iip final report

8/2/2019 IIP Final Report

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A Detailed Analysis Of The Mutual fund Industry

&

A Customer Perception Study

SUPERVISED BY:

MR.DHAVAL BAROT

PREPARED BY:

Nishant Gupta


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CONTENTS

1ST

HALF PAGE NO

1. ACKNOWLEDGEMENTS 32. PREFACE 43. SUMMARY/ABSTRACT 54. INTRODUCTION 65. INDUSTRY PROFILE 76. ABOUT MUTUAL FUND 87. STRUCTURE OF MUTUAL FUND 128. ASSET MANAGEMTN COMPANY 169. HISTORY OF MUTUAL FUND 2110.TYPES OF MUTUAL FUND 242nd HALF

11.OBJECTIVE 4412.RESEARCH METHODOLOGY 4513.SCALING 4714.ANALYSIS 49-8315.

FINDINGS 84

16. QUESTIONNAIRE 86

17. BIBLIOGRAPHY 93


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ACKNOWLEDGEMENT

Expression of feelings by words makes them less significant when it

comes to make statement of gratitude

I take this opportunity to express my gratitude to all the people who have guided

and helped me directly or indirectly in the course of completion of my project.

I feel immense pleasure to express a deep sense of gratitude to my Director MR.

J.L.Tulli Sir who has given me an opportunity to do my internship in L&T Mutual

Funds. I would also thankful to my Faculty Guide Prof.Ranjeet Verma for her

constant support and guidance. Her valuable suggestions and helping hands has

helped me to complete my project successfully.

I am also very thankful to Mr. Dhaval Barot(Gujarat Retail Head) and Mr.

Parmnider Singh(Sales Manager) L&T Mutual -Funds, for their cooperation in

providing me all the necessary information for doing this project.

Nishant Gupta


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PREFACE

MBA is a stepping-stone to the management carrier and to develop good manager.

It is necessary that the theoretical must be supplemented with exposure to the realenvironment.

Theoretical knowledge just provides the base and its not sufficient to produce a

good manager thats why practical knowledge is needed.

Therefore the research product is an essential requirement for the student of MBA.

This research project not only helps the student to utilize his skills properly learn

field realities but also provides a chance to the organization to find out talent

among the budding managers in the very beginning.

Investing money where the risk is less has always been risky to decide. The first

factor, which an investor would like to see before investing, is risk factor.

Diversification of risk gave birth to the phenomenon called Mutual Fund.

The Mutual Fund Industry is in the growingstage in India, which is evident from

the flood of mutual funds offered by the Banks, Financial Institutes & Private

Financial Companies.

In accordance with the requirement of MBA course I have summer training Research

project on the topic A REPORT ON DESCRIPTIVE STUDY OF MUTUAL FUNDS

AND STUDY OF INVESTORS PERCEPTION ABOUT INVESTMENT IN MUTUAL

FUNDS.

For conducting the research project sample size of 150 customers of Mutual Funds

were selected. The information regarding the project research was collected

through the questionnaire formed by me which was filled by the investors of

Mutual Funds.


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SUMMARY

Indian Stock market has undergone tremendous changes over the years. Investmentin Mutual Funds has become a major alternative among Investors. The project has

been carried out to have an overview of Mutual Fund Industry and to understand

investors perception about Mutual Funds in the context of their trading preference,

explore investors risk perception & find out their preference over Top Mutual

funds.

The methodology used was data collection using Schedule.

Secondary data was collected from Internet. Primary Data was collected through

survey among existing clients along with the other investors. The procedure

adopted to select sample was simple random sampling

The research design is analytical in nature. A questionnaire was prepared and

distributed to Investors. The investors profile is based on the results of a

questionnaire that the Investors completed. The Sample consists of 150 investors

from various brokers premises. The target customers were Investors who are

investing in mutual fund. The area of survey was restricted to people residing in

AHMEDABAD.


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INTRODUCTION

Investment in share markets are influenced by the analysis & reasoning which help

in predicting the market to some extent. Over the past years a number of technical& theories for analysis have evolved, these combined with modern technology

guides the investor. The big players in the market, like Foreign Institutional

Investors, Mutual Funds, etc. have the expertise for various analytical tools &

make use of them. The small investors are not in a position to benefit from the

market the way Mutual Funds can do. Generally a small investors investments are

based on market sentiments, inside information, through grapevine, tips &

intuition. The small investors depend on brokers and brokerage house for his

investments. They can invest through the Mutual Funds who are more experienced

and expert in this field than a small investor himself.

In recent years a large number of players have entered into his market. The project

has been carried out to have an overview of Mutual Fund Industry and to

understand investors perception about Mutual Funds in the context of their trading

preference, explore investors risk perception & find out their preference over Top

Mutual funds.


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INDUSTRY PROFILE

Structure of the Indian Mutual Fund industry

The largest categories of Mutual Funds are the ones floated by the private sector

and by Foreign Asset Management Companies. The largest of these are Prudential

ICICI AMC and Birla Sun Life AMC. The aggregate corpus of assets managed by

this category of AMCs is in excess of Rs.350 bn.

Earlier the Indian Mutual Fund industry was dominated by the Unit Trust of India

which has a total corpus of Rs.700 bn collected from more than 20 million

investors. The UTI has many funds/schemes in all categories i.e. equity, balanced,

income etc. with some being open-ended and some being closed-ended. The Unit

Scheme 1964 commonly referred to as US 64, which is a balanced fund, is the

biggest scheme with a corpus of about Rs.200 bn. UTI was floated by financial

institutions and is governed by a special Act of Parliament. Most of its investors

believe that the UTI is government owned and controlled, which, while legally

incorrect, is true for all practical purposes.

The second largest categories of mutual funds are the ones floated by nationalizedbanks. Can bank Asset Management floated by Canara Bank and SBI Funds

Management floated by the State Bank of India are the largest of these. GIC AMC

floated by the General Insurance Corporation and Jeevan Bima Sahayog AMC

floated by the LIC are some of the other prominent ones. The aggregate corpus of

funds managed by this category of AMCs is about Rs.200 bn.


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ABOUT MUTUAL FUNDS

A Mutual Fund is a trust that pools the savings of a number of investors who share

a common financial goal. The money thus collected is then invested in capital

market instruments such as shares, debentures and other securities. The incomeearned through these investments and the capital appreciation realized is shared by

its unit holders in proportion to the number of units owned by them. Thus a Mutual

Fund is the most suitable investment for the common man as it offers an

opportunity to invest in a diversified, professionally managed basket of securities

at a relatively low cost. The flow chart below describes broadly the working of a

mutual fund

The structure of Mutual Funds in India is governed by SEBI (Mutual Fund)Regulations, 1996.

SEBI

AMC

Unit holders

Savings

Unit

Trust Investments

Returns

Trust

AMCCustodian

Registrar


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It is mandatory to have a three tier structure of Sponsor Trustee AssetManagement Company.

The trust is established by a Sponsor or more than one sponsor who is like apromoter of a company. He appoints the Trustees who are responsible to the

investors of the fund.

The Trustees of the mutual fund hold its property for the benefit of the unitholders.

