Introduction

In this competitive world, every company is looking to have an edge over another company, or an

advantage over another company, to be the best. To achieve all this, a company must go through a

vigorous research about the consumer awareness and their requirements, to provide them with better

services. In this report a sincere attempt has been made to study on awareness of mutual fund, where

people would like to park their money. This report is based on the market survey and research conducted

to determine the “CONSUMER AWARENESS OF MUTUAL FUND”. The topic “Consumer Awareness

of Mutual fund and prospective customers” is selected keeping in mind the following OBJECTIVES.

To know where people prefer to invest.

To know what are products features investors are looking into.

To know whether people are interested in knowing about mutual fund.

To know what people looking from their investment.

To create awareness about mutual funds in the minds of new customers.

These objectives of the study will help to ascertain the awareness of mutual fund that may further guide the

company to improve its products features and services. This survey includes various professionals,

business men/women, house wife, salaried job people few customers of Standard Chartered Mutual Fund.

A mutual fund represents a vehicle for collective investment. When you participate in a scheme of a

mutual fund, you become a part owner of the investments held under that scheme.

A variety of schemes are offered by mutual funds. Based on the investment policy, the mutual

fund schemes are broadly classified as follows: equity schemes, and debt schemes.

The investments of mutual fund are subject to a set of regulations prescribed by SEBI.

The mutual fund business is highly concentrated fund-wise and scheme-wise. The dominant

position of the UTI in the industry has already been referred to. Similarly, a handful of schemes

account for a major part of the unit capital.

INDUSTRY PROFILE

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 of India. The history of mutual funds

in India can be broadly divided into four distinct phases

First Phase – 1964-87

 

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the

Reserve Bank of India and functioned under the Regulatory and administrative control of the

Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial

Development Bank of India (IDBI) took over the regulatory and administrative control in place

of RBI. The first scheme launched by UTI was Unit Scheme 1964. 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 Can

bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual

Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established

its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

 

Third Phase – 1993-2003 (Entry of Private Sector Funds)

 

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 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.

 

The number of mutual fund houses went on increasing, with many foreign mutual funds setting

up funds in India and also the industry has witnessed several mergers and acquisitions. As at the

end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The

Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other

mutual funds.

 

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 Specified Undertaking of

Unit Trust of India, functioning under an administrator and under the rules framed by

Government of India and does not come under the purview of the Mutual Fund Regulations.

 

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with

SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile

UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with

the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and

with recent mergers taking place among different private sector funds, the mutual fund industry

has entered its current phase of consolidation and growth.

SET UP OF A MF

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management

Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor

who is like promoter of a company. The trustees of the mutual fund hold its property for the

benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the

funds by making investments in various types of securities. Custodian, who is registered with

SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested

with the general power of Superintendence and direction over AMC. They monitor the

performance and compliance Of SEBI Regulations by the mutual fund. SEBI Regulations

require that at least two thirds of the directors of trustee company or board of trustees must be

independent i.e. they should not be associated with the Sponsors. Also, 50% of the directors of

AMC must be independent. All mutual funds are required to be registered with SEBI before they

launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on

January 15, 2002).

COMPANY PROFILE

  

KARVY INVESTOR SERVICES LIMITED is a I0O% subsidiary of karvy consultants limited!

and was set up to undertake Merchant banking, Distribution of financial products

consequent to the flew SEBI guidelines which directed that an NBFC should set up separate

companies for handling fee based and fund based activities.

The parent company i.e. Karvy Consultants Limited Was founded by the group to

professionals in 1982 and today it has evolved as integrated financial services company

of repute, offering various financial services to suit every requirement /need by

investors. By virtue of its access to million of Indian share holders, in addition to

companies, banks and financial institutions, karvy has in the process built up a positive

reputation with regulatory authorities and other government agencies emphasis on the

following factors has been instrumental in helping them attain the leadership in the

financial service sector.

Karvy is well networked with over 60 full-fled gad branches and 112 investor Service

centers with a work force of over 2000 professional drawn from various Disciplines.

RANGE OF SERVICES

The range of services offered by Karvy group of companies are issue servicing,

Corporate shareholder services, Mutual fund investor servicing, Asset financing,

Merchant banking & Underwriting services, Loan syndication and Project Financing

Products, Karvy Depository services and investor services. Karvy also has taken the

dealership of the OCTIE.

BACKGROUND

In 1982, a group of Hyderabad-based practicing Chartered Accountants starred KARVY

CONSULTANTS LIMITED with a capital of Rs.1, 50,000 offering auditing and taxation

services initially. Later, it forayed in to the registrar and share transfer activities and

subsequently into financial services, All along, Karvy strong work ethic and professional

background leveraged with information technology enabled it to deliver the quality to

the individual.

