mba project work

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S. TABLE OF CONTENT PAGE NO.

I

II

III

IV

V

VI

VI

CHAPTER-1

INTRODUCTION

OBJECTIVES

RESEARCH METHODOLOGY

LIMITATIONS

CHAPTER-2

REVIEW OF LITERATURE

CHAPTER-3

INDUSTRY PROFILE

COMPANY PROFILE

CHAPTER-4

DATA ANALYSIS & INTERPRETATION

FINDINGS

CHAPTER-5

SUMMARY& CONCLUSIONS

SUGGESTIONS

CHAPTER- 6

BIBLIOGRAPHY

CHAPTER- 7

ANNEXURE

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9

10

11

12-30

31-38

39-46

47-70

71

72-74

75-76

77-78

79-82

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INTRODUCTION

Investment can be defined as an item of value purchased for income

or capital appreciation. Investments are made to achieve a specificobjective and savings are made to meet an unforeseen event.

There are various avenues of investments in accordance with

individual preferences. Investments are made in different asset

classes depending on an individuals risk and return characteristics

Investment choices are physical assets and financial assets.

Gold and Real estates are examples of physical assets, which have a

physical form to them. There is a strong preference for these assets,

as these assets can be purchased with cash and held for a long

term. The obvious disadvantages with physical assets are the risks

of loss and theft, lower levels of return; illiquid secondary markets;

and adhoc valuations and transactions.

Financial assets are securities, which are certificates embodying a

financial contract between parties. Bonds, Equity shares, Deposits

and Insurance policies are some of the examples of financial assets.

In financial assets investors only hold the proof of their investments

in the form of a certificate or account. These products are usually

liquid, transferable and in most cases, stored electronically with

high degree of safety.

But a minimum amount of cash is always kept in hand for

transactions and contingencies. To face the contingencies and

unexpected events the insurance came into existence.

Another avenue of investment is mutual funds. It is created when

investors put their money together. It is therefore a pool of the

investors funds. The most important characteristics of a mutual

fund are that the contributors and the beneficiaries of the fund are

the same class of people, namely the investors.

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The term mutual means that investors contribute to the pool, and

also benefit from the pool. There are no other claimants to the

funds. The pool of funds held mutually by investors is the mutual

fund.A mutual fund pools the money of people with similar investment

goals. The money in turn is invested in various securities depending

on the objectives of the mutual fund scheme, and the profits (or

loss) are shared among investors in proportion to their investments.

Mutual fund schemes are usually open-ended (perpetually open for

investments and redemptions) or closed end (with a fixed term). A

mutual fund scheme issues units that are normally priced at Rs.10

during the initial offer. Thus, the number of units you own as against

the total number of units issued by the mutual fund scheme

determines your share in the profits or loss of a scheme.

In the case of open-end schemes, units can be purchased from or

sold back to the fund at a Net Asset Value (NAV) based price on all

business days.

The NAV is the actual value of a unit of the fund on a given day.

Thus, when you invest in a mutual fund scheme, you normally get

an account statement mentioning the number of units that have

been allotted to you and the NAV based price at which the units

have been allotted. The account statement is similar to your bank

statement.

Mutual funds invest basically in three types of asset classes:

Stocks: Stocks represent ownership or equity in a company,

popularly known as shares.

Bonds: These represent debt from companies, financial institutions

or Government agencies.

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Money market instruments: These include short-term debt

instruments such as treasury bills, certificate of deposits and inter-bank call money.

A mutual funds business is to invest the funds thus collected,

according to the wishes of the investors who created the pool. In

many markets these wishes are articulated as investment

mandates.

Analysis of The perception towards these mutual funds is done here

in this project. Even what factors the investors look before investing

can also be observed.

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OBJECTIVES

To study the level of awareness of mutual funds

To analyze the perception of investors towards mutual funds.

To study the factors considered by the investors and those

which ultimately influence him while investing.

To determine the type of mutual fund investor prefers the

most.

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RESEARCH METHODOLOGY

Primary data is data that is tailored to a companys needs, by

customizing true approach focus groups, survey, field-tests,

interviews or observation.

Primary data delivers more specific results than secondary research,

which is an especially important consideration when one launching a

new product or service. In addition, primary research is usually

based on statistical methodologies. The tiny sample can give an

accurate representation of a particular market.

Secondary data is based on information gleaned from studies

previously performed by government agencies, chambers of

commerce, trade associations and other organizations. This includes

census bureau information. Much kind of this information can be

found in libraries or on the web, but looks and business publications,

as well as magazines and newspapers.

Analysis of individual investment patterns can be done by

this primary data analysis. In this project I have done a survey with

a questionnaire with a sample size of 100 individuals who are

employees and tax payees. The questionnaire includes the

economic status of the individuals, age group, marital status,

investments made etc.

As Karvy securities ltd. distributes several investment

products like mutual funds, insurance, shares, debentures etc. This

survey will help them in developing marketing strategies for their

investment products.

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LIMITATIONS

Geographic Scope: The sample used for the study has been taken

from the investors of the twin cities Hyderabad and Secunderabad.

Frame work: Sampling frame (i.e., the list of population members)

from which the sample units are selected was incomplete as it takes

into consideration only those (target investors) who have made their

investments during March and April 2006.

Although adequate care was taken to elicit the accurate information

from the respondents, some of them have felt difficulty in

crystallizing their feelings into words. Apart from the problem faced

in articulating, it is the validity of the feedback can be speculated.

Despite the above limitations the study is useful in that it does point

out the trends and helps to identify the dimensions for improving

the scope of mutual funds.

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MUTUAL FUNDS

THEORITICAL BACKGROUND

Mutual fund is a mechanism for pooling the resources by issuing

units to the investors and investing funds in securities in accordance

with objectives as disclosed in offer document.

A mutual fund is an investment vehicle for investors who pool their

savings for investing in diversified portfolio of securities with theaim of attractive yields and appreciation in their value.

Investments in securities are spread across a wide cross-section of

industries and sectors and thus the risk is reduced .Mutual funds

issues units to the investors in accordance with quantum of money

invested by them. Investors of mutual funds are known as unit-

holders. The profit or losses are shared by the investors in

proportion to their investments. The mutual funds normally come

out with a number of schemes with different investment objectives,

which are launched from time to time. A mutual fund is required to

be registered with securities and exchange board of India.

A mutual fund is setup in the form of a trust, which has

1. Sponsor

2. Trustees

3. Asset Management Company and

4. Custodian.

The trust is established by a sponsor or more than one sponsor who

is like promoter of a company. The trustees of 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.

Respective asset management companies (AMC) management

mutual fund schemes. Different business groups have sponsored

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these AMC s. some international funds are also operation

independently in India like Aliens and Template.

A BRIEF HISTORY OF MUTUAL FUND

The concept of mutual fund is a new feather in Indian capital

market but not to international capital markets. The formal origin of

mutual funds can be traced to Belgium where society generated

Belgium was established in 1822 as an investment company to

finance investments in National Industries with high associated risk.

The concept of mutual funds spread to USA in the beginning of 20th

century and three investment companies were started in 1924 since

then the concept of mutual funds has been growing all around the

world

In India, first mutual fund was started in 1964 when unit trust of

India (UTI) was established in the similar line of operation of the UK.

The term Mutual fund has not been explained in British literature

but it is considered as synonym of investment trust of

DEFINITIONS

The concept of mutual fund has been defined in various ways.

The mutual fund as an important vehicle for bringing wealth

holders and deficit units together indirectly

...Mr. James

Pierce

Mutual fund as financial intermediaries which being a wide variety

of securities with in the reach of the most modest of investors.

