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  • A PROJECT REPORT ONPERFERENCE OF THE ADVISORS TOWARDS MUTUAL FUND AT KARVY SECURITIES LTD., JAMNAGAR SUBMITED BY Badiyani Amit (MBA – IV SEM.) ACEDAMIC YEAR 2007-09 SUBMITTED TOSHRI JAYSUKHLAL VADHAR INSTITUTE OF MANAGEMENT STUDIES JAMNAGAR. AFFILIATED TO SAURASHTRA UNIVERSITY RAJKOT.Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 1
  • ACKNOWLEDGEMENTI am really happy and exited in representing this summer trainingproject report before you.I must express my gratitude towards KARVY SECURITIES LTDfor giving mean opportunity to work with on this report.And of course I am very much thankful to our honorable Dy.Director Prof. Ajay Shah (PROJECT GUIDE) for giving meopportunity and his guidance help me through out preparing thisreport. He has also provided me a valuable suggestions andexcellence guidance about this training, which proved very helpfulto me to utilize my theoretical knowledge in practical field.At last I am also thankful to my friends, to all known and unknownindividuals who have given me their constructive advise, educativesuggestion, encouragement, co-operation and motivation toprepare this report. EXECUTIVE SUMMARY Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 2
  • India’s economy is highly developing. The development is taken placedue to the growth in the financial system. This financial systemprovides the background to various investors regarding varied optionsto invest. Thus, development of the economy depends on how theseinvestors invest for the well being in long run.As financial markets become more sophisticated and complex, investorsneed a financial intermediary who provides the required knowledge andprofessional expertise on successful investing. Mutual Funds representperhaps the most appropriate investment opportunity for investors. Nowonder the concept of Mutual Fund was initially developed in the U.S.market, but the entry of the concept in the Indian Financial Marketwas in the year 1964 with the formulation of the UTI, at the initiativeof the RBI and Govt. of India.For most people, money is a delicate matter and when it comes toinvesting they are wary. Simply because there are many investmentoptions out there, each out promising the other. An important questionfacing many investors is whether to invest in Banks, National Savings,Post office, Non-banking finance companies, Fixed deposits, Sharesetc. or to invest distinctively in Mutual Funds.It has been perceived that there is huge potential market in the regionof Saurashtra. Thus an exploratory research with the hypothesis “Theregion of Saurashtra being progressively industrializing & developingshould provide a large & wider market share for Mutual Fund” has beendone.Thus the purpose of this research was to find why people do notactively invest in mutual fund in spite of various benefits likeProfessional management, Diversification, Convenience liquidity,Flexibility, Tax benefits etc. as well as to find out potential of businessof KARVY in distribution of Mutual Fund in Jamnagar City.After performing the detailed exploratory research by interviewingdifferent persons who act as investment advisor like Insurance advisorand Post office advisor etc. with the help of questionnaire, certain Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 3
  • facts were revealed regarding the view about Mutual Funds in the mindof investors.I have observed that approximately 60% of the people are unaware ofMutual Funds but most of them are interested to know about MutualFunds and ready to attend seminar arranged by KARVY. They are alsointerested to work with KARVY if sufficient information is provided tothem about Mutual Fund and KARVY.People from service class prefers safety of income plus the regularincome as well as tax benefits while on the other hand Professional andBusinessman focus on high return with some risk.For growth and development of the Mutual Fund Industry, themisconception regarding Mutual Fund should be removed & theawareness for the same should be made. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 4
  • INTRODUCTION COMPANY DETAILSBackgroundKarvy Consultants Limited was established in 1982 at Hydrabad. It wasestablished by a group of Hydrabad-based practicing CharteredAccountants. At initial stage it was very small in size. It was startedwith a capital of Rs. 1,50,000.In starting it was only offering auditing and taxation services. Later, itacts into the Registrar and Share transfer activities and subsequentlyinto financial services and other services like Financial ProductDistribution, Investment Advisory Services, Demat Services,Corporate Finance, Insurance etc.All along, Karvy’s strong work ethics and professional backgroundleveraged with Information Technology enabled it to deliver quality tothe individual. A decade of commitment, professional integrity andvision helped Karvy achieving a leadership position in its field when ithandled largest number of corporate and retail that proved to be asound business synergy.Today, Karvy has access to millions of Indian shareholders, besidescompanies, banks, financial institutions and regulatory agencies. Overthe past one and half decades, Karvy has evolved as a veritable linkbetween industry, finance and people.In January 1998, Karvy became first Depository Participant in AndhraPradesh. An ISO 9002 Company, Karvy’s commitment to quality andretail reach has made it an Integrated Financial Services Company.Today, company has 230 branch offices in 164 cities all over the India.The company adds 5 new offices every month to the company’s evergrowing national network in every nook and corner of the country. Thecompany service over 16 million individual investors, 180 corporate andhandle corporate disbursements that exceed Rs.2500 Crores. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 5
  • WHERE KARVY STAND IN THE MARKET?KARVY is a legendary name in financial services, Karvy’s credit isdefined by its mission to succeed, passion for professionalism,excellent work ethics and customer centric values.Today KARVY is well known as a premier financial services enterprise,offering a broad spectrum of customized services to its clients, bothcorporate and retail. Services that KARVY constantly upgrade andimprove are because of company’s skill in leveraging technology. Beingone of the most techno-savvy organizations around helps company todeliver even more cost effective financial solutions in the shortestpossible time.What bears ample testimony to Karvy’s success is the faith reposed incompany by valued investors and customers, all across the country.Indeed, with Karvy’s wide network touching every corner of thecountry, even the most remote investor can easily access Karvy’sservices and benefit from company’s expert advice. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 6
  • KARVY GROUPKarvy Consultants LimitedKarvy Securities LimitedKarvy Investor Services LimitedKarvy Stock broking LimitedKarvy Computer Shares Pvt. Ltd.Board of DirectorsKarvy Consultants LimitedParthasarathy CYugandhar MRamakrishna M SPrasad V PotluriRobert GibsonSanjay Kumar DhirR Shyamsunder [Table1: BODs of Karvy Consultants Limited] Karvy Investor Services LimitedParthasarathy CYugandhar MRamakrishna M S [Table2: BODs of Karvy Investor Services Limited] Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 7
  • Karvy Securities LimitedParthasarathy CYugandhar MRamakrishna M SAjay Kumar KWilliam SamuelNicholas Tully [Table3: BODs of Karvy Securities Limited]Karvy Stock Broking LimitedParthasarathy CYugandhar MRamakrishna M SAjay Kumar KKutumba Rao VWilliam SamuelNicholas Tully [Table4: BODs of Karvy Stock Broking Limited] Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 8
  • Mission Statement of ‘Karvy’An organization exists to accomplish something or achieve something.The mission statement indicates what an organization wants to achieve.The mission statement may be changed periodically to take advantageof new opportunities or respond to new market conditions.Karvy’s mission statement is “To Bring Industry, Finance and Peopletogether.”Karvy is work as intermediary between industry and people. Karvy workas investment advisor and helps people to invest their money same wayKarvy helps industry in achieving finance from people by issuing shares,debentures, bonds, mutual funds, fixed deposits etc.Company’s mission statement is clear and thoughtful which guidegeographically dispersed employees to work independently yetcollectively towards achieving the organization’s goals.Vision of KarvyCompany’s vision is crystal clear and mind frame very directed. “To bepioneering financial services company. And continue to grow at ahealthy pace, year after year, decade after decade.” Company’sforay into IT-enabled services and internet business has provided anopportunity to explore new frontiers and business solutions. To build acorporate that sets benchmarks for others to follow. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 9
  • Behind the Picture: What Customers matter for KARVY? The underlying picture forming answer for above question is given below. Market Brand Customer Power Preference Value RELATIONSHIPS OUR COMPETITIVE ADVANTAGE [Fig.1 Competitive Advantage of Karvy] Every year with this picture keeping in mind ‘Karvy accelerate with Recovery, Revival and Reappearance.’ Karvy has started 2004 on a strong note with the realization to signal some of the challenges it faced previous year. In a competitive market and a branded business, Karvy need to carefully manage itself to avoid down trading or brand shifts by consumers. For Karvy, Jamnagar branch 2003 was truly exhilarating because of: •Successful implementation of a carefully crafted strategy. •Excellence in execution. •Immense learning enabling to set up a launch pad for revitalizingitself. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 10