Asset Management Company (AMC) approved by SEBI is the business face ofthe mutual fund as it manages all the affairs of the fund by making investments

in various types of securities.

Custodian, who is registered with SEBI, holds the securities of variousschemes of the funds in its custody.

WHY MUTUAL FUNDS?

An investor normally prioritizes his investment needs before undertaking an

investment. So different goals will be allocated different proportions of the total

disposable amount. Investments for specific goals normally find their way into the

debt market as risk reduction is of prime importance. This is the area for the risk-averse investors and here, mutual funds are generally the best option. The reasons

are not difficult to see.

One can avail of the benefits of better returns with added benefits of anytime

liquidity by investing in open-ended debt funds at lower risk. Many people have

burnt their fingers by investing in fixed deposits of companies who were assuring

high returns but have gone bust in course of time leading to distraught investors as

well as pending cases in the Company Law Board.

This risk of default by any company that one has chosen to invest in, can be

minimized by investing in mutual funds as the fund managers analyze the

companies financials more minutely than an individual can do as they have the

expertise to do so. They can manage the maturity of their portfolio by investing in


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instruments of varied maturity profiles. Since there is no penalty on pre-mature

withdrawal, as in the cases of fixed deposits, debt funds provide enough liquidity.

Moreover, mutual funds are better placed to absorb the fluctuations in the prices of

the securities as a result of interest rate variation and one can benefits from any

such price movement.

Apart from liquidity, these funds have also provided very good post-tax returns on

year to year basis. Even historically, we find that some of the debt funds have

generated superior returns at relatively low level of risks. On an average debt funds

have posted returns over 10 percent over one-year horizon. The best performing

funds have given returns of around 14 percent in the last one-year period. In

nutshell we can say that these funds have delivered more than what one expects of

debt avenues such as post office schemes or bank fixed deposits. Though they are

charged with a dividend distribution tax on dividend payout at 10 percent (plus a

surcharge of 10 percent), the net income received is still tax free in the hands of

investor and is generally much more than all other avenues, on a post tax basis.

Moving up in the risk spectrum, we have people who would like to take some risk

and invest in equity funds/capital market. However, since their appetite for risk is

also limited, they would rather have some exposure to debt as well. For these

investors, balanced funds provide an easy route of investment. Armed with the

expertise of investment techniques, they can invest in equity as well as goodquality debt thereby reducing risks and providing the investor with better returns

than he could otherwise manage. Since they can reshuffle their portfolio as per

market conditions, they are likely to generate moderate returns even in pessimistic

market conditions.

This risk of default by any company that one has chosen to invest in, can be

minimized by investing in mutual funds as the fund managers analyze the

companies financials more minutely than an individual can do as they have the

expertise to do so. They can manage the maturity of their portfolio by investing in

instruments of varied maturity profiles. Since there is no penalty on pre-mature

withdrawal, as in the cases of fixed deposits, debt funds provide enough liquidity.

Moreover, mutual funds are better placed to absorb the fluctuations in the prices of


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the securities as a result of interest rate variation and one can benefits from any

such price movement.

Next come the risk takers. Risk takers by their very nature, would not be averse to

investing in high-risk avenues. Capital markets find their fancy more often thannot, because they have historically generated better returns than any other avenue,

provided, the money was judiciously invested. Though the risk associated is

generally on the higher side of the spectrum, the return-potential compensates for

the risk attached.

Capital markets interest people, albeit not all for there are several problems

associated. First issue is that of expertise. While investing directly into capital

market one has to be analytical enough to judge the valuation of the stock and

understand the complex undertones of the stock. One needs to judge the right

valuation for exiting the stock too. It is very difficult for a small investor to keep

track of the movements of the market. Entrusting the job to experts, who watch the

trends of the market and analyze the valuations of the stocks will solve this

problem for an investor. Mutual funds specialize in identification of stocks through

dedicated experts in the field and this enables them to pick stocks at the right

moment. Sector funds provide an edge and generate good returns if the particular

sector is doing well.

Next problem is that of funds/money. A single person cant invest in multiple high-

priced stocks for the sole reason that his pockets are not likely to be deep enough.

This limits him from diversifying his portfolio as well as benefiting from multiple

investments.

Here again, investing through MF route enables an investor to invest in many good

stocks and reap benefits even through a small investment. This not only diversifies

the portfolio and helps in generating returns from a number of sectors but reduces

the risk as well. Though identification of the right fund might not be an easy task,

availability of good investment consultants and counselors will help investors take

informed decision.


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How are the Mutual Funds Structured?

The Mutual Funds are structured in two forms: Company form and Trust form.

Company Form: These forms of mutual funds are more popular in US. Trust Form: In India, mutual funds are organized as Trusts. The Trust is

either managed by a Board of Trustees or by a Trustee Company.

There must be at least 4 members in the Board of Trustees and at least 2/3 ofthe members of the board must be independent.

Trustee of one mutual fund cannot be a trustee of another mutual fund.

Unit TrustsConstituents:

A Mutual Fund is set up in the form of a Trust which has the following

constituents:-

1. Fund Sponsor2. Mutual Fund as Trust3. Asset Management Company

4. Other Fund Constituents

4.1. Custodian and Depositors


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4.2. Brokers

4.3. Transfer Agent

4.4. Distributors

FUND SPONSOR

What a promoter is to a company, a sponsor is to a mutual fund. The sponsor

initiates the idea to set up a mutual fund. It could be a financial services company,

a bank or a financial institution. It could be Indian or foreign. It could do it alone or

through a joint venture. In order to run a mutual fund in India, the sponsor has to

obtain a license from SEBI. For this, it has to satisfy certain conditions, such as on

capital and profits, track record (at least five years in financial services), default-

free dealings and a general reputation for fairness. The sponsor must have been

profit making in at least 3 years of the above 5 years.

The Sponsor appoints the Trustees, Custodian and the AMC with the prior

approval of SEBI and in accordance with SEBI Regulations.

Like the company promoter, the sponsor takes big-picture decisions related to the

mutual fund, leaving money management and other such nitty-gritty to the other

constituents, whom it appoints. The sponsor should inspire confidence in you as a

money manager and, preferably, be profitable. Financial muscle, so long as it is

complemented by good fund management, helps, as money is then not animpediment for the mutual fund- it can hire the best talent, invest in technology

and continuously offer high service standards to the investors.


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In the days of assured return schemes, sponsors also had to fulfill return promises

made to the unit holders. This sometimes meant meeting shortfalls from their own

pockets, as the government did for UTI. Now that assured return schemes are

passed, such bailouts wont be required. All things considered, choose sponsors

who are good money managers, who have a reputation for fair business practicesand who have deep pockets.

TRUST

The Mutual Fund is constituted as a Trust in accordance with the provisions of the

Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the

Indian Registration Act, 1908. The Trust appoints the Trustees who are responsible

to the investors of the fund.

TRUSTEES

Trustees are like internal regulators in a mutual fund, and their job is to protect the

interests of the unit holders. Trustees are appointed by the sponsors, and can be

either individuals or corporate bodies. In order to ensure they are impartial and fair,

SEBI rules mandate that at least two-thirds of the trustees be independent, i.e., nothave any association with the sponsor.