Frank Relicy

According to SEBI mutual fund regulations 1993, Mutual fund

means a fund established in the form of trust by sponsor to raise

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moneys by the trustees through the sale of units to the public under

one or more schemes for investing in securities in accordance with

these regulations.

CONCEPT OF 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 income earned through

these investments and the capital appreciation realized are 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:

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VALUE CHAIN OF MUTUAL FUND

SPONSOR:

Any person who, acting alone or in combination with another

body corporate, establishes a mutual fund.

Asset Management Company

A firm that invests the pooled funds of retail investors in

securities in line with the stated investment objectives. For a fee,

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the investment company provides more than diversification,

liquidity, and professional management service than is normally

available to individual investors.

Trustee

The Board of Trustees or the Trustee company who hold the

property of the Mutual Fund in trust for the benefit of the unit

holders.

Mutual Fund

A fund established in the form of a trust to raise money through

the sale of units to the public or a section of the public under one or

more schemes for investing in securities, including money market

instruments.

Transfer Agent

A transfer agent is employed by a mutual fund to maintain

records of shareholder accounts calculate and disburse dividends

and prepare and mail shareholder account statements, federal

income tax information and other shareholder notices.

Custodian

Mutual funds are required by law to protect their portfolio

securities by placing them with a custodian. Nearly all mutual fundsuse qualified bank custodians.

Unit Holder

A person who is holding units in a scheme of a mutual

fund.

CLASSIFICATION OF SCHEMES

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By Structure

Open-ended

A scheme where investors can buy and redeem their units on any

business day. Its units are not listed on any stock exchange but are

bought from and sold to the mutual fund.

Close-ended

A mutual fund scheme that offers a limited number of units, which

have a lock-in period, usually of three to five years. The units of

closed-end funds are often listed on one of the major stock

exchanges and traded like securities at prices, which may be higher

or lower than its NAV.In India 90% of the schemes is open-ended

fund and the rest 10% is close-ended funds. There are 1062 open-

ended funds and 119 close-ended funds.

By Objective

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A scheme can also be classified as growth scheme, income scheme,

or balanced scheme considering its investment objective. Such

schemes may be open-ended or close-ended schemes as described

earlier. Such schemes may be classified mainly as follows:

Growth / Equity Oriented Scheme

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

medium to long- term. Such schemes normally invest a major part

of their corpus in equities. Such funds have comparatively high

risks. These schemes provide different options to the investors like

dividend option, capital appreciation, etc. and the investors may

choose an option depending on their preferences. The investors

must indicate the option in the application form. The mutual funds

also allow the investors to change the options at a later date.

Growth schemes are good for investors having a long-term outlook

seeking appreciation over a period of time.

Income / Debt Oriented Scheme

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, Government securities and

money market instruments. Such funds are less risky compared to

equity schemes. These funds are not affected because of

fluctuations in equity markets. However, opportunities of capital

appreciation are also limited in such funds. The NAVs of such funds

are affected because of change in interest rates in the country. If

the interest rates fall, NAVs of such funds are likely to increase in

the short run and vice versa. However, long-term investors may not

bother about these fluctuations.

Balanced Fund

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

income as such schemes invest both in equities and fixed income

securities in the proportion indicated in their offer documents. These

are appropriate for investors looking for moderate growth. Theygenerally invest 40-60% in equity and debt instruments. These

funds are also affected because of fluctuations in share prices in the

stock markets. However, NAVs of such funds are likely to be less

volatile compared to pure equity funds.

Money Market or Liquid Fund

These funds are also income funds and their aim is to provide easy

liquidity, preservation of capital and moderate income. These

schemes invest exclusively in safer short-term instruments such as

treasury bills, certificates of deposit, commercial paper and inter-

bank call money, government securities, etc. Returns on these

schemes fluctuate much less compared to other funds. These funds

are appropriate for corporate and individual investors as a means to

park their surplus funds for short periods.

Gilt Fund

These funds invest exclusively in government securities.

Government securities have no default risk. NAVs of these schemes

also fluctuate due to change in interest rates and other economic

factors as, is the case with income or debt oriented schemes.

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. NAVs of such schemes would rise or fall in accordance with

the rise or fall in the index, though not exactly by the same

percentage due to some factors known as "tracking error" in

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technical terms. Necessary disclosures in this regard are made in

the offer document of the mutual fund scheme.

There are also exchange traded index funds launched by the mutual

funds that are traded on the stock exchanges.

AVENUES OF INVESTMENTS

Savings form an important part of the economy of any nation. With

the savings invested in various options available to the people, the

money acts as the driver for growth of the country. Indian financial

scene too presents a plethora of avenues to the investors.

Banks:

Considered as the safest of all options, banks have been the roots of

the financial system in India. For an ordinary person though, they

have acted as the safest investment avenue wherein a person

deposits money and earns interest on it. One and all have

effectively used the two main modes of investment in banks,savings accounts and fixed deposits. However, today the interest

rate structure in the country is headed southwards, keeping in line

with global trends. With the banks offering little above 7% in their

fixed deposits for one year, the yields have come down substantially

in recent times. Add to this, the inflationary pressures in economy

and you have a position where the savings are not earning. The

inflation is creeping up, to almost 8% at times, and this means thatthe value of money saved goes down instead of going up. This

effectively mars any change f gaining from the investments in

banks.

Post office Schemes

Among all saving options, post office schemes have been offering

the highest rates. Added to it is that the investments are safe with

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the department being a government of India entity. So the two basic

and most sought for features, those of return safety and quantum of

returns were being handsomely taken care of Public Provident Funds

act as options to save for the post retirement period for most peopleand have been considered good option largely due to the fact that

returns were higher than most other options and also helped people

gain from tax benefits under various sections. The following are the

post office savings schemes available for the investors:

Monthly Income scheme:

This scheme offers an interest of 8%p.a, payable monthly and a

bonus of 10% payable at maturity after 6 years. There is no tax

deductible at source (TDS) applicable on investments made in this

scheme.

National Savings Scheme:

This scheme offers an interest of 8% p.a; compounded half yearly

and payable at maturity in 6 years.

Post Office Time Deposits:

There are 4 options available to investors depending on the termof investment desired by the investor. They are:

1 year) this gives an interest of 6.25% p.a

2 year) This gives an interest of 6.5% p.a



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Kisan Vikas Patra:

An important feature of this scheme is that it assures that the

money invested doubles in 8 years and 7 months.

Public Provident Fund:

This scheme gives a return of 8% per annum, compounded

annually for maturity of 15 years.

Government of India Bonds:

The GOI Bonds have the following investment options:

6.5% Tax free bonds

There is no ceiling on the amount of investment in these bonds.

The effective yields of these bonds are 9.28% p.a for the period of 5

years and premature encashmentoption available to investors only

after the completion of 3 years.

8% Taxable Bonds:

These bonds do not have any TDS charged on them. There is no

maximum limit of investment in these bonds but there should be aminimum investment of Rs.1, 000. The maturity period is 6 years.

The investor has the option of interest payable half yearly or

cumulative. The investors can also avail tax benefit under section

80L of income Tax Act, up to Rs. 15,000.

Company Fixed Deposits:

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Companies have used fixed deposit schemes as a means of

mobilizing funds for their operations and have paid interest on

them. The safer a company is rated, the lesser the return offered

has been the thumb rule. However, there are several potentialroadblocks in these.

The danger of financial position of the company not being

understood by the investor lurks.

1. Liquidity is a major problem with the amount being received

monthly after the due dates.

2. The safety of principal amount has been found lacking.

Stock markets:

Stock markets provide an option to invest in a high risk, high

return game. While the potential return is much more than 10-11%

any of the options discussed above can generally generate, the risk

is undoubtedly of the highest order. However, as it might appear,people generally are clueless as to how the stock market functions

and in the process can endanger the hard-earned money.