Today, Karvy has access to millions of Indian shareholders, besides companies, banks,

financial institutions and regulatory agencies. Over the past one and half decades Karvy

has evolved as a veritable link between industry, finance and people. In January 1988,

Karvy became the first depository participant in Andhra Pradesh. An ISO 9002 company,

Karvy’s commitment to quality and retail reach has made it an integrated financial

service company.

KARVY AS AN INVESTMENT BANKER

The parent company i.e. KARVY CONSULTANTS LIMITED was founded by a group of

professionals in 1982 and today it has evolved as an integrated financial services

company of repute, offering various financial services to suit every requirement need of

our customers. By virtue of its access to millions of Indian share holders in addition to

companies, banks and financial institutions! Karvy has in the process, built up a positive

reputation with regularity authorities and other government agencies.

KARVY INVESTOR SERVICES LIMITED the investment banking arm of the karvy group is a 100%

subsidiary of Karvy Consultants Limited, and was set up to undertake the specialized activities of

investment banking and distribution of financial products. in the recent years KARVY has caned a niche

for itself in the management of the public issues, which is viewed with envy in the market circles. The

marketing capability dovetailed with the range and quality of services has been the core attraction of

many an issuer company.

INVESTMENT BANKING ACTIVITIES AT KARVY

• MANAGEMENT OF CAPITAL ISSUES

• Private PLACEMENT OF DEBT AND EQUITY

• MERGERS AND AMALGAMATIONS

• LOAN SYNDICATION

• OTHER VALUE ADDED ACTIVITIES

PATES OBTAINED BY KARVY AS INVESTMENT BANKER

RATING AGENCY: PRIME

PERLOC: APRIL—JUNE 2000.

• No.1 among private merchant bankers in terms of number of issues

• No.2 among private merchant bankers ri terms of the aggregate public issues amount

• No.3 among private merchant hankers (private and public sector) in terms of the aggregate public

issues amount

Karvy has made its presence strongly felt in all the segments of capital market like

depository participant services, stock braking, primary market distribution etc. has a

national reach through 14 branches and 64 investor services centers aided by a

contingent of 5000 sub brokers.

PRODUCT PROFILE

1. BY OBJECTIVE

Investment goals vary from person to person. While somebody wants security, others might give

more weight age to returns alone. Somebody else might want to plan for his child’s education

while somebody might be saving for the proverbial rainy day or even life after retirement. With

objectives defying any range, it is obvious that the products required will vary as well. So,

Mutual Funds can be classified based on the objectives of the investor.

(a). Equity Fund:

Equity funds invest a major portion of their corpus in equity shares issued by companies. NAV

of equity funds are fluctuated by fluctuation in price of shares that it holds. So there is a high risk

as well as high return in equity fund. Potential to earn in such funds is higher when they are

invested for long term. The leading example of such funds are Prudential ICICI Growth Plan,

Tata Pure Equity Fund, Reliance Vision, Franklin India Prima Fund etc.

(b). Debt Fund:

Debt funds invest in debt instruments debt instruments issued by governments, private

companies, banks and financial institutions. By investing in debt, these funds target low risk and

stable income investors. These funds are low risk low return funds.

The leading examples are:

Birla Income Plus,

Principal Income Fund,

HDFC Income Fund,

UTI Bond Fund etc.

(c). Balanced Fund:

A balanced fund is one that has a portfolio comprising debt instruments as well as preference and

equity shares. The idea is to reduce volatility of funds, while providing some upside for capital

appreciation. They are best suitable for the people looking for a combination for capital

appreciation and regular income and best time spend for such investment is more than 3 years.

The leading examples are Prudential ICICI Balanced Fund, Birla Balance Fund, Franklin India

Balance Fund, Sundaram Balance Fund etc.

(d). Money Market Fund:

Money market funds invest in securities of a short-term nature, which generally means securities

of less than one-year maturity such as Treasury Bills issued by governments, Certificates of

deposit issued by banks and Commercial paper issued by companies. The major strength of

money market funds are the liquidity and safety of principal that the investors can normally

expect from short term investments.

The leading examples are

Prudential ICICI Liquid Plan,

Templeton India Liquid Fund,

Grindlays Cash Fund etc.

(e). Gilt Fund:

These funds are sort of government funds wherein the investments are made in debt instrument

of government, which carry no risk of non payment of interest as the RBI manages the payment

of interest and principal on the investments. These funds are best suited for regular income and

long term investment objectives.

