INTRODUCTION

The definition of a mutual fund is a form of collective investment that pools money from many

investors and invests their money in stocks, bonds, short-term money market instruments, and/or other

securities. In a mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or

losses, and collects the dividend or interest income. The investment proceeds are then passed along to the

individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is

calculated daily based on the total value of the fund divided by the number of shares currently issued and

outstanding.

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 appreciations 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: brief

Thus a mutual fund is the most suitable investment for the common man as its offers an opportunity to invest

in a diversified, professionally managed portfolio at a relatively low cost. Thus the mutual fund is packed

product which consists of following attributes:-

Professionally manage portfolio Diversification Convenience Tax benefits u/s 80c Liquidity Lesser risk

Mutual fund scheme is prepared by fund manager of that company where offer document contains

Load structure (exit load /exit load) Type of fund Investment objective Asset allocation

Plans and options Minimum application Bench mark index

EVOLUTION OF MUTUAL FUNDS IN INDIA

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of

the Government of India and Reserve Bank. The objective then was to attract the small investors and

introduce them to market investment. The history of mutual funds in India can be broadly divided into four

distinct phases

Phase 1- 1964-87: Growth of Unit Trust of India

In 1963, UTI was established by an act of Parliament. The first scheme launched by UTI was Unit Scheme

1964. Later in 1970’s and 80’s, UTI started innovating and offering different schemes to suit the different

classes of investors. Unit Link Insurance Plan (ULIP) was launched in 1971. Six new schemes were introduced

between 1981 and 1987. The asset under management of UTI was increased from Rs. 600 crores in 1984 to Rs.

6700 cr. by the end of 1987.

Phase 2- 1987-1993: Entry of public sector funds

1987 marked the entry of public sector mutual funds. With the opening up of the economy, many public

sector banks and financial institutions were allowed to establish mutual funds. State Bank of India established

the first non UTI mutual fund- SBI Mutual Fund in November 1987. This was followed by Canbank Mutual

Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB

Mutual Fund. From 1987-88 to 1992-93, the asset under management increased from Rs.6700 cr. to Rs.47004

cr.

Phase 3-1993-1996: Emergence of Private Funds

A new era of mutual fund industry began in 1993 with the permission granted for the entry of private

sector funds. This gave the Indian investors a broader choice of ‘fund families’ and increasing competition to

the existing private sector funds. Foreign fund management companies entered joint ventures with Indian

companies to start the mutual fund business in India. These private funds have bought in with them the latest

product innovation, investment management techniques and investor-servicing technology that make the

Indian mutual fund industry today a vibrant and growing financial intermediary. During the year 1993-94, five

private sector mutual funds launched their schemes followed by six others in 1994-95. Due to the SEBI

regulatory in Indian mutual fund industry, the fund industry began to witness much greater investor

confidence in due course. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first

private sector mutual fund registered in July 1993.

Phase 4-1996-1999: Growth and SEBI regulation

Since 1996, the mutual fund industry in India saw tighter regulation and higher growth. It scaled new

heights in terms of mobilization of funds and number of funds. Deregulation and liberalization of the Indian

economy had introduced competition and provided impetus to the growth of industry. Measures were taken

both by SEBI to protect the investor and by the Government to enhance investors’ returns through tax

benefits.

A comprehensive set of regulations for all mutual funds operating in India was introduced with SEBI (mutual

fund) Regulations, 1996. These regulations set uniforms standards for all funds. The budget of Union

Government in 1999 took a big step in exempting all mutual fund dividends from income tax in hands of

investors. During this phase, both SEBI and AMFI launched investor awareness programmes aimed at

educating all investors about investing through mutual funds.

Phase 5-1999-2004: Emergence of a large and uniform industry

The other major development in the fund industry has been the creation of a level playing field for all

mutual funds operating in India. This happened in February 2003, when the UTI Act was repealed. Unit Trust

of India no longer has a special legal status as a trust established by an Act of Parliament. Instead, it has also

adopted the same structure as any other fund in India- a Trust and an Asset Management Company. UTI

Mutual Fund is the present name of the erstwhile Unit Trust of India. UTI Mutual Fund is now under the SEBI’s

(Mutual Fund) Regulations, 1996 like all other Mutual Fund in India. UTI Mutual Fund is still the largest player

in the Indian Fund industry.

The emergence of a uniform industry with the same structure, operations and regulations made it easier for

distributers and investors to deal with any fund house in India. 1999 marked the beginning of a new phase in

the history of the mutual fund industry in India, a phase of significant terms of both amounts mobilized from

investors and asset under management. Between 1999 and 2005, the size of the industry has doubled in

terms of asset under management which has gone up from Rs. 68000 cr. to Rs. 1, 50,000cr. Within the

growing industry, the relative share of different players in terms of amount mobilized and asset under

management have also undergone changes.

