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Ankit project report final Document Transcript

  • 1. “A STUDY ON COMPARITIVE ANALYSIS OF VARIOUSMUTUAL FUNDS WITH SPECIAL REFERENCE TO IIFL” A Summer Training Project Report Submitted in partial fulfillment of the requirement for the Award of Degree of Master of Business Administration 2011-2013Under the Guidance of: - Submitted By:-Mr. Nakul Anand Ankit Kumar(Assistant Professor) Enroll No:-04514803911 DEPARTMENT OF MANAGEMENT MAHARAJA AGRASEN INSTITUTE OF TECHNOLOGY (Affiliated to G.G.S.I.P. University) Sector – 22, Rohini, Delhi -110086 An ISO 9001:2008 Certified Institute
  • 2. AICTE NBA Accredited Institute Certificate from the Company/OrganizationThis is to certify that Ankit Kumar Son of Late Sh. Ravinder Kumar pursuingMBA from Maharaja Agrasen Institute of Technology (Affiliated to G.G.S.I.P.University),New Delhi has successfully completed Project Report in our organization onthe topic titled, ” A STUDY ON COMPARITIVE ANALYSIS OF VARIOUSMUTUAL FUND WITH SPECIAL REFERENCE TO IIFL”” from 04TH JUNE2012 to 04TH AUG 2012. During his/ her project tenure in the organization/ company,we found her hard working, sincere and diligent person and her behavior and conductwas good during the project. We wish her all the best for her future endeavors.Comments of Guide (if Any)1.2.3.Name and Signature of the Mentor (Industrial Guide)Designation
  • 3. STUDENT UNDERTAKINGThis is to certify that I Ankit Kumar had completed the Project titled “ASTUDY ON COMPARITIVE ANALYSIS OF VARIOUS MUTUALFUND WITH SPECIAL REFERENCE TO IIFL” in INDIA INFOLINELTD.” under the guidance of Mr. Nakul Anand in the partial fulfillment ofthe requirement for the award of degree of MBA from Maharaja AgrasenInstitute of Technology (Affiliated to G.G.S.I.P. University), New Delhi.This is an original piece of work and I had neither copied nor submitted itearlierElsewhere.Ankit KumarMBA
  • 4. CERTIFICATE FROM GUIDEThis is to certify that the project titled “A STUDY ONCOMPARITIVE ANALYSIS OF VARIOUS MUTUALFUND WITH SPECIAL REFERENCE TO IIFL” is anacademic work done by Ankit Kumar submitted in the partialfulfillment of the requirement for the award of the Degree ofMBA from Maharaja Agrasen Institute of Technology (Affiliatedto G.G.S.I.P. University), New Delhi under my guidance anddirection. To the best of my knowledge and belief the data andinformation presented by her in the project has not been submittedearlier.
  • 5. ABBREVIATIONS INITIALS TERMS SEBI Securities and Exchange Board of India F&O Future and Option NSE National Stock Exchange BSE Bombay Stock Exchange MCX Multi Commodity Exchange NCDEX National Commodity Exchange NSDL National Securities Depository Limited MTM Marking-to-market GDP Gross Domestic Product ATM At-the-money-option OTC Over The Counter OPEC The Organization of the Petroleum Exporting Counties MFI Mutual fund Of India AMC The company vested with the responsibility of managing investments of the schemes of a fund in line with the stated investment objective of each scheme.Back End Load The difference between the NAV of the units of a scheme and the price at which they are redeemed. The difference is charged by the fund. Current Load Load structure applicable currently. Funds keep revising the load structures prospectively from time to time.Equity Schemes Schemes where more than 65% of the investments are done in equity and equity related securities of various companies. These funds tend to provide maximum returns over a long-term horizon. However, the returns from these funds are directly linked to the stock market and are volatile as compared to those from debt funds. Exit Load The fee charged at the time of redemption. It amounts to the difference between the NAV of the units of a scheme and the price at which existing units are redeemed. The fee has to fall within the overall limit laid down by SEBI.
  • 6. Face Value The original issue price of one unit of a scheme. Fund A mutual fund is a trust under the Indian Trust Act. Each fund manages one or more schemes. Growth Option A scheme where the fund ploughs back the dividend announced. The fund allots as many units of the scheme as are arrived at on dividing the dividend amount by the ex- dividend NAV. Gilt funds Funds which invest only in government securities of different maturities with virtually no default risk. While returns are steady and secure, they are generally lower than those from other debt funds. Initial Offer Price The price at which units of a scheme are offered in its New Fund Offer (NFO).Income / Debt Funds Funds that invest in income bearing instruments such as corporate debentures, PSU bonds, gilts, treasury bills, certificates of deposit, commercial papers etc. Although these funds are less volatile, the underlying investments carry a credit risk. Comparatively, these funds are less risky and are preferred by risk-averse investors. Index Funds A class of equity funds that invest in equity shares of various companies in the same proportion in which they appear in the composition of any popular index, such as the BSE Sensex, S&P 500 or NASDAQ composite. The performance of such funds closely tracks the performance of the index. Junk Bond A speculative bond rated BB or below."Junk bonds" are generally issued by corporations of questionable financial strength or without proven track records. They tend to be more volatile and higher yielding than bonds with superior quality ratings. "Junk bond funds" emphasize diversified investments in these low-rated, high-yielding debt issues. Load A sales charge or commission assessed by certain mutual funds ("load funds,") to cover their selling costs. The commission is generally stated as a portion of the funds offering price, usually on a sliding scale from one to 8.5%. Mutual Fund An open-end investment company that buys back or redeems its shares at current net asset value. Most mutual funds continuously offer new shares to investors.
  • 7. Net Asset Value Per The current market worth of a mutual fund share. Share Calculated daily by taking the funds total assets securities, cash and any accrued earnings deducting liabilities, and dividing the remainder by the number of shares outstanding. Performance performance of an investment indicates the returns from an investment. the returns can come by way of income distributions as well as appreciation in the value of the investment. Portfolio the basket of investments in which the funds of a scheme are deployed. Prospectus an offer document by which a mutual fund invites the public for subscription to units of a scheme, and informs them of the terms & conditions for management of the scheme on a day to day basis thereafter. the document contains information about the scheme to enable a prospective investor make an informed investment decision. Registrar an agent appointed by the trustees of a mutual fund in consultation with the amc or by the companies for the purpose of handling the records of the unit holders or shareholders. Redemption / the price of a unit (net of exit load) that the fund offers the investor to redeem his investment. Repurchase price systematic a systematic investment plan allows an investor to buy units of a mutual fund scheme on a regular basis by means of periodicinvestment plan (sip) investments into that scheme in a manner similar to instalments paid on purchase of normal goods. the investor is allotted units on a predetermined date specified in the offer document of the scheme. here the plan allows the investor to take advantage of the rupee cost averaging methodology.
  • 8. List of FiguresSr. No. Particulars Page No.1. Diversification of IndiaTOPICS Ltd. Infoline 23 PAGE NO.2. Concept of mutual fund 303. 1 Categories of mutual fund ABSTRACT 35 24. 2 COMPANY PROFILE Risk Vs. Return 42 3-6 3 RESEARCH DESIGN mutual fund5. Organization of & METHODOLOGY 43 7 3.1 OBJECTIVES OF THE STUDY 8 3.2 SCOPE 9 3.3 TYPE OF DATA 9 3.4 LIMITATIONS 9 3.5 TOOLS OF ANALYSIS 10 4 INTRODUCTION TO THE TOPIC 11 4.1 WHAT IS MUTUAL FUND 12 4.2 EQUITY FUNDS 12 4.3 DEBT FUNDS 13 4.4 BY INVESTMENT OBJECTIVES 14 4.5 OTHER SCHEMES 14 4.6 PROS AND CONS OF INVESTMENT IN MUTUAL FUNDS 15-18 4.7 ADVANTAGES OF INVESTMENT IN MUTUAL FUNDS 19-20 4.8 DISADVABTAGE OF INVESTMENT IN MUTUAL FUNDS 21 4.9 MUTUAL FUNDS INDUSTRY IN INDIA 21 4.10 MAJOR PLAYERS OF MUTUAL FUNDS INDUSTRY 22 4.11 CATEGORIES OF MUTUAL FUNDS 23 4.12 INVESTMENT STRATAGIES 24 4.13 WORKING OF MUTUAL FUNDS 26-28 4.14 GUIDELINES OF THE SEBI FOR MUTUAL FUNDS 29 4.15 PORTFOLIO ANALYSIS TOOLS 30 5 DATA ANALYSIS AND INTERPRETATION 31-44 6 RESEARCH FINDINGS 45 7 SUGGESTIONS 46 8 CONCLUSION 47 9 BIBLIOGRAPHY 48 10 WEBLIOGRAPHY 49
  • 9. List of Tables1. List of Stock Exchanges 192. Swot Analysis of IIFL 283. Relative comparison of Mutual funds 59 and Other Investment4. Investment risk and objective 60 ComparisonList of Graphs1. Investors Convention. 712. Investors 723. Investor’s preference. 734. Investment option having all round 74 capability.5. Factors while investing. 756. Previously Invested in mutual fund or 76 not.7. Where you find yourself as mutual 77 fund investor.8. Factors that attract you to invest in 78 mutual fund.9. Expected rate of return onInvestments 7910. Investors risk taking ability. 8011. Investors experience with mutual fund 81 EXECUTIVE SUMMARYA mutual fund is a scheme in which several people invest their money for a commonfinancial cause. The collected money invests in the capital market and the money, whichthey earned, is divided based on the number of units, which they hold.