Trustees appoint the AMC, which subsequently, seeks their approval for the work

it does, and reports periodically to them on how the business being run. Trustees

float and market schemes, and secure necessary approvals. They check if the

AMCs investments are within defined limits and whether the funds assets are

protected. Trustees can be held accountable for financial irregularities in the

mutual fund.


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Rights of the Trustees:

Trustees appoint the AMC in consultation with the sponsor and according tothe SEBI Regulations.

All Mutual Fund Schemes floated by the AMC have to be approved by theTrustees.

Trustees can seek information from the AMC regarding the operations andcompliance of the mutual fund.

Trustees can seek remedial actions from AMC, and in cases can dismissthe AMC.

Trustees review and ensure that the net worth of the AMC is according tothe stipulated norms, every quarter.

Obligations of the Trustees:

Trustees must ensure that the transactions of the mutual fund are inaccordance with the trust deed.

Trustees must ensure that the AMC has systems and procedures in place. Trustees must ensure due diligence on the part of AMC in the appointment

of constituents and business associates.

Trustees must furnish to the SEBI, on half yearly basis a report on theactivities of the AMC.

Trustees must ensure compliance with SEBI Regulations.


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ASSET MANAGEMENT COMPANY (AMC)

An AMC is the legal entity formed by the sponsor to run a mutual fund. The AMC

is usually a private limited company in which the sponsors and their associates orjoint venture partners are the shareholders. The trustees sign an investment

agreement with the AMC, which spells out the functions of the AMC. It is the

AMC that employs fund managers and analysts, and other personnel. It is the AMC

that handles all operational matters of a mutual fund from launching schemes to

managing them to interacting with investors.

The people in the AMC who should matter the most to you are those who take

investment decisions. There is the head of the fund house, generally referred to as

the Chief Executive Officer (CEO). Under him comes the Chief Investment Officer

(CIO), who shapes the funds investment philosophy, and fund managers, who

manages its schemes. They are assisted by a team of analysts, who track markets,

sectors and companies.

Although these people are employed by the AMC, its you, the unit holders, who

pays their salaries, partly or wholly. Each scheme pays the AMC an annual fund

management fee, which is linked to the scheme size and results in a corresponding

drop in your return. If a schemes corpus is up to Rs.100 crores it pays 1.25% of itscorpus a year; on over Rs.100 crores, the fee is 1% of the corpus. So, if a fund

house has two schemes, with a corpus of Rs.100 crores and Rs.200 crores

respectively, the AMC will earn Rs.3.25 crore (1.25+2) as fund management fee

that year.

If an AMCs expenses for the year exceed what it earns as fund management fee

from its schemes, the balance has to be met by the sponsor. Again, financial

strength comes into play: a cash-rich sponsor can easily pump in money to meet

short falls, while a sponsor with less financial clout might force the AMC to trimcosts, which could well turn into an exercise in cutting corners.


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Regulatory requirements for the AMC:

Only SEBI registered AMC can be appointed as investment managers ofmutual funds.

AMC must have a minimum net worth of Rs.10 crores at all times.

An AMC cannot be an AMC or Trustee of another Mutual Fund.

AMCs cannot indulge in any other business, other than that of assetmanagement

At least half of the members of the Board of an AMC have to beindependent.

The 4th schedule of SEBI Regulations spells out rights and obligations ofboth trustees and AMCs.

Obligations of the AMC:

Investments have to be according to the investment management agreementand SEBI regulations.

The actions of its employees and associates have to be as mandated by thetrustees.

AMCs have to submit detailed quarterly reports on the working andperformance of the mutual fund.


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AMCs have to make the necessary statutory disclosures on portfolio, NAVand price to the investors.

Restrictions on the AMC:

AMCs cannot launch a scheme without the prior approval of the trustees.

AMCs have to provide full details of the investments by employees andBoard members in all cases where the investment exceeds Rs.1 lakh.

AMCs cannot take up any activity that is in conflict with the activities of themutual fund.

Conditions under which two AMCs can be merged:

SEBI Regulations require the following:

SEBI and Trustees of both the funds must approve of the merger.

Unit holders should be notified of the merger, and provided the option toexit at NAV without load.

Conditions under which an AMC can be taken over:

SEBI approval is required for the change of ownership and unit holders have

to be informed of the takeover.


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Scheme take over: If an existing mutual fund scheme is taken over by another

AMC, it is called as scheme take over. The two mutual funds continue to exist.

Trustee and SEBI approval and notification of the unit holders are required forscheme take over.

CUSTODIAN

A custodian handles the investment back office of a mutual fund. Its

responsibilities include receipt and delivery of securities, collection of income,

distribution of dividends and segregation of assets between the schemes. It also

track corporate actions like bonus issues, right offers, offer for sale, buy back andopen offers for acquisition. The sponsor of a mutual fund cannot act as a custodian

to the fund. This condition, formulated in the interest of investors, ensures that the

assets of a mutual fund are not in the hands of its sponsor. For example, Deutsche

Bank is a custodian, but it cannot service Deutsche Mutual Fund, its mutual fund

arm.

BROKERS

Role of Brokers in a Mutual Fund:

They enable the investment managers to buy and sell securities.

Brokers are the registered members of the stock exchange.

They charge a commission for their services.

In some cases, provide investment managers with research reports.


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Act as an important source of market information.

REGISTRAR OR TRANSFER AGENTS

Registrars, also known as the transfer agents, are responsible for the investorservicing functions. This includes issuing and redeeming units, sending fact sheets

and annual reports. Some fund houses handle such functions in-house. Others

outsource it to the Registrars; Karvy and CAMS are the more popular ones. It

doesnt really matter which model your mutual fund opt for, as long as it is prompt

and efficient in servicing you. Most mutual funds, in addition to registrars, also

have investor service centers of their own in some cities.

Some of the investorrelated services are:-

Processing investor applications.

Recording details of the investors. Sending information to the investors.

Processing dividend payout.

Incorporating changes in the investor information.

Keeping investor information up to date.


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DISTRIBUTORS

Role of Selling and Distribution Agents:

Selling agents bring investors funds for a commission.

Distributors appoint agents and other mechanisms to mobilize funds fromthe investors.

Banks and post offices also act as distributors. The commission received by the distributors is split into initial commission

which is paid on mobilization of funds and trail commission which is paid

depending on the time the investor stays with the fund.

HISTORY OF INDIAN MUTUAL FUNDS INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trustof India, at the initiative of the Government of India and Reserve Bank the. The

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

First Phase1964-87

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.


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Second Phase1987-1993 (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 Fundestablished in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab

National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank

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

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

At the end of 1993, the mutual fund industry had assets under management of

Rs.47,004 Crores.

Third Phase1993-2003 (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.


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Fourth Phasesince 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 endof January 2003, representing broadly, the assets of US 64 scheme, assured return

and certain other schemes. The Specified Undertaking of Unit Trust of India,

functioning under an administrator and under the rules framed by Government of

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

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

is registered with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000

Crores of assets under management and with the setting up of a UTI Mutual Fund,

conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking

place among different private sector funds, the mutual fund industry has entered its

current phase of consolidation and growth. As at the end of September, 2004, there

were 29 funds, which manage assets of Rs.153108 Crores under 421 schemes.