  • Some competitive advantages are long lasting. These are intangible, difficult to replicate and thus more sustainable. Karvy has focused on some of these to gain competitive advantages. There are: •Winning culture and a desire to excel in everything Karvy do. •Strong meaningful relationships with Customers along with StrategicPartners in which Karvy operate and above all, its own staff. Karvy value and carefully nurture relationships with customers. Karvy truly believe that more than technological prowess and business process innovations, it is the ‘focus on relationships’ which has been the corner stone of satisfying and successful presence in India over many years. This has been possible with deep insight of consumer behavior as well as market demand drivers, understanding of the arena where to operate and quality execution – all thanks to a ‘greater team’ that makes this happen. Karvy’s customers consider themselves part of Karvy family and share their experiences and dreams with other customers and thus Karvy becomes successful not only in relating customers but also gains new customers from satisfied prevailing customers. Karvy want to create a strong emotional bond with new customers promoted by prevailing customers. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 11
  • Karvy Values:IntegrityResponsibilityReliabilityUnityUnderstandingExcellenceConfidentialityKarvy has adequate internal control systems and procedurescommensurate with the size nature of its business. These system andprocedures provide reasonable assurance of maintenance of properaccounting records, reliability of financial information, protection ofresources and safeguarding of assets against unauthorized use. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 12
  • KARVY SERVICES – AN OVERVIEW1. Stock broking2. Demat services3. Investment product distribution4. Investment advisory services5. Corporate finance & Merchant banking6. Insurance7. Mutual fund services8. IT enabled services9. Registrars & Transfer agents10. Loans1. Stock Broking:KARVY is working as Capital Market Intermediaries. Stockbrokers areregulated by SEBI [Stock-brokers and Sub-brokers] Regulations, 1992.The stockbroker is a member of the stock exchange. Stockbrokersare the intermediaries who are allowed to trade in securities on theexchange of which they are members. They buy and sell on their ownbehalf as well as on behalf of their clients.Stockbrokers expand their business by engaging sub-broker. Sub-brokers mean “any person not being a member of a stock exchange whoacts on behalf of a stock broker as an agent or otherwise for assistingthe investors in buying, selling or dealing in securities through suchstock-brokers.”2. Demat Services:Karvy is a depository participant with the National SecuritiesDepository Limited (NSDL) for trading and settlement ofdematerialized shares.Depository Participants (DPs) are described as an agent of thedepository. They are intermediaries between the depository and theinvestors. The relationship between the DPs and the depository is Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 13
  • governed by an agreement made between the two under DepositoriesAct.A DP can offer depository-related services only after obtaining acertificate of registration from SEBI.Since Karvy is also in the broking business, investors who use Karvy’sdepository services get a dual benefit. They can use Karvy’s brokerageservices to execute transactions and Karvy’s depository services tosettle them.3. Investment Products Distribution:Company is also concern with the distribution of investment productslike(a). Fixed Deposit(b). Bonds(c). IPO(a). Fixed Deposit:KARVY is dealer of 34 fixed deposits of various types which includesfixed deposits of Public Sector, Non Banking Finance Companies,Housing Finance Companies and Manufacturing Companies.Company is dealer of following Fixed DepositsPUBLIC SECTORSl. No. Company Name1 HUDCO2 Sardar Sarovar Narmada Nigam Ltd.3 Tamilnadu Power Finance Corporation Ltd.4 NTPC [Table5: Public Sector FD with which Karvy deals]NON BANKING FINANCE COMPANIES Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 14
  • Sl. No. Company Name1 Ashok Leyland Finance Ltd.2 Bajaj Auto Finance Ltd.3 Birla Home Finance Ltd.4 Cholamandalam Investment & Finance Co. Ltd.5 Escorts Finance Ltd.6 First Leasing Company of India Ltd.7 IDBI Suvidha8 Nicco Uco Alliance Credit Ltd. [Table6: FD of Non Banking Finance Companies with which Karvy deals]HOUSING FINANCE COMPANIESSl. No. Company Name1 Can Fin Homes Ltd.2 Dewan Housing Finance Corporation Ltd.3 Gruh Finance Ltd.4 HDFC Ltd.5 PNB Housing Finance Ltd.6 Sundaram Home Finance Ltd. [Table7: FD of Housing Finance Companies with which Karvy deals]MANUFACTURING COMPANIESSl. No. Company Name1 A P Paper Mills Ltd.2 Amtek India Ltd.3 Atul Ltd.4 Ballarpur Industries Ltd.5 Chambal Fertilizers & Chemicals Ltd.6 Escort Ltd.7 Greaves Ltd.8 Gujarat Alkalies & Chemicals Ltd.9 Indian Express10 Ind-Swift Ltd.11 JK Industries Ltd.12 Jindal Steel & Power Ltd.13 Sound Craft Industries Ltd.14 Supreme Industries Ltd. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 15
  • 15 Zuari Industries Ltd. [Table8: FD of Manufacturing Companies with which Karvy deals](b). Bonds:Karvy is dealer of following bonds•RBI Saving Bonds•NHB•REC(c). IPO:Company is also provides services related to Initial Public Offer ofcompany. Company provides stationary at the time of IPO as well asprovides information to investors regarding IPO and solves theirqueries.4. Investment Advisory Services:This division provides portfolio management services to high net-worthindividuals and corporate. The expertise of Karvy in research and stockbroking gives it the right perspective to provide investment advisoryservices. Company provides advisory services to its clients.Financial goal of each individual investor varies according to his dream,ambition and family size and future financial planning for the children &old age pension for self and wife so does the pathway to achieve it.Karvy apply the principles of Financial Planning as both science & art, itunderstands the time horizon, risk bearing capacity and investmentgoals of investors keeping in mind their psyche and financial needs.Based upon this Karvy helps individual investors to plan their entire lifeup to retirement, Taxes, Insurance needs and other important personalfinancial goals. It designs portfolio for investor to invest their saving invarious financial products like shares, bonds, debentures, mutual funds, Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 16
  • fixed deposits, insurance etc., Company design portfolio by consideringfollowing factors.•Investor’s requirement of getting money back,•Investor’s willingness to take risk,•Investor’s tax planning etc.5. Corporate finance & Merchant banking:Corporate finance is the financial activity of corporation. It deals withthe firms operations with regard to investing and financing. Itconcerned with how firms raise capital and the consequences ofalternative methods of raising capital. Firm’s capital can be raised byraising loans, issuing shares, and acquiring or merging with otherbusinesses by public or private companies.Merchant banking is a financial intermediation that matches entitiesthat need capital and those that have capital. Hence they facilitate theflow of capital in the market.Karvy enjoys SEBI category (I) authorization for Merchant Banking.Karvy offers the full spectrum of Merchant Banking Services,beginning from identifying the best time for an issue to final stage ofmarketing it, to harvest unparalleled success.As a merchant banker Karvy offer following services:•Issue management•Instrument designing•Pricing of the issue•Registration process for the issue of shares•Marketing efforts•Final allotment to investors•Listing details on stock exchanges•Loan syndication•Lease financing•Corporate advisory services•Underwriting Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 17
  • •Portfolio management6. Insurance:Karvy is also dealer of many private life insurance companies. AtJamnagar branch, company is associated with dealing of followingcompanies.•ICICI Prudential Life Insurance•HDFC Life Insurance•TATA AIG Life Insurance7. Mutual Fund Services:Since its inception in 1982, Karvy has demonstrated a dedicationcoupled with dynamism that has inspired trust from various segments –corporate, government bodies and individuals. Karvy has since beenperforming a pivotal role as the intermediary – the interface – betweenthese players.With Mutual Funds emerging as a distinct asset class, Karvy has made astrategic choice to leverage the power of latest technology to providea cutting edge to its services. Karvy, today, service nearly 80% of theasset management companies (AMCs) across an extensive network ofservice centers with assets under service in excess of Rs.10,000crores.Karvys ability to mass customize and offer a diverse range ofproducts for a diverse range of customers has helped mutual fundcompanies to uniquely position themselves in the market place. Thesediverse range of services cut across multiple delivery channels –service centers, web, mobile phones, call center – has brought home thebenefits of technology to investors, distributors, and the mutual funds.Going forward, Karvy shall strive to create new products and services,which would address the needs of the end customer. Company’s singleminded focus in delivering products for customers has given it thedistinguished position of being the preferred provider of financialservices in the country. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 18