For those who are not adept at understanding the stock

market, the task of generating superior returns at similar levels of

risk is arduous to say the least. This is where mutual funds come

into picture.

COMPARISION OF OTHER AVENUES WITH MUTUAL FUNDS

The mutual fund sector operates under stricter regulations as

compared to most other investment avenues. Apart from offering

investors tax efficiency and legal comfort, how do mutual funds

compare with other products?

Company Fixed Deposits versus Mutual Funds

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Fixed deposits are unsecured borrowings by the company

accepting the deposit. Credit rating of the fixed deposit program is

an indication of the inherent default risk in t he investment. The

money of investors in a mutual fund scheme are invested by theAMC in specified investments under that scheme. These

investments are held and managed in-trust for the benefit of the

schemes investors. On the other hand, there is no such direct

correlation between a companys fixed deposit mobilization, and the

avenues where it deploys these resources.

There can be no certainty of yield, unless a named guarantor

assures a return or to a lesser extent, if the investment is in a serial

gilt scheme. O the other hand, the return under a fixed deposit is

certain, subject only to the default risk of the borrower.

The basic value at which fixed deposits are encashable is not

subject to market risk. However, the value at which units of a

scheme are redeemed entirely depends on the market. If securities

have gained value during the period, then the investor can evenearn that is higher than what she anticipated when she invested.

Conversely, she could also end up with a loss.

Early encashment of fixed deposits is always subject to a

penalty charged by the company that accepted the fixed deposit.

Mutual fund schemes also have the option of charging a penalty on

early redemption of units (by way of an exit load).

Bank Fixed Deposits versus Mutual Funds

Bank fixed deposits are similar to company fixed deposits.

The major difference is that banks are more stringently regulated

than are companies. They even operate under stricter requirements

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regarding Statutory Liquidity ratio(SLR) and Cash Reserve Ratio

(CRR) mandated by RBI.

While the above are for comfort, bank deposits too are

subject to default risk. However, given the political and economic

impact of bank defaults, the government as well as Reserve Bank of

India (RBI) tries to ensure that banks do not fail.

Further, the Deposit Insurance and Credit Guarantee

Corporation (DICGC) protect bank deposits up to Rs. 100,000. The

monetary ceiling of Rs.100,000 is for all the deposits in all the

branches of a bank, held by the depositor in the same capacity and

right.

Bonds and Debentures versus Mutual funds

As in the case of fixed deposits, credit rating of a bond or

debenture is an indication of the inherent default risk in the

investment. However, unlike fixed deposits, bonds and debentures

are transferable securities.

While an investor may have an early encashment option from the

issuer ( for instance through a put option), liquidity is generally

through a listing in the market, implications of this are:

The value that the investor would realize in an early exit is

subject to market risk. The investor could have a capital gain or a

loss. This aspect is similar to a mutual fund scheme.

A hypothecation or mortgage of identified fixed and / or

current assets could back debt securities, e.g secured bonds or

debentures. In such a case, if there is a default, the identified assets

become available for meeting redemption requirements.

An unsecured bond or debenture is for all practical purposeslike a fixed deposit, as far as access to assets is concerned.

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A custodian for the benefit of investors in the scheme holds the

investment of a mutual fund scheme.

Equity versus Mutual fund

Investment in both equity and mutual funds are subject to

market risk. Investment in an open-end mutual fund eliminates this

direct risk of not being able to dell the investment in the market. An

indirect risk remains, because the scheme has to realize its

investments to pay investors. The AMC is however in a better

position to handle the situation. Further, on account of various SEBI

regulations, such as illiquid securities are likely to be only a part of

the schemes portfolio.

Another benefit of equity mutual fund scheme is that they give

investors the benefit of portfolio diversification through a small

investment.

RISK AND RETURN GRID:

An investor has mainly three investment objectives.

1. Safety of Principal

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2. Return

3. Liquidity

BANKS FIXED

DEPOSIT

BONDS AND

DEBENTURE

S

EQUITY

MARKET

MUTUAL

FUND

Returns Low Low to

Moderat

e

Low to

moderate

Moderate to

high

Better

Administrati

ve expenses

High Moderat

e to High

Moderate to

high

Low to

Moderate

Low

Risk Low Low to

Moderat

e

Low to

moderate

High Moderate

Investment

options

Less Few Few Many More

Network High

penetrati

on

Low

penetrati

on

Low

penetration

Low but

improving fast

Low but

improving

Liquidity At a cost Low Low to

moderate

Moderate to

High

Better

Quality of

Assets

Not

transpar

ent

Not

transpar

ent

Not

transparent

Transparent Transpare

nt

Guarantee Maximu

m Rs 1

lakh

None

Pricing

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

the asset fund net of its liabilities. In other words, if the fund is

dissolved or liquidated, by selling off all the assets in the fund, this

is the amount that the shareholders would collectively own. This

gives rise to the concept of the net asset value per unit, which is the

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

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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 NAV

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 units

outstanding. The detailed methodology for the calculation of the

asset value is given below.

Asset value = (Value of investments+ receivables+ accrued

income+ other current assets- liabilities- accrued

expenses) /Number of units outstanding.

ADVANTAGES OF INVESTING IN MUTUAL FUND:

Number of options available

Mutual funds invest according to the underlying investment

objective as specified at the time of launching a scheme. Mutual

fund have equity funds, debt funds, gilt funds and many others that

cater to the different needs of the investor. While equity funds can

be as risky as the stock markets themselves, debt funds offer the

kind of security that is aimed for at the time making investments.

The only pertinent factor here is that the fund has to be selected

keeping the risk profile of the investor in mind because the products

listed above have different risks associated with them.

Diversification

Diversification reduces the risk because all stocks dont move

in the same direction at the same time. One can achieve this

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diversification through a Mutual Fund with far less money that one

can on his own.

Professional Management

Mutual Funds employ the services of the skilled professionals

who have years of experience to back them up. They use intensive

research techniques to analyze each investment option for the

potential of returns along with their risk levels to come up with the

figures for the performance that determine the suitability of any

potential investment.

Potential of returns

Returns in the mutual are generally better than any option in

any other avenue over a reasonable period of time. People can pick

their investment horizon and stay put in the chosen fund for the

duration.

Liquidity

The investors can withdraw or redeem money at the Net

Asset Value related prices in the open-end schemes. In the Closed-

end Schemes, the units can be transacted at the prevailing marketprice on a stock exchange. Mutual Funds also provide the facility of

direct repurchase at NAV related prices.

Well Regulated

The Mutual Fund industry is very well regulated. All

investment has to be accounted for, decisions judiciously taken.

SEBI acts as a true watch dog in this case and can impose penalties

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on the AMCs at fault. The regulations designed to protect the

investors interests are implemented effectively.

Transparency

Being under a regulatory frame work, Mutual Funds have to

disclose their holdings, investment pattern and all the information

that can be considered as material, before all investors. This means

that investment strategy, outlooks of the markets and scheme

related details are disclosed with reasonable frequency to ensure

that transparency exists in the system.

Flexible, Affordable and Low cost

Mutual Funds offer a relatively less expensive way to invest

when compared to other avenues such as capital market operations.

The fee in terms of brokerages, custodial fees and other

management fees are substantially lower than other options and are

directly linked to the performance of the scheme. Investment in

Mutual Funds also offer a lot of flexibility with features such as

regular investment plans, regular withdrawal plans and dividend

investment plans enabling systematic investment or withdrawal of

funds.

Convenient Administration

Investment in the mutual fund reduces paper work 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.

