BSE Sensex level of 12,000 points has been sharp and therefore, in the short term, we could see some volatility in the market, but what we want to emphasis is that the story behind such a rise is intact and therefore the up move is likely to sustain. Another thing that we believe and we want to stress is that irrespective of the market level, there are always pockets of opportunities available in the market.

CHAPTER-4

FINDINGS

FINDINGS

A summary of the response to this the Indian economy is in the midst of a structural shift. The primarily agrarian economy is shedding its old clothes to don new ones. The economy, which a decade ago was primarily dependent on agriculture, is now driven by the services and manufacturing sectors. Outsourcing as a theme, which was prevalent only in services, is now fast catching up even in the manufacturing sector. The GDP growth at >7%, and industrial growth of >10%, is one of the highest in the world. And the pace of change as well as the pace of growth is not expected to slow down too soon. Considering the above, we feel that the current market levels, more or less, reflect the fundamentals prevalent in the economy. The results declared, so far, by India Inc. also do not suggest any slow down in momentum. The strong economic growth, sustained corporate performance and ample liquidity in the system suggest that in the long run there is still money to be made in the market. While the journey to the current BSE Sensex level of 12,000 points has been sharp and therefore, in the short term, we could see some volatility in the market, but what we want to emphasis is that the story behind such a rise is intact and therefore the up move is likely to sustain. Another thing that we believe and we want to stress is that irrespective of the market level, there are always pockets of opportunities available in the market.

Small firms have their own advantages owing to their size and turn over, therefore, they face difficulties in adopting product innovation methods.

If we go by the respondents views, product innovation can neutralize competition in the mutual fund sector

CHAPTER 5

RECOMMENDATIONS

RECOMMENDATIONS

The small investors purchase behavior does not have a high level of coherence due to the influence of different purchase factors. The buying intent of a mutual fund product by a small investor can be due to multiple reasons depending upon customers risk return trade off. Due to the reduction in the bank interest rates and high degree of volatility in Indian stock market, investors are looking for an alternative for their small time investments which will provide them a higher return and also safety to their investments. The bond market is also passing through a recession due to its interest parity with bank instruments. So mutual funds offer the best alternative to the small investors in India. A prudent product design by adding the features expected by investors and spelt out in this research will make the new mutual fund products attractive for the Indian investors. The factors identified in the study provide key information inputs regarding investors preferences and priorities that will guide future mutual fund product managers in designing attractive mutual fund products for the Indian market.

By carefully dealing with these risk factors and integrating the findings with innovation management and risk management, it is hoped that Indian financial institutions will be better able to optimize the allocation of resources, and to achieve expected performance of the innovation in terms of reasonable risk tolerance.

CONCLUSION

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 everyday, and there are constant shifts and upheavals. The mutual fund is structured around a fairly simple concept, the mitigation of risk through the spreading of investments across multiple entities, which is achieved by the pooling of a number of small investments into a large bucket. Yet it has been the subject of perhaps the most elaborate and prolonged regulatory effort in the history of the country.

The mutual fund industry started in India in a small way with the UTI Act creating what was effectively a small savings division within the RBI. Over a period of 25 years this grew fairly successfully and gave investors a good return, and therefore in 1989, as the next logical step, public sector banks and financial institutions were allowed to float mutual funds and their success emboldened the government to allow the private sector to foray into this area. The initial years of the industry also saw the emerging years of the Indian equity market, when a number of mistakes were made and hence the mutual fund schemes, which invested in lesser-known stocks and at very high levels, became loss leaders for retail investors. From those days to today the retail investor, for whom the mutual fund is actually intended, has not yet returned to the industry in a big way. But to be fair, the industry too has focused on brining in the large investor, so that it can create a significant base corpus, which can make the retail investor feel more secure.

The growth of the industry continued to be corporate focused barring a few initiatives by mutual funds to expand the retail base. Large money brought with it the problems of low retention and consequently low profitability, which is one of the problems plaguing the business. But at the same time, the industry did see spectacular growth in assets, particularly among the private sector players, on the back of the continuing debt bull run. Equity did not find favor with investors since the market was lack-luster and performances of funds, barring a few, were quite disappointing for investors. The other aspect of this issue is that institutional investors do not usually favor equity. It is largely a retail segment product and without retail depth, most mutual funds have been unable to tap this market.

The major findings show that the concentration has declined and competition increased in the mutual fund industry in terms of both funds and schemes. The regression coefficient for funds indicates that the concentration has declined and the large firms lost their share to small firms. Sector wise (among the public sector, private and foreign sectors and also within sectors) analysis of competition among mutual funds has also being attempted. The result shows that the competition is moderate among the sectors. Within the sectors competition is high in the public sector and foreign sector and it has declined in the private sector. Also at the same time the concentration index has declined and competition increased among the schemes.