  • List of Mutual Fund Clients of KARVY:1 Alliance Mutual Fund2 Birla Mutual Fund3 Bank of Baroda Mutual Fund4 Can Bank Mutual Fund5 Chola Mutual Fund6 Deutsche Mutual Fund7 DSP Merrill Lynch Mutual Fund8 Franklin Templeton Investments9 GIC Mutual Fund10 HDFC Mutual Fund11 HSBC Mutual Fund12 IL & FS Mutual Fund13 JM Mutual Fund14 Kotak Mutual Fund15 LIC Mutual Fund16 Punjab National Bank Mutual Fund17 Prudential ICICI Mutual Fund18 Principal Mutual Fund19 Reliance Mutual Fund20 State Bank of India Mutual Fund21 Standard Chartered Mutual Fund22 Sundaram Mutual Fund23 SUN F&C Mutual Fund24 Tata Mutual Fund [Table9: List of MF Companies with which Karvy deals]8. Income Tax enabled services:Karvy has been started this service since March, 2004. Karvy is workas TIN Facilitation Centre it provides following IT enabled services.a. Distribution of PAN Card.b. Distribution of TAN Card.c. Services related to e-TDS. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 19
  • Karvy work as an intermediary between NSDL and IT payers. Karvyprovides various form for different IT enabled services and guidepeople to fill that forms. It also solves queries of the tax payers. Italso distributes PAN and TAN card to the tax payers.TIN OverviewNational Securities Depository Ltd. (NSDL) has established anationwide Tax Information Network (TIN) on behalf of the IncomeTax Department (ITD). This is designed to make the tax administrationmore effective, furnishing of returns convenient, reduce compliancecost and bring greater transparency.While NSDL will be the primary agency responsible for the design,implementation and maintenance of TIN as per the requirements ofITD, other agencies will also play key roles in the TIN system.Karvy has established infrastructure required to provide IT enabledservices so, Karvy provides TIN facilitation centers all over India onbehalf of NSDL. Besides Karvy following companies can also work asintermediary between NSDL and customers.•Alankit Assignments Ltd.•Integrated Enterprise (I) Ltd.•Shell Tran source Ltd. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 20
  • [Fig.2 TIN System]The banking system, being the agency that collects the money onbehalf of the ITD against tax obligations from the tax payers will belinked to the TIN central system to provide accounting information ontax paid by various entities under various heads. As banks arerelatively technology-enabled entities, they will directly be linkedelectronically to the TIN central system enabling online tax accounting.On the other hand, the entities depositing the tax (deductors) varysubstantially with respect to their computer skills and hence TINdesign provides for TIN Facilitation Centers managed by NSDL to helpdigitization and upload of tax payment related information to the TINcentral system.Besides NSDL, UTI Investor Services Ltd. may also provides ITEnabled services. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 21
  • 9. Registrars & Transfer agents:In 1985, Karvy entered the Registrar and Share Transfer Business tocreate a market niche in the competitive field of financial services. In1994-95, it reached a milestone when it processed 104 Public Issuesconstituting 46 per cent market share. Now in its second decade ofexistence, Karvy is the leader in the industry: In an opinion pollconducted by an independent market research agency - MARG, Karvyhas been rated as India’s Most Admired Registrar on variousparameters: -•Overall Excellence.•Handling of Volumes•Timely Dispatch•Quality Management and Technological Up gradation.A SEBI Category 1 Registrar, So far, Karvy has handled over 675ISSUES as Registrars to public issues processed over 52 millionapplications and is servicing over 16 million investors from variouslocations spread over 205 clients.10. Loan:Karvy has recently started this service at selected branches of metrocities. This service has not been started in Saurashtra-Kucch region.Karvy provides loans for following.•Vehicle Loan•Home Loan•Personal Loan Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 22
  • MARKETING STRATEGY OF KARVYMarket Positioning:Market positioning statements of Karvy are “At Karvy we give yousingle window service” and “We also ensure your comfort”.So, Karvy focus on the consumers who prefer almost all investmentactivities at same place by providing number of various financialservices. At Karvy a person can purchase or sell shares, debenturesetc. and at the same place also demat it. Karvy also provides otherinvestment option to the same person at same place like Mutual Fund,Insurance, Fixed Deposit, and Bonds etc. and help the person indesigning his portfolio. By this way Karvy provides comfort to itscustomers.Karvy is also positioned according to Ries and Trout. Karvy is promotedas a no. 1 investment product distributor and R & T agent of India.Target Market:Karvy uses demographic segmentation strategy and segment peoplebased on their occupation. Karvy uses selective specialization strategyfor market targeting. Target person for the Karvy Stock Broking andKarvy Investment Service are persons who can work as sub-broker forthe companies. Companies focus on Advisors of Insurance and postoffice, Tax consultants and CAs for making sub-broker. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 23
  • Marketing channel System:Karvy uses one level marketing channel for investment productdistribution. Sub-brokers work as intermediary between consumer andcompany. Company has both forward and backward flow of activitythrough channel. Company distributes stationery, brokerage, andinformation forward to its sub-broker. The sub-brokers send filledforms, queries, amount of investment etc. back to the company.Training Channel Members:Karvy provides training to the sub-brokers because they will be viewedas the company by the investors. The executives of Karvy explainvarious new schemes of investment to the sub-brokers with itsobjective, risk factors and expected return. Company also periodicallyarrange seminar to guide sub-brokers.Advertising and Promotion:The objective of advertising of Karvy is to create awareness aboutservices of Karvy among investors and sub-brokers and increase sub-brokers of Karvy.Company doesn’t give advertisement in media like TV, Newspapers, andMagazines etc. Karvy’s advertisement is made indirectly by thecompanies associate with it. Karvy is R & T agent of around 700companies. They publish name, address and logo of Karvy on theirannual report.Karvy also publish its weekly Stock Market Newsletter ‘Karvy BazaarBaatein’ and monthly magazine ‘The Finapolis’ to guide investors andsub-brokers about market. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 24
  • HR POLICY OF KARVYKarvy’s HR Department is located at Hyderabad.Recruitment and Selection Policy:The upper level members like zonal managers, regional managers,branch managers and senior executives are recruited by publishingrecruitment advertisement in leading national level newspaper. Thequalified applicant are then called for interview and selected.The regional manager has authority to select lower level employee likepeon, marketing executives, accountant etc. by approval of zonalmanager.Training and Development:Continuous training and upgrading technical, behavioral and managerialskills is a way of life in Karvy. Karvy encourages employees to honetheir skills regularly to enable them to face the challenges of thechanging requirements of customers that fit market up and down.Training needs analysis is done on a regular basis and systematicmethodologies are ensured that skills and capabilities of all employeesare constantly upgraded to enable them to perform in the challengingwork environment.New employee has given training under experienced employee. The newemployee work under experience employee and observe his allactivities. When company employs new technology or there is anychange in the working of company the training program is arranged. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 25
  • Employee Motivation:Karvy’s employees are highly empowered. They don’t have to report anyperson of the same branch but they report upper level branch. E.e.Marketing executive of Jamnagar branch directly reports SeniorMarketing executive of Baroda zonal office.If particular branch earn certain profit then Karvy gives them specialincentives. E.g. last year Karvy had arranged two days tour of Div fortheir employees of Rajkot, Jamnagar, Junagadh and Bhavnagar branchwhich was totally free of cost. This also helps in maintaining co-operation between employees. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 26
  • NATIONAL LEVEL ORGANIZATION CHART CM & MD (Hyderabad) GM GM GM (Marketing) (Finance) (HRM) Zonal Manager (Baroda) Regional Manager (Rajkot) Branch Mgr. Branch Mgr. Branch Mgr. (Junagadh) (Jamnagar) (Bhavnagar) Accountant Sr. Executives Executives [Fig.3 National Level Organization Chart of Karvy] Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 27