TAXATION ON MUTUAL FUNDS

An Indian mutual fund registered with the SEBI, or schemes

sponsored by specified public sector banks/financial institutions andapproved by the central government or authorized by the RBI are

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tax exempt as per the provisions of section 10(23D) of the income

tax act. The mutual fund will receive all income without any

deduction of tax at source under the provisions of section 196(iv), of

the income tax act.

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MUTUAL FUND INDUSTRY

INDUSTRY OVERVIEW

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The financial markets in India are in the process of

maturing. The markets witnessed many structural changes in the

years gone by primarily due to the market regulators proactive

approach to the changes in the global scenario as well as to meetthe needs of domestic investors.

The RBI has carried out major reforms in the Indian

financial markets in the last few years primarily by reducing Cash

Reserve ratio by 4% over three years and Bank Rate by 5% over five

years. It is due to measures like these that the Indian economy is

currently showing fundamental robustness, with the GDP expected

to grow by almost 8%. With rising exports and stable inflation of

around 5%, the foreign exchange reserves are at an all time high of

$118 billion. The interest rates in the country are at record lows and

have led to an increase in credit flow to the commercial sector.

The equity markets have passed through a tumultuous

phase in the last 3 years. The improving macro-economic

fundamentals of the Indian economy have led the market players to

expect a bright future. During the year, the equity markets around

the world are showing good performance. However the markets in

India outperformed the world major scripts showed around more

than 75% growth in last 12 months. The year began with

resumption of peace process with Pakistan and end of war in Gulf.

The market also has welcome robust increase in agriculture

production with more-than-normal monsoons. Most of the

groundwork for the disinvestment completed over the last few

years, the last Government had started disinvestments and new

government has already acquired shape and started it is not

reluctant of divestment.

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The debt markets have witnessed a rally for over 2 years

and now seem to be stabilizing. The measures to deepen and widen

the debt markets continued throughout the year. A key step in

developing the markets was the launch of Negotiated DealingSystem (NDS). NDS allows electronic bidding in primary markets,

thereby bringing about transparency in trading, electronic

settlement of trades and better monitoring and controls. Issuances

of a 30-year paper, floaters ranging from 5 to 15 years and

securities with call and put options by the government will also go a

long way in deepening the markets. In a bid to increase the retail

participation, non-competitive bidding is being encouraged by the

RBI.

INDUSTRY STRUCTURE

Global Scenario

At the end of 2006:Q3, mutual fund assets worldwide were $ 17.28

trillion, having increased 18 percent over the year 2005:Q3.

Worldwide mutual fund assets (trillions of US dollars)

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Worldwide assets of Equity, Bond, Money Market & Balanced

fund

(Billions of US dollars)

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Composition of world Wide mutual fund assets by the types

of fund 2006 Q4

Source: Ici.org

The end of 2006:Q3, mutual fund assets were split into 44% Equity,

18% Money market, 20% Bonds, 9% Balanced / Mixed and

remaining 8% unclassified.

Worldwide mutual fund assets by region 2006;Q3

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At the end of 2006:Q3 by region, 55% of the global assets was in

America, 34% in Europe and the remaining 11% in Africa and Asia /

Pacific.

World wide mutual funds by the type of fund 2006;Q2

At the end of the fourth quarter of 2006, the number of mutual

funds worldwide stood at 54,986. By type of fund, 41 percent were

equity funds, 24 percent were bond funds, 20 percent werebalanced/mixed funds, and 6 percent were money market funds.

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Number of funds 2000-2006;Q3

2000 2001 2002 2003 20042005 2006Q4 Q1 Q2 Q

All Reporting

Countries1

52,74

6

51,69

2

52,84

9

54,11

0

54,56

9

54,98

4

55,09

5

55,91

9

5

5

Equity 22,453 20,381 22,348 22,974 22,688 22,364 22,796 23,043 2

Bond 15,474 13,128 12,183 11,619 11,886 13,309 13,127 13,213 1

Money Market 6,745 4,692 4,277 4,394 4,974 3,623 3,618 3,598 3

Balanced/Mixed 6,375 11,110 11,155 11,228 11,465 11,603 11,111 11,291 1

Other 612 1,000 1,195 1,310 1,578 1,997 2,364 2,659 3Countries

Reporting in

Every Period2

35,96

2

39,36

7

41,62

0

42,39

3

41,68

9

42,35

6

42,09

3

42,52

9

4

7

Equity 15,656 18,637 20,630 20,808 20,018 19,920 19,971 20,052 1

Bond 10,867 10,176 9,830 9,946 9,847 9,961 10,004 10,026 1

Money Market 2,701 2,786 2,727 2,674 2,652 2,899 2,901 2,867 2

Balanced/Mixed 6,149 6,926 7,500 7,723 7,857 8,095 7,674 7,966 7

Other 589 842 933 1,242 1,315 1,481 1,543 1,618 1

MUTUAL FUNDS IN INDIAN SCENARIO

Unit Trust of India was the first mutual fund set up in India in the

year 1963. In early 1990s, Government allowed public sector banks

and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act

was passed. The objectives of SEBI are to protect the interest of

investors in securities and to promote the development of and to

regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies andregulates the mutual funds to protect the interest of the investors.

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SEBI notified regulations for the mutual funds in 1993. Thereafter,

mutual funds sponsored by private sector entities were allowed to

enter the capital market. The regulations were fully revised in 1996

and have been amended thereafter from time to time. SEBI has alsoissued guidelines to the mutual funds from time to time to protect

the interests of investors.

All mutual funds whether promoted by public sector or private

sector entities including those promoted by foreign entities are

governed by the same set of Regulations. There is no distinction in

regulatory requirements for these mutual funds and all are subject

to monitoring and inspections by SEBI. The risks associated with the

schemes launched by the mutual funds sponsored by these entities

are of similar type. It may be mentioned here that Unit Trust of India

(UTI) is not registered with SEBI as a mutual fund (as on January 15,

2002).

In February 2003, following the repeal of Unit Trust of India act

1963; UTI was bifurcated into two separate entities. One is thespecified undertaking of UTI with assets under the 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 administrator & under

rules framed by Government of India and does not come under the

purview of mutual fund regulation.

The second is the UTI mutual fund Ltd sponsored by SBI,

BOB & LIC. It is registered with SEBI & 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 setting up of a UTI mutual fund, conforming

to the SEBI, mutual fund regulation and with recent mergers taking

place among different private sector funds, the mutual fund industry

has entered its current phase of consolidation and growth.

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As at the end of September,2004, there were 29 funds which

manage assets of Rs. 231358.03 crores under 421 schemes.

GROWTH IN ASSETS UNDER MANAGEMENT

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The Company Background:

In 1982, a group of Hyderabad-based practicing Chartered

Accounts started Karvy Consultants Limited with a capital of rs.1,

50,000 offering auditing and taxation services initially. Later, it

forayed into the Registrar and Share Transfer activities and

subsequently into financial services. All along, Karvys strong work

ethic and professional background leveraged with Information

Technology enabled it to deliver quality to the individual.

A decade of commitment, professional integrity and vision helped

Karvy achieve a leadership position in its field when it handled the

largest number of issues ever handled in the history of the Indian

stock market in a year. Thereafter, Karvy made inroads into a host

of capital-market services,-corporate and retail which proved to be a

sound business synergy.

GROUP OF COMPANIES

KARVY CONSULTANTS LIMITE

Deals in Registrar and Investment Services

KARVY INC

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Deals in distribution of various investment products, viz., equities,

mutual funds, bonds and debentures, fixed deposits, insurance

policies for the investor.

KARVY INVESTOR SERVICES LIMITED

Deals in Issue management, Investment Banking and Merchant

Banking.

KARVY STOCK BROKING LIMITED

Deals in buying and selling equity shares and debentures o the

National stock Exchange (NSE), the Hyderabad Stock Exchange

(HSE) and the Over-The-Counter Exchange of India. (OTCEI).