The net asset value (NAV) of mutual funds in India declined when stock prices

started falling in the year 1992. Those days, the market regulations did not allowportfolio shifts into alternative investments. There was rather no choice apart from

holding the cash or to further continue investing in shares. One more thing to be

noted, since only closed-end funds were floated in the market, the investors

disinvested by selling at a loss in the secondary market.

The performance of mutual funds in India suffered qualitatively. The 1992 stock

market scandal, the losses by disinvestments and of course the lack of transparent

rules in the whereabouts rocked confidence among the investors.

Funds now have shifted their focus to the recession free sectors like

pharmaceuticals, FMCG and technology sector. Funds performances are

improving. Funds collection, which averaged at less than Rs100bn per annum over

five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. In the 2000


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mobilization had exceeded Rs300bn. Total collection for the financial year ending

March 2000 reached Rs450bn.

India had been at the first stage of a revolution that has already peaked in the U.S.

The U.S. boasts of an Asset base that is much higher than its bank deposits. InIndia, mutual fund assets are not even 10% of the bank deposits, but this trend is

beginning to change. The figures indicate that in the first quarter of the year 1999-

2000 mutual fund assets went up by 115% whereas bank deposits rose by only

17%. (Source: Thinktank, The Financial Express September, 99) This is forcing a

large number of banks to adopt the concept of narrow banking wherein the deposits

are kept in Gilts and some other assets which improves liquidity and reduces risk.

The basic fact lies that banks cannot be ignored and they will not close down

completely. Their role as intermediaries cannot be ignored. It is just that Mutual

Funds are going to change the way banks do business in the future

TYPES OF MUTUAL FUNDS

Mutual fund schemes may be classified on the basis of its structure and its

investment objective.

By Structure:

Open-ended Funds

An open-end fund is one that is available for subscription all through the year.

These do not have a fixed maturity. Investors can conveniently buy and sell units at

Net Asset Value ("NAV") related prices. The key feature of open-end schemes is

liquidity.

Closed-ended Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3to 15 years. The fund is open for subscription only during a specified period.

Investors can invest in the scheme at the time of the initial public issue and

thereafter they can buy or sell the units of the scheme on the stock exchanges

where they are listed. In order to provide an exit route to the investors, some close-


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ended funds give an option of selling back the units to the Mutual Fund through

periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least

one of the two exit routes is provided to the investor.

Interval Funds

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

are open for sale or redemption during pre-determined intervals at NAV related

prices.

By Investment Objective:

Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to

long- term. Such schemes normally invest a majority of their corpus in equities. It

has been proven that returns from stocks, have outperformed most other kind of

investments held over the long term. Growth schemes are ideal for investors

having a long-term outlook seeking growth over a period of time.

Income Funds

The aim of income funds is to provide regular and steady income to investors.

Such schemes generally invest in fixed income securities such as bonds, corporate

debentures and Government securities. Income Funds are ideal for capital stability

and regular income.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such

schemes periodically distribute a part of their earning and invest both in equities

and fixed income securities in the proportion indicated in their offer documents. In

a rising stock market, the NAV of these schemes may not normally keep pace, or

fall equally when the market falls. These are ideal for investors looking for a

combination of income and moderate growth.


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Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital

and moderate income. These schemes generally invest in safer short-term

instruments such as treasury bills, certificates of deposit, commercial paper andinter-bank call money. Returns on these schemes may fluctuate

depending upon the interest rates prevailing in the market. These are ideal for

Corporate and individual investors as a means to park their surplus funds for short

periods.

Load Funds

A Load Fund is one that charges a commission for entry or exit. That is, each time

you buy or sell units in the fund, a commission will be payable. Typically entry

and exit loads range from 1% to 2%. It could be worth paying the load, if the fund

has a good performance history.

No-Load Funds

A No-Load Fund is one that does not charge a commission for entry or exit. Thatis, no commission is payable on purchase or sale of units in the fund. The

advantage of a no load fund is that the entire corpus is put to work.

Other Schemes:

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of theIndian Income Tax laws as the Government offers tax incentives for investment in

specified avenues. Investments made in Equity Linked Savings Schemes (ELSS)

and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act,

1961. The Act also provides opportunities to investors to save capital gains u/s


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54EA and 54EB by investing in Mutual Funds, provided the capital asset has been

sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

Special Schemes

Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer

document. The investment of these funds is limited to specific industries like

InfoTech, FMCG, and Pharmaceuticals etc.

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the

BSE Sensex or the NSE 50.

Sectoral Schemes

Sectoral Funds are those, which invest exclusively in a specified industry or a

group of industries or various segments such as 'A' Group shares or initial publicofferings.


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BENEFITS OF MUTUAL FUND INVESTMENT


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Professional Management

Mutual Funds provide the services of experienced and skilled professionals,

backed by a dedicated investment research team that analyses the performance and

prospects of companies and selects suitable investments to achieve the objectivesof the scheme.

Diversification

Mutual Funds invest in a number of companies across a broad cross-section of

industries and sectors. This diversification reduces the risk because seldom do all

stocks decline at the same time and in the same proportion. You achieve this

diversification through a Mutual Fund with far less money than you can do on yourown.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many

problems such as bad deliveries, delayed payments and follow up with brokers and

companies. Mutual Funds save your time and make investing easy and convenient.

Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a higher

return as they invest in a diversified basket of selected securities.

Low Costs

Mutual Funds are a relatively less expensive way to invest compared to directly

investing in the capital markets because the benefits of scale in brokerage,

custodial and other fees translate into lower costs for investors.


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Liquidity

In open-end schemes, the investor gets the money back promptly at net asset value

related prices from the Mutual Fund. In closed-end schemes, the units can be sold

on a stock exchange at the prevailing market price or the investor can avail of thefacility of direct repurchase at NAV related prices by the Mutual Fund.

Transparency

You get regular information on the value of your investment in addition to

disclosure on the specific investments made by your scheme, the proportion

invested in each class of assets and the fund manager's investment strategy and

outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans and

dividend reinvestment plans, you can systematically invest or withdraw funds

according to your needs and convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks. A

mutual fund because of its large corpus allows even a small investor to take the

benefit of its investment strategy.


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Choice of Schemes

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

Well Regulated

All Mutual Funds are registered with SEBI and they function within the provisions

of strict regulations designed to protect the interests of investors. The operations of

Mutual Funds are regularly monitored by SEBI.

RISKS ASSOCIATED WITH MUTUAL FUNDS

The most important relationship to understand is the risk-return trade-off.


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Higher the risk greater the returns/loss and lower the risk lesser the returns/loss.

Hence it is up to you, the investor to decide how much risk you are willing to take.

In order to do this you must first be aware of the different types of risks involved

with your investment decision.

MARKET RISK

Sometimes prices and yields of all securities rise and fall. Broad outside influences

affecting the market in general lead to this. This is true, may it be big corporations

or smaller mid-sized companies. This is known as Market Risk. A Systematic

Investment Plan (SIP) that works on the concept of Rupee Cost Averaging

(RCA) might help mitigate this risk.

