A project on equity

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A project on equity

  1. 1. CONTENTS• ACKNOWLEDGEMENT 2• EXECUTIVE SUMMARY 3• CHAPTER 1 5  RATIONALE 5  OBJECTIVES 6  LITERATURE REVIEW 7• CHAPTER 2 30  SCOPE OF THE STUDY 30  TARGET POPULATION 30 1
  2. 2.  RESEARCH DESIGN 30  DATA COLLECTION 31  QUESTIONNAIRE DESIGN 31  SAMPLING 33  PROCEDURE FOR DATA COLLECTION 34• FINDINGS & ANALYSIS 51• INVESTOR SURVEY ANALYSIS 54• CONCLUSION 68• LIMITATIONS 69• QUESTIONNAIRE 70• BIBLIOGRAPHY 2
  3. 3. 73 3
  4. 4. ACKNOWLEDGEMENTOn the completion of this project I would like to take this opportunity as aplatform to thank all the people who helped me in this work and who madethis project a success. I express my heartfelt gratitude and thanks to Dr Sanjiv Mittalfor his guidance and support throughout this project. I am also thankful tohim for giving his suggestions and encouragement throughout the projectwork and helping me continuously at each and every stage 4
  5. 5. Executive Summary Each investment alternative has its own strengths and weaknesses. Someoptions seek to achieve superior returns (like equity), but withcorresponding higher risk. Other provide safety (like PPF) but at the expenseof liquidity and growth. Other options such as FDs offer safety and liquidity,but at the cost of return. Mutual funds seek to combine the advantages ofinvesting in arch of these alternatives while dispensing with theshortcomings.Indian stock market is semi-efficient by nature and, is considered as one ofthe most respected stock markets, where information is quickly and widelydisseminated, thereby allowing each security’s price to adjust rapidly in anunbiased manner to new information so that, it reflects the nearestinvestment value. And mainly after the introduction of electronic tradingsystem, the information flow has become much faster. But sometimes, indeveloping countries like India, sentiments play major role in pricemovements, or say, fluctuations, where investors find it difficult to predictthe future with certainty. Some of the events affect economy as a whole,while some events are sector specific. Even in one particular sector, somecompanies or major market player are more sensitive to the event. So, thenew investors taking exposure in the market should be well aware about themaximum potential loss, i.e. Value at risk. 5
  6. 6. It would be good to diversify one’s portfolio to include equity mutualfunds and stocks. The benefit of diversification are that while risk exposurefrom a particular asset may not be very high, it would also give theopportunity of participating in the party in the equity markets- which mayhave just begun- in a relatively safe manner(than investing directly intostock markets). Mutual funds are one of the best options for investors tochoose from. It must be realized that the performance of different fundsvaries time to time. Evaluation of a fund performance is meaningful when afund has access to an array of investment products in market. An investorcan choose from a variety of funds to suit his risk tolerance, investmenthorizon and objective. Direct investment in equity offers capital growth butat high risk and without the benefit of diversification by professionalmanagement offered by mutual funds. 6
  7. 7. Chapter 1RATIONALEIndia presents a vast potential for investment and is actively encouraging theplayers especially entrance of foreign players into the market. India is alsoone of the few markets in the world which offers high prospects for growthand earning potential in all areas of business. In the current market scenario where there is more expenditure thanone’s salary, inflation touching its high and fixed deposits going down dayby day, thus net rate of return on the investments being below the inflationrate. To meet these growing requirements, the investors need to invest hisdisposable income to reap short as well as long term benefits. Those who domake diverse investments are able to squeeze maximum benefits. The rationale behind undertaking this project is to understand theawareness and acceptance of various investment alternatives and to make acomparative study as which mode of equity investments are preferred byindividuals. That is direct equity or the mutual funds. 7
  8. 8. OBJECTIVES:• To make a comparison between direct investment in equity and investment through Mutual funds.• Study of select Mutual Funds schemes with the point of attractiveness to investors. 8
  9. 9. LITERATURE REVIEWInvestment avenues in India Savings form an important part of the economy of any nation. With thesavings invested in various options available to the people, the money actsas the driver for growth of the country. Indian financial scene too presents aplethora of avenues to the investors. Though certainly not the best or deepestof markets in the world, it has reasonable options for an ordinary man toinvest his savings. Banks are considered as the safest of all options, bankshave been the roots of the financial systems in India. Promoted as the meansto social development, banks in India have indeed played an important rolein the rural upliftment. For an ordinary person though, they have acted as thesafest investment avenue wherein a person deposits money and earnsinterest on it. The two main modes of investment in banks, savings accountsand fixed deposits have been effectively used by one and all. However, today the interest rate structure in the country is headedsouthwards, keeping in line with global trends. With the banks offering littleabove 9 percent in their fixed deposits for one year, the yields have comedown substantially in recent times. Add to this, the inflationary pressures ineconomy and one has a position where the savings are not earning. Theinflation is creeping up, to almost 8 percent at times, and this means that thevalue of money saved goes down instead of going up. This effectively marsany chance of gaining from the investments in banks. Just like banks, postoffices in India have a wide network. Spread across the nation, they offerfinancial assistance as well as serving the basic requirements of 9