  • 10. The mutual fund industry started in India in a small way with the UTI Act creating whatwas effectively a small savings division within the RBI. Over a period of 25 years thisgrew fairly successfully and gave investors a good return, and therefore in 1989, as thenext logical step, public sector banks and financial institutions were allowed to floatmutual funds and their success emboldened the government to allow the private sector toforay into this area.The advantages of mutual fund are professional management, diversification, andeconomies of scale, simplicity, and liquidity.The disadvantages of mutual fund are high costs, over-diversification, possible taxconsequences, and the inability of management to guarantee a superior return.The biggest problems with mutual funds are their costs and fees it include Purchase fee,Redemption fee, Exchange fee, Management fee, Account fee & Transaction Costs.There are some loads which add to the cost of mutual fund. Load is a type ofcommission depending on the type of funds.Mutual funds are easy to buy and sell. You can either buy them directly from the fundcompany or through a third party. Before investing in any funds one should considersome factor like objective, risk, Fund Manager’s and scheme track record, Cost factoretc.There are many, many types of mutual funds. You can classify funds based Structure(open-ended & close-ended), Nature (equity, debt, balanced), Investment objective(growth, income, money market) etc. A code of conduct and registration structure formutual fund intermediaries, which were subsequently mandated by SEBI. In addition,this year AMFI was involved in a number of developments and enhancements to theregulatory framework.
  • 11. The most important trend in the mutual fund industry is the aggressive expansion of theforeign owned mutual fund companies and the decline of the companies floated bynationalized banks and smaller private sector players.SBI mutual fund, Reliance Mutual Fund, UTI Mutual Fund, ICICI Prudential MutualFund, HDFC Mutual Fund and Birla Sun Life Mutual Fund are one of top the fivemutual fund company in India.
  • 12. CHAPTER 1 INTRODUCTIONINTRODUCTION TO CAPITAL MARKETThe capital market is the market for securities, where Companies & governments canraise long-term funds. It is a market in which money is lent for periods longer than a
  • 13. year. A nations capital market includes such financial institutions as banks, insurancecompanies, & stock exchanges that channel long-term investment funds to commercial& industrial borrowers. Unlike the money market, on which lending is ordinarily shortterm, the capital market typically finances fixed investments like those in buildings &machinery.Nature & Constituents:The capital market consists of number of individuals & institutions (including thegovernment) that canalize the supply & demand for long term capital & claims oncapital. The stock exchange, commercial banks, co-operative banks, saving banks,development banks, insurance companies, investment trust or companies, etc., areimportant constituents of the capital markets.The capital market, like the money market, has three important Components, namely thesuppliers of loan able funds, the borrowers & the Intermediaries who deal with theleaders on the one hand & the Borrowers on the other.The demand for capital comesmostly from agriculture, industry, trade the government. The predominant form ofindustrial organization developed Capital Market becomes a necessary infrastructure forindustrialization. Capital market not concerned solely with the issue of new claims oncapital, But also with dealing in existing claims. HISTORYEstablished in 1875, the Bombay Stock Exchange (BSE) is Asias first stock exchange.In 12th century France the courratiers de change were concerned with managing &regulating the debts of agricultural communities on behalf of the banks. Because thesemen also traded with debts, they could be called the first brokers. A common misbelief isthat in late 13th century Bruges commodity traders gathered inside the house of a mancalled Van der Beurze, & in 1309 they became the "Brugse Beurse", institutionalizing
  • 14. what had been, until then, an informal meeting, but actually, the family Van der Beurzehad a building in Antwerp where those gatherings occurred; the Van der Beurze hadAntwerp, as most of the merchants of that period, as their primary place for trading. Theidea quickly spread around Flanders & neighboring counties & "Beurzen" soon openedin Ghent & Amsterdam.In the middle of the 13th century, Venetian bankers began to trade in governmentsecurities. In 1351 the Venetian government outlawed spreading rumors intended tolower the price of government funds. Bankers in Pisa, Verona, Genoa & Florence alsobegan trading in government securities during the 14th century. This was only possiblebecause these were independent city states not ruled by a duke but a council ofinfluential citizens. The Dutch later started joint stock companies, which let shareholdersinvest in business ventures & get a share of their profits - or losses. In 1602, the DutchEast India Company issued the first share on the Amsterdam Stock Exchange. It was thefirst company to issue stocks & bonds.The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been thefirst stock exchange to introduce continuous trade in the early 17th century. The Dutch"pioneered short selling, option trading, debt-equity swaps, merchant banking, unit trusts& other speculative instruments, much as we know them" There are now stock marketsin virtually every developed & most developing economies, with the worlds biggestmarkets being in the United States, United Kingdom, Japan, India, China, Canada,Germany, France, South Korea & the Netherlands. IMPORTANCE OF STOCK MARKETFunction and purposeThe main trading room of the Tokyo Stock Exchange, where trading is currentlycompleted through computers. The stock market is one of the most important sourcesfor companies to raise money. This allows businesses to be publicly traded, or raiseadditional capital for expansion by selling shares of ownership of the company in apublic market. The liquidity that an exchange provides affords investors the ability to
  • 15. quickly & easily sell securities. This is an attractive feature of investing in stocks,compared to other less liquid investments such as real estate.History has shown that the price of shares & other assets is an important part of thedynamics of economic activity, & can influence or be an indicator of social mood. Aneconomy where the stock market is on the rise is considered to be an up-and-comingeconomy. In fact, the stock market is often considered the primary indicator of acountrys economic strength & development. Rising share prices, for instance, tend to beassociated with increased business investment & vice versa. Share prices also affect thewealth of households & their consumption. Therefore, central banks tend to keep an eyeon the control & behavior of the stock market &, in general, on the smooth operation offinancial system functions. Financial stability is the raison dêtre of central banks.Exchanges also act as the clearinghouse for each transaction, meaning that they collect &deliver the shares, & guarantee payment to the seller of a security. This eliminates therisk to an individual buyer or seller that the counterparty could default on the transaction.The smooth functioning of all these activities facilitates economic growth in that lowercosts & enterprise risks promote the production of goods & services as well asemployment. In this way the financial system contributes to increased prosperity. Animportant aspect of modern financial markets, however, including the stock markets, isabsolute discretion.For example, American stock markets see more unrestrained acceptance of any firm thanin smaller markets. For example, Chinese firms that possess little or no perceived valueto American society profit American bankers on Wall Street, as they reap largecommissions from the placement, as well as the Chinese company which yields funds toinvest in China. However, these companies accrue no intrinsic value to the long-termstability of the American economy, but rather only short-term profits to Americanbusiness men & the Chinese; although, when the foreign company has a presence in thenew market, this can benefit the markets citizens. Conversely, there are very few largeforeign corporations listed on the Toronto Stock Exchange TSX, Canadas largest stock
  • 16. exchange. This discretion has insulated Canada to some degree to worldwide financialconditions. In order for the stock markets to truly facilitate economic growth via lowercosts & better employment, great attention must be given to the foreign participantsbeing allowed in.Relation of the stock market to the modern financial systemThe financial systems in most western countries has undergone a remarkabletransformation. One feature of this development is disintermediation. A portion of thefunds involved in saving & financing, flows directly to the financial markets instead ofbeing routed via the traditional bank lending & deposit operations. The general publicsheightened interest in investing in the stock market, either directly or through mutualfunds, has been an important component of this process.Statistics show that in recent decades shares have made up an increasingly largeproportion of households financial assets in many countries. In the 1970s, in Sweden,deposit accounts & other very liquid assets with little risk made up almost 60 percent ofhouseholds financial wealth, compared to less than 20 percent in the 2000s. The majorpart of this adjustment in financial portfolios has gone directly to shares but a good dealnow takes the form of various kinds of institutional investment for groups of individuals,e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc.The trend towards forms of saving with a higher risk has been accentuated by new rulesfor most funds & insurance, permitting a higher proportion of shares to bonds. Similartendencies are to be found in other industrialized countries. In all developed economicsystems, such as the European Union, the United States, Japan & other developednations, the trend has been the same: saving has moved away from traditional(government insured) bank deposits to more risky securities of one sort or another.The stock market, individual investors, and financial riskRiskier long-term saving requires that an individual possess the ability to manage theassociated increased risks. Stock prices fluctuate widely, in marked contrast to the
  • 17. stability of (government insured) bank deposits or bonds. This is something that couldaffect not only the individual investor or household, but also the economy on a largescale. The following deals with some of the risks of the financial sector in general andthe stock market in particular. This is certainly more important now that so manynewcomers have entered the stock market, or have acquired other risky investments(such as investment property, i.e., real estate and collectables).With each passing year, the noise level in the stock market rises. Televisioncommentators, financial writers, analysts, & market strategists are all overtaking eachother to get investors attention. At the same time, individual investors, immersed in chatrooms & message boards, are exchanging questionable & often misleading tips. Yet,despite all this available information, investors find it increasingly difficult to profit.Stock prices skyrocket with little reason, then plummet just as quickly, & people whohave turned to investing for their childrens education & their own retirement becomefrightened. Sometimes there appears to be no rhyme or reason to the market, only folly.This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. Buffett began his career with $100, and$100,000 from seven limited partners consisting of Buffetts family and friends. Over theyears he has built himself a multi-billion-dollar fortune.Role of Capital MarketThe primary role of the capital market is to raise long-term funds for governments,banks, & corporations while providing a platform for the trading of securities. Thisfundraising is regulated by the performance of the stock & bond markets within thecapital market. The member organizations of the capital market may issue stocks &bonds in order to raise funds. Investors can then invest in the capital market bypurchasing those stocks & bonds.The capital market, however, is not without risk. It is important for investors tounderstand market trends before fully investing in the capital market. To that end, thereare various market indices available to investors that reflect the present performance ofthe market.