  • BRANCH LEVEL ORGANIZATION CHART Branch ManagerSr. Executive Executives Executive(Investment) (SB - 4) (IT)Marketing ClerkExecutives-3 Executive (Demat) AccountantPeon Peon [Fig.4 Branch Level Structure of Karvy] Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 28
  • Quality Policy Of Karvy: 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 Customer’s expectations. Quality Objectives of Karvy •Build in-house processes that will ensure transparent and harmoniousrelationships with its clients and investors to provide high quality of services. •Establish a partner relationship with its investor service agents andvendors that will help in keeping up its commitments to the customers. •Provide high quality of work life for all its employees and equip themwith adequate knowledge & skills so as to respond to customers needs. •Continue to uphold the values of honesty & integrity and strive toestablish unparalleled standards in business ethics. •Use state-of-the art information technology in developing new andinnovative financial products and services to meet the changing needs of investorsand clients. •Strive to be a reliable source of value-added financial products andservices and constantly guide the individuals and institutions in making a judiciouschoice of same. •Strive to keep all stake-holders (shareholders, clients, investors,employees, suppliers and regulatory authorities) proud and satisfied. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 29
  • Achievements of Karvy: •Largest mobilizer 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 •Strategic tie-up with Jardine Fleming India Securities Ltd •Handled over 500 Public issues as Registrars •Handling the Reliance Account which accounts for nearly 10 millionaccount holders •First Depository Participant from Andhra Pradesh Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 30
  • SWOT ANALYSIS OF KARVY Strengths: •Employees are highly empowered. •Strong Communication Network. •Good co-operation between employees. •Number 1 Registrar and Transfer agent in India. •Number 1 dealer of Investment Products in India. Weaknesses: •High Employee Turnover. Opportunity: •Growth rate of mutual fund industry is 40 to 50% during last year andit expected that this rate will be maintained in future also. •Marketing at rural and semi-urban areas. Threats: •Increasing number of local players. •Past image of Mutual Fund. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 31
  • About Jamnagar Branch:Jamnagar branch comes under Rajkot branch which is a regional officeof Karvy for Saurashtra Kutch region. It was established on Jan. 2002.In Saurashtra there are four Branch Offices of Karvy:•Rajkot•Jamnagar•Junagadh•BhavnagarIn Jamnagar Karvy has started Demat Services on 21 June 2002.DP ID of Karvy is IN300394.In Jamnagar Karvy has started IT enabled services on Mar. 2004. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 32
  • INDUSTRY DETAILSFollowing are list of Mutual Fund companies in India.Sr. No. Mutual Fund Name No. of Schemes1 Alliance Mutual Fund 362 Benchmark Mutual Fund 53 Birla Mutual Fund 744 Bank of Baroda Mutual Fund 175 Can Bank Mutual Fund 256 Chola Mutual Fund 457 Deutsche Mutual Fund 408 DSP Merrill Lynch Mutual Fund 409 Escorts Mutual Fund 1510 Franklin Templeton Investments 13011 GIC Mutual Fund 512 HDFC Mutual Fund 7913 HSBC Mutual Fund 3214 IL & FS Mutual Fund 4315 ING Vysya Mutual Fund 5516 JM Mutual Fund 5517 Kotak Mutual Fund 5618 LIC Mutual Fund 3519 Morgan Stanley Mutual Fund 120 Punjab National Bank Mutual Fund 421 Prudential ICICI Mutual Fund 12422 Principal Mutual Fund 6823 Reliance Mutual Fund 7424 Sahara Mutual Fund 1225 State Bank of India Mutual Fund 5926 Standard Chartered Mutual Fund 10027 Sundaram Mutual Fund 5228 SUN F&C Mutual Fund 129 Tata TD Mutual Fund 10030 Taurus Mutual Fund 9 Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 33
  • 31 Unit Trust of India 4232 UTI Mutual Fund 66 [Table10: Mutual Funds in India]Development of Mutual Funds in IndiaThe mutual fund industry in India started in 1963 with the formationof Unit Trust of India, at the initiative of the Government of India andReserve Bank the. The history of mutual funds in India can be broadlydivided into four distinct phasesFirstPhase-1964-87Unit Trust of India (UTI) was established on 1963 by an Act ofParliament. It was set up by the Reserve Bank of India and functionedunder the Regulatory and administrative control of the Reserve Bank ofIndia. In 1978 UTI was de-linked from the RBI and the IndustrialDevelopment Bank of India (IDBI) took over the regulatory andadministrative control in place of RBI. The first scheme launched byUTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700crores of assets under management.Second Phase – 1987-1993 (Entry of Public Sector Funds)1987 marked the entry of non- UTI, public sector mutual funds set upby public sector banks and Life Insurance Corporation of India (LIC)and General Insurance Corporation of India (GIC). SBI Mutual Fundwas the first non- UTI Mutual Fund established in June 1987 followedby Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fundin June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets undermanagement of Rs.47,004 crores.Third Phase – 1993-2003 (Entry of Private Sector Funds) Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 34
  • With the entry of private sector funds in 1993, a new era started inthe Indian mutual fund industry, giving the Indian investors a widerchoice of fund families. Also, 1993 was the year in which the firstMutual Fund Regulations came into being, under which all mutual funds,except UTI were to be registered and governed. The erstwhile KothariPioneer (now merged with Franklin Templeton) was the first privatesector mutual fund registered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a morecomprehensive and revised Mutual Fund Regulations in 1996. Theindustry now functions under the SEBI (Mutual Fund) Regulations 1996.The number of mutual fund houses went on increasing, with manyforeign mutual funds setting up funds in India and also the industry haswitnessed several mergers and acquisitions. As at the end of January2003, there were 33 mutual funds with total assets of Rs. 1,21,805crores. The Unit Trust of India with Rs.44,541 crores of assets undermanagement was way ahead of other mutual funds.Fourth Phase – since February 2003In February 2003, following the repeal of the Unit Trust of India Act1963 UTI was bifurcated into two separate entities. One is theSpecified Undertaking of the Unit Trust of India with assets undermanagement of Rs.29,835 crores as at the end of January 2003,representing broadly, the assets of US 64 scheme, assured return andcertain other schemes. The Specified Undertaking of Unit Trust ofIndia, functioning under an administrator and under the rules framedby Government of India and does not come under the purview of theMutual Fund Regulations.The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOBand LIC. It is registered with SEBI and functions under the MutualFund Regulations. With the bifurcation of the erstwhile UTI which hadin March 2000 more than Rs.76,000 crores of assets undermanagement and with the setting up of a UTI Mutual Fund, conformingto the SEBI Mutual Fund Regulations, and with recent mergers takingplace among different private sector funds, the mutual fund industryhas entered its current phase of consolidation and growth. As at theend of September, 2004, there were 29 funds, which manage assets ofRs.153108 crores under 421 schemes.The graph indicates the growth of assets over the years. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 35
  • 180000 160000 154018 140000 120000 121805 121778Rs. In Crores 100000 80000 79464 60000 47000 40000 20000 4564 0 25 Mar-65 Mar-87 Mar-93 Jan-03 Mar-03 Sep-03 May-04 Years [Fig. 5: Growth in Assets Under Management] [Source: www.amfiindia.com] Mutual Funds – Organisation There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund: Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 36
  • Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 37
  • 45% 42% 40% 36% 35% 30% 25% 20% 15% 14% 10% 5% 3% 4% 1% 0% ELSS Income Market Gilt Growth Money Balanced Fund Type [Fig. 6: Assets Under Management By Fund Type] [Source: www.amfiindia.com] 40% 38% 35% 30% 25% 21% 20% 19% 17% 15% 10% 5% 5% 0% Bank Joint-I Joint-F Private Institutions Fund Type [Fig. 7 Assets Under Management By AMC] [Source: www.amfiindia.com]Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 38
  • REGULATORY BODIESFinancial System is basically responsible for the major up and downs inthe economy. So, there are some regulatory bodies on it which ensureseffectiveness in the management of fund of the investors andtransparency in the transactions. Ministry of Finance SEBI RBI Dept. of IT Stock Brokers Commercial PAN R & T Agent Banks TAN Mutual Fund NBF Co. e-TDS [Fig.8: Regulatory bodies] Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 39
  • COMPETITORS DETAILS1. Bajaj CapitalIt was established in 1964 at Delhi. In 1965 it innovates a new financialinstrument ‘Companies Fixed Deposits’ and becomes the first companyto raise Fixed Deposits. The objective of company is to provideprofessional guidance to investors on where, when and how to investand to assist the corporate sector in its resource raising activities.Bajaj Capital became the first company to set up ‘InvestmentCenters’ all over India for this purpose. Today, Bajaj Capital has90 offices in over 40 important Indian Cities and has a team ofaround 500 employees nationwide.Services provided•Merchant banking•Buying and Selling of Money Market Investments•Distribution of financial products•Investment Advisory Service » Company fixed deposits » Bonds » Mutual funds » Life insurance » General insurance » Pension schemes » Post office schemes » Tax saving schemes » Insurance linked investment schemes » Initial public offerings » Housing loans » NRI schemes » Car insurance Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 40