KARVY COMPUTERSHARES LIMITED

KARVY GLOBAL SERVICES LIMITED

KARVY COMMODITIES BROKING LIMITED

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BOARD OF DIRECTORS

Mr.C.Parthasarathy

Mr.M.YugandharMr.M S.Ramakrishna

QUALITY POLICY

To achieve and retain leadership, Karvy shall aim for

complete customer satisfaction, by combining its human and

technological resources, to provide superior quality financial

services. In the process, Karvy will strive to exceed Customers

expectations.

Quality objectives

As per the Quality Policy, Karvy will:

Build in-house processes that will ensure transparent and

harmonious relationships with its clients and investors to

provide high quality of services.

Establish a partner relationship with its investor services

agents and vendors that will help in keeping up its

commitments to the customers.

Provide high quality of work life for all its employees and

equip them with adequate knowledge & skills so as to respond

to its customers needs.

Continue to uphold the values of honesty & integrity and

strive to establish unparalleled standards in business ethics.

Use state-of-the art information technology in developing new

and innovative financial products and services to meet the

changing needs of invetors and clients.

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Strive to be a reliable source of value-added financial products

and services and constantly guide the individuals and

institutions in making a judicious choice of it.

Strive to keep all stake-holders (shareholders, clients,investors, employees, suppliers and regulatory authorities)

proud and satisfied.

ACHIEVEMENTS

Largest mobiliser of funds as per PRIME DATABASE.

First ISO-9002 Certified Registrar in India.

A Category I-Merchant banker.

A Category-I-Registrar to public Issues.

Ranked as The Most Admired Registrar by MARG.

Handled the largest-ever public issue-IDBI

Handled over 500 public issues as registrars.

Handling the reliance Account which for nearly 10 million

account holders.

First Depository Participant from Andhra Pradesh.

Major issues managed as arrangers

Kerala state electricity board.

Power Finance Corporation.

A.P. Water resources Development Corporation.

A.P Roads Development corporation.

A.P state electricity board.

Haldia Petrochemicals ltd.

Major issues managed as co-managers

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IDBI Equity

Morgan Stanley Mutual Fund.

Bank of Baroda

Bank of Punjab Ltd

Corporation Bank

IndusInd Bank Ltd

Jammu and Kashmir bank Ltd

Housing and Urban Development corporation (HUDCO) Ltd

Madras refineries Ltd

Tamil Nadu Newsprint & Paper Ltd

BPL Ltd

Birla 3M Ltd

Essar Steels Ltd

Hindustan Petroleum corporation Ltd

Infosys technologies Ltd

Jindal Vijaynagar Steels Ltd

Nagarjuna Fertilizers & Chemicals Ltd

Rajshree Polyfil Ltd

Karvy securities Ltd.

Karvy has secured over rs.500 crore in the following debt

issues.

Andhra Pradesh road development corporation Ltd

ICICI Bonds (private placement)

ICICI Bonds-96

ICICI Bonds-97-I

ICICI Bonds-97-II

ICICI safety Bonds March 98

IDBI Bonds 96

IDBI Flexi Bonds I

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IDBI Flexi Bonds II

IDBI Flexi Bonds III

Kerala state electricity Board

Krishna Bhagya Jala Nigam Ltd

Power Finance Corporation Ltd

Andhra Pradesh Water Resources Development Corporation

Andhra Pradesh state Electricity Board

KARVY CAPABILITIES

Technology infrastructure

It has desktops and 200 plus enterprise class servers having

licensed software across technology platforms. It has wide area

network connecting branches all over India. It has 24 * 7 back

up and Redundancy support for critical business data.

PHYSICAL INFRASTRUCTURE

It has 40 branches and 65 investor centers connected with

communication facilities like Email, Fax, Videoconferencing,

WAN and LAN.

MAN POWER

It has work force of over 2000 highly trained people. It has

experience of processing over 120 million transactions. The

Domain experience in the areas of Data processing operations,

Technology, Management and Financials and legal processing.

It has specialist expertise in quality control and cast

management.

QUALITY PROCESS

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It is an ISO 9002 certified operations by DNV Norway. It

performs regular internal and external audits for quality

standards.

TRAININGIt has full-fledged learning center to train 150 people

simultaneously. It has simulated environment and on the Job

training facilities.

BUSINESS CONTINUITY

It is a two-decade-old company of repute in the industry. It

has a disaster recovery center at separate location. It has

investment in infrastructure.

VALUES

INTEGRITY

TRANSPARENCY

PASSION FOR QUALITY

HARD WORK AND TEAM PLAY

LEARNING AND INNOVATION

EMPATHY AND HUMILITY

SENSE OF OWNERSHIP.

KARVY ACHIEVEMENTS

Indias # 1 public issue registrars with 655-market share.

# 2 in India in mutual fund registraring and investor servicing.

Amongst the top 5 mobilizers of funds in India.

Among the top 3 depository Participants.

Among the top 5 retail brokers in the country.

ISO 9002 certified operations by DNV.

Among the top 10 medical transcriptionists.

Adjudged as one of the top 50 IT users in India by MIS Asia.

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DATA ANALYSYS

SOME OF THE SCHEMES OF MUTUAL FUNDS:

Standard Chartered Mutual Fund

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Schemes:

Grindlays cash fund: It is an Open-ended Income scheme with high

liquidity. A scheme that invests in money market instruments like

Treasury Bills, Call money, Repos , Short-term Corporate

Debentures, Commercial Papers, Certificate of Deposits, etc that

provide a high level of stability and easy liquidity .

Tax:

The GCF is also very taxed efficient. It comes with a daily

(compulsory reinvestment), Weekly (compulsory reinvestment),

Monthly and Bi-monthly dividend options. Each day gains are

declared in the form of dividends and then reinvested after netting

it off against Dividend Distribution Tax (currently 20.91%).This

dividend is completely tax free. So the net tax incidence is just

20.91% as compared to 36.5925% for comparable non mutual fund

option.

Grindlays Floating Rate Fund: It seeks to generate stable returns

with a low risk strategy by creating a portfolio that is substantially

invested in good quality floating rate debt or money market

instruments, fixed rate debt and money market instruments.

GFRF primarily invests in Floating rate debentures and bonds,

Short tenor fixed rate instruments and long tenor fixed rate

instruments swapped to floating rate.

Plans:The fund comes in two plans

Short term plan for investors with a time horizon of 1-6

months.

Long term plan for investors with a time horizon of beyond 6months.

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Grindlays Debt Funds:Debt funds are funds that invest only in debt

securities and are designed to primarily protect your capital and

provide better returns by investing in high quality debt securities.

Operations of Debt funds: There are two important sources of

revenue that a debt fund earns:

a) Interest income

When you invest in a Bank / Company deposit, it offers you a fixed

rate of interest with the principal being returned on maturity.

Similarly when a debt fund invests in various debt securities the

issuers of these securities offer a rate of interest and the principal

on maturity. The issuers of these securities could either could either

be various corporates like Reliance, Hindalco, ICICI, Bharat

Petroleum or the Government of India.

b) Mark to Market gain/loss

As interest rates on bank fixed deposits change frequently so dointerest rates on debt securities. Interest rates and debt security

prices are in fact the two sides in seesaw. In general, prices fall

when interest rates rise and rise when interest rates fall. If the

interest rates were to decline then newer bonds would be issued at

lower interest rates than existing bonds. Consequently old bonds

would be dearer and hence prices of these older bonds would rise.

Similarly if interest rates were to raise then value of old bonds would

fall, as newer bonds would bear higher interest rates. The traded

price of a bond may thus differ from its face value. The longer a

bonds period to maturity, the more its price tend to fluctuate as

market interest rates change.