CREDIT RISK

The debt servicing ability (may it be interest payments or repayment of principal)

of a company through its cashflows determines the Credit Risk faced by you. This

credit risk is measured by independent rating agencies like CRISIL who ratecompanies and their paper. An AAA rating is considered the safest whereas a D

rating is considered poor credit quality. A well-diversified portfolio might help

mitigate this risk.

INFLATION RISK

Things you hear people talk about: Rs. 100 today is worth more than Rs. 100

tomorrow. Remember the time when a bus ride costed 50 paisa? Mehangai Ka

Jamana Hai.

The root cause , Inflation. Inflation is the loss of purchasing power over time. A lot

of times people make conservative investment decisions to protect their capital but


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end up with a sum of money that can buy less than what the principal could at the

time of the investment. This happens when inflation grows faster than the return on

your investment. A well-diversified portfolio with some investment in equities

might help mitigate this risk.

INTEREST RATE RISK

In a free market economy interest rates are difficult if not impossible to predict.

Changes in interest rates affect the prices of bonds as well as equities. If interest

rates rise the prices of bonds fall and vice versa. Equity might be negatively

affected as well in a rising interest rate environment. A well-diversified portfolio

might help mitigate this risk.

POLITICAL RISK

Changes in government policy and political decision can change the investment

environment. They can create a favorable environment for investment or vice

versa.

LIQUIDITY RISK

Liquidity risk arises when it becomes difficult to sell the securities that one has

purchased. Liquidity Risk can be partly mitigated by diversification, staggering of

maturities as well as internal risk controls that lean towards purchase of liquid

securities. You have been reading about diversification above, but what is it?

Diversification The nuclear weapon in your arsenal for your fight against Risk. It

simply means that you must spread your investment across different securities

(stocks, bonds, money market instruments, real estate, fixed deposits etc.) anddifferent sectors (auto, textile, information technology etc.). This kind of a

diversification may add to the stability of your returns,


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ACCOUNTING AND VALUATION

Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of the assets fund

net of its liabilities. In other words, if the fund is dissolved or liquidated by sellingoff all the assets in the fund, this is the amount that the shareholders would

collectively own. This gives rise to the concept of net asset value per unit, which is

the value represented by the ownership of one unit in the fund. It is calculated

simply by dividing the net asset value of the fund by the number of units.

However, most people refer loosely to the NAV per unit as NAV, ignoring the per

unit. We also abide by the same convention.

Calculation of Net Asset Value

The most important part of the calculation is the valuation of the assets owned by

the fund. Once it is calculated, the NAV is simply the net value of assets divided

by the number of the units outstanding. The detailed methodology for the

calculation of the net asset value is given below:

NAV = Market value of investments

+ Current assets and other assets

+ Accrued income

- Current liabilities and other liabilities

- Accrued expenses


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MAJOR PLAYERS IN MUTUAL FUNDS INDUSTRY

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee

(India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset

Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank

A G is the custodian of ABN AMRO Mutual Fund.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life

Financial. Sun Life Financial is a global organization evolved in 1871 and is being

represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda

apart from India. Birla Sun Life Mutual Fund follows a conservative long-term

approach to investment. Recently it crossed AUM of Rs. 10,000 Crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992

under the sponsorship of Bank of Baroda. BOB Asset Management Company

Limited is the AMC of BOB Mutual Fund and was incorporated on November 5,

1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsor namely Housing

Development Finance Corporation Limited and Standard Life InvestmentsLimited.


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HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital

Markets (India) Private Limited as the sponsor. The Board of Trustees, HSBC

Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named

Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING

Investment Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of

the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund

was setup on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI

Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is

Prudential ICICI Asset Management Company Limited incorporated on 22nd ofJune, 1993.

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial

Corporation Ltd. as the sponsor. Sahara Asset Management Company Private

Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual

Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.


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State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to

launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr.

approximately. Today it is the largest Bank sponsored Mutual Fund in India. Theyhave already launched 35 Schemes out of which 15 have already yielded handsome

returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500

Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18

schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsors

for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd.

The investment manager is Tata Asset Management Limited and its Tata Trustee

Company Pvt. Limited. Tata Asset Management Limited is one of the fastest in the

country with more than Rs. 7,703 Crores (as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of

KMBL. It is presently having more than 1,99,818 investors in its various schemes.

KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund

offers schemes catering to investors with varying risk - return profiles. It was the

first company to launch dedicated gilt scheme investing only in government

securities.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003,

manages the UTI Mutual Fund with the support of UTI Trustee Company Private

Limited. UTI Asset Management Company presently manages a corpus of over


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Rs.20000 Crore. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB),

Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance

Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds,

Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance

Funds.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act,

1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital

Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance

Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual

Fund was formed for launching of various schemes under which units are issued to

the Public with a view to contribute to the capital market and to provide investors

the opportunities to make investments in diversified securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by

Standard Chartered Bank. The Trustee is Standard Chartered Trustee CompanyPvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC

which was incorporated with SEBI on December 20,1999

Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company

with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largestfinancial services groups in the world. Investors can buy or sell the Mutual Fund

through their financial advisor or through mail or through their website. They have

Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end

Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid


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schemes, Closed end Income schemes and Open end Fund of Funds schemes to

offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the

market in securities, investment management and credit services. Morgan Stanley

Investment Management (MISM) was established in the year 1975. It provides

customized asset management services and products to governments, corporations,

pension funds and non-profit organizations. Its services are also extended to high

net worth individuals and retail investors. In India it is known as Morgan Stanley

Investment Management Private Limited (MSIM India) and its AMC is Morgan

Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme

serving the needs of Indian retail investors focusing on a long-term capital

appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as

its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC

was incorporated on December 1, 1995 with the name Escorts Asset Management

Limited.

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance

Capital Management Corp. of Delaware (USA) as sponsorer. The Trustee isACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset

Management India (Pvt.) Ltd. with the corporate office in Mumbai.


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Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial

Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd. as

the Trustee Company. Incorporated on October 16, 2000 and headquartered inMumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.

Canbank Mutual Fund

Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting

as the sponsor. Canbank Investment Management Services Ltd. incorporated on

March 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.

Chola Mutual Fund (L&T Mutual Fund)

Chola Mutual Fund under the sponsorship of Cholamandalam Investment &

Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co.

Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.

Cholamandalam AMC Limited is taken over by the L&T finance and L&T comes

into the opration seens Feb-2010.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It

contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was

constituted as a Trust in accordance with the provisions of the Indian Trust Act,

1882. . The Company started its business on 29th April 1994. The Trustees of LIC

Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company

Ltd as the Investment Managers for LIC Mutual Fund.


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GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a

Government of India undertaking and the four Public Sector General Insurance

Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co.Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co.

Ltd. (UII) and is constituted as a Trust in accordance with the provisions of the

Indian Trusts Act, 1882.