  • •Financial Planning » Investment planning » Retirement planning » Insurance planning » Childrens future planning » Tax planning » Short-term cash flow planning 2.MCS Ltd. It is established in 1985 in Delhi. It is one of the largest Data Processing House employing more than 600 people. MCS Ltd. has 8 branches all over India including 2 in Gujarat, Ahmedabad and Baroda. Volumes Handled •Share registry activities for over 100 corporate servicing over 10million investors. •Mutual fund operations for 25 funds, servicing over 4.5 millioninvestors. •Billing & settlement plan for Indian operations of IATA Geneva for 1.2million tickets per annum covering (26 airlines & over 1200 agents). Services Offered: •Registrars and Transfer Agents •Registrars to IPO’s /Right Issues •Registrars to Open Offers •Registrars to Mutual Funds •Data Processing for Airlines •Print Shop Services MCS is a major player in these activities in the Country with a market share of about 25%. MCS today provides these services to over 140 Corporate and Mutual Funds for a total investor base of 15 million. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 41
  • 3. N.J.India Investments Pvt. Ltd.NJ India Invest (formerly known as NJ Capital stocks) was started in1994 to cater to the growing financial services sector. NJ India Investevolved out as a client focused need based investment advisory firm.NJ regards mutual fund as one of the best investment avenue availableto satisfy any kind of investment need.NJ India Investment has 11 branches in Gujarat including 3 branches inSaurashtra.•Rajkot•Jamnagar•Bhavnagar4. ICICI Securities Ltd.ICICI Securities Limited (i-SEC) is a wholly owned investment-bankingsubsidiary of ICICI Limited. ICICI is the only non-Japanese Asianfinancial institution to be listed on the New York Stock Exchange(NYSE). ICICI Securities was formed on 22nd Feb. 1993, when ICICIsMerchant Banking Division was spun off into a new company, ICICISecurities today is Indias leading Investment Bank and one of themost significant players in the Indian capital markets.ICICI Brokerage Services Limited (IBSL) set up in March 1995, IBSLis a 100% subsidiary of i-SEC. It commenced its securities brokerageactivities in February 1996 and is registered with the National StockExchange of India Limited and The Stock Exchange, Mumbai.ICICI has started a website ICICIdirect.com which is the mostcomprehensive website, which allows you to invest in Shares, Mutualfunds, Derivatives (Futures and Options) and other financial products.ICICI has a large network of branches all over India. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 42
  • Services offered:•Merchant Banking•Demat Service•Stock Broking5. HDFCHDFC is the leading financial company in India. IT has large network ofbranches all over India. HDFC Securities which is fully subsidiary ofHDFC provides demat service.HDFC and its subsidiary provides following services.•Demat Service•Life Insurance•Banking Service•Housing Finance•Vehicle Finance•Education Loan•Personal Loan•Mutual Fund6. Kotak Securities Ltd.Kotak Securities needs no introduction as one of the largest stockbroking houses in the country and a leading distributor of primarymarket offerings. Kotak Securities limited is a joint venture betweenKotak Mahindra Bank and Goldman Sachs, the international investmentbanking and brokerage firm.Kotak Securities is a corporate member of both the BSE and the NSE.It is also a depository participant with the National SecuritiesDepository Limited (NSDL) for trading and settlement ofdematerialized shares. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 43
  • Services offered:•Stock Broking•Financial Product Distribution•Demat Services•Investment Advisory Services7. Motilal Oswal Securities Ltd.Motilal Oswal Securities Ltd (MOSt) is one of the leading equityresearch and broking houses of India. MOSt has a 20-memberresearch team, which is engaged round the clock in analyzing the Indianeconomy and corporate sectors to identify equity investment ideas.Asia Money Brokers Poll 2002 has rated MOSt as one of the bestIndian broking house, for research, for the second time since 2000.Motilal Oswal is member of NSDL and CDSIL for DP. It has widenetwork of branches. It has 158 branches all over India.Services Offered:•Demat Services•Stock Broking•Investment Advisory Service Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 44
  • PRODUCT DETAILSMutual funds serve as a link between the saving people and the capitalmarket in that they mobilize saving from investors and bring them toborrowers in the capital markets. In short, it is a common pool ofmoney into which investors place their contribution that is to beinvested in accordance with a stated objective.A mutual fund uses the money collected from the investors to buythose assets, which are specially permitted by its stated investmentobjective. When an investor subscribes to a mutual fund, he/she buys apart of asset or the pool of funds that are outstanding at that time.A mutual fund is constituted as an investment company and an investorbuys into the fund, means he buys the share of the fund and is knownas a unit holder. Since each unit holder is a part of owner of a mutualfund, it is necessary to establish the value of his part. Since the unitheld by an investor evidences the ownership of the fund’s assets, thevalue of the total asset of the fund when divided by the totalnumber of units issued by the mutual fund gives us the value of oneunit. This is called as Net Asset Value (NAV). Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 45
  • STRUCTURE OF INDIAN MUTUAL FUNDS Mutual fund industry is highly regulated by the government keeping in view of the protection of investor’s interest as well as to maintain operational transparency. In India SEBI Regulations Act, 1996, guides the formation and operation of Mutual Funds. A Mutual Fund comprises of 4 separate entities. 1. Sponsor 2. Board of Trusties 3. Asset Management Company 4. Custodian and Depositories 5. Distributors 1. Sponsor: “Sponsor” is defined under SEBI regulation as any person who, acting alone or in combination with another body corporate, establishes a mutual fund. The sponsor gets the fund registered with SEBI. The sponsors form a trust and appoint a Board of Trustees. •The sponsor must contribute at least 40% of the net worth of theAMC. •The sponsor must posses a sound financial track record over 5 yearsprior to registration. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 46
  • 2. Board of Trustees: Mutual funds are managed by Board of Trustees. Trust is created by a document called the Trust Deed that is executed by fund sponsor in favour of trustees. •The trustees appoint the AMC and custodian with the prior approvalof SEBI. •They also approve all the schemes floated by the AMC. •They have right to dismiss the AMC, with the approval of SEBI. •Half of the trustees should be independent persons. Neither theAMC, nor its employees can act as trustee. •A trustee can not be appointed as a trustee of two or more mutualfunds until and unless he is an independent person or has permission from theMutual Fund where he is trustee. •Trustees can be removed only by prior approval of SEBI. 3. Asset Management Company: The role of an AMC is to act as the investment manager of the Trust under the Board supervision and direction of the Trustees. The AMC is required to be approved and registered with SEBI. •The AMC of a Mutual Fund must have a net worth of at least Rs. 10crore at all time. •The AMC can not act as a trustee of any other Mutual Fund. •They will float schemes only after obtaining the prior approval of theTrustees and SEBI. •The director of AMC should be a person of reputed of high standingand at least have five years experience in relevant field. •AMC can be terminated with 75% unit holders or majority of trustees. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 47
  • 4. Custodian and Depositories:As per SEBI Regulations Mutual Funds shall have a custodian who is notany way associated with the AMC. It carry outs the activity of safekeeping the securities or participating, in any clearing system. Thecustodian should be independent from sponsors and AMC and shouldhave a sound track record and adequate relevant experience.As Indian capital markets are moving away from having physicalcertificates to ownership of these securities in “dematerialized” formwith Depository. Mutual Fund’s “dematerialized” securities are hold bydepository participant.5. Distributors:For a fund to sell units across a wide retail base of individual investors,an established network of distribution agents is essential. AMCs usuallyappoint Distributors or Brokers, who sell units on behalf of the fund. Abroker usually acts on behalf of several mutual funds simultaneouslyand may have several sub-brokers under him for the purpose ofdistribution of units. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 48