DSP Merrill lynch Mutual Fund:

Schemes

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Liquidity Fund:

It is an open-ended fund liquid scheme seeking to generate a

reasonable return commensurate with low risk and high degree of

liquidity from a portfolio constituted of money market securities and

high quality debt securities.

Floating rate Fund:

It is an open-ended income scheme seeking to generate

income commensurate with prudent risk from a portfolio

substantially constituted of floating rate debt securities and fixed

rate debt securities swapped for floating rate returns. The scheme

may also invest in fixed rate debt securities and money market

securities.

Short term Fund:

It is an open-ended income scheme seeking to generate income

commensurate with prudent risk, from a portfolio constituting ofmoney market securities, floating rate debt securities and debt

securities.

Bond fund:

It is an open-ended income scheme seeking to generate an

attractive return, consistent with prudent risk from a portfolio, which

is substantially constituted of high quality debt securities of issuers

predominantly domiciled in India.

Equity Fund:

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It is an open ended growth scheme seeking to generate long

term capital appreciation, from a portfolio which is substantially

constituted of equity and equity related securities of issuers

domiciled in India. The scheme may also invest a certain portion ofits corpus in debt and money market securities, in order to meet

liquidity requirements from time to time.

T.I.G.E.R Fund:

It is an open ended growth scheme whose primary

investment objective is to seek to generate capital appreciation,

from a portfolio that is substantially constituted of equity securities

of corporates, which could benefits from structural changes brought

about by continuing liberalization in economic policies by the

government and / or from continuing investments in infrastructure,

both by public and private sector.

HDFC MUTUAL FUND

Schemes

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HDFC Growth Fund:

It is a open ended scheme seeking to generate long term

capital appreciation from a portfolio that is invested predominantly

in equity and equity related instruments

HDFC Equity Fund:

It is an open-ended growth scheme to achieve capital

appreciation.

HDFC Top 200 Fund:

It is an open-ended growth scheme seeking to generate long-term

capital appreciation from a portfolio of equity and equity-linked

instruments primarily drawn from the companies in BSC 200 index.

HDFC Balanced Fund:

It is an open ended balanced scheme seeking to generate

capital appreciation along with current income from a combined

portfolio of equity and equity related and debt & money market

instruments.

HDFC Tax Savers Fund:

It is an open-ended equity linked saving scheme with a lock-in

period of 3 yrs seeking to generate long term growth of capital.

HDFC Gilt Fund:

It is an open-ended income scheme seeking to generate credit

risk-free returns through investments in sovereign securities issued

by central government or state government.

Birla Sun Life Mutual Fund:

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Schemes

Birla Advantage Fund:

It is an open-ended diversified equity fund and portfolio

remains over wait across banks MNC pharma, IT and Telecom.

Birla Dividend Yield Plus:

It is an open-ended growth scheme investing in high dividend yield

companies and continuously having a positive outlook on banking

sector.

Birla Mid cap Fund:

It is an open ended growth scheme investing primarily in mid

cap stocks and the portfolio remains well diversified across

pharmaceutical, banking, consumer non durable, IT, Hotels.

Birla MNC Fund:

It is an open-ended growth scheme investing in multi national

companies and the portfolio remains over weight across consumer

non-durable, IT, Agro chemicals.

Birla Gilt Plus:

It is an open-ended government security scheme.

Birla Equity Plan:

It is an open-ended equity linked savings scheme with a lock-in

for three years.

Kotak Mutual Fund

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Schemes:

Kotak 30:

It is an open-ended equity growth scheme seeking to

generate capital appreciation from a portfolio of predominantly and

equity related securities with investment in, generally, not more

than 30 stocks.

Kotak opportunities:

It is an open-ended equity growth scheme seeking to

generate capital appreciation from a diversified portfolio of equity

and equity related securities.

Kotak Global India:

It is an open-ended growth scheme seeking to generate

capital appreciation from a diversified portfolio of equity and equity

related securities issued by globally competitive Indian companies.

Kotak Liquid:

It is an open-ended debt scheme to provide reasonable

returns and high level of liquidity by investing in debt and money

market instruments of different maturities so as to spread the risk

across different kinds of issuers in debt markets.

Chola mutual fund:

Schemes:Cholamandalam growth fund:

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It is an open ended scheme seeking to generate long term capital

appreciation, income through investments in equity & equity related

instruments; the secondary objective is to generate some current

income and distributive dividend.

Chola midcap fund:

It is an open ended scheme seeking to generate capital

appreciation by investing primarily in mid cap stocks. The scheme

will invest primarily that have a market capitalization between

Rs.300 crores to Rs. 3000 crore.

Chola opportunities fund:

It is an open ended scheme which will invest mainly to generate

long term capital appreciation from a diversified portfolio of equity

and equity related securities.

Chola Multi-cap fund:

It is an open-ended growth scheme which will provide long term

capital appreciation by investing in a well diversified portfolio of

equity and equity related instruments across all ranges of market

capitalization.

Chola Gilt investment plan:

It is an open-ended growth scheme seeking to generate returnsfrom a portfolio by investing in Government securities.

Chola monthly income plan:

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It isan open-ended growth scheme seeking to generate monthly

income through investment in range of debt, equity and money

market instruments.

CHOOSING FUNDS

When it comes down to it, the decision to invest in a

mutual fund is one you have to make on your own. When you try to

choose an investment, however, it is a good idea to seek the

guidance of a financial advisor who will review its objective to make

sure it supports your financialgoal.

As an investor, your goals are unique, and a financial

advisor can help match you with the best funds. Remember,

however, when you are choosing funds, to consider how much risk

you are comfortable with and when you'll need the money. If you

have the time to weather the market's ups and downs, you may

want to consider equity investments.

Before you select a mutual fund, it is essential to read

the prospectus carefully to learn all you can about the fund's

performance, investment goals, risks, charges and expenses.

DECISION MAKING FACTORS WHILE INVESTING IN MUTUAL

FUNDS

Before looking at the mutual funds available to you, it may be best

to decide

the mix of stock, bond, and money market funds you prefer. Some

experts believe this is the most important decision in investing.

Here are some general points to keep in mind when deciding what

your investment strategy should be.

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Diversify. It is a good idea to spread your investment among

mutual funds that invest in different types of securities. Stocks,

bonds, and money market securities work differently. Each offers

different advantages and disadvantages. You may also want todiversify within the same class of securities. Diversifying can keep

you from putting all your eggs in one basket and therefore, may

increase your returns over along period of time.

Consider the effects of inflation. Since the money you set aside

today may be intended to be used several years down the road, you

need to look at inflation. Inflation measures the increase of general

prices over time.

Conservative investments like money market funds often may be

popular because they are managed to keep a steady value. But

their return after accounting for the inflation rate can be very low,

perhaps even negative.

For example, a 4% inflation rate over a period of many years could

erase a money market fund's 3% yield over the same period of time.

So even though such an investment may give some safety of

principal, it may not be able to grow enough in value over the years

or even keep up with the rate of inflation.

Patience is a virtue. It's no secretthe prices of common stocks

can change quite a bit from day to day. Therefore, the part of your

account invested in stock funds would likely fluctuate in value much

the same way.

If you don't need your money right away (for at least 5 years), you

probably don't need to panic if the stock market declines or you find

that your quarterly statement shows the value of your investment

has fallen. In the past, the stock market has regained lost value over

time. Although you are not assured it will do so in the future, try to

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be patient and allow your stock funds time to recover.

Remember the saying, "buy low, and sell high." Switching out of a

stock mutual fund when prices are low is usually not the way to

make the most of your investment. Of course, if a fund continues tounder-perform over time as well as your other fund choices, you

may want to consider changing funds.