Fidelity Investments

Fidelity Investments was founded in 1946. Fidelity Investments is an internationalprovider of financial services and investment resources that help individuals and

institutions meet their financial objejectives


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COMPETITION IN MUTUAL FUNDS INDUSTRY

The most important trend in the mutual fund industry is the aggressive

expansion of the foreign owned mutual fund companies and the decline of the

companies floated by nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early nineties

and got off to a good start due to the stock market boom prevailing then. These

banks did not really understand the mutual fund business and they just viewed it

as another kind of banking activity. Few hired specialized staff and generally

chose to transfer staff from the parent organizations. The performance of most

of the schemes floated by these funds was not good. Some schemes had offered

guaranteed returns and their parent organizations had to bail out these AMCs by

paying large amounts of money as the difference between the guaranteed andactual returns. The service levels were also very bad. Most of these AMCs have

not been able to retain staff, float new schemes etc. and it is doubtful whether,

barring a few exceptions, they have serious plans of continuing the activity in a

major way.

The experience of some of the AMCs floated by private sector Indian

companies was also very similar. They quickly realized that the AMC businessis a business, which makes money in a long term and requires deep-pocketed

support in the intermediate years. Some have sold out to foreign owned

companies, some have merged with others and there is general restructuring

going on.

The foreign owned companies have deep pockets and have come in here with

the expectation of a long haul. They can be credited with introducing many new

practices such as new product innovation, sharp improvement in service

standards and disclosure, usage of technology, broker education and supportetc. In fact, they have forced the industry to upgrade itself and service levels of

organizations like UTI have improved dramatically in the last few years in

response to the competition provided by these.


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2nd

HALF

A

RESEARCH

REPORT

ON INVESTORS

PERCEPTION ABOUTINVESTMENT IN MUTUAL FUNDS


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Managerial Usefulness of Study:

The study also provides the problems related to distribution of Mutual Fundso that they can improve the service rendered by them as a distributor.

The study will also give information about prospective investors bothindividual as well as institutional clients in areas of surrey where they can

get lead.

The study provides the complete information about all close competitors inMutual Fund investment.

It provides the AMC a feedback from customers regarding their problemsand perception about investing in mutual funds so that they can improve

their services.

Objectives:

To study the Mutual funds industry in detail

To study the Investment procedure in Mutual funds

To study in brief various Mutual funds promoted by different AMC

To study the investors Preference regarding Investment in Mutual Funds


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RESEARCH METHODOLOGY

I decided to do the project in two half. The first half of the project is comprised of

the study of Mutual Funds as a whole and the second half deals with the investors perception regarding their investment preferences about investment in Mutual

Funds.

The first half of the project i.e. descriptive study is comprising an overall study of

Mutual funds as what it is, why to invest and where to invest, risk factor associated

with it i.e. an overview of whole Mutual fund industry.

The second part of the project that is related to investors perception about

investment in Mutual funds available in market. Indian Stock market hasundergone tremendous changes over the years. Investment in Mutual Funds has

become a major alternative among Investors. The project has been carried out to

understand investors perception about Mutual Funds in the context of their trading

preference and explore investors risk perception.

The first half of the project relating the study of Mutual funds is collected

through secondary data obtained from internet & books whereas the second half

relating the Investors perception about investment in Mutual Funds is covered

using primary data.


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SOURCE OF DATA COLLECTION

Both Primary and Secondary data are required

Primary data is the first hand information collected directly from the respondents.

The tool used here is questionnaire. Primary Data is collected through surveyamong existing clients along with the other investors

Secondary data is collected through internet, books

I had prepared a questionnaire for collecting information about second part of the

project.

Sample size: Sample size for the survey is 150.

Breakup of the sample

50 Service Class

50 Business class

50 Professionals

Age Group:Between 25 to 55 years of age

Research Instrument: - Questionnaire

Type of sampling: Stratified Random &Convenience sampling technique is used

for collecting the primary data. The data is collected only from the respondents ofAhmedabad who have invested in Mutual Funds.


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Data Analysis Procedures

The major focus is on the results of the questionnaire survey.

(1)I will screen all the questionnaires in order to gain a first overview over the datagathered.

(2)The analysis of the data generated during the study with the help of variousstatistical tools like bar charts & pie charts.

(3)At the last I will draw conclusion regarding customers preferences andsatisfaction about mutual fund.

SCALING

In my study I have used various scales such as numerical scale, nominal scale,

ranking scale and constant-sum scale

1) Numerical scale:-Numerical scales have numbers, rather than Semantic space or verbal

descriptions, as response options, to identify categories (response position). If the

scale items have five response positions, the scale is called a 5-point numerical

scale; with seven response positions, it is called a 7-point numerical scale; and so

on.

In my research project I have taken into consideration 6-point scale, as through thisscale I come to at which side they fall, or to know at what extent does the market

situation affect their investment decision. If I have kept the odd number than might

be the majority of the people would have selected the neutral or the average choice.

But this might have created problem in our analysis, so to avoid this, I have created


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a 5-point scale which help us to analyze that which side of the scale are the

different people in different sectors affected.

2) Nominal scale:-A scale in which the numbers or letters assigned to objects serve as labels for

identification or classification; a measurement scale of the simplest type.

In my research I have used nominal scale for to know the sector of the people,

reason for investment decision and to know the frequency of the investment.

3) Ordinal scale:-A scale that arranges objects or alternatives according to their magnitudes.

In my project respondents are asked to rank order their investment preferences,

they assign ordinal values to them.

4) Ranking scale:-People often rank order their preferences. An ordinal scale may be develop by

asking respondents to rank order (from most preferred to last preferred) a set of

objects or attributes. It is not difficult for respondents to understand the task of

rank ordering the importance of fringe benefits or arranging a set of job tasks

according to preference.

In my research, I have taken this ranking scale as because people dont invest only

in one financial instrument, instead they invest in more than one instrument

according to their preference.


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Do you invest in Mutual Funds?

Case Processing Summary

Cases

Valid Missing Total

N Percent N Percent N Percent

Respondent's

occupation *

Investment in

mutual fund

145 96.8% 5 3.2% 150 100.0%

Respondent's occupation * Investment in mutual fund Crosstabulation

Count

Investment inmutual fund Total

yes No Yes

Respondent'

s

occupation

Job 35 15 50

Business 45 5 50

Profession

al40 10 50

Total 120 30 150

35

45

40

15

5

10

0

5

10

15

20

25

30

35

40

45

50

Job Business Professional

Respondent's occupation

Investment in mutual

fund yes

Investment in mutual

fund No


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From the above chart suggests that out of 150 respondents 120 respondents invests

their money in mutual fund this shows that investor choose mutual fund because

they want to earn good return with some safety. Ratio of respondents who are from

business and professional is more than ratio of respondents who are from job that

choose mutual fund as their investment tools.

If No Then,

What is the most important reason for not investing in mutual funds?

30 out of 150 total respondents say they are not investing their money in mutual

fund the main reason behind it they enjoys investing in other options except thisinvestors didnt have trust over the fund manager of the AMC companies . And

very few respondents says they have lack of knowledge about mutual funds.