With the bond yields plateauing and with the mutual fund industry trying to attract people to the equity market, the year also saw some remarkable products flavors for Indian investors. Birla Sunlife Mutual Fund led the pack with an equity fund focused on dividend yield stock, a bond index fund and a bond-for-units swap product. Some of the other innovative products were the series of exchange-traded funds from Benchmark, including a liquid index traded fund. Prudential- ICICI also launched an exchange-traded fund, the SPICE, in association with BSE.

The industry focused also on making existing products more attractive by adding on a number of service features and cost control measures. Same day redemption in liquid funds, institutional plans which would reduce the overall cost of investment and bonus units in lieu of dividend were some of these features.

Innovation is crucial to a firms success and as a result the financial services industry needs to be more involved in developing its research and development sector. New products and processes are constantly being created and R&D could open up new ways of improving productivity of the innovation process for the financial services. If RD&I are not already a top source for generating innovation a firm should work towards advancing in making it one. In reviewing collaboration, centralization, patenting, product development processes, and executive awareness of the problems inherent to innovation in the financial industry we can see that there are a number of areas where gaps exist. A new method for approaching research and development and the role it plays in innovation needs to be defined. Financial services are an important sector that need to make use of technological and information systems advances, to mention just a few. It is vital to manage these changes and move forward with the next wave, or even better, lead the next wave.

ANNEXURES

ANNEXURESQuestionnaire 1. Are you aware about the present boom in the investment Market? Yes --------------------------------------------------

No. --------------------------------------------------

Do not know/ Can not say -----------------------

2. Which sectors or Any Particular Sector you look as market Performer?

IT-------------------------------------------------

Engineering ----------------------------------

Banking -----------------------------------------

Telecom ----------------------------------------

3. Do you agree that your company has a good financial standing in comparison with others in the market?

Agree ------------------------------------------------

Disagree --------------------------------------------


4. Why do you think the mutual funds of your company should be accepted among the investors?

It is more risk proof -------------------------------------

Can stand against market volatility -------------------

Design according to the investors needs ------------

Other reasons ---------------------------------------------

Do not know/ Can not say ------------------------------

5. Do you agree that strong management is an asset for better financial performance of mutual funds in the capital market?

Agree -----------------------------------------------

No --------------------------------------------------

Do not know/ Can not say ----------------------

6. Do you agree that private sector mutual funds and public sector mutual funds differ in terms of their financial performance and return?

Agree -----------------------------------------------

No ---------------------------------------------------


7. Which types of mutual funds are better placed in terms of their return?

Unit linked growth funds ---------------------------

Equity linked growth funds -------------------------

Tax saving bonds ------------------------------------

Others --------------------------------------------------

8. How significant is portfolio diversification for better returns out of the mutual funds?

Very significant -------------------------------

Significant -------------------------------------

Less significant -------------------------------

Not significant at all --------------------------

Do not know/ Can not say --------------------

9. Are you satisfied with the returns you are getting from the mutual funds of your company present available in the market?

Very satisfied --------------------------------

Satisfied --------------------------------------

Less satisfied ---------------------------------

Not significant at all -------------------------

Do not know/ Can not say ------------------

10. Are you aware about product innovation techniques in the mutual fund sector?

Yes ---------------------------------------------------

No ----------------------------------------------------

11.Does your company resort to product innovation methods?

Yes ----------------------------------------------------

No -----------------------------------------------------

Do not know / Can not say -------------------------

12.Do you agree that product innovation can neutralize competition in the mutual fund sector?

Agree ----------------------------------------------

Strongly Agree ----------------------------------

Disagree ------------------------------------------

Strongly Disagree -------------------------------

Do not know / Can not say ---------------------13.Do you agree that product innovation is a difficult strategy for the small firms to adopt?

Agree --------------------------------------------

Strongly Agree ---------------------------------

Disagree -----------------------------------------

Strongly Disagree ------------------------------

Do not know / Can not say --------------------

14.Do you agree that recruitment from rival companies can be a viable alternative to product innovation?

Agree ---------------------------------------------

Strongly Agree ----------------------------------

Disagree ------------------------------------------

Strongly Disagree -------------------------------

Do not know / Can not say ---------------------

15.What future do you predict for the mutual funds of your company in the near future?

The profit scenario will continue --------------------------

Returns may not be so significant -------------------------

Returns will depreciate --------------------------------------

Do not know/ Can not say -----------------------------------

16. With the given market valuations and most analysts making a hue and cry about Indian markets being expensive, do you still see untapped opportunities in the market?