  • 18. Regulation of the Capital MarketEvery capital market in the world is monitored by financial regulators & their respectivegovernance organization. The purpose of such regulation is to protect investors fromfraud & deception. Financial regulatory bodies are also charged with minimizingfinancial losses, issuing licenses to financial service providers, and enforcing applicablelaws.The Capital Market’s Influence on International TradeCapital market investment is no longer confined to the boundaries of a single nation.Today’s corporations and individuals are able, under some regulation, to invest in thecapital market of any country in the world. Investment in foreign capital markets hascaused substantial enhancement to the business of international tradeThe Primary and Secondary Markets The capital market is also dependent ontwo sub-markets – the primary market & the secondary market. The primary marketdeals with newly issued securities & is responsible for generating new long-term capital.The secondary market handles the trading of previously-issued securities, & must remainhighly liquid in nature because most of the securities are sold by investors. A capitalmarket with high liquidity & high transparency is predicated upon a secondary marketwith the same qualities. List of Stock Exchanges in India
  • 19. The Ludhiana Stock Exchange Association Ltd National Stock Exchange of India LtdThe Gauhati Stock Exchange Association Ltd Inter-Connected Stock Exchange of India LtdBhubaneswar Stock Exchange Association Ltd Vadodara Stock Exchange Ltd The Uttar Pradesh Stock Exchange Ltd. Jaipur Stock Exchange LtdSaurashtra Kutch Stock Exchange Association Bombay Stock Exchange Ltd Ltd. Over The Counter Stock Exchange Of India Ahmedabad Stock Exchange Ltd The Pune Stock Exchange Ltd Bangalore Stock Exchange Ltd Coimbatore Stock Exchange Ltd The Calcutta Stock Exchange Association Ltd The Cochin Stock Exchange Ltd The Delhi Stock Exchange Association Ltd. Magadh Stock Exchange Association The Hyderabad Stock Exchange Ltd Madhya Pradesh Stock Exchange Ltd Madras Stock Exchange Ltd Table1.1 About the organization The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of India’s premier
  • 20. providers of financial services.IIFL offers advice and execution platform for the entire range of financial servicescovering products ranging from Equities and derivatives, Commodities, Wealthmanagement, Asset management, Insurance, Fixed deposits, Loans, Investment Banking,Gold bonds and other small savings instruments.We have a presence in:Equities our core offering, gives us a leading market share in both retail and institutionalsegments. Over a million retail customers rely on our research, as do leading FIIs andMFs that invest billions.Private Wealth Management services cater to over 2500 families who have trusted uswith close to Rs 25,000 crores ($ 5bn) of assets for advice.Investment Banking services are for corporates looking to raise capital. Our forte isEquity Capital Markets, where we have executed several marquee transactions.Credit & Finance focuses on secured mortgages and consumer loans. Our high qualityloan book of over Rs. 6,200 crores ($ 1.2bn) is backed by strong capital adequacy ofapproximately 20%.IIFL Mutual Fund made an impressive beginning in FY12, with lowest chargeNifty ETF. Other products include Fixed Maturity Plans.Life Insurance, Pension and other Financial Products, on open architecture completeour product suite to help customers build a balanced portfolio.IIFL has received membership of the Colombo Stock Exchange becoming the firstforeign broker to enter Sri Lanka. IIFL owns and manages thewebsite, www.indiainfoline.com, which is one of India’s leading online destinations forpersonal finance, stock markets, economy and business. IIFL has been awarded the ‘BestBroker, India’ by FinanceAsiaand the ‘Most improved brokerage, India’ in
  • 21. the Asia Money polls. India Infoline was also adjudged as ‘Fastest Growing EquityBroking House - Large firms’ by Dun & Bradstreet. A forerunner in the field of equityresearch, IIFL’s research is acknowledged by none other than Forbes as ‘Best of theWeb’ and ‘…a must read for investors in Asia’.Our research is available not just over the Internet but also on international wire serviceslike Bloomberg, Thomson First Call and Internet Securities besides others where it isamongst one of the most read Indian brokers.IIFL is a listed company with a consolidated group net worth of about Rs 1,800 crores.The income and net profit during FY2010-11 were Rs. 14.7 bn and Rs. 2.1 bnrespectively.The Group has a consistent and uninterrupted track record of profits and dividends sinceits listing in 2005. The company is listed on both Exchanges and also trades in thederivatives segment.IIFL’s Crisil and ICRA Rating for short term is top rated as CRISIL A1+ and ICRA(A1+) respectively. For long term, IIFL has been rated ICRA (AA-) by ICRA andCRISIL AA-/Stable by CRISIL indicating high degree of safety for timely servicing offinancial obligations.IIFL is near you physically: we are present in every nook and cranny of the country, withover 3,000 business locations across 500 cities in India. You can reach us in a variety ofways, online, over the phone and through our branches. All our offices are connectedwith the corporate office in Mumbai with cutting edge networking technology. Thegroup caters to a customer base of about a million customers.Our physical presence in key global markets includes subsidiaries in Colombo, Dubai,New York, Mauritius, London, Singapore and Hong Kong.
  • 22. The company has a network of 596 branches spread across 345 cities and towns. It hasmore than 500000 customers.India Infoline Limited is listed on both the leading stock exchanges in India, viz. the StockExchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both theexchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services andPortfolio Management Services. It offers broking services in the Cash and Derivatives segments ofthe NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL as adepository participant, providing a one-stop solution for clients trading in the equities market. It hasrecently launched its Investment banking and Institutional Broking business.
  • 23. Fig 1.1A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. Theseservices are offered to clients as different schemes, which are based on differing investmentstrategies made to reflect the varied risk-return preferences of clients.
  • 24. India Infoline Media and Research Services LimitedThe content services represent a strong support that drives the broking, commodities,mutual fund and portfolio management services businesses. Revenue generation isthrough the sale of content to financial and media houses, Indian as well as global.It undertakes equities research which is acknowledged by none other than Forbes as ‘Bestof the Web’ and ‘…a must read for investors in Asia’. India Infoline’s research isavailable not just over the internet but also on international wire services like Bloomberg(Code: IILL), Thomson First Call and Internet Securities where India Infoline is amongstthe most read Indian brokers.India Infoline Commodities Limited.India Infoline Commodities Pvt Limited is engaged in the business of commoditiesbroking. Our experience in securities broking empowered us with the requisite skills andtechnologies to allow us offer commodities broking as a contra-cyclical alternative toequities broking. We enjoy memberships with the MCX and NCDEX, two leading Indiancommodities exchanges, and recently acquired membership of DGCX. We have a multi-channel delivery model, making it among the select few to offer online as well as offlinetrading facilities.India Infoline Marketing & ServicesIndia Infoline Marketing and Services Limited is the holding company of India Infoline
  • 25. Insurance Services Limited and India Infoline Insurance Brokers Limited.(a) India Infoline Insurance Services Limited is a registered Corporate Agent with theInsurance Regulatory and Development Authority (IRDA). It is the largest CorporateAgent for ICICI Prudential Life Insurance Co Limited, which is India’s largest privateLife Insurance Company. India Infoline was the first corporate agent to get licensed byIRDA in early 2001.(b) India Infoline Insurance Brokers Limited India Infoline Insurance Brokers Limited isa newly formed subsidiary which will carry out the business of Insurance broking. Wehave applied to IRDA for the insurance broking licence and the clearance for the same isawaited. Post the grant of license, we propose to also commence the general insurancedistribution business.India Infoline Investment Services LimitedConsolidated shareholdings of all the subsidiary companies engaged in loans andfinancing activities under one subsidiary. Recently, Orient Global, a Singapore-basedinvestment institution invested USD 76.7 million for a 22.5% stake in India InfolineInvestment Services. This will help focused expansion and capital raising in the saidsubsidiaries for various lending businesses like loans against securities, SME financing,distribution of retail loan products, consumer finance business and housing financebusiness. India Infoline Investment Services Private Limited consists of the followingstep-down subsidiaries.(a) India Infoline Distribution Company Limited (distribution of retail loan products)(b) Moneyline Credit Limited (consumer finance)India Infoline Housing Finance Limited (housing finance)
  • 26. IIFL (Asia) Private LimitedIIFL (Asia) Private Limited is wholly owned subsidiary which has been incorporated inSingapore to pursue financial sector activities in other Asian markets. Further toobtaining the necessary regulatory approvals, the company has been initially capitalizedat 1 million Singapore dollars.India Infoline Investment Services Ltd:India Infoline Investment Service Ltd is also a 100% subsidiary of India Infoline Ltd. Ithas an NBFC license from the Reserve Bank of India (RBI) and offers margin fundingfacility to the broking customers.MANAGEMENT OF INDIA INFOLINEMr. Nirmal JainNirmal Jain is the founder and Chairman of India Info line Ltd. He holds an MBAdegree from IIM Ahmedabad, and is a Chartered Accountant and a Cost Accountant. Hehas had an impeccable professional and academic track record. He then joined handswith two local brokers to set up their equity research division Inquire, in 1994. His work
  • 27. set new standards for equity research in India. In 1995, he founded his own independentfinancial research company, now known as India Info line Ltd.Mr. R VenkataramanVenkataraman is the co-promoter and Executive Director of India Infoline Ltd.He holds a B.Tech degree in Electronics and Electrical Communications Engineeringfrom IIT Kharagpur and an MBA degree from IIM Bangalore. He has held seniormanagerial positions in various divisions of ICICI Limited, including ICICI SecuritiesLimited, their investment banking joint venture with J P Morgan of USA and with BZWand Taib Capital Corporation Limited. He has also held the position of Assistant VicePresident with G E Capital Services India Limited in their private equity division.The Board of DirectorsApart from Nirmal Jain and R Venkataraman, the Board of Directors of IndiaInfoline comprises:Mr. Sat Pal Khattar (Non Executive Director)Mr. Sanjiv Ahuja (Independent Director)Mr. Nilesh Vikamsey (Independent Director)Mr. Kranti Sinha (Independent Director)
  • 28. SWOT ANALYSIS India Infoline (IIFL)Parent Company India Infoline Ltd.Category Brokerage Houses, Consumer Financial ServicesSector Banking and Financial ServicesTagline/ Slogan Knowledge is the edge; Its all about money, honeyUSP One of the leading players in the Indian financial services space STPSegment BrokerageTarget Group Urban and Rural InvestorsPositioning Complete Investment and Stock trading Solutions SWOT Analysis 1. Wide range of financial products 2. Successful implementation of “Insurance broking” model 3. Online portal’s successful branding as “5paisa.com” 4. Have over 2500 offices in India in over 500 cities 5. First Indian brokerage house to get membership of Singapore Exchange 6. IIFL has been awarded the ‘Best Broker, India’ , ‘Most improvedStrength brokerage, India’ , ‘Fastest Growing Equity Broking House’ 1. High risk exposure as seen by conservative population 2. Less emphasis on advertising causes lack of brand visibilityWeakness 1. High income Urban familiesOpportunity 2. More penetration into the growing cities 1. Stringent Economic measures by Government and RBIThreats 2. Entry of foreign finance firms in Indian Market Competition 1. Share khan 2. IndiabullsCompetitors 3. Angel Broking
  • 29. ABOUT THE TOPICMutual fund is a trust that pools the savings of a number of investors who share acommon financial goal. This pool of money is invested in accordance with a statedobjective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongsto all investors. The money thus collected is then invested in capital marketinstruments such as shares, debentures and other securities. The income earnedthrough these investments and the capital appreciations realized are shared by itsunit holders in proportion the number of units owned by them. Thus a MutualFund is the most suitable investment for the common man as it offers anopportunity to invest in a diversified, professionally managed basket of securitiesat a relatively low cost. A Mutual Fund is an investment tool that allows smallinvestors access to a well-diversified portfolio of equities, bonds and othersecurities. Each shareholder participates in the gain or loss of the fund. Units areissued and can be redeemed as needed. The funds Net Asset value (NAV) isdetermined each day. Investments in securities are spread across a wide cross-section of industriesand sectors and thus the risk is reduced. Diversification reduces the risk because allstocks may not move in the same direction in the same proportion at the sametime. Mutual fund issues units to the investors in accordance with quantum ofmoney invested by them. Investors of mutual funds are known as unit holders.