Lack of knowledge a bout mu tual funds

Enjoys investing in other options

No trust over the fund m anagers

Reason for not investing in mutual funds

Pies sh ow counts

no


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Please rank the following investment instruments according to your

preference. (On the basis of risk and return concept)

Preference for fixed instruments Case Processing Summary

Cases

Valid Missing Total


Respondent's

occupation *

Investment prefrence

for fixed instrument

137 91.9% 13 8.1% 150 100.0%

Respondent's occupation * Investment prefrence for fixed instrument Crosstabulation

Count

Investment prefrence for fixed

instrument Total

1st

prefrence

2nd

prefrence

3rd

prefrence

1st

preference

Responden

t's

occupation

Job

20 15 15 50

Business 11 12 22 45

Professio

nal17 8 22 47

Total 48 35 59 142


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Above graph suggests that respondents who are doing job they prefer fixed depositas their 1st preference because they are less interested in taking risk on the other

hand respondents who are doing business or they are professional the ratio is lower

than respondents who are doing job but they are interested in investing their money

direct equity .



Respondents preference for mutual fund Case Processing Summary

Cases

Valid Missing Total


Respondent's

occupation *

Investment prefrence

for mutual funds

131 87.1% 19 12.9% 150 100.0%

20

11

17

15

12

8

15

22 22

0

5

10

15

20

25

job business professional


investment prefrence 1st

prefrence

2nd prefrance

3rd prefrence


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Respondent's occupation * Investment preference for mutual funds Cross

tabulation

Count

Investment prefrence for mutual funds Total

1st

preference

2nd

preference

3rd

preference

1st

prefrence

Respondent's

occupation

Job22 18 0 40

Business 27 12 8 47

Professiona

l22 14 11 47

Total 71 44 19 134

Above graph suggests that the respondents who are in the job or they are

professional person the ratio of giving 1st preference to mutual fund is same where

as the ratio of the respondents who are doing business is more . All the three type

of respondents wants to earn some good return so they choose mutual fund as their1st preference.

22

27

22

18

1214

0

8

11

0

5

10

15

20

25

30

job business professional


investment prefrence for

mutual fund 1st prefrence

2nd prefrence

3rd prefrence


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Respondents preference for direct equity


Cases

Valid Missing Total



* Investment prefrence

for direct equity

124 82.3% 26 17.7% 150 100.0%

Respondent's occupation * Investment prefrence for direct equityCrosstabulation

Count

Investment prefrence for direct equity Total

1st

preference 2nd prefrence 3rd prefrence

1st

preference

Respondent's

occupation

Job7 7 26 40

Business 12 18 12 42

Professional 10 22 13 45Total 29 47 51 127


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Above graph reflects that respondents who are from job they are the highest whogave 3rd preference to direct equity compare to others two .The ratio of respondents

who are in the business or have some profession they gave 1st and 2nd preference to

direct equity is more then the respondents who are doing job.

7

12

10

7

18

22

26

1213

0

5

10

15

20

25

30

job business professinal


invester's prefrence for

direct Equity 1st

prefrence

2nd prefrence

3rd prefrence


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What is your Average investment period?

The above graph reflects the average investment period for all the 150 respondents.

612 months Is the most chosen option among all the other options because of the

current market condition people are not interested in investing their money for

short time like less than 6 months because return will be very less in short time

period .If they want to earn more return they need to invest their money at least

more than 6 months or more than one year.

Less than 6 m onths

6-12 mo nths

12 mon ths- 2 year

More than 2 year

Average investment period

Pies sh ow counts

3.39%

40.68%

25.42%

30.51%


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Television influence the purchase decision

Nowadays everybody have television at home and it became most used medium ofmarketing for any company. And AMC companies uses for advertise their

investment product so the respondents who choose it is very less influential and

the respondents who choose it is most influence for their purchase decision is very

low but the ratio of 2 and 3 rank preferred by respondents is very high.

Bars show counts

Least infu ential

2

3

4

Most influ ential

Television influencing factor for purchase

0

5

10

15

20

Count


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Internet influence for purchase decision

Usage of internet is increasing very high but it still needs to increase people uses it

for their regular thing but few people manage their investment on internet. Above

graph reflects that respondents choose 1st and 2nd rank are more than other two

ranks choose by respondents. Internet is very convient option for investor and

nowadays AMC companies are also promoting it.

Bars show counts

Least infuential 2 3 4

Internet influencing factor for purchase

0

5

10

15

20

Count


59/93

KITM

Newspaper influencing purchase decision

Peoples uses newspaper as their medium of getting information from long time and

its very effective with cheap rates. The above graph shows that most of the investor

choose that they got information from newspaper and very less respondents choose

its very less influencing factor for their purchase decision.

Bars show counts

2 3 4 M ost influential

Newspaper influencing factor for purchase

0

10

20

30

Count


60/93

KITM

Articles/journals influence purchase decision

Above graph suggests that people are now somewhat aware about reading financial

magazines or articles related to finance which regularly comes in newspaper .They

can get the information and can take their decision according to it. But still lots of

scope of increase the usage of this tool and above graph suggest the same thing

most of respondents gave more preference to 1st and 2nd rank.

Bars show counts

Least infuential 2 3 4

Articles influencing factor for purchase

5

10

15

20

25

Count


61/93

KITM

Relations/Friends influencing purchase decision

Above graph reflects that friends/relation is still very influential tool which

influence the purchase decision. People still gave more preference to their

friends/relative to ask before purchasing their investment product.

Bars sh ow counts

2 3 4 M ost in fluen tial

Relation influencing factor for purchase

5

10

15

20

25

Count


62/93

KITM

How much Risk are you willing to take?

H0Young age people are more willing to take risk than old age people

H1Young age peoples arent willing to take risk than old age people

Above graph reflects that all the three age group respondents wants to take

moderate risk that means not very low or very high because its fact that if they

want to earn some good profit they need to take some risk.

The age group of more than 40 gave less preference to moderate risk compare to

other two age group and they also choose they want to take low risk .As the age

Respondent's age

More than 4030-4022-30

Count

20

15

10

5

0

Bar Chart

High

Moderate

Low

Respondent's risktaking ability


63/93

KITM

increase people are less interested in taking risk the line for moderate risk reflects

the same thing. So we can say that H0 is accepted.

What is your preference in Mutual Funds?

Case Processing SummaryCases

Valid Missing Total


Respondent's

occupation * Prefrence

in mutual fund

136 90.3% 14 9.7% 150 100.0%

Respondent's occupation * Prefrence in mutual fund Crosstabulation

Count

Prefrence in mutual fund Total

Equity

funds

Income

funds

Money

market

funds

ELSS(TA

X

SAVER)

Balanced

Fund SIP

Equity

funds

Respondent'

s occupation

Job20 2 5 10 2 8 47

Business 5 3 0 12 5 25 50

Profession

al 22 0 0 7 6 7 42

Total 47 5 5 29 13 40 139


64/93

KITM

Above graph reflects that the respondents who are from job or they have their own

profession choose equity fund more than other options available. And the

respondents have their own business they choose SIP more as their investment

product compare to two other groups because SIP is more safe and convient option

for investment. ELSS (Tax Saver) is also choose by some respondents because

they can get the tax saving benefit if they invests their money in it.