  • MUTUAL FUND – A GLOBALLY PROVEN INVESTMENTWorldwide, the mutual fund has a long and successful history. Thepopularity of mutual fund has increased manifold. In developedfinancial market, like US mutual funds have almost overtaken bankdeposits and total assets of over US $ 3 trillion.In India, Mutual Fund industry started with the setting up of UTI in1964. Public sector banks and financial institution began to establishMutual Funds in 1987. The private sector and foreign institutions wereallowed to set up Mutual Fund in 1993.WHAT IS MUTUAL FUND?A Mutual Fund is a trust that pools the savings of a number ofinvestors who share a common financial goal. The money thus collectedis then invested in capital market instruments such as shares,debentures and other securities. The income earned through theseinvestments and the capital appreciation realized is shared by its unitholders in proportion to the number of units owned by them. Thus aMutual Fund is the most suitable investment for the common man as itoffers an opportunity to invest in a diversified, professionally managedbasket of securities at a relatively low cost. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 49
  • Critical View About Mutual FundAdvantages:1. Portfolio Diversification:Each investor in a fund is a part owner of all the funds assets, thusenabling investor to hold a diversified investment portfolio even with asmall amount of investment, which would otherwise require big capital.2. Professional Management:Mutual Funds provide the services of experienced and skilledprofessionals, backed by a dedicated investment research team thatanalyze the performance and prospect of companies and selectssuitable investments to achieve the objectives of the scheme.3. Diversification:Mutual Fund invests in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the riskbecause all stock can not go through a downtrend at the same time andin the same proportion. You achieve this diversification through amutual fund with powerless money that you can do on your own.4. Reduction of Transaction Cost:The investors bear all the cost of investing such as brokerage orcustody of securities. When going through the fund investor has thebenefit of economies of scale; the funds pay lesser cost because oflarger volumes, a benefit passed on to its investors.5. Liquidity:By investing in Mutual Funds the investors can cash their investment byselling their units to the fund if open-ended, or selling them in thestock market if the fund is close ended. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 50
  • 6. Convenience & Flexibility:Mutual Funds Companies offer investor to transfer their holding fromone scheme to other.7. Tax Benefits:The investors are totally exempt from paying any tax on the incomethey receive from the Mutual Funds.Investment up to 10000 in ELSS qualifies for tax rebate of 20%.8. Regulatory oversight:Mutual funds are subject to many government regulations that protectinvestors from fraud.9. Convenience:You can usually buy mutual fund shares by mail, phone, or over theInternet.10.Well regulatedLimitations:1. No Control over Costs:An investor in a mutual fund has no control over the overall cost ofinvesting. He/she has to pay investment management fees as long ashe/she remains with the fund. Fees are payable even while the value ofthe investment may be declining.2. No Tailor made Portfolios:Investors who invest on their own can build their own portfolios ofshares and bonds and other securities. Investing through fund meanshe/she delegates this decision to the fund managers.3. Managing a Portfolio of Funds: Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 51
  • Availability of a large number of funds can actually mean too muchchoice for the investor. He/she may again need advice on how to selecta fund to achieve his/her objectives, quite similar to the situation whenhe/she has to select individual shares or bonds to invest in.4. Entry and Exit Cost:When large bodies like a fund invest in shares, the concentrated buyingor selling often result in adverse price movements i.e. at the time ofbuying, fund has to pay high and vise-versa.5. No Guarantees:No investment is risk free. If the entire stock market declines in value,the value of mutual fund shares will go down as well, no matter howbalanced the portfolio. Investors encounter fewer risks when theyinvest in mutual funds than when they buy and sell stocks on their own.However, anyone who invests through a mutual fund runs the risk oflosing money. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 52
  • MUTUAL FUND CYCLE [Fig.9: Mutual Fund Cycle] [Source: amfiindia.com]From above cycle, it can be observed clearly that how the money fromthe investors flow and they get returns out of it. With a very smallamount of fund, investors pool their money with fund managers.After studying the market, the fund manager invests money of theinvestors in various securities like shares, bonds, debentures,government securities etc. to achieve goal of the investors.With ups and downs in the market returns are generated and they arepassed on to the investors in form of dividend or capital gain or lost.The above cycle is very clear and also very effective.The fund manager while investing on behalf of investors takes intoconsideration various factors like time, risk; amount etc. so thathe/she can make proper investment decision. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 53
  • Types of Mutual FundTypes of Mutual Fund By Objective Equity Fund Debt Fund Balanced Money Gilt Fund By Duration Open Ended Close Ended Interval By Load Load Fund No Load Fund Other Fund Tax Saving Index Fund Sector Fund Comm. Fund Offshore [Fig.10: Types of Mutual Funds] Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 54
  • 1. By objective:Investment goals vary from person to person. While somebody wantssecurity, others might give more weightage to returns alone. Somebodyelse might want to plan for his child’s education while somebody mightbe saving for the proverbial rainy day or even life after retirement.With objectives defying any range, it is obvious that the productsrequired will vary as well. So, Mutual funds can be classified based onthe objectives of the investor.(a). Equity Fund:Equity funds invest a major portion of their corpus in equity sharesissued by companies. NAV of equity funds are fluctuated by fluctuationin price of shares that it holds. So there is a high risk as well as highreturn in equity fund. Potential to earn in such funds is higher whenthey are invested for long term.The leading example of such funds arePrudential ICICI Growth Plan,Tata Pure Equity Fund,Reliance Vision,Franklin India Prima Fund etc.(b). Debt Fund:Debt funds invest in debt instruments debt instruments issued bygovernments, private companies, banks and financial institutions. Byinvesting in debt, these funds target low risk and stable incomeinvestors. These funds are low risk low return funds.The leading examples areBirla Income Plus,Principal Income Fund,HDFC Income Fund,UTI Bond Fund etc. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 55
  • (c). Balanced Fund:A balanced fund is one that has a portfolio comprising debtinstruments as well as preference and equity shares. The idea is toreduce volatility of funds, while providing some upside for capitalappreciation. They are best suitable for the people looking for acombination for capital appreciation and regular income and best timespend for such investment is more than 3 years.The leading examples arePrudential ICICI Balanced Fund,Birla Balance Fund,Franklin India Balance Fund,Sundaram Balance Fund etc.(d). Money Market Fund:Money market funds invest in securities of a short-term nature, whichgenerally means securities of less than one-year maturity such asTreasury Bills issued by governments, Certificates of deposit issued bybanks and Commercial paper issued by companies.The major strength of money market funds are the liquidity and safetyof principal that the investors can normally expect from short terminvestments.The leading examples arePrudential ICICI Liquid Plan,Templeton India Liquid Fund,Grindlays Cash Fund etc.(e). Gilt Fund:These funds are sort of government funds wherein the investments aremade in debt instrument of government, which carry no risk of nonpayment of interest as the RBI manages the payment of interest and Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 56
  • principal on the investments. These funds are best suited for regularincome and long term investment objectives.The leading examples arePrudential ICICI Gilt Fund,Tata Gilt Securities Fund,Templton India Government Securities Fund etc.2. By Duration:(a). Open-ended Fund:An open ended fund is one that is available for subscription andrepurchase on a continuous basis. These schemes do not have a fixedmaturity period. Investors can conveniently buy and sell units at NAVrelated prices which are declared daily basis. The key feature of thisfund is liquidity.(b). Close-ended Fund:A close ended fund has a stipulated maturity period e.g. 5-7 years. Thefund is open for subscription only during a specified period at the timeof launch of the scheme. Investors can invest in the scheme at thetime of initial public issue and thereafter they can buy or sell units onstock exchange where the units are listed at NAV. These mutual fundschemes disclose NAV generally on weekly basis.(c). Interval Fund:Interval funds combine the features of open-ended and close-endedschemes. They are open for sale or redemption during pre determinedintervals at NAV related prices. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 57