  10. 10. communication. Among all saving options, Post office schemes have beenoffering the highest rates. Added to it is the fact that the investments are safewith the department being a Government of India entity. So, the two basicand most sought after features, such as - return safety and quantum ofreturns was being handsomely taken care of. Though certainly not the mostefficient systems in terms of service standards and liquidity, these have stillmanaged to attract the attention of small, retail investors. However, with thegovernment announcing its intention of reducing the interest rates in smallsavings options, this avenue is expected to lose some of the investors. Public Provident Funds act as options to save for the post retirementperiod for most people and have been considered good option largely due tothe fact that returns were higher than most other options and also helpedpeople gain from tax benefits under various sections. This option too islikely to lose some of its sheen on account of reduction in the rates offered.Another often-used route to invest has been the fixed deposit schemesfloated by companies. Companies have used fixed deposit schemes as ameans of mobilizing funds for their operations and have paid interest onthem. The safer a company is rated, the lesser the return offered has been thethumb rule. However, there are several potential roadblocks in these. First ofall, the danger of financial position of the company not being understood bythe investor lurks. The investors rely on intermediaries who more often thannot, don’t reveal the entire truth. Secondly, liquidity is a major problem withthe amount being received months after the due dates. Premature redemptionis generally not entertained without cuts in the returns offered and thoughthey present a reasonable option to counter interest rate risk (especiallywhen the economy is headed for a low interest regime), the safety of 10
  11. 11. principal amount has been found lacking. Many cases like the Kuber Groupand DCM Group fiascoes have resulted in low confidence in this option.The options discussed above are essentially for the risk-averse, people whothink of safety and then quantum of return, in that order. For the brave, it isdabbling in the stock market. Stock markets provide an option to invest in a high risk, high returngame. While the potential return is much more than 10-11 percent any of theoptions discussed above can generally generate, the risk is undoubtedly ofthe highest order. But then, the general principle of encountering greaterrisks and uncertainty when one seeks higher returns holds true. However, asenticing as it might appear, people generally are clueless as to how the stockmarket functions and in the process can endanger the hard-earned money.For those who are not adept at understanding the stock market, the task ofgenerating superior returns at similar levels of risk is arduous to say theleast. This is where Mutual Funds come into picture. Mutual Funds are essentially investment vehicles where people withsimilar investment objective come together to pool their money and theninvest accordingly. Each unit of any scheme represents the proportion ofpool owned by the unit holder (investor). Appreciation or reduction in valueof investments is reflected in net asset value (NAV) of the concernedscheme, which is declared by the fund from time to time. Mutual fundschemes are managed by respective Asset Management Companies (AMC).Different business groups/ financial institutions/ banks have sponsored theseAMCs, either alone or in collaboration with reputed international firms. 11
  12. 12. Several international funds like Alliance and Templeton are alsooperating independently in India. Many more international Mutual Fundgiants are expected to come into Indian markets in the near future.Investment alternatives in India • Non marketable financial assets: These are such financial assets which gives moderately high return but can not be traded in market.  Bank Deposits  Post Office Schemes  Company FDs  PPF • Equity shares: These are shares of company and can be traded in secondary market. Investors get benefit by change in price of share and dividend given by companies. Equity shares represent ownership capital. As an equity shareholder, a person has an ownership stake in the company. This essentially means that the person has a residual interest in income and wealth of the company. These can be classified into following broad categories as per stock market:  Blue chip shares  Growth shares  Income shares  Cyclic shares  Speculative shares 12
  13. 13. • Bonds: Bonds are the instruments that are considered as a relatively safer investment avenues.  G sec bonds  GOI relief funds  Govt. agency funds  PSU Bonds  RBI BOND  Debenture of private sector co.• Money market instrument: By convention, the term "money market" refers to the market for short-term requirement and deployment of funds. Money market instruments are those instruments, which have a maturity period of less than one year.  T-Bills  Certificate of Deposit  Commercial Paper• Mutual Funds- A mutual fund is a trust that pools together the savings of a number of investors who share a common financial goal. The fund manager invests this pool of money in securities, ranging from shares, debentures to money market instruments or in a mixture of equity and debt, depending upon the objective of the scheme. The different types of schemes are  Balanced Funds  Index Funds  Sector Fund  Equity Oriented Funds 13