Look at your age. Younger investors may be more at ease with

stock funds, because they have time to wait out the short-term ups

and downs of stock prices. By investing in a stock fund, they might

be able to receive high returns over the long-term.

On the other hand, people who are closer to retirement may be

more interested in protecting their money from possible drops in

prices, since they'll need to use it soon. In this case, it may be wise

to place a greater percentage of money in bond and/ or money

market funds, which may not have such large changes in value.

How can you determine an investment mix appropriate for

your age? One way is to subtract your age from 100. The answer

you come up with may be a good number to start with in deciding

what portion of your total investments to put into stock mutual

funds.

Risk. When you are choosing funds, be sure to consider how much

risk you are comfortable with and how close you are to retirement. If

retirement is around the corner, you may want a portfolio with very

little risk. On the other hand, if you are younger, and have the time

to weather the market's ups and downs, you may want to choose a

more aggressive investment strategy.

READ FUND DOCUMENTS

Your primary source of data concerning the mutual fund will be theprospectus. It is a legal document illustrating the rules and

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regulations that a mutual fund must follow and contains information

on the fund's goal and strategy, risks, performance, financial

highlights fees and expenses, and a wide variety of information that

you should know before investing.

What are the fund' s goal and strategy?

Goals vary from fund to fund, and they're important to

understand so you can decide if they match your personal

objectives. Some funds generate income for their shareholders,

while others concentrate on capital appreciation. Some focus on a

combination of the two, and others are oriented towards tax

benefits or preservation of capital.

Funds also implement differing strategies to help accomplish their

goals. The Goals and Strategies section of a prospectus details thetypes of securities in which fund managers can invest and how

managers analyze them

Funds can be limited to domestic investments, focus on a certain

country or region, or invest anywhere in the world. In addition, some

funds invest only in specific industries or in particular types of

companies. Others invest in large-, medium- or small-capitalization

companies.

What are the risks?

As with all investments, each fund, whether domestic, international

or sector specific, carries different risks. The Main Risks section of a

prospectus explains which ones are associated with the securities in

that particular fund, which may help you decide what level of risk

you're comfortable having in your investment portfolio.

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How has a fund performed?

While historical performance doesn't predict how a fund will do in

the future, you may be interested in how it performed in past

market environments. Depending on the age of the fund, a

prospectus will provide its 1- 5- and 10-year average annual returns,

including a comparison to its benchmark index over the same

period.

What are financial highlights?

In this section a prospectus lists 5 years of annual financial

information, if a fund is less than 5 years old, provides data since

inception. Information includes net asset values at the beginning

and end of each year, and details the gains or losses, dividends and

distributions that account for any changes.

Financial Highlights also show fund asset information such as net

assets ratios to average net assets for expenses and net investment

income, and portfolio turnover rates.

What are the expenses of a fund?

Operating a fund entails some costs you should be aware of. The

Fees and Expenses section breaks out these costs and who pays

them. In addition, an example of fund expenses is provided to helpyou compare the cost of investing in one fund versus another.

Who's managing the fund?

In the Management section, a prospectus gives a brief biography of

a fund' s managers, including how long they have worked on the

fund and their overall industry experience.

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.MARKET SEGMENTATION

Market segmentation is the division of market into

homogeneous groups, which will respond differently to promotions,

communications, advertising and other marketing mix variables. A

different marketing mix can target each group, or segment,

because the segments are created to minimize inherent differences

between respondents within each segment and maximize

differences between each segment.

Market segmentation was first described in the 1950s, when

product differentiation was the primary marketing strategy used. In

the 1970s and 1980s, market segmentation began to take off as a

means of expanding sales and obtaining competitive advantages.

Uses of Market Segmentation

There are many good reasons for dividing a market into smaller

segments. The primary reasons:

Easier marketing

It is easier to address the needs of smaller groups of

customers, particularly if they have many characteristics in common

(e.g. seek the same benefits, same age, gender, etc.).

Find niches

Identify under-served or un-served markets. Using niche

marketing, segmentation can allow a new company or new product

to target less contested buyers and helps a mature product seek

new buyers.

Efficient

More efficient use of marketing resources is by focusing on

the best segments for the investor offeringproduct, price,

promotion, and place (distribution). Segmentation can help avoid

sending the wrong message or sending message to the wrong

people.

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Classification variables

Classification variables are used to classify survey

respondents into market segments. Almost any demographic,

geographic, Psychographic or behavioral variable can be used toclassify people into segments.

Demographic variables Age, gender, income, ethnicity, martial

status, education, occupation, household size, length of residence,

type of residence, etc.

Geographic variables City, state, zip code, census tract, country,

region, metropolitan or rural location, population density, climate,

etc.

Psychographic variables Attitudes, lifestyle, hobbies, risk

aversion, personality traits, leadership traits, magazines read,

television programs watched, PRIZM clusters, etc.

Behavioral variables Brand loyalty, usage level, benefits sought,

distribution channels used, reaction to marketing factors, etc.

Summary

Target marketing or market segmentation based on

customer needs and wants can increase profits. Target market

identifies customer groups and the reasons they purchase. Market

segmentation helps a business be more responsive to changing

customer needs. An overall marketing plan or strategy visually

shows how all aspects of a marketing effort work together. The

ultimate goal of any business is to sell the product or service.

PRIMARY DATA FOR THE PROJECT:

For the customized needs o the project, primary data was

collected through a survey in the twin cities of Hyderabad &

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Secunderabad. A Random sample of 100 investors were surveyed.

They were all asked to answer a questionnaire true to their

knowledge. The feedback obtained from the customer was

instrumental, gauging the perception of the investors towardsmutual funds. It also throws light on the factors, which influence

them to make decisions while investing. Further the interaction with

few of the investors goes a long way in understanding the inlaid

reasons for their decisions.

SECONDARY DATA:

The main sources of secondary data are the web sites of

various mutual fund houses like cholamandalam mutual fund,

Franklintempletonindia, ICICI, BIRLA SUNLIFE, KOTAK and more such

houses. Many references were collected from different libraries to

gain an insight on mutual funds. Previous studies conducted in this

field provided valuable help. In addition to the above sources,

Working with Karvy associates and interaction with their personnel

provided a pragmatic edge to my theoretical concepts.

Survey Details

Total Sample Size 100

Economic Status Criterion Tax payees & Non tax

payees

Age groups 23 years and above

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Martial Status Criterion Married, Married with

children & Unmarried

FACTORS CONSIDERED BY INVESTORS

WHILE INVESTING

Every investor considers several factors while investing in any of the

products as it deals with the most important need of life money.

The five main factors that were considered are:

1. Safety & security2. Tax exemption

3. Liquidity

4. Profitability

5. Return pattern

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SAMPLE SIZE 100

ECONOMIC STATUS TAX PAYEES AND NON-TAX PAYEES

The above graph shows that 31% people consider safety & security

as the main factor while investing, 26% goes for Tax exemption,

17% considered return pattern in the investment, 14% went with

profitability and 12% showed interest in liquidity.

ANALYSIS OF THE ABOVE GRAPH:

In a developing country like India most of the people fall in the lower

middle class and middle class sectors. The attitude of the investors

is of primary concern. As more and more options that warrant high

returns are available in the market, investor tends to be more

skeptical. So, while investing in any avenue, their first priority issafety and security. Even the age of the investor plays a major role

in the decision-making. For example, if the investor is in the age of

50 and above, he usually looks for low or no risks while investing.

Therefore, 31% of investors surveyed preferred safety & security.