  • 30. Fig: 1.2
  • 31. When an investor subscribes for the units of a mutual fund, he becomes part ownerof the assets of the fund in the same proportion as his contribution amount put upwith the corpus (the total amount of the fund). Mutual Fund investor is also knownas a mutual fund shareholder or a unit holder. Any change in the value of theinvestments made into capital market instruments (such as shares, debentures etc)is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as themarket value of the Mutual Fund schemes assets net of its liabilities. NAV of ascheme is calculated by dividing the market value of schemes assets by the totalnumber of units issued to the investors.ADVANTAGES OF MUTUAL FUND • Portfolio Diversification • Professional management • Reduction / Diversification of Risk • Liquidity • Flexibility & Convenience • Reduction in Transaction cost • Safety of regulated environment • Choice of schemes • TransparencyDISADVANTAGE OF MUTUAL FUND • No control over Cost in the Hands of an Investor • No tailor-made Portfolios • Managing a Portfolio Funds • Difficulty in selecting a Suitable Fund Scheme
  • 32. HISTORY OF THE INDIAN MUTUAL FUND INDUSTRYThe mutual fund industry in India started in 1963 with the formation of Unit Trustof India, at the initiative of the Government of India and Reserve Bank. Thoughthe growth was slow, but it accelerated from the year 1987 when non-UTI playersentered the Industry.In the past decade, Indian mutual fund industry had seen a dramatic improvement,both qualities wise as well as quantity wise. Before, the monopoly of the markethad seen an ending phase; the Assets Under Management (AUM) was Rs67billion. The private sector entry to the fund family raised the A sum to Rs. 470billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion.The Mutual Fund Industry is obviously growing at a tremendous space with themutual fund industry can be broadly put into four phases according to thedevelopment of the sector. Each phase is briefly described as under. First Phase – 1964-87Unit Trust of India (UTI) was establisheds on 1963 by an Act of Parliament by theReserve Bank of India and functioned under the Regulatory and administrativecontrol of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI andthe Industrial Development Bank of India (IDBI) took over the regulatory andadministrative control in place of RBI. The first scheme launched by UTI was UnitScheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets undermanagement.
  • 33. Second Phase – 1987-1993 (Entry of Public Sector Funds)1987 marked the entry of non- UTI, public sector mutual funds set up by publicsector banks and Life Insurance Corporation of India (LIC) and General InsuranceCorporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fundestablished in June 1987 followed by Canbank Mutual Fund (Dec 87), PunjabNational Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bankof India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established itsmutual fund in June 1989 while GIC had set up its mutual fund in December1990.At the end of 1993, the mutual fund industry had assets under managementof Rs.47,004 crores. Third Phase – 1993-2003 (Entry of Private Sector Funds)1993 was the year in which the first Mutual Fund Regulations came into being,under which all mutual funds, except UTI were to be registered and governed. Theerstwhile Kothari Pioneer (now merged with Franklin Templeton) was the firstprivate sector mutual fund registered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a morecomprehensive and revised Mutual Fund Regulations in 1996. The industry nowfunctions under the SEBI (Mutual Fund) Regulations 1996. As at the end ofJanuary 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.
  • 34. Fourth Phase – since February 2003In February 2003, following the repeal of the Unit Trust of India Act 1963 UTIwas bifurcated into two separate entities. One is the Specified Undertaking of theUnit Trust of India with assets under management of Rs.29,835 crores as at the endof January 2003, representing broadly, the assets of US 64 scheme, assured returnand certain other schemesThe second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. Itis registered with SEBI and functions under the Mutual Fund Regulations.consolidation and growth. As at the end of September, 2004, there were 29 funds,which manage assets of Rs.153108 crores under 421 schemes.
  • 35. CATEGORIES OF MUTUAL FUND: Fig 1.3
  • 36. Mutual funds can be classified as follow :Based on their structure:  Open-ended funds: Investors can buy and sell the units from the fund, at any point of time.  Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidityBased on their investment objective:Equity funds: These funds invest in equities and equity related instruments.With fluctuating share prices, such funds show volatile performance, even losses.However, short term fluctuations in the market, generally smoothens out in thelong term, thereby offering higher returns at relatively lower volatility. At the sametime, such funds can yield great capital appreciation as, historically, equities haveoutperformed all asset classes in the long term. Hence, investment in equity fundsshould be considered for a period of at least 3-5 years. It can be further classifiedas: i) Index funds- In this case a key stock market index, like BSE Sensex or Niftyis tracked. Their portfolio mirrors the benchmark index both in terms ofcomposition and individual stock weightages.ii) Equity diversified funds- 100% of the capital is invested in equitiesspreading across different sectors and stocks.
  • 37. iii|) Dividend yield funds- it is similar to the equity diversified funds exceptthat they invest in companies offering high dividend yields.iv)Thematic funds- Invest 100% of the assets in sectors which are relatedthrough some theme.e.g. -An infrastructure fund invests in power, construction, cements sectors etc.v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A bankingsector fund will invest in banking stocks.vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.Balanced fund: Their investment portfolio includes both debt and equity. As aresult, on the risk-return ladder, they fall between equity and debt funds. Balancedfunds are the ideal mutual funds vehicle for investors who prefer spreading theirrisk across various instruments. Following are balanced funds classes:i) Debt-oriented funds -Investment below 65% in equities.ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.Debt fund: They invest only in debt instruments, and are a good option forinvestors averse to idea of taking risk associated with equities. Therefore, theyinvest exclusively in fixed-income instruments like bonds, debentures,Government of India securities; and money market instruments such as certificatesof deposit (CD), commercial paper (CP) and call money. Put your money into anyof these debt funds depending on your investment horizon and needs.
  • 38. i) Liquid funds- These funds invest 100% in money market instruments, a largeportion being invested in call money market.ii) Gilt funds ST- They invest 100% of their portfolio in government securitiesof and T-bills.iii) Floating rate funds - Invest in short-term debt papers. Floaters invest indebt instruments which have variable coupon rate.iv)Arbitrage fund- They generate income through arbitrage opportunities dueto mis-pricing between cash market and derivatives market. Funds are allocated toequities, derivatives and money markets. Higher proportion (around 75%) is put inmoney markets, in the absence of arbitrage opportunities.v) Gilt funds LT- They invest 100% of their portfolio in long-termgovernment securities.vi) Income funds LT- Typically, such funds invest a major portion of theportfolio in long-term debt papers.vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and anexposure of 10%-30% to equities.viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in linewith that of the fund.
  • 39. INVESTMENT STRATEGIES1. Systematic Investment Plan: under this a fixed sum is invested eachmonth on a fixed date of a month. Payment is made through post dated cheques ordirect debit facilities. The investor gets fewer units when the NAV is high andmore units when the NAV is low. This is called as the benefit of Rupee CostAveraging (RCA)2. Systematic Transfer Plan: under this an investor invest in debt orientedfund and give instructions to transfer a fixed sum, at a fixed interval, to an equityscheme of the same mutual fund.3. Systematic Withdrawal Plan: if someone wishes to withdraw from amutual fund then he can withdraw a fixed amount each month.MUTUAL FUND FEES AND EXPENSESMutual fund fees and expenses are charges that may be incurred by investors who holdmutual funds. Running a mutual fund involves costs, including shareholder transactioncosts, investment advisory fees, and marketing and distribution expenses. Funds passalong these cost to investors in a number of ways.1. TRANSACTION FEESi) Purchase Fee: It is a type of fee that some funds charge their shareholders when theybuy shares. Unlike a front-end sales load, a purchase fee is paid to the fund (not to abroker) and is typically imposed to defray some of the funds costs associated with thepurchase.ii) Redemption Fee: It is another type of fee that some funds charge their shareholderswhen they sell or redeem shares. Unlike a deferred sales load, a redemption fee is paid to
  • 40. the fund (not to a broker) and is typically used to defray fund costs associated withshareholders redemption.iii) Exchange Fee: Exchange fee that some funds impose on shareholders if theyexchange (transfer) to another fund within the same fund group or "family of funds."2. PERIODIC FEESi) Management Fee: Management fees are fees that are paid out of fund assets to thefunds investment adviser for investment portfolio management, any other managementfees payable to the funds investment adviser or its affiliates, and administrative feespayable to the investment adviser that are not included in the "Other Expenses" category.They are also called maintenance fees.ii) Account Fee: Account fees are fees that some funds separately impose on investorsin connection with the maintenance of their accounts. For example, some funds imposean account maintenance fee on accounts whose value is less than a certain dollar amount.3. OTHER OPERATING EXPENSESTransaction Costs: These costs are incurred in the trading of the funds assets. Funds witha high turnover ratio, or investing in illiquid or exotic markets usually face highertransaction costs. Unlike the Total Expense Ratio these costs are usually not reported.LOADSDefinition of a loadLoad funds exhibit a "Sales Load" with a percentage charge levied on purchase or sale ofshares. A load is a type of Commission (remuneration). Depending on the type of load amutual fund exhibits, charges may be incurred at time of purchase, time of sale, or a mixof both. The different types of loads are outlined below.