BIBLIOGRAPHY/REFERENCES

BIBLIOGRAPHY/REFERENCES(i) Molyneux, F. and Shamroukh, N., Financial Innovation, John Wiley & Sons, Inc.,1999

(ii) De Brentani, U., The new product process in financial services: Strategy for success, International Journal of Bank Marketing, 1993, 11:15-22

(iii) Edgett, S., The new product development process for commercial financial services, Industrial Marketing Management, 1996, 25(1):507-515

(iv) Easingwood, C. and Storey, C., Success factors for new consumer financial services, International Journal of Bank Marketing, 1991, 9(1):3-10

(v) Storey, C. and Easingwood, C., The impact of the new product development project on the success of financial services, The Service Industries Journal, 1993, 13(3):40-54

(vi) Edgett, S. and Parkinson, S., The development of new financial services: Identifying determinants of success and failure, International Journal of Service Industry Management, 1994, 5:24-38

(vii) Harrison, T., Financial Services Marketing, Pearson Education Limited, 2000

(viii) Avlonitis, G., Papastathopoulou, P. and Gounaris, S., An empirically-based typology of product innovativeness for new financial services: Success and failure scenarios, The Journal of Product Innovation Management, 2001, 18:324-342

(ix) Cooper, R., Easingwood, C., Edgett, S., Kleinschmidt E., and Storey, C., What distinguishes the top performing new products in financial services, Journal of Product Innovation Management, 1994, 11(1):281-299

(x) Storey, C. and Easingwood, C., Determinants of new product performance: A study in the financial services sector, International Journal of Service Industry Management, 1996, 7:32-55

(xi) COSO, Enterprise Risk Management Framework, Pricewaterhouse Coopers, 2010(xii) Booms, B. and Bitner, M., Marketing strategies and organization structures for service firms, in Donnelly, J. and George, W. (Eds), Marketing of Services, American Marketing Association. Chicago. IL., 1981:47-51

(xiii) Balachandra, R. and Friar, J., Factors for success in R&D projects and new product innovation: A context framework, IEEE Transaction on Engineering Management, 1997, 44:276-287

(xiv) Anna and Jonas (2010) Application of the Structure Conduct Performance Paradigm in a

(xv) Transition Economy: Explaining Reported Profitability of the Largest Latvian Firms, SSE Riga Working Papers 2010: 8 (63).

(xvi) Bain, Joe S. (1956) Barriers to new Competition, their character and Consequences in Manufacturing Industries, Cambridge, Mass: Harward University Press, 1956.

(xvii) Bajo, Oscar and Rafael Salas, (2002) Inequality Foundations of Concentration Measures: An Application to the Hannah-Kay Indices, Spanish Economic Review, 4, 311- 316.

(xviii) Banikanta, Mishra and Mahmud Rahman, (2001), Measuring Mutual Fund Performance using lower partial moment, Global Business Trends, Contemporary Readings , 2001 edition.

(xix) Barua and Varma (1994), Financial Sector Reform: Institutional and Technological Imperatives Indian Institute of Management Ahmedabad-380015 February 1994.

(xx) Baumol J. William, John C. Panzar, and Robert D. Willig (1988), Contestable Markets and the Theory of Industry Structure, revised edition, San Diego, Calif.: Harcourt Brace Jovanovich, 1988.

(xxi) Baumol W. J., J. C. Panzar and R. D. Willig (1982), Contestable Markets and the Theory of Industry Structure, New York: Harcourt Brace Jovanovich.

(xxii) Baumol, J William, Stephen, Gold Feld M, Lilli, Gordon A, Michael, Koehn F (1989), The Economies of Mutual Fund Markets: Competition versus Regulation Boston: Academic publishers, Management,8 (Winter 1982), pp.35-42.1964, Journal of Finance, 23, No. 2, pp. 389-416.27, pp. 551-567.

(xxiii) Bhattacharya and Patel (2002), Financial Intermediation in India: A Case of Aggravated Moral Hazard? Center for Research on Economic Development and Policy Reform Working Paper no. 145 Stanford University.

(xxiv) Carter R John (1984), Concentration Change and the Structure-Performance Debate: An

(xxv) Interpretive Essay, Managerial and Decision Economics, Vol. 5, No. 4. (Dec., 1984), pp. 204-212.

(xxvi) Caves E. Richard (1980), Industrial Organization, Corporate Strategy and Structure, Journal of Economic Literature, Vol. 18, No. 1. (Mar., 1980), pp. 64-92.

(xxvii) Curry, B. and K.D George (1983), Industrial concentration: A survey, Journal of Industrial Economics, 31: 203-55.

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