  • Risk Return GridRisk Benefits offeredTolerance/Return Focus Suitable Products by MFsExpected Bank/ Company FD, Liquidity, BetterLow Debt Debt based Funds Post-Tax returns Balanced Funds, Some Partially Liquidity, Better Diversified Equity Debt, Post-Tax returns,Medium Funds and some debt Partially Better Management, Funds, Mix of shares Equity Diversification and Fixed Deposits Diversification, Capital Market, Equity Expertise in stockHigh Equity Funds (Diversified as picking, Liquidity, well as Sector) Tax free dividends [Table11: Risk Return Grid of various MF]3. By Load:(a). Load Fund:Marketing of new mutual fund scheme involves initial expenses. Theseinitial expenses may be recovered from the investors by entry or exitload.(i). Entry Load or Front-end Load:If initial expenses recovered from investors at the time of investor’sentry into the fund, by deducting a specific amount from his initialcontribution it is called Entry Load. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 58
  • (ii). Exit Load or Back-end Load: If initial expenses recovered at the time of the investor’s exit from the scheme, by deducting a specified amount from the redemption proceeds payable to the investor it is called exit load. (iii). Deferred Load: The load amount charged to the scheme over a period of time is called a deferred load. (b). No Load Fund: Funds that don’t charge entry, exit, or deferred load or any other charges for sales expenses are called no load funds. •Now, generally all Mutual Fund companies charge 2 to 2.5% entry loadon equity fund. •Generally there is no exit load on equity and sectoral funds to maintainliquidity of that funds. •Generally there is no entry load on gilt scheme and income fund. •There is 0.25 to 1% exit load on gilt and income fund if investors exitfrom fund before specified time which is generally 3 to 6 months. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 59
  • 4. Other types of fund:(a). Tax Saving Funds:These schemes offer tax rebates to the investors under specificprovisions of the Income Tax Act, 1961 as the Government offers taxincentives for investment in specified avenues. E.g. Equity LinkedSaving Scheme (ELSS). Pension schemes also offer tax benefits.The leading examples arePrudential ICICI Tax Plan,Templeton India Pension Plan,Franklin India Taxshield etc.(b). Index Funds:Index Funds replicate the portfolio of a particular index such as theBSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemesinvest in the securities in the same weightage comprising of an index.NAV of such funds are changed accordance with the change in theindex.The leading examples areBirla Index Fund,HDFC Index Fund,Prudential ICICI Index Fund,UTI Index Fund etc. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 60
  • (C). Sector Funds:These are the funds which invest in the securities of only thosesectors or industries as specified in the offer documents. E.g.Pharmaceuticals, Software, Petroleum etc. These types of funds aremore risky compared to diversified funds.The leading examples areBirla IT Fund,Pru. ICICI FMCG Fund,Franklin India Pharma Fund etc.(d). Commodity Funds:Commodity funds invest into the different commodities directly orthrough shares of commodity companies. E.g. Commodity fund invest ingold or shares of gold mines. Commodity funds have not yet developedin India.(e). Off Shore Funds:These funds invest in equities in one or more foreign countries thereby achieving diversification across the country’s borders. However theyalso have additional risks such as the foreign exchange rate risk andtheir performance depends on the economic conditions of the countriesthey invest in. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 61
  • PROBLEM FORMULATIONMarketing Research being a logical process definitely follows ourpredetermined sequence or steps in order to obtain the desired resultsor outcomes. Though the entire process of Marketing Research is quitecomplex and requires a considerable degree of knowledge and skill, thestep of the Problem Formulation is the most challenging and critical onefor the researcher as well as the research. It is rightly said that aproblem, well defined is half solved.In today’s competitive world companies can not afford to reactive,instead the trend is toward proactive. It is due to the increasingcompetition that the companies can not afford to undertake researchuntil something goes wrong. This can curtail the future growth or evenaffect the very existence of the organization seeing to the trend ofbeing proactive in the future; companies are allocating more resourcesto the disciplines of research. In such case it becomes a duty ofresearcher to ensure that the organization gets an optimum return onthe resources it has invested. Thus, Problem Formulation assumesgreat importance in Marketing Research.The Marketing Research project undertaken by me for the ‘KarvySecurities Limited’ encompasses within its scope, the study of “TheMutual Fund and to find out market potential of KARVY InvestorService Ltd. with special reference to distribution of Mutual Fundin Jamnagar City. Company wants to increase it’s sub-brokers whocan work as intermediary between company and the investors.” Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 62
  • RESEARCH OBJECTIVES Any activity done without an objective in a mind cannot turn fruitful. An objective provides a specific direction to an activity. Objectives may range from very general to very specific, but they should be clear enough to point out with reasonable accuracy what researcher wants to achieve through the study and how it will be helpful to the decision maker in solving the problem. The objective of any research is basically divided into two categories. Primary Objective: To find out market potential of Karvy Investor Service Ltd. Secondary Objectives: Following are secondary objectives. •To assess an awareness of mutual funds in Jamnagar City. •To find out level of awareness of mutual funds in Jamnagar City. •To find out how many investment advisors are interested in dealing ofmutual fund. •To find out how many investment advisors are willing to work withKarvy. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 63
  • RESEARCH METHODOLOGY1.Research Design:A research design is a pattern or an outline of a research project’sworking. It is a statement of only the essential elements of a study,those that provide the basic guidelines for the details of the project.It comprises a series of prior decision that taken together providemaster plans for executing a research projects.A research design serves as a bridge between what has beenestablished i.e., the research objectives and what is to be done, inconduct of the study to relish those objectives. If there were noresearch design, the research would have only foggy notions as aboutwhat is to be done.I have used ‘Cross-Sectional Design’ of ‘Exploratory Type’. Theresearch is of both qualitative as well as quantitative type.2. Unit of Analysis:Mutual Fund Advisors.Characteristics of interest:•Advisor’s knowledge about Mutual Fund•Advisor’s knowledge about Karvy•Advisor’s interest in getting knowledge of Mutual Fund•Advisor’s willingness to deal in Mutual Fund with Karvy•Advisor’s preference in selecting tax saving instrument of investment•Advisor’s preference in selecting dealer Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 64
  • 3. Sources of Data:a. Primary Source:The primary data is collected using sampling method and by surveyusing questionnaire.b. Secondary Source:Secondary data includes information regarding present marketscenario, Information regarding Mutual Funds and competitors arecollected by Internet, Magazines and News papers and books.4. Sample Planning:Sample Size: 50 unitsSample Extent: Jamangar CitySampling Design:A Sample Design is a definite plan for obtaining a sample from a givenpopulation. It refers to the technique or method the researcher wouldadopt in selecting items for the sample.I have used both ‘Convenience Sampling Method’ and ‘Snow BallSampling Method’. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 65
  • 5. Data Collection Method:I have used ‘Survey Method’ to collect data. I have collected datausing questionnaire.Questionnaire PlanI have used ‘Structured Questionnaire’ for gathering the requireddata through contacting respondent personally.Type of Information:I have collected Fact, Awareness, Attitude, Future action plan andreason using questionnaire.Type of Questions:‘Close-ended questions’ of ‘Dichotomous’ and ‘Multiple Choice’ typeare asked in the questionnaire for data collection.6. Data Analysis & Interpretation:Data Analysis is based on the data collected by way of Questionnaires.From the collected data findings are extracted. The data is tabulatedand frequency distribution chart is prepared. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 66
  • RESEARCH ANALYSIS AND INTERPRETATIONRate reason for choosing particular dealer. Mutual Fund Advisors Suggestion Shares Mutual Fund Insurance FD Tax Bond PPF [Fig.12: Mutual Fund Advisors’ Suggestions] Reasons of Choosing Above Returns Risk Safety Tax Benefite Others [fig.13: Reasons of Choosing Above] 15 15 12 No. of Advisors 10 8 6 5 5 4 0 <100 100-300300-500500-750 750- >1000 1000 No. of Clients [Fig.17: Differentiate advisors according to no of their clients} Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 67