  • 41. Front-end load:Also known as Sales Charge, this is a fee paid when shares are purchased. Also knownasa "front-end load," this fee typically goes to the brokers that sell the funds shares.Front-end loads reduce the amount of your investment. For example, lets say you haveRs.10,000 and want to invest it in a mutual fund with a 5% front-end load. The Rs.500sales load you must pay comes off the top, and the remaining Rs.9500 will be invested inthe fund. According to NASD rules, a front-end load cannot be higher than 8.5% of yourinvestment.Back-end load: Also known as Deferred Sales Charge, this is a fee paid when sharesare sold. Also known as a "back-end load," this fee typically goes to the brokers that sellthe funds shares. The amount of this type of load will depend on how long the investorholds his or her shares and typically decreases to zero if the investor holds his or hershares long enough.Level load / Low load:Its similar to a back-end load in that no sales charges are paid when buying the fund.Instead a back-end load may be charged if the shares purchased are sold within a giventimeframe. The distinction between level loads and low loads as opposed to back-endloads, is that this time frame where charges are levied is shorter.No-load Fund:As the name implies, this means that the fund does not charge any type of sales load.But, as outlined above, not every type of shareholder fee is a "sales load." A no-loadfund may charge fees that are not sales loads, such as purchase fees, redemption fees,exchange fees, and account fees.
  • 42. RISK V/S. RETURN: Fig 1.4
  • 43. ORGANIZATION OF A MUTUAL FUNDThere are many entities involved and the diagram below illustrates theOrganizational set up of a mutual fund Fig 1.5A Mutual Fund is set up in the form of trust, which has sponsor, trustees, assetmanagement company (AMC), and custodian. The trust is established by sponsor ormore than one sponsor who is like a promoter of company. The trustee of mutual fundholds its property for the benefit of unit holders. Asset Management Company (AMC)approved by SEBI manages the funds by making investments in various types ofsecurities. Custodian, who registered with SEBI, holds the securities of the fund in itscustody. The trustees are vested with the general power of superintendence and directionover AMC. They monitor the performance and compliance of SEBI regulations bymutual fund. SEBI regulations required that at least two thirds of the directors of trusteecompany or board of trustees must be independent i.e. they should not be associated withsponsors. Also, 50% of the directors of the AMC must be independent. All mutual fundsare required to be registered with SEBI before they launch their schemes.
  • 44. MAJOR MUTUAL FUND COMPANIES IN INDIAABN AMRO MUTUAL FUNDABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMROTrustee(India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO AssetManagement (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G isthe custodian of ABN AMRO Mutual Fund.BIRLA SUN LIFE MUTUAL FUNDBirla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and SunLife Financial. Sun Life Financial is a global organization evolved in 1871 and is beingrepresented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apartfromIndia. Birla Sun life Mutual Fund follows a conservative long-term approach toinvestment. Recently it crossed a AUM of Rs.10, 000 crores.BANK OF BARODA MUTUAL FUNDBank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30,1992 under the sponsorship of Bank of Baroda. BOB Assets Management CompanyLimited is the AUM of BOB Mutual Fund and was incorporated on November 5, 1992.Deutsche Bank AG is the custodian.HDFC MUTUAL FUNDHDFC Mutual Fund was setup on June 30, 2000 with two sponsors namelyHousing Development Finance Corporation Limited and Standard Life Investments
  • 45. Limited.ING VYSYA MUTUAL FUNDING Vysya Mutual Fund was setup on February 11, 1999 with the same named TrusteeCompany. It is a joint venture of Vysya and ING. The AMC, ING InvestmentManagement (India) Pvt. Ltd. was on incorporated on April 6, 1998.PRUDENTIAL ICICI MUTUAL FUNDThe mutual fund of ICICI is a joint venture with Prudential Plc. Of America, one of thelargest life insurance companies in the US of A. Prudential ICICI Mutual Fund wassetup on 13 October, 1993 with two sponsors, Prudential Plc. and the AMC is PrudentialICICI Asset Management Company Limited incorporated on 22 June, 1993.SAHARA MUTUAL FUNDSahara Mutual Fund was setup on July 18, 1996 with Sahara India financial CorporationLtd. as the sponsor. Sahara Assets Management Company Private Limited incorporatedon August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid up capital ofthe AMC stands at Rs.25.8 crore.STATE BANK OF INDIA MUTUAL FUNDState Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launchoffshore fund, the India Magnum Fund with a corpus of Rs.225 crore Approximately.Today it is the largest Bank sponsored Mutual Fund in India. They already launched 35schemes out of which 15 have already yield handsome returns to investors. State Bank ofIndia Mutual Fund has more than Rs.5, 500 crores as AUM. Now it has an investor baseof over 8 lakhs spread over 18 schemes.
  • 46. TATA MUTUAL FUNDTATA Mutual Fund is a Trust under the Indian Trust Act, 1882. The sponsors for TataMutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investmentmanger is Tata management Limited is one of the fastest in the country with more thanRs.7,703 Crore(as on 2005) of AUM.KOTAK MAHINDRA ASSTE MANAGEMENT COMPANYKotak Mahindra Asset Management Company is a subsidiary of KMBL. It is presentlyhaving more than 1, 99,818 investors in its various schemes. KMAMC stared itsoperations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering toinvestors with varying risk return profiles. It was the first company to launch todedicated gilt scheme investing only in government securities.UNIT TRUST OF INDIA MUTUAL FUNDUTI Asset Management Company Private Limited, established in Jan 24, 2003 managesthe UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTIAsset Management Company presently manages a corpus of over Rs.20, 000 crore. Thesponsors of UTI Mutual Fund are Bank of Baroda, Punjab National Bank, State Bank ofIndia, and Life Insurance Corporation of India. The schemes of UTI Mutual Fund areLiquid Funds, assets Management Funds, Index Funds and Balanced Funds.RELIANCE MUTUAL FUNDReliance Mutual Fund was established as trust under Indian Trusts Act, 1882.Thesponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited isthe Trustee. It was registered on June 30, 1995 as Reliance Mutual Fund which waschanged on March 11, 2004. Reliance Mutual Fund was formed for launching of various
  • 47. schemes under which, units are issued to the public with a view to contribute to thecapital market and to provide investors the opportunities to make investments indiversified securities.STANDARD CHARTERED MUTUAL FUNDStandard Chartered Mutual Fund was setup on March 13, 2000 sponsored by StandardChartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. StandardChartered Asset Management Company Pvt. Ltd is the AMC which was incorporatedwith SEBI on December 20, 1999.FRANKLIN TEMPLETON MUTUAL FUNDThe group, Franklin Templeton investment is a California based company with a globalAUM of US $409.2(as on 2005). It is one of the largest financial service group in theworld. Investors can buy or sell the Mutual Fund through their financial advisor orthrough mail or through their website. They have open end Diversified Equity schemes,Open end Sector Equity schemes, Open end Hybrid schemes, Open end tax savingschemes, Open end income and liquid schemes, Closed end Income schemes and Openend Fund of Funds schemes to offer.MORGAN STANLEY MUTUAL FUND Morgan Stanley is a world wide financial services company and its leading in themarket in securities, investment management and credit services. Morgan Stanleyinvestment management was established in the year 1975. it provides customized assetmanagement services and products to governments, corporations, pension funds and nonprofit organizations. Its services are also extending to high net worth individuals andretail investors. In India it is known as Morgan Stanley investment management PrivateLtd. and its AMC is Morgan Stanley Mutual Fund. This is the first closed end diversifiedequity scheme serving the needs of Indian retail investors focusing on the long termcapital appreciation.