Next is the tax exemption; as there is tremendous boom in

the corporate sector and the remuneration system for a particular

sector has changed. This created a change in income levels and

Factors considered by investors

While investing

31%

26%12%

14%

17%

Safety & security Tax exemption

Liquidity Profitability

Return pattern

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thereby affected the expenditure patterns. In the past, it took

employee years of time to reach a five-figured salary. But, gradually

the system has changed. Even the employee in the lower level or

the middle level of the corporate ladder is receiving a handsomeemolument. So, they are opting for the exemption of tax. Therefore,

the next preference is for tax exemption that is 26% of the total.

Besides investors going for Safety & security, there are

investors who opt for return on investments they made. They are

mainly in the age group of 23 and 35. Because these investors are

likely to think that, at this age they are mentally more stable and

feel that they can cope with financial risks. Any profits made would

further bolster their financial stability. And so, 17% went with return

pattern of their investment. In the same way, 14% of the investors

look for profitability, especially those who are already doing

business, i.e. those who are already accustomed to taking risks.Out

of the total, 12% of investors preferred liquidity. The main reason

for this could be that, that making the invested money liquefied as

and when required is important, and this is not possible if the

investments are made in any insurance, Bank deposits, etc.

Though there are numerous factors that can be attributed to

an investors psyche, by large, we can conclude that maximum

number of investors is investing in those sectors where there is

safety & security for their principal. The other factors antecede

safety.

INVESTMENT PATTERN:

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Sample size 100

Economic status Tax payees & non-tax payees

From the above graph, it is clear that 42% opted for an investment

in bank deposits, 31% for insurance, 7% for shares, 9% for mutual

fund, 2% for bonds, 5% for equity and remaining 4% have invested

in some other investments such as real estates etc.


The investment pattern of an investor is also very important

because this shows the avenues where the people are really

interested. Here, 42% have invested in bank deposits as it is very

safe and risk free. Out of the sample of 100,it is observed that those

who opted for an investment in banks in the form of deposits are

Investment pattern

42%

31%

9%2%

7%5% 4%

Bank deposits insurance mutual fund

bonds shares Equity

none

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found to be in the age group of 40 and above and are in

government services.

The next preference, as observed in the pie chart for

investment pattern is Insurance. People generally opt for life

insurance because it promotes a sense of safety & security for the

dependents on the person and even his belongings. So, the next

priority is insurance. 7% of the investors went for an investment in

shares as it brings quick returns, although shares are prone to high

risks.

As shown 9% of the investors opted for an investment in

mutual funds. From this we can infer that the market of mutual fund

is picking up slowly. According to the survey, the people who have

invested in the mutual funds belong to high-income range and they

want an exemption from tax and a mere 2% opted for bonds, 5% for

investment in equity and 4% have invested in other investments

such as Real estate to make quick returns on their investments.

AWARENESS TOWARDS MUTUAL FUNDS:

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Awareness towards mutual

funds

87%

13%

Aware of mutual fund Not aware of mutual fund

In the above pie chart, we can observe that nearly 90% of investors

are aware of mutual funds and only 13% people are not aware of it.

This shows that most of the investors know about mutual funds in

one or the other way.


Of the sample surveyed, almost all of the people are aware of

mutual funds. They are aware of the term mutual fund. Though

the questionnaire cannot identify the extent of the awareness.

Through the interaction it is found that they are not actually aware

of the advantages in investing mutual funds, various types of

mutual funds and different schemes offered in it. It is found that

People often have an inhibition that investments in mutual funds

can be done only by those who have surplus amount of money with

them and want to avail tax redemption.

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MUTUAL FUND INVESTMENTS:

Mutual funds are medium risk investments. Though Investing in

mutual fund doesnt assure a fixed amount of returns, nevertheless,

they are not low. The awareness about mutual funds is the primary

criterion.

Mutual fund investments

75%

6%

19%

Equity funds Debt funds Liquid funds

Sample size 16

Criterion Mutual fund investors in the survey

From the graph, it is clear that only 16 out of 100 invested in mutual

funds. From those 16, 12 have invested in Equity funds, 3 in liquid

funds and the remaining 1 in debt funds.


Only 16 out of 100 invested in mutual funds this can be mainly

attributed to the low level of awareness, various inhibitions and a

not so clear idea about the mutual funds. It is very important to

have a clear perception of mutual funds, how they work and how

the money is invested in different portfolios according to the

investors choice.

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Investors who opted for equity funds are 12 of 16 percent.

Equity funds being the majority preference can be reasoned as they

want their investments to be put in various sectors i.e. DIVERSIFIED

FUNDS so that they can make profits out of it easily. Even somewent for INDEX FUNDS as the investments are made in Bench Nark

Index Stock like BSE, NSE.

A few (3%of 16%) investors made investments in liquid funds

as they want a Short term investments where the investor need not

wait for much time for the return. These are also called as Money

Markets for short term.

Only a single investor went for debt funds where investments

are in various debt products like Certificate of Deposits (CDs),

Commercial papers and call money as the investor want a secured

investment, which he can avail in Debt Funds.

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FINDINGS

Many of the investors are aware of mutual funds but most of

their perception towards them is not positive.

Investors are mainly concerned with the risk factors of mutual

funds and are not directing towards them.

The investors who have invested in mutual funds mainly go

for it because of the Liquidity matter and Tax exemption.

Most of the people dont know the advantages of mutual funds

and the various types of mutual funds.

There are nearly 1173 schemes of mutual funds offered by

various mutual fund houses, which an ordinary person is not

aware.

A common investor basically looks for the Tax exemption and

Safety & security while investing.

Investors often feel that those people, who have surplus

amount with them and invest to avail Tax exemption, can do

investing in mutual funds.

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SUMMARY

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This report is an attempt to provide an analysis of the perception of

an investor towards mutual funds. However, what has been reported

is only the tip of iceberg in terms of data that are available.

However, my examinations suggests that employees are

interested to invest in mutual funds provided sufficiently educated

and a know-how is provided on its working. Though the self-

employed are investing in mutual funds and insurance, they are

investing small amounts in them because they do not want to take

high risks.

Karvy stock broking ltd should educate the people about the

various advantages of investing in mutual funds and create an

awareness regarding various investment options.

In conclusion, it is important to remember that the main

purpose for initiating the project is to analyze the perception of an

ordinary investor towards the mutual funds and the aspects that

guide him to make investment decisions. The study does not aim to

advocate investments in mutual funds.

CONCLUSION

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Mutual funds are still and would continue to be the uniquefinancial tool in the country. One has to appreciate the fact that

every aspect of life as its periods of high and lows. This has been

the case with the stock markets. Why not apply the same logic to

mutual funds? Mutual funds have not failed in any country where

they worked with regulatory frame work. Their future is bright. The

poor performance of many mutual funds schemes may be mostly

attributed to the quality of personal involved and their matter of

fund management.

SUGGESTIONS

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Make people aware of mutual funds by:

Arranging free seminars in different organizations about mutual

fund investments.

Arranging stalls in Public places is a good publicity.

More advertisements need to come to explain the various

advantages of mutual funds and even the various schemes

offered by them.

What to expect from a financial advisor

The key for mutual fund investors is to define and recognize the

value of professional financial services, and then insist on getting

that value. When you pay a sales charge or a fee, what can you

expect a professional to do for you? Your advisor should at least:

Understand investor needs and help him formulate long-terminvestment goals and objectives. Before making specific

recommendations, advisor should try to gain a whole picture of

investors past experience, lifestyle and goals, as well as his other

investments and current financial situation. When the investor

planning to retire, for example? Does the investor have life

insurance? Does he own real estate? How secured is his job?

Help the investor develop realistic expectations by discussing the

risks and rewards of each investment. Every investment choice

has its strengths and weaknesses, and investor should never feel

less than fully informed. When investor ask questions, or have

doubts,

Investor should expect your financial advisor to answer honestly,

and help him develop a strategy that is both realistic and

comfortable for hi

mba project work

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