  • 60% 55% 50% 40% 30% 20% 14% 14% 11% 10% 5% 1% 0% Insurance ELSS PPF Pension NSC Bond Plan Investment Options [Fig. 18 Advisors gets invested IT payers in] 60% 60% 50% 40% 40% 30% 20% 10% 0% Interested Not Interested[Fig.20: Advisors who are interested in dealing of Mutual Funds] Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 68
  • 100% 90%80%60%40%20% 10% 0% Know Dont KNOW [Fig.22: Advisor know about MF services provided by Karvy] 70% 66% 60% 50% 40% 34% 30% 20% 10% 0% Interested Not Interested [Fig.23: Advisor who are interested to attend seminar on MF]75% 70%60%45%30% 24%15% 6% 0% No Time Not Answered Not Interested [Fig.24 Reason for not attending Seminar] Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 69
  • 60% 54%50% 46%40%30%20%10% Interested Not Inteested [Fig.25: Advisors who are interested to work with KARVY] 60% 52% 50% 40% 30% 22% 20% 11% 10% 5% 0% Not No time Lack of Dont want to Answered Knowledge expand services [Fig.26: Reasons for not interested in work with KARVY] Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 70
  • FINDINGS •The awareness level about Mutual Funds is quite low in the JamnagarCity among advisors. •Approximately 40% of advisers are aware of and interested in dealingof Mutual Funds. The reason for not interested in dealing of Mutual Fund isunawareness about Mutual Fund. •Only 10% investment advisors are aware of MF services provided byKarvy, so we can say that awareness level about MF services of Karvy is very low. •Most of advisers are interested to know about Mutual Funds andinterested to attend seminar on Mutual Funds arranged by Karvy. •Only 46% of advisers are interested to work with Karvy. Most ofadvisors don’t want to work with Karvy because they have no time for expandingtheir services. •Most of people invest in insurance to save tax followed by PPF.Insurance is widely used as tax-saving instrument. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 71
  • LIMITATIONS •Due to limitation of time and cost constrains a sample size of only 50respondents are chosen. •Data Analysis and interpretation done may not be that strong due tosmall sample and ‘Convenience Sampling Method’. •The sample extent for research is only Jamnagar City. •Some of the respondents may be biased in giving responses. •My inexperience in research area might have affected results. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 72
  • CONCLUSIONS •Mutual Fund Advisors give emphasis on mutual funds than otherinvestment options. •Mutual Funds have given a new direction to the flow of personal savingand enable small and medium investors in remote rural and semi urban areas to reapthe benefits of the stock market investment. Indian Mutual Funds are thus playinga very important developmental role in allocation of scares resources in theemerging economy. •Karvy is not able to provide sufficient services to the investors due tounawareness among advisors regarding services. •The awareness level of investor is low in advisors are interested indealing in mutual fund. •Very less advisors are knowing about services provided by karvy. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 73
  • RECOMMENDATIONS •There is high potential market for Mutual Fund Advisors in Jamnagarcity, but this market needs to be explored as investors are still hesitated to investtheir money in Mutual Funds. •In Jamngar investors have inadequate knowledge about Mutual Funds,So proper Marketing of various schemes is required, company should arranges moreand more seminars on Mutual Funds. •Awareness of MF services provided by Karvy is also very low socompany needs proper marketing of their all services by advertising, distributionof pamphlet, arranging seminars etc. •Most of advisors are not interested in dealing of Mutual Fundsbecause they don’t want to expand their services due to lack of time, so companyshould provide them knowledge about single window services by which investor canget all financial services from one place. •Company should also provide knowledge about the growth rate and theexpected growth rate of Mutual Fund industry in India. •Most of people aware of life insurance, NSC and PPF for tax saving so,company should market various tax saving schemes of Mutual Funds and theirbenefits. •The interface among the investors and the Mutual Fund Companies isthe agents, so the agents should have proper knowledge about Mutual Funds as wellas market so that they can help investors in their investment decisions. Thequality of agents performance and investors trust on them can be improved only ifthey are permanent in nature. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 74
  • ANNEXURE QUESTIONNAIRE We assure you that all the information that will be collected from you will remain fully confidential and it is used for study purpose only. 1. As a financial investment adviser which investment options you suggest to your customers? Shares Mutual Fund Insurance Fixed Deposit Tax Bond PPF Other2. Please indicate reason for choosing above. Returns Risk Safety Tax Benefits Timely Brokerage Other 3. Approximately how many customers you have? 4. What is the brokerage Payment Period? 5. Expected Brokerage Payment Period 6. If a service person who pays Income Tax wants to invest, generally which option do you suggest for investment? Insurance Pension Plan PPF Infrastructure Bond ELLS Scheme Other _______________________________________ 7. Are you interested to deal in MF? Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 75
  • Yes No If No Why?8. Do you know about MF services provided by Karvy’s Jamnagar Branch? Yes No9. In future will you attend seminar arranged by Karvy to guide investors about MF? Yes No If No Why?10. Will you like to work with Karvy Securities Ltd for dealing in mutual fund? Yes No If No Why?11. Name : Address : Phone (O) (R) Mobile : Email : Thank You Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 76
  • GLOSSARYCorporate advisory servicesMerchant bankers offer customised solutions to solve the financialproblems of their clients. Merchant bankers study the working capitalpractices that exist within the company and suggest alternativepolicies. They also advise the company on rehabilitation and turnaroundstrategies, which would help companies to recover from their currentposition. They also provide advice on appropriate risk managementstrategies.Loan syndicationArrangement of loans for clients, by analysing their cash flow pattern,so that the terms of borrowing meet the client’s cash requirements andoffer assistance in loan documentation procedures.PortfolioTotal number of all holdings held by a company is called portfolio. Theportfolio mix is aimed at spreading the risk over different sectors. Itconsists of all assets of company.NAVNet Asset Value is the current market worth of the mutual fundshares. It is calculated daily by taking the funds total asset securities,cash and any accrued earning deducting liabilities, and dividing thereminder by the number of shares outstanding. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 77
  • DepositoryThe principal function of a depository is to dematerialize securities andenable their transactions in book-entry form. A depository establishedunder the Depositories Act can provide any service connected withrecording of allotment of securities or transfer of ownership ofsecurities in the record of a depository.Capital gainThe profit made from selling shares, mutual funds etc.IPOAbbreviation for initial public offering. Generally associated withadmission to listing of the share capital on the stock exchange. Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 78
  • DETAILS OF TABLES & FIGURESTables:No. Particulars Page No.1 BODs of Karvy Consultants Limited 52 BODs of Karvy Investor Services Limited 53 BODs of Karvy Securities Limited 64 BODs of Karvy Stock Broking Limited 65 Public Sector FD with which Karvy deals 126 FD of Non Banking Finance Companies with which 13 Karvy deals7 FD of Housing Finance Companies with which Karvy 13 deals8 FD of Manufacturing Companies with which Karvy 13 deals9 List of MF Companies with which Karvy deals 1710 Mutual Funds in India 3111 Risk Return Grid of various MF 53 Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 79
  • Figures:No. Particulars Pg. No.1 Competitive Advantage of Karvy 82 TIN System 193 National Level Organization Chart of Karvy 254 Branch Level Structure of Karvy 265 Growth in Assets Under Management 336 Assets Under Management By Fund Type 347 Assets Under Management By AMC 348 Regulatory bodies 359 Mutual Fund Cycle 4810 Types of Mutual Funds 4911 Differentiate advisors according to yearly amount 62 they get invested12131415161718 Instrument in which advisors gets invested to IT 64 payers1920 Advisors who are interested in dealing of Mutual 65 Funds21 Reasons for not interested in dealing of Mutual 65 Funds22 Advisor know about MF services provided by Karvy 6523 Advisor who are interested to attend seminar on 66 MF24 Reason for not attending Seminar 6625 Advisors who are interested to work with KARVY 6626 Reasons for not interested in work with KARVY 67 Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 80
  • BIBLIOGRAPHY1. www.mutualfundsindia.com2. www.amfiindia.com3. www.themanagementor.com4. www.dewb-vc.com5. www.karvy.com6. www.indiacorporateadvisor.com7. www.nsdl.co.in8. www.incometaxdelhi.nic.in9. www.incometaxindia.gov.in10. David J. Luck & Ronald S. Rubin, “Marketing Research”, Ed. – 7 (ISBN)11. D.C.Anjaria & Dhaivat Anjaria, “AMFI Workbook”, Ed. – 2 (Association of Mutual Funds in India) Shri Jaysukhlal Vadhar Institute of Management Studies, Jamnagar 81