  • 48. ESCORT MUTUAL FUNDSEscort Mutual Funds was set up on April 15th, 1996 with Escorts Finance Ltd. as itssponsor. The Trustee Company is Escorts Investments Trust Ltd.. Its AMC wasincorporated on Dec1st, 95 with the name Escorts Asset Management Ltd. ALLAINCECAPITAL MUTUAL FUND Alliance Capital Mutual Fund was set up on December30, 1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsor. TheTrustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital AssetManagement India Pvt. Ltd. with the corporate office in Mumbai.BENCHMARK MUTUAL FUNDBenchmark Mutual Fund was setup on June 12, 2001 with Niche FinancialServices Pvt. Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as thetrustee Company. incorporated on October 16, 2000 and headquartered in Mumbai,Benchmark Assets Management Company Pvt. Ltd. is the AMC.CAN BANK MUTUAL FUNDCan Bank Mutual Fund was setup on December 19, 1987 with Canara Bankacting as the sponsor. Canara bank investment Management Service Ltd. incorporated onMarch 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.CHOLA MUTUAL FUNDChola Mutual Fund under the sponsorship of Cholamandalam Investment & FinanceCompany Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is theTrustee Company and AMC is Cholamandalam AMC Limited.LIC MUTUAL FUND
  • 49. Life Insurance Corporation on India setup LIC Mutual Fund on 19th June 1989. Itcontributed Rs.2 crore towards the corpus of the Fund. LIC Mutual Fund was constitutedas a trust in accordance with the provisions of the Indian trust Act, 1882. The Companystarted its bsiness on 29th April 1994. The Trustees of LIC Mutual Fund have appointedJeevan Bima Sahayog Asset Management Company Ltd. as the Investment Managers formutual fund.GIC MUTUAL FUNDGIC Mutual Fund, sponsored by General Insurance Corporation of India, a governmentof India undertaking and the four Public Sector General Insurance Companies, viz.National Insurance Co. Ltd, the New India Assurance Co. Ltd. the Oriental InsuranceCo. Ltd and United India Insurance Co. Ltd and is constituted as a Trust in Accordancewith the provisions of the Indian Trusts Act, 1882.IIFL MUTUAL FUNDIndia Infoline Asset Management Company Ltd. ("AMC") was incorporated under theCompanies Act, 1956 on March 22, 2010, having its Registered Office at IIFL Centre,3rd Floor Annex, Kamala City, Senapati Bapat Marg, Lower Parel, Mumbai 400 013.AMC has been appointed as the Investment Manager to IIFL Mutual Fund by theTrustee vide Investment Management Agreement (IMA) April 29, 2010, executedbetween India Infoline Trustee Company Ltd. and India Infoline Asset ManagementCompany Ltd.Sponsor: India Infoline Limited (IIFL)Trustee: India Infoline Trustee Company LimitedInvestment Manager: India Infoline Asset Management Company LimitedStatutory Details: IIFL Mutual Fund has been set up as a Trust under the Indian TrustAct, 1882.
  • 50. PARAMETERS OF MUTUAL FUND EVALUATION: • Risk • Returns • Liquidity • Expense Ratio • Composition of Portfolio RisksRisk Associated With Mutual FundsInvesting in mutual funds as with any security, does not come without risk. One of themost basic economic principles is that risk and reward are directly correlated. In otherwords, the greater the potential risk, the greater the potential return. The types of riskcommonly associated with mutual funds are:Market Risk:Market risk relate to the market value of a security in the future. Market prices fluctuateand are susceptible to economic and financial trends, supply and demand, and manyother factors that cannot be precisely predicted or controlled.Political Risk:Changes in the tax laws, trade regulations, administered prices etc. is some of the manypolitical factors that create market risk. Although collectively, as citizens, we have
  • 51. indirect control through the power of our vote, individually as investors, we havevirtually no control.Inflation Risk:Inflation or purchasing power risk, relates to the uncertainty of the future purchasingpower of the invested rupees. The risk is the increase in cost of the goods and services,as measured by the Consumer Price Index. Interest Rate Risk: Interest Rate risk relatesto the future changes in interest rates. For instance, if an investor invests in a long termdebt mutual fund scheme and interest rate increase, the NAV of the scheme will fallbecause the scheme will be end up holding debt offering lowest interest rates.Business RiskBusiness Risk is the uncertainty concerning the future existence, stability andprofitability of the issuer of the security. Business Risk is inherent in all businessventures. The future financial stability of a company can not be predicted or guaranteed,nor can the price of its securities. Adverse changes in business circumstances will reducethe market price of the company’s equity resulting in proportionate fall in the NAV ofmutual fund scheme, which has invested in the equity of such a company.Economic Risk :Economic Risk involves uncertainty in the economy, which, in turn can have an adverseeffect on a company’s business. For instance, if monsoons fall in a year, equity stocks ofagriculture bases companies will fall and NAVs of mutual funds, which have invested insuch stocks, will fall proportionately. There are 3 different methods with the help ofwhich we can measure the risk.Measurement of risk
  • 52. I. Beta Coefficient Measure Of Risk Beta relates a fund’s return with a market index. It basically measures the sensitivityof funds return to changes in market index.If Beta = 1Fund moves with the market i.e. Passive fundIf Beta < 1Fund is less volatile than the market i.e. Defensive FundIf Beta > 1Funds will give higher returns when market rises & higher losses whenmarket falls i.e. Aggressive FundII. Ex –Marks or R-squaredEx –Marks represents co relation with markets. Higher the Ex-marks lower the risk ofthe fund because a fund with higher Ex-marks is better diversified than a fund withlower Ex-marks.Standard Deviation Measure of Risk: It is a statistical concept, which measures volatility. It measures the fluctuations offund’s returns around a mean level. Basically it gives you an idea of how volatile yourearnings are. It is broader concept than BETA. It also helps in measuring total risk andnot just the market risk of the portfolio.How to Calculate the Value of a Mutual Fund:The investors’ funds are deployed in a portfolio of securities by the fund manager. Thevalue of these investments keeps changing as the market price of the securities change.Since investors are free to enter and exit the fund at any time, it is essential that themarket value of their investments is used to determine the price at which such entry andexit will take place. The net assets represent the market value of assets, which belong tothe investors, on a given date.
  • 53. Net Asset Value or NAV of a mutual fund is the value of one unit of investment in thefund, in net asset terms.NAV = Net Assets of the scheme / Number of Units Outstanding Where Net Assets arecalculated as:-(Market value of investments + current assets and other assets + Accruedincome – current liabilities and other liabilities – less accrued expenses) / No. of UnitsOutstanding as at the NAV date NAV of all schemes must be calculated and published atleast weekly for closed-end schemes and daily for open-end schemes.The major factors affecting the NAV of a fund are. • Sale and purchase of securities • Sale and repurchase of units • Valuation of assets • Accrual of income and expenses SEBI requires that the fund must ensure that repurchase price is not lower than 93% of NAV (95% in the case of a closed-fund). On the other side, a fund may sell new units at a price that is different from the NAV, but the sale price cannot be higher than 107 % of NAV. Also the difference between the repurchase price and the sale price of the unit is not permitted to exceed 7% of the sale price.Measuring Mutual Fund Performance:We can measure mutual fund’s performance by different method:• Absolute Return Method:Percentage change in NAV is an absolute measure of return, which finds the NAVappreciation between two points of time, as a percentage.e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 12 months then Absolutereturn = (22 – 20)/20 X 100 =10%
  • 54. • Simple Annual Return Method :Converting a return value for a period other than one year, into a value for one year, iscalled as annualisation In order to annualize a rate, we find out what the return wouldbe for a year, if the return behaved for a year, in the same manner it did, for any otherfractional period .E .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 monthsthen Annual Return = (22 – 20) /20 X 12/6 X 100 = 20%• Total Return Method :The total return method takes into account the dividends distributed by the mutual fund,and adds it to the NAV appreciation, to arrive at returns .Total Return =(Dividenddistributed + Change in NAV)/ NAV at the start X 100e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months if in betweendividend of Rs 4 has then Total Return = {4 + (22 – 20)}/20 X 100 = 30%• Total Return when dividend is reinvestedThis method is also called the return on investment (ROI) method. In this method, thedividends are reinvested into the scheme as soon as they are received at the thenprevailing NAV (ex-dividend NAV).= ((Value of holdings at the end of the period/ valueof the holdings at the beginning) – 1)*100E.g. An investor buys 100 units of a fund at Rs. 10.5 on January 1, 2007. On June 30,2007 he receives dividends at the rate of 10%. The ex-dividend NAV was Rs. 10.25. OnDecember 31, 2007, the fund’s NAV was Rs. 12.25. Value of holdings at the beginningperiod= 10.5*100= 1050 Number of units re-invested = 100/10.25 = 9.756 End periodvalue of investment = 109.756*12.25 = 1344.51 Rs. Return on Investment =((1344.51/1050)-1)*100 = 28.05%• Compounded Average Annual Return Method:
  • 55. This method is basically used for calculating the return for more than 1 year. In thismethod return is calculated with the following formula: A = P X (1 + R / 100) N WhereP = Principal invested A = maturity value N = period of investment in years R =Annualized compounded interest rate in %R = {(Nth root of A / P) – 1} X 100E. g: Ifamount invested is Rs. 100 & in the end we get return of Rs. 200 & period of investmentis 10 years then annualized compounded return is 200 = 100 (1 + R / 100) 10Rate = 7.2%RETURNS:Returns have to be studied along with the risk. A fund could have earned higher returnthan the benchmark. But such higher return may be accompanied by high risk.Therefore, we have to compare funds with the bench marks, on a risk adjusted basis.William Sharpe created a metric for fund performance, which enables the ranking offunds on a risk adjusted basis.Sharpe Ratio = Risk Premium Funds Standard Deviation Treynor Ratio = Risk Premium Funds BetaRisk Premium = Difference between the Fund’s Average return and Risk free return ongovernment security or treasury bill over a given period .LIQUIDITY:Most of the funds being sold today are open-ended. That is, investors can sell theirexisting units, or buy new units, at any point of time, at prices that are related to theNAV of the fund on the date of the transaction. Since investors continuously enter and
  • 56. exit funds, funds are actually able to provide liquidity to investors, even if the underlyingmarkets, in which the portfolio is invested, may not have the liquidity that the investorseeks.EXPENSE RATIO:Expense ratio is defined as the ratio of total expenses of the fund to the average netassets of the fund. Expense ratio can actually understate the total expenses, becausebrokerage paid on transactions of a fund are not included in the expenses. According tothe current SEBI norms, brokerage commissions are capitalized and included in the costof the transactions.Expense ratio = Total Expenses Average Net AssetsCOMPOSITION OF THE PORTFOLIO:Credit quality of the portfolio is measured by looking at the credit ratings of theinvestments in the portfolio .Mutual Fund fact sheets show the composition of theportfolio and the investments in various asset classes overtime.Portfolio turnover rate is the ratio of lesser of asset purchased or sold by funds in themarket to the net assets of the fund.If Portfolio ratio is 100% means portfolio has been changed fully. When Portfolio ratiois high means expense ratio is high.Portfolio Ratio = Total Sales & Purchase Net Assets of fundIn order to meaningfully compare funds some level of similarity in the following factorshas to be ensured. • Size of the funds • Investment objective