2003-2004: A retrospect :

This year was extremely eventful for mutual funds. The aggressive competition in the business took its toll and

two more mutual funds bit the dust. Alliance decided to remain in the ring after a highly public bidding war did

not yield an acceptable price, while Zurich has been sold to HDFC Mutual. The growth of the industry

continued to be corporate focused barring a few initiatives by mutual funds to expand the retail base. Large

money brought with it the problems of low retention and consequently low profitability, which is one of the

problems plaguing the business. But at the same time, the industry did see spectacular growth in assets,

particularly among the private sector players, on the back of the continuing debt bull run. Equity did not find

favor with investors since the market was lack-luster and performances of funds, barring a few, were quite

disappointing for investors. The other aspect of this issue is that institutional investors do not usually favor

equity. It is largely a retail segment product and without retail depth, most mutual funds have been unable to

tap this market.

Impact of local and international developments

During the year we had two major political developments that affected the mutual fund industry. The standoff

between India and Pakistan at the beginning of the financial year saw the debt market being extremely

volatile. Investors pulled out of funds and this also put pressure on fund managers to hold returns and at the

same time meet redemption commitments. The equity markets were equally subdued but the industry did not

react greatly to this since equity funds were in any case not a significant part of the mobilization in the last few

years. With the stand down on the Indian side, the debt markets recovered and with that the inflow of funds

into our industry soared once again. But at the end of the year the industry was hit by another war – the

impending US attack on Iraq and consequent oil price pressures once again made the debt market volatile. It is

a mark of the maturing of the Indian investor that redemptions were only need based and the industry did not

see as much outflows as one feared.

Product innovations

With the bond yields plateauing and with the mutual fund industry trying to attract people to the equity

market, the year also saw some remarkable products flavors for Indian investors. Birla Sunlife Mutual Fund led

the pack with an equity fund focused on dividend yield stock, a bond index fund and a bond-for-units swap

product. Some of the other innovative products were the series of exchange-traded funds from Benchmark,

including a liquid index traded fund. Prudential-ICICI also launched an exchange-traded fund, the SPICE, in

association with BSE.

The industry focused also on making existing products more attractive by adding on a number of service

features and cost control measures. Same day redemption in liquid funds, “institutional” plans which would

reduce the overall cost of investment and bonus units in lieu of dividend were some of these features.

A new Emphasis on Risk Management

The year also saw a tremendous emphasis on risk management. A number of mutual funds were already

taking steps to mitigate risks not only in operations as in the past, but also in the area of management of

funds. A committee constituted by AMFI carried the initiative taken under the FIRE (Financial Institutions

Reform and Expansion) Project forward and developed a risk management framework for the industry. The

subsequent circular by SEBI is perhaps one of the most comprehensive attempts to address the issue of risk in

the mutual fund business and carries with it the added advantage of phase wise escalation starting with

mandatory items and moving towards best practices.

RISK

TYPE OF FUND

Money Market Fund

Debt Fund

Gilt FundHybrid Fund

Equity Fund

Aggressive Growth Fund

Flexible Asset Allocation Fund

Growth Funds

High Yield Debt Funds

Diversified Equity Fund

Index Fund

Value Funds

Money Market Funds

Equity Income Funds

Focused Debt Funds

Diversified Debt Fund

Balanced FundsGilt Funds

RISK HIERARCHY OF MUTUAL FUNDS

Growth and Income Funds

STRUCTURE OF MUTUAL FUND:

SEBI

Trustee Sponsor

AMC

FUND MANAGER MKT/SALES

MUTUAL FUND DISTRIBUTOR

SCHEMES

INVESTOR

Structure of the organization

Gap analysis

Customers expect different levels of services from different organizations for example the level of customer

services from different organizations. For example, the level of customer services expected from a fast food

outlet differs from that of a restaurant at a star hotel. Therefore, an organization should understand

customer expectations and deliver the service in a way that matches these expectations. Some of the gaps

that MAHINDRA FINANCE (finsmart) should minimize to improve the quality of services delivered to their

customer are:-

Gap 1. Consumer Expectation----------------------Management Perception Gap

This gap arises as service marketers may not always understand what consumers expect in a service.

This type of gap has an impact on the consumer’s evaluation of service quality

Gap 2.Management Perception ------------ Service Quality Specification Gap

This gap arises from the fact that many services provider fail to set appropriate service standards

required to deliver the service expected by the customer

Gap 3.Service Quality Specification ----- Actual Service Delivery Gap

This gap results from the employee’s inability to deliver the service according to the standards set. This

may be due to unclear standards or due lack of empowerment

Gap 4.Service Delivery--------------- External Communications Gap

This gap arises due to poor external communications that affect consumer expectations about a

service and his perception of the delivered service

As described above in structure the main four entities that are responsible for providing good/bad

services are as follows

Sales team

Back office

Cams

AMCs

Sales team generates new clients with the help database given by the company, then sales

team interacts them as per the appointments, now investor decides about the investments then sales

executive provides them the application form of respective schemes then after filling the application form,

application form comes to back office where application gets processed then application reaches to CAMs

and ,later respective AMCs receive that application form, from the CAMs and then AMCs will send the

account statement along with a folio number of that mutual fund schemes through which investor comes to

know about units purchased by him and NAV of his mutual fund scheme

Here the entire process takes around 3-4 days, so because of the share market performance

the NAV of that fund fluctuates because mutual funds are dependent on share market so once customer

agrees on particular NAV, any change at the time of purchase effects the profitability of investor

