mba project work
TRANSCRIPT
-
7/29/2019 MBA Project Work
1/84
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
5-8
9
10
11
12-30
31-38
39-46
47-70
71
72-74
75-76
77-78
79-82
1
-
7/29/2019 MBA Project Work
2/84
2
-
7/29/2019 MBA Project Work
3/84
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.
3
-
7/29/2019 MBA Project Work
4/84
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.
4
-
7/29/2019 MBA Project Work
5/84
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.
5
-
7/29/2019 MBA Project Work
6/84
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.
6
-
7/29/2019 MBA Project Work
7/84
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.
7
-
7/29/2019 MBA Project Work
8/84
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.
8
-
7/29/2019 MBA Project Work
9/84
9
-
7/29/2019 MBA Project Work
10/84
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
10
-
7/29/2019 MBA Project Work
11/84
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
11
-
7/29/2019 MBA Project Work
12/84
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:
12
-
7/29/2019 MBA Project Work
13/84
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,
13
-
7/29/2019 MBA Project Work
14/84
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
14
-
7/29/2019 MBA Project Work
15/84
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
15
-
7/29/2019 MBA Project Work
16/84
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
16
-
7/29/2019 MBA Project Work
17/84
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
17
-
7/29/2019 MBA Project Work
18/84
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
18
-
7/29/2019 MBA Project Work
19/84
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
3 year) This gives an interest of 7.25% p.a
4 year) This gives an interest of 7.5% p.a
19
-
7/29/2019 MBA Project Work
20/84
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:
20
-
7/29/2019 MBA Project Work
21/84
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
21
-
7/29/2019 MBA Project Work
22/84
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
22
-
7/29/2019 MBA Project Work
23/84
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.
23
-
7/29/2019 MBA Project Work
24/84
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
24
-
7/29/2019 MBA Project Work
25/84
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
25
-
7/29/2019 MBA Project Work
26/84
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
26
-
7/29/2019 MBA Project Work
27/84
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
27
-
7/29/2019 MBA Project Work
28/84
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
28
-
7/29/2019 MBA Project Work
29/84
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.
29
-
7/29/2019 MBA Project Work
30/84
MUTUAL FUND INDUSTRY
INDUSTRY OVERVIEW
30
-
7/29/2019 MBA Project Work
31/84
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.
31
-
7/29/2019 MBA Project Work
32/84
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)
32
-
7/29/2019 MBA Project Work
33/84
Worldwide assets of Equity, Bond, Money Market & Balanced
fund
(Billions of US dollars)
33
-
7/29/2019 MBA Project Work
34/84
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
34
-
7/29/2019 MBA Project Work
35/84
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.
35
-
7/29/2019 MBA Project Work
36/84
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.
36
-
7/29/2019 MBA Project Work
37/84
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.
37
-
7/29/2019 MBA Project Work
38/84
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
38
-
7/29/2019 MBA Project Work
39/84
39
-
7/29/2019 MBA Project Work
40/84
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
40
-
7/29/2019 MBA Project Work
41/84
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
41
-
7/29/2019 MBA Project Work
42/84
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.
42
-
7/29/2019 MBA Project Work
43/84
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
43
-
7/29/2019 MBA Project Work
44/84
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
44
-
7/29/2019 MBA Project Work
45/84
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
45
-
7/29/2019 MBA Project Work
46/84
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.
46
-
7/29/2019 MBA Project Work
47/84
DATA ANALYSYS
SOME OF THE SCHEMES OF MUTUAL FUNDS:
Standard Chartered Mutual Fund
47
-
7/29/2019 MBA Project Work
48/84
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.
48
-
7/29/2019 MBA Project Work
49/84
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
49
-
7/29/2019 MBA Project Work
50/84
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:
50
-
7/29/2019 MBA Project Work
51/84
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
51
-
7/29/2019 MBA Project Work
52/84
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:
52
-
7/29/2019 MBA Project Work
53/84
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
53
-
7/29/2019 MBA Project Work
54/84
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:
54
-
7/29/2019 MBA Project Work
55/84
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:
55
-
7/29/2019 MBA Project Work
56/84
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.
56
-
7/29/2019 MBA Project Work
57/84
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
57
-
7/29/2019 MBA Project Work
58/84
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
58
-
7/29/2019 MBA Project Work
59/84
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.
59
-
7/29/2019 MBA Project Work
60/84
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.
60
-
7/29/2019 MBA Project Work
61/84
.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.
61
-
7/29/2019 MBA Project Work
62/84
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 &
62
-
7/29/2019 MBA Project Work
63/84
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
63
-
7/29/2019 MBA Project Work
64/84
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
64
-
7/29/2019 MBA Project Work
65/84
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
65
-
7/29/2019 MBA Project Work
66/84
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:
66
-
7/29/2019 MBA Project Work
67/84
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.
ANALYSIS OF THE ABOVE GRAPH:
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
67
-
7/29/2019 MBA Project Work
68/84
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:
68
-
7/29/2019 MBA Project Work
69/84
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.
ANALYSIS OF THE ABOVE GRAPH:
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.
69
-
7/29/2019 MBA Project Work
70/84
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.
ANALYSIS OF THE ABOVE GRAPH:
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.
70
-
7/29/2019 MBA Project Work
71/84
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.
71
-
7/29/2019 MBA Project Work
72/84
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.
72
-
7/29/2019 MBA Project Work
73/84
SUMMARY
73
-
7/29/2019 MBA Project Work
74/84
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
74
-
7/29/2019 MBA Project Work
75/84
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
75
-
7/29/2019 MBA Project Work
76/84
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