The leading examples are

Prudential ICICI Gilt Fund,

Tata Gilt Securities Fund,

Templton India Government Securities Fund etc.

2. BY DURATION

(a). Open-ended Fund:

An open ended fund is one that is available for subscription and repurchase on a continuous

basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and

sell units at NAV related prices which are declared daily basis. The key feature of this fund is

liquidity.

(b). Close-ended Fund:

A close ended fund has a stipulated maturity period e.g. 5-7 years. The fund is open for

subscription only during a specified period at the time of launch of the scheme. Investors can

invest in the scheme at the time of initial public issue and thereafter they can buy or sell units on

stock exchange where the units are listed at NAV. These mutual fund schemes disclose NAV

generally on weekly basis.

(c). Interval Fund:

Interval funds combine the features of open-ended and close-ended schemes. They are open for

sale or redemption during pre determined intervals at NAV related prices.

3. By Load:

(a). Load Fund:

Marketing of new mutual fund scheme involves initial expenses. These initial expenses may be

recovered from the investors by entry or exit load. But now SEBI has confirmed that AMC can

not charge entry load on new mutual fund.

(i). Entry Load or Front-end Load:

If initial expenses recovered from investors at the time of investor’s entry into the fund, by

deducting a specific amount from his initial contribution it is called Entry Load. But now it has

been banned by SEBI.

(ii). Exit Load or Back-end Load:

If initial expenses recovered at the time of the investor’s exit from the scheme, by deducting a

specified amount from the redemption proceeds payable to the investor it is called exit load.

(iii). Deferred Load:

The load amount charged to the scheme over a period of time is called a deferred load.

(b). No Load Fund:

Funds that don’t charge entry, exit, or deferred load or any other charges for sales expenses are

called no load funds. Now, generally all Mutual Fund companies charge 2 to 2.5% entry load on

equity fund. Generally there is no exit load on equity and sectoral funds to maintain liquidity of

those funds. Generally there is no entry load on gilt scheme and income fund. There is 0.25 to

1% exit load on gilt and income fund if investors exit from fund before specified time which is

generally 3 to 6 months.

4. Other types of fund:

(a) Tax Saving Funds:

These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act,

1961 as the Government offers tax incentives for investment in specified avenues. E.g. Equity

Linked Saving Scheme (ELSS). Pension schemes also offer tax benefits. The leading examples

are Prudential ICICI Tax Plan, Templeton India Pension Plan, Franklin India Tax shield etc.

(b) Index Funds:

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P

NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weight age

comprising of an index. NAV of such funds are changed accordance with the change in the

index.

The leading examples are

Birla Index Fund,

HDFC Index Fund,

Prudential ICICI Index Fund,

UTI Index Fund etc.

(C) Sector Funds:

These are the funds which invest in the securities of only those sectors or industries as specified

in the offer documents. E.g. Pharmaceuticals, Software, Petroleum etc. These types of funds are

more risky compared to diversified funds.

The leading examples are

Birla IT Fund,

Pru. ICICI FMCG Fund,

Franklin India Pharma Fund etc.

(d) Commodity Funds:

Commodity funds invest into the different commodities directly or through shares of commodity

companies. E.g. Commodity fund invest in gold or shares of gold mines. Commodity funds have

not yet developed in India.

(e) Off Shore Funds:

These funds invest in equities in one or more foreign countries there by achieving diversification

across the country’s borders. However they also have additional risks such as the foreign

exchange rate risk and their performance depends on the economic conditions of the countries

they invest in.

NEED OF THE STUDY

The study is carried out to find out the level of consumer awareness on the mutual

funds.

To find out how many consumers are satisfied and how many consumers are not

satisfied with this mutual fund investment.

To gain knowledge about the mutual funds and its operations

To study the level of interest of consumers to know about the new funds of mutual

funds.

To gain practical knowledge about consumer attitude towards mutual funds.

SCOPE OF THE STUDY

This study helps to know the awareness that consumers have towards the mutual fund and

their level of satisfaction towards the investment on various mutual fund schemes and it helps me

to understand why people investing in mutual funds. It helps me to understand the market

conditions.

OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE

To study the consumer awareness on mutual funds and its various schemes in

karvy share broking Ltd.

SECONDARY OBJECTIVE

To evaluate awareness about mutual funds providing by karvy

To study the general investment criteria of consumers.

To study the interest of consumers for further investment in Mutual Funds.

To find in which investment tool people invest more.

To find out how many people are interested to deal with karvy mutual funds.

To find out the future action of the consumers with respect to the awareness they

obtain through karvy.