20

2

5

10

2

8

5

3

0

12

5

25

22

0 0

76

7

0

5

10

15

20

25

30

equity

funds

Income

funds

Money

market

fund

ELSS Balanced

fund

SIP

prefrence in mutual fund

Respondent's occupation Job

Respondent's occupation Business


Professional


65/93

KITM

How much return do you expect from your Investments?

If any person invested their money in any option which are available in the market

they obviously look for good return but if they want to earn high return than highrisk is also associated with it as above graph suggests that most of the respondents

choose the return between 15% to 25% because they knows that the current market

condition its good return they can get and very few respondents choose more than

35% return which is actually very difficult to get.

up to 15%

15%-25%

25%-35%

More than 35%

Return expected in percentage

Pies sh ow counts

31.03%

53.45%

8.62%

6.90%


66/93

KITM

Which type of Mutual funds do you prefer?


Cases

Valid Missing Total


Respondent's

occupation * Type of

funds prefer by

respondents

138 91.9% 12 8.1% 150 100.0%

Respondent's occupation * Type of funds prefer by repsondents

Crosstabulation

Count

Type of funds prefer by respondents Total

Open ended

schemes

Close ended

Schemes

Open ended

schemes

Respondent's

occupation

Job42 5 47

Business 47 3 50

Professional 40 5 45Total 129 13 142


67/93

KITM

H0: Most of the investors invest in Open-Ended Schemes of Mutual

Funds.

H1: Most of the investors do not invest in Open-Ended Schemes of

Mutual Funds.

Above graph shows that no matter in which profession they are but they chooseopen ended schemes. In open ended schemes they can enter at any time or they can

exit at any time. And as they knows they with current market conditions no one

wants to continue their investment if they wont get good return of negative return.

Ratio of close ended schemes is very low. So we can say that H0 is accepted.

42

47

40

53

5

0

5

10

15

20

25

30

35

40

45

50

Job Business Professional

Respondent's

occupation

Open ended schemes

Close ended Schemes


68/93

KITM

Do you get influenced by the name of Company promoting Mutual Funds?

Above graph suggests that AMC companies promoting their product well because

81% of the total respondents are influenced by their promotional activities andvery few are not influenced.

yes

no

Promotion influence

Pies show counts

81.03%

18.97%


69/93

KITM

Rank the following companies according to your investment preference

For Reliance mutual fund

As reliance is very known company in India so investor believes gave 1st and 2nd

preference to reliance followed by respondents 3rd preference and 4th preference

and very few gave 5th & 6th preference to reliance.

1st p refrence

2nd prefrence

3rd prefrence

4th prefrence

5th prefrence

8th prefrence

Investment prefrence for reliance mutualfund

Pies sh ow counts

24.49%

26.53%18.37%

20.41%

6.12%4.08%


70/93

KITM


For UTI mutual fund

UTI Mutual Fund is also known in the mutual fund market but the ratio of the

respondents who gave 5th preference to UTI Mutual Fund is more than any other

rank. Most of the respondents gave 5th,6th and 7th for the company in which they

want to invest.

1st prefrence

3rd prefrence

4th prefrence

5th prefrence

6th prefrence

7th prefrence

8th prefrence

Investment prefrence for UTI mutualfund

Pies show counts

3.45%3.45%

10.34%

37.93%17.24%

17.24%

10.34%


71/93

KITM


For SBI Mutual Fund

Above graph suggest that the respondents gave 8th as their most preferred rank to

SBI Mutual Fund .The reason can be when share market was low SBI gives the

bed return compare to other investment companies. About other ranks its very mixkind of reply from respondents.

1st prefrence

2nd pre fren ce

4th prefrence

5th prefrence

6th prefrence

7th prefrence

8th prefrence

Investment prefrence for sbi mutual fund

Pies show counts

13.33%

10.00%

10.00%

13.33%

10.00%

10.00%

33.33%


72/93

KITM


For HDFC mutual fund

HDFC Mutual Fund is also got very low preference in 1st, 2nd, 3rd and 4th rank

because most of the respondents gave 7th and 8th preference to HDFC Mutual Fund.

1st p refrence

2nd prefrence

3rd prefrence

4th prefrence

5th prefrence

6th prefrence

7th prefrence

8th prefrence

Investment prefrence for hdfc mutual fund

Pies show counts

3.45%3.45%

3.45%

6.90%

17.24%

27.59%

20.69%

17.24%


73/93

KITM


For Birla sun life

Birla Sun Life Mutual Fund is very preferred company choose by the respondents.

The ratio for 1st rank is more than 50% which shows that the company is getting

good reputation among the investors and the ratio for 6 th and 7th rank is very low

compare to others.

1st prefrence

2nd prefren ce

3rd prefrence

4th prefrence

5th prefrence

6th prefrence

7th prefrence

Investment prefrence for bsl mutual fund

Pies sh ow counts51.02%

12.24%

6.12%

14.29%

6.12%

2.04%

8.16%


74/93

KITM


For ICICI prudential

ICICI Prudential is also very reputed company and above graph reflects that the

ratio of 1

st

, 2

nd

and 3

rd

rank is more than other rank and very few respondents gave7th and 8th rank.

1st p refrence

2nd prefrence

3rd prefrence

4th p refrence

5th p refrence

6th p refrence

7th p refrence

8th p refrence

Investment prefrence for icici prudential

Pies sh ow counts

18.18%

27.27%

20.45%

13.64%

6.82%

4.55%

6.82%2.27%


75/93

KITM

Do you get influenced by the returns given by a fund or by the current NAV

of a fund?

If any investor invest money in the market then surely he/she is looking for good

return and above graph reflects the same thihg. Respondets gave very less

preference to NAV because the reason can be most of the respondents are not

much aware about it they only interest in earning return.

Bars show counts

By NAV By Return By both

Influence by return or nav

0

10

20

30

Count


76/93

KITM

Where do you find yourself as a mutual fund investor?

Above graph suggests that most of the respondets have partial knowledge about

mutual fund followed by some of the customer who are aware only of any specifics

scheme in which they have invested.Only 10% of the respondetns are full ware and

only 5% of the total respondetn doesnt have any knowledge about mutual fund.

Totally ignorant

Partial knowleged of mutual funds

Aware only of any specific scheme in which you invested

Fully aware

Knowledge about mutual funds

Pies show counts

5.00%

65.00%

20.00%

10.00%


77/93

KITM

What is the major reason for using financial advisors?

Nowadays financial advisors are playing very important role to sell financial

product. Most of the respondent havent knowledge about various investment

option so financial advisor are really helpful to them. Asset allocation is also

important part of financial planning so many respondents choose that they need

help for their asset allocation.

Want help with asse t allocation

Dont have time to make my own investme nt decision

To explain various in ves tment option

Want to make su re i m investing enough to meet my financial goals

Usage fo financial advisor

Pies sh ow counts

22.03%

18.64%

52.54%

6.78%


78/93

KITM

From where do you purchase mutual funds?

Brokers are very important role in the distribution channel of AMCS most of the

respondents buys their investment produts from brokers. This shows the

importance of brokers and they also want to earn money so they gave good service

to their investors and in the return they gets good business. Only few of the

investors knows that they can buy directly for AMCS so they can save their 0.50%.

Directly from the AMCs

Brokers onl

iip final report

Documents