Because allotment of NAV is subject to realization of the cheque so as number of units this generally does

not matches with the investor’s expectation not only this investors do not get their account statements on

prescribed date so investor has to enquire about the account statement time and again

GAP ANALYSIS

Here I have seen in their operations, company follows a systematic way. Since the

company is in its growing stage and also I feel that company requires good marketing of its offerings to their

investors , so as to support its sales team other findings and observations are as follows :-

Company’s structure

Company is the distributor of different mutual fund.

It works as a bridge ,facilitator , and advisor between AMCs and investors

Work culture of the organization is excellent. Here I did not get unnecessary pressures from the high

authority.

4C MODEL OF MARKETING MIX

Marketing mix refers to a set of controllable, tactical marketing tool that firms blend to produce

the response that it wants in the target market (Kotler & Armstong, 2008). According toTellis,

marketing mix refers to variables that a marketing manager can control to influence a brands sale

or market share (Tellis).The term "marketing mix" was coined in 1953 by Neil Borden in his

American Marketing Association. Traditionally these considerations were known as 4Ps of

marketing mix. The 4Ps classification was first suggested by McCarthy. Marketing Mix model

(also known as 4 Ps) can be used by marketers as a tool to assist in implementing marketing

strategy. Marketing managers use this method to attempt to generate optimum response from the

target market by blending these four variables. Traditionally, the marketing specialists relied on

marketing mix or 4Ps- product, price, place and promotion to develop marketing plans. But this

approach is unidirectional in the sense that that it comes from the organisation and imposed on

the customer. That is why Schultz, Tannenbaum, Lauterborn proposed a consumer oriented four

Cs classification in 1993 for the movement from mass marketing to niche marketing (Schulz,

Tannenbaum, & Lauterborn, 1993).They suggested that marketers must think in terms of 4Cs

instead of 4 Ps: Customer solution (Not product), Customer cost (Not price alone), Convenience

(Not Place), and Communication (Not promotion). Marketers sees themselves as selling

products, customers see themselves as buying value or solution to their problems. Customers are

interested in cost rather than cost of obtaining, using and disposing the products. Customers want

the products and services as conveniently as possible. Finally they want two way

communications. These has resulted a shift of 4P model of marketing mix to 4C model.

Nezakati, Abu and Toh mentioned that 4C’s imply more emphasis on customers want and

concern than 4P’s. Consumer value as a complexity approach allows the product to develop as

the customer uses it with the perfect product emerging from the inter-relationship between

product and customer use. Price may be somewhat companies decided to charge for their

product, customer cost represent the real cost that customers will to pay. Implying management’s

method of placing product where they want to be as customer convenience recognizing

consumers’ choice for buying in ways convenient to them. Promotion suggest the ways in which

companies persuade people to buy , consumers communication is a two a process involving

feedback from customers to suppliers (Nezakati, Abu, & Toh , 2011).

1.5 ORGANIZATION STRUCTURE OF MUTUAL FUNDS

Mutual funds have organization straucture as per ther Security Exchange Board of India guideline, Security Exchange Board of India specified authority and responsibility of Trustee and Aeest Management Companies. The objectives is to controlling, to promoted, to regulate, to protected the investors right and efficient trading of units. Operation of Mutual fund start with investors save their money on mutual fund, than Mutual Fund manager handling the funds and strategic investment on scrip. As per the objectives of particular scheme manager selected scrips. Unit value will become high when fund manager investment policy generate the return on capital market. Unit return depends on fund return and efficient capital market. Also affects international capital market, liquidity and at last economic policy. Below the graph indicates how the process was going on to investors to earn returns. Mutual fund manager having high responsibility inside of return and how to minimize the risk. When fund provided high return with high risk, investors attract to invest more fund for same scheme.

Operation of mutual fund investors Fund Manager Securities

Return

7

The Mutual fund organization as per the SEBI formation and necessary formation is needed for sooth activities of the companies and achieved the desire objectives. Transfer agent and custodian play role for dematerialization of the fund and unit holders hold the account statement, but custody of the unit is on particular Asset Management Company. Custodian holds all the fund units on dematerialization form. Sponsor had decided the responsibility of custodian when investor to purchase the fund and to sell the unit. Application forms, transaction slip and other requests received by transfer agent, middle men between investors and Assts Management Companies.

A shift back to focusing on

operational excellence

MF- SUPPLY CHAIN