  • 57. • Risk profile • Portfolio composition • Expense ratios Fund evaluation against benchmark:Funds can be evaluated against some performance indicators which are known asbenchmarks. There are 3 types of benchmarks:  Relative to market as whole  Relative to other comparable financial products  Relative to other mutual funds Relative to market as whole:There are different ways to measure the performance of fund w.r.t market asEquity Funds• Index Fund – An Index fund invests in the stock comprising of the index in thesame ratio. This is a passive management style.For example,Market Index Fund - BSE SensexNifty Index Fund – NIFTYThe difference between the return of this fund and its index benchmark can be explainedby “TRACKINGERROR”.• Active Equity Funds:The fund manager actively manages this fund. To evaluate performance in such case wehave to select an appropriate benchmark.Large diversified equity fund - BSE 100
  • 58. Sector fund - Sectoral Indices• Debt Funds :Debt fund can also be judged against a debt market index e.g. I-BEX
  • 59. Table 1.3
  • 60. Table 1.4TREATMENT FOR THE INVESTORS (UNITHOLDERS)Tax benefits of investing in the Mutual FundAs per the taxation laws in force as at the date of the Offer Document, some broadincome tax implications of investing in the units of the Scheme are stated below. Theinformation so stated is based on the Mutual Funds understanding of the tax laws inforce as of the date of the Offer Document, which have been confirmed by its auditors.The information stated below is only for the purposes of providing general informationto the investors and is neither designed nor intended to be a substitute for professionaltax advice. As the tax consequences are specific to each investor and in view of thechanging tax laws, each investor is advised to consult his or her or its own tax consultantwith respect to the specific tax implications arising out of his or her or its participation inthe Scheme .Implications of the Income-tax Act, 1961 as amended by the Finance Act,2006To the Unit holders(a.) Tax on Income In accordance with the provisions of section 10(35)(a) of the Act,income received by all categories of unit holders in respect of units of the Fund will beexempt from income-tax in their hands. Exemption from income tax under section10(35) of the Act would, however, not apply to any income arising from the transfer ofthese units.(b.) Tax on capital gains: As per the provisions of section 2(42A) of the Act, a unit of aMutual Fund, held by the investor as a capital asset, is considered to be a short-termcapital asset, if it is held for 12 months or less from the date of its acquisition by the unitholder. Accordingly, if the unit is held for a period of more than 12 months, it is treatedas a long-term capital assetComputation of capital gain Capital gains on transfer of units will be computed aftertaking into account the cost of their acquisition. While calculating long-term capitalgains, such cost will be indexed by using the cost inflation index notified by theGovernment of India. Individuals and HUFs, are granted a deduction from total income,
  • 61. under section 80C of the Act upto Rs. 100,000, in respect of specified investments madeduring the year (please also refer paragraph d).Long-term capital gainsAs per Section 10(38) of the Act, long-term capital gains arising from the sale of unit ofan equity oriented fund entered into in a recognized stock exchange or sale of such unitof an equity oriented fund to the mutual fund would be exempt from income-tax,provided such transaction of sale is chargeable to securities transaction tax.Pursuant to an amendment made in the Finance Act, 2006, effective 1April 2006,companies would be required to include such long term capital gains in computing thebook profits and minimum alternated tax liability under section 115JB of the Act.Short -term capital gainsAs per Section 111A of the Act, short-term capital gains from the sale of unit of anequity oriented fund entered into in a recognized stock exchange or sale of such unit ofan equity oriented fund to the mutual fund would be taxed at 10 per cent, provided suchtransaction of sale is chargeable to securities transaction tax.The said tax rate would be increased by a surcharge of:- 10 per cent in case of non-corporate Unit holders, where the total income exceedsRs.1,000,000,- 10 per cent in case of resident corporate Unit holders, and- 2.5 per cent in case of non-resident corporate unit holders irrespective of the amount oftaxable income.Further, an additional surcharge of 2 per cent by way of education cess would becharged on amount of tax inclusive of surcharge.In case of resident individual, if the income from short term capital gains is less than themaximum amount not chargeable to tax, then there will be no tax payable.Further, in case of individuals/ HUFs, being residents, where the total income excludingshort-term capital gains is below the maximum amount not chargeable to tax1, then thedifference between the current maximum amount not chargeable to tax and total income
  • 62. excluding short-term capital gains, shall be adjusted from short-term capital gains.Therefore only the balance short term capital gains will be liable to income tax at the rateof 10 percent plus surcharge, if applicable and education cess.Non-residentsIn case of non-resident unit holder who is a resident of a country with which India hassigned a Double Taxation Avoidance Agreement (which is in force) income tax ispayable at the rates provided in the Act, as discussed above, or the rates provided in thesuch agreement, if any, whichever is more beneficial to such non-resident unit holder.Investment by MinorsWhere sale / repurchase is made during the minority of the child, tax will be levied oneither of the parents, whose income is greater, where the said income is not covered bythe exception in the proviso to section 64(1A) of the Act. When the child attainsmajority, such tax liability will be on the child.Losses arising from sale of unitsAs per the provisions of section 94(7) of the Act, loss arising on transfer of units, whichare acquired within a period of three months prior to the record date (date fixed by theFund for the purpose of entitlement of the unit holder to receive income from units) andsold within a period of nine months after the record date, shall not be allowed to theextent of income distributed by funds in respect of such units.
  • 63. SEBI REGULATIONS:• As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors.• SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market.• The regulations were fully revised in 1996 and have been amended thereafter from time to time.• SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors.• All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI.• SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors.• Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme.• Further SEBI Regulations, inter-alia, stipulate that MFs cannot guarantee returns in any scheme and that each scheme is subject to 20 : 25 condition [i.e. minimum
  • 64. 20 investors per scheme and one investor can hold more than 25% stake in the corpus in that one scheme]. • Also SEBI has permitted MFs to launch schemes overseas subject various restrictions and also to launch schemes linked to Real Estate, Options and Futures, Commodities, etcASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI):With the increase in mutual fund players in India, a need for mutual fund association inIndia was generated to function as a non-profit organization. Association of MutualFunds in India (AMFI) was incorporated on 22nd August, 1995. AMFI is an apex bodyof all Asset Management Companies (AMC) which has been registered with SEBI. Tilldate all the AMCs are that have launched mutual fund schemes are its members. Itfunctions under the supervision and guidelines of its Board of Directors. Association ofMutual Funds India has brought down the Indian Mutual Fund Industry to a professionaland healthy market with ethical lines enhancing and maintaining standards. It follows theprinciple of both protecting and promoting the interests of mutual funds as well as theirunit holders.The Objectives of Association of Mutual Funds in India: • The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The objectives are as follows: • This mutual fund association of India maintains high professional and ethical standards in all areas of operation of the industry. It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association.
  • 65. • AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry. • Associations of Mutual Fund of India do represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. • It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. • AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds. • At last but not the least association of mutual fund of India also disseminate information’s on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.AMFI Publications: AMFI publish mainly two types of bulletin. One is on the monthlybasis and the other is quarterly. These publications are of great support for the investorsto get intimation of the knowhow of their parked money.
  • 66. CHAPTER 2 RESEARCHMETHODOLOGY
  • 67. OBJECTIVES • To study the benefits available from Mutual Fund investment. • To give an idea of the types of schemes available. • To analyze about the market trends of Mutual Fund investment. • To study some popular mutual fund schemes. • Observe the fund management process of mutual funds. • Explore the recent developments in the mutual funds in India. • To give an idea about the regulations of mutual fundsMethodologyThe technique deployed to analyze and interpret the data for the purpose of hitting thetarget objectives plays a crucial role. The effective research technique has a significantcontribution for effective objective achievement. Throughout this project I have blankedsome of the questions placed in the questionnaire and the secondary data gatheredDeveloping a Research plan:A proper plan was developed and finalized and decision regarding data sources, researchsampling plan was designed. The research was exploratory as well as conclusive in
  • 68. nature and the database was gathered through secondary and primary sources in order toachieve the objective of the study.Type of Research methods:The research technique used for the study involve following two methods:1.) Exploratory Research: The exploratory research was used to search the secondaryand primary database in form of survey of the customers dealing with various mutualfund companies with the help of questionnaire. The hypothesis for the research has beengenerated in the following manner:- Survey of Individuals2.) Conclusive research: The database for the research has been conductedsystematically; and its observations and analysis has been done as per the researchobjectives.Sample Design:- Sample Size: The Total sample size was 30Sampling Method: - The study is based on the non-probability sampling and whereinconvenience sampling was used to collect the data by picking out people in the mostconvenient and fastest way to immediately get their reactions.Research Type:The research types used for the above mentioned research methods are as follows:AnalyticalThe analytical research instruments include surveys and fact-findings and enquire ofdifferent kinds. As it is a data base project, analytical research is done to make facts andinformation already available, analyze these to make critical evaluation.
  • 69. EmpiricalEmpirical research relies on experience/observation. This is a data base research, comingup with conclusion.Data Sources:Database serves as a base for concluding any type of research. It is necessary to knowwhich type of data is relevant for the present research. As the present study is a literaturesurvey, secondary data plays a crucial role in concluding the project. While secondarydata are easy to measure and quantify, relatively easy to assign money value, objectivelybased, a common measure of organizational performance and very credible, the primarydata on the other hand are difficult to measure or quantify directly, difficult to assignmoney value in absolute term, subjective, less creditable as a performance measure andusually behaviorally oriented. • Primary data source • Secondary data source1.)Sources of primary data were feedback of the questionnaire from the investors as wellas non-investors in various mutual funds, the person authorize for selling of mutualfunds and managers of various banks having their mutual fund schemes.2.) Secondary data sources are those which have already been passed through thestatistical process. In the present study secondary data is used to from the literaturereviews of various banks.
  • 70. CHAPTER 3 DATA ANALYSIS &INTERPRETATION
  • 71. Ques 1.) Are you conventional of making investments? Graph 3.1INTERPRETATION:According to this chart out of 30 investors of Delhi mostly conventional of makinginvestment i.e. 53% and others are not i.e. 47%.
  • 72. Ques 2.) Are you planning to invest in future? Graph 3.2INTERPRETATIONAccording to this chart out of 30 investors of Delhi majority of the investors areplanning to invest in near future i.e. 87% and very few are not eager in investments i.e.13%.
  • 73. Ques 3.) What kind of investment you prefer the most? Graph 3.3
  • 74. INTERPRETATION From above graph it can be inferred that of 30, people have invested in fixed deposit19%, 9% in insurance, 16% in mutual funds, 19% in real estate, 12% in commodity,12% in equity, and 13% in gold.Ques 4.) From the following, which Investment option do you think has good All-round capacity performing ability? Graph 3.4INTERPRETATION
  • 75. Out of 30 investors, they found that stock has the most all round investment performingability i.e. 40%, than mutual funds 27%, than real estate 20% and finally money market13%.Ques 5.) While investing your money factor you prefer the most? Graph 3.5INTERPRETATIONOut of 30 investors, 7 people prefer to invest where there is low risk, 15 prefer to investwhere there is high return and remaining 8 prefer easy liquidity.
  • 76. Ques 6.) Have you ever invested in mutual fund or are you aware about mutualfunds? Graph 3.6INTERPRETATION
  • 77. From the above chart it is inferred that 63% of the people are aware of mutual funds andits operations and 37% are not aware of mutual funds and its operations.Ques 7.) Where do you find yourself as mutual fund investor? Graph 3.7
  • 78. INTERPRETATIONFrom the above chart it can be inferred that 60% of the investors have partial knowledgeof mutual funds and its operations, whereas 13% are fully aware, 20% are totallyignorant and 7% are aware of only specific scheme of the 30 respondents.Ques 8.) What are the factors that attract you to invest in mutual fund? Graph 3.8
  • 79. INTERPRETATIONOut of the 30 investors, 33% invested to get tax benefit, 46% invested to get goodreturns, 8% invested to get the professional management of the fund managers and 13%invested because of other specific reasons.Ques 9.) What is your expected rate of return on Investments in a year? Graph 3.9
  • 80. INTERPRETATIONOut of the 30 investors the expected rate of return upto 10% were 9, 10-15% were of 10,15-20% were of 5 and above 20% were of 6 investors.Ques 10.) How do you rate the risk taking ability? Graph 3.10
  • 81. INTERPRETATIONFrom the above chart it can be inferred that the risk bearing ability of the investors, outof 30 investors 53% are medium risk takers, 34% are low risk takers and 13% can bearhigh risk.Ques 11.) How do you rate your experience with Mutual Funds?
  • 82. Graph 3.11INTERPRETATIONFrom the above chart it can be interpreted that experience of the investors was 7% poor,27% average, 46% good and 20% excellent of the 30 respondents.
  • 83. CHAPTER 4 FINDINGS & CONCLLUSIONFindings
  • 84.  In Delhi the age groups of 20-25 were more in numbers. The second most investors were in the age group of 30-35 and least were in the age group of above 40. In Delhi most of the investors were graduates or post graduates. Investors below high school were very few in numbers. In occupation group most of the investors were employed and very few of them were students or unemployed. In family income group , between Rs. 1,50,000-5,00,000 were more in numbers, the second most were in the group of 5,00,000-10,00,000, and least were in the group of 10,00,000 and above. About all respondents had a savings A/c in the bank, 75% invested in fixed deposits, only 25% invested in mutual fund. Mostly respondents preferred high return while investment, the second most preferred low risk and least preferred was liquidity. Only 63% respondents were aware of the mutual fund and its operations and 37% are not. Among 30 respondents 27% found mutual fund has all round investment performing capability, 40% found stocks, 20% real estate and 13% money market. Among 30 respondents 30% expected rate of return to be upto 10%, 33% expected it to be 10-15%, 17% expected it to 15-20% and 20% expected it to be more than 20%. 87% of the investors wanted to invest in near future and only 13% were not of making investment. Out of the 30 investors, 33% invested to get tax benefit, 46% invested to get good returns, 8% invested to get the professional management of the fund managers and 13% invested because of other specific reasons CONCLUSION
  • 85. Mutual Funds now represent perhaps most appropriate investment opportunity for mostinvestors. As financial markets become more sophisticated and complex, investors needa financial intermediary who provides the required knowledge and professional expertiseon successful investing. As the investor always try to maximize the returns and minimizethe risk. Mutual fund satisfies these requirements by providing attractive returns withaffordable risks. The fund industry has already overtaken the banking industry, morefunds being under mutual fund management than deposited with banks. With theemergence of tough competition in this sector mutual funds are launching a variety ofschemes which caters to the requirement of the particular class of investors. Risk takersfor getting capital appreciation should invest in growth, equity schemes. Investors whoare in need of regular income should invest in income plans.The stock market has been rising for over three years now. This in turn has not onlyprotected the money invested in funds but has also helped to grow these investments.This has also instilled greater confidence among fund investors who are investing moreinto the market through the MF route than ever before.Mutual funds like Reliance India mutual funds, SBI mutual funds, and LIC mutual fundprovide major benefits to a common man who wants to make his life better thanprevious. India’s largest mutual fund, UTI, still controls nearly 80 per cent of the market.Also, the mutual fund industry as a whole gets less than 2 per cent of household savingsagainst the 46 percent that go into bank deposits.Some fund managers say this only indicates the sectors potential."If mutual fundssucceed in chipping away at bank deposits, even a triple digit growth is possible over thenext few years.
  • 86. CHAPTER 5LIMITATIONS
  • 87. LIMITATIONS • Time and money are critical factors limiting this study. • The data provided by the prospects may not be 100% correct as they too have their limitations. • The study is limited to selected mutual fund schemes.
  • 88. CHAPTER 6 SUGGESTIONS ANDRECOMMENDATIONS
  • 89. Suggestions and recommendation• The most vital problem spotted is of ignorance. Investor should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investor should be made to realize that ignorance is no longer bliss and what they are losing by not investing.• Mutual fund offers a lot of benefit which no other single option could offer. But most of the people are not aware of what a mutual fund is? Then only see it is just another option. So the advisors try to change their mind. The advisors should target more and more young investors. Young investors as well as the person at the height of their career would like to for advisors due to lack of time and expertise.• Mutual fund company need to give the training of individual financial advisor about the fund/scheme and its objectives, because they are the main source to influence the investors.• Before making any investment financial advisors should first enquire about the risk tolerance of the investor/customer, their need and time(how long they want to invest). By considering these three things they can take the customers into considerations.• Younger people under age 35 are a new customer group. So making greater efforts with younger customers who show some interest in investing should pay off.• Customers with graduate level education are easier to sell to and there is large untapped market there. To succeed however, advisors must provide sound advise and high quality.
  • 90. • Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies very recently i n t h e industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.
  • 91. BIBLIOGRAPHY
  • 92. BIBLIOGRAPHYBOOKS: 1. Nataragan and Gordan “Financial Services and Markets” Himalaya Publishing House, Mumbai (Edition 2000) 2. Clifford Gomez “Financial Markets, Institutions and Financial services” Prentice- Hall of -India Pvt. Ltd. (Edition 2008) 3. Ponithavatih Pandian “Security Analysis and Portfolio -Management” Vikas Publishing House Pvt. Limited (Edition 2009) 4. A.K Vashisht and R.K Gupta “Investment Management and Stock market” Deep & Deep publications Pvt. Ltd. (Edition 2005) 5. S. Kevin “Security Analysis and Portfolio Management” Prentice- Hall of -India Pvt. Ltd. (Edition 2003) 6. Donald E. Fisher, Ronald J. Jordan “Security Analysis and Portfolio- Management” Pearson Prentice hall (Edition 2006)  News Papers- The Economic Times and Business line  Magazines:- Business World India Today and Outlook Money  Television Channel (CNBC)  Mutual funds Handbook Web sites  WWW.IIFL.COM  WWW.SBIMF.COM  WWW.MONEYCONTROLINDIA.COM  WWW.AMFINDIA.COM
  • 93.  WWW.MUTUALFUNDSINDIA.COM WWW.INDIAMART.COM WWW.BSEINDIA.COM WWW.NSEINDIA.COM
  • 94. APPENDICES
  • 95. QUESTIONNAIRE 1. Are you conventional of making investments? o YES o NO 2. Are you planning to invest in future? o Yes o No` 3. What kind of investment you prefer the most? Equity Mutual Fund Fixed Deposit Gold/ Sliver Real Estate PPF/PF Insurance 4. From the following, which Investment option do you think has good All- round capacity performing ability? Stock market Money market Mutual Fund Other (specify) 5. While investing your money, which factor you prefer the most? Liquidity Low risk High return Other(Specify) 6. Have you ever invested your money in mutual fund or are you aware about mutual funds? o Yes o No
  • 96. 7. Where do you find yourself as mutual fund investor? o Totally ignorant o Partial knowledge o Fully aware o Aware of only specific schemes 8. What are the factors that attract you to invest in mutual fund? Good returns Tax benefit/exemption Professional management Other(Specify) 9. What is your average annual income o Below 150000 o 150000-500000 o 500000-1000000 o Above 1000000 10. What is your expected rate of return on Investments in a year? o Up-to 10% o 10-15% o 15-20% o Above 20% 11. How do you rate the risk taking ability? o Low o Medium o Average o High 12. Do you think mutual fund is a safe investment?Low 1 2 3 4 5 High 13. Which other facilities would you like Mutual Funds to provide you with?________________________________________________________________________________________________________________________________________________________________________________________________________________________
  • 97. 14. Any Mutual Fund scheme you are satisfied with?________________________________________________________________________________________________________________________________________________________________________________________________________________________ 15. How do you rate your experience with Mutual Funds? o Poor o Average o Good o Excellent