  14. 14. • Life insurance: Now-a-days life insurance is also being considered as an investment avenue. Insurance premiums represent the sacrifice and the assured sum the benefit. Under it different schemes are:  Endowment assurance policy  Money back policy  Whole life policy  Term assurance policy• Real estate: One of the most important assets in portfolio of investors is a residential house. In addition to a residential house, the more affluent investors are likely to be interested in the following types of real estate:  Agricultural land  Semi urban land  Farm House• Precious objects: Investors can also invest in the objects which have value. These comprises of:  Gold  Silver  Precious stones  Art objects• Financial Derivatives: These are such instruments which derive their value from some other underlying assets. It may be viewed as a side bet on the asset. The most important financial derivatives from the point of view of investors are:  Options  Futures 14
  15. 15. Direct equity vs. mutual funds 1) Equity share/Direct investment 2) Mutual funds, a brief introduction 3) Equity Fund 4) Difference between direct equity and mutual fund 15
  16. 16. 1) Equity share/Direct investmentEquity shares: These are shares of company and can be traded in secondarymarket. Investors get benefit by change in price of share or dividend givenby companies. Equity shares represent ownership capital. As an equityshareholder, a person has an ownership stake in the company. Thisessentially means that the person has a residual interest in income andwealth of the company. These can be classified into following broadcategories as per stock market:  Blue chip shares- Shares of large, well established, financially strong companies with an impressive record of earnings and dividends.  Growth shares-Shares of companies that have fairly entrenched positions in a growing market and which enjoy an above average rate of growth as well as profitability.  Income shares-Share of companies that have fairly stable operations, relative limited growth opportunities, and high dividend payout ratios.  Cyclic shares – Share of companies that have a pronounced cyclicality in their operations.  Defensive shares- Shares of companies that are relatively unaffected by the ups and downs in general business conditions.  Speculative shares- Shares of companies that tend to fluctuate widely because there is a lot of speculative trading in them. 16
  17. 17. 2) Mutual Funds: A brief introduction A Mutual Fund is a trust that pools the savings of a number of investorswho share a common financial goal. The money thus collected is investedby the fund manager in different types of securities depending upon theobjective of the scheme. These could range from shares to debentures tomoney market instruments. The income earned through these investmentsand the capital appreciations realized by the schemes are shared by its unitholders in proportion to 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 portfolio at arelatively low cost. The small savings of all the investors are put together toincrease the buying power and hire a professional manager to invest andmonitor the money. Anybody with an investible surplus of as little as a fewthousand rupees can invest in Mutual Funds. Each Mutual Fund scheme hasa defined investment objective and strategy. 17
  18. 18. INCEPTION OF MUTUAL FUNDS IN INDIAThe history of mutual funds in India can be divided into 5 important phases:1963-1987The Unit Trust of India was the sole player in the industry. Created by anAct of Parliament in 1963, UTI launched its first product, the Unit Scheme1964, which is even today the single largest mutual fund scheme. UTIcreated a number of products such as monthly income plans, children plans,equity-oriented schemes and off shore funds during this period. UTImanaged assets of Rs.6,700 crores at the end of this phase.1987-1993In 1987 public sector banks and financial institutions entered the mutualfund industry. SBI mutual fund was the first non- UTI fund to be set up in1987. Significant shift of investors from deposits to mutual fund industryhappened during this period. Most funds were growth-oriented closed-endedfunds. By the end of this period, assets under UTI’s management grew toRs.38,247 crores and public sector funds managed Rs.8,750 crores.1993-1996In 1993, the mutual fund industry was open to private sector players, bothIndian and foreign. SEBI’s first set of regulations for the industry wereformulated in 1993, and substantially revised in 1996.Signifficantinnovations in servicing, product design and information disclosurehappened in this phase, mostly initiated by private players. 18
  19. 19. 1996-1999The implementation of the new SEBI regulations and the restructuring of themutual fund industry led to rapid asset growth. Bank mutual funds wererecast according to the SEBI recommended structure, and the UTI cameunder voluntary SEBI supervision.1999-2002This phase was marked by the rapid growth in the industry, and significantincrease in market shares of private sector players. Assets crossedRs.1,00,000 crore .The tax break offered to mutual fund in 1999 createdarbitrage opportunities for a number of institutional players. Bond funds andLiquid funds registered the highest growth in this period, accounting fornearly 60% of the assets. UTI’s share of the industry dropped to nearly 50%. 19
  20. 20. Types of mutual funds:Open ended schemesAn open-end fund is one that is available for subscription all through theyear. This type of Mutual funds does not have a predefined maturity period.The key feature is liquidity. Direct dealing is another noticeable feature. Onecan easily buy and sell units at Net Asset Value related prices.Close ended schemesHere maturity period is predefined usually ranging from 2 to 15 years.Investment can be done directly in the scheme at the time of the initial issueand units can be brought and sold whenever units are listed in the stockexchanges. 20
  21. 21. Types of Schemes 1. Equity/growth oriented Funds: Equity schemes are those that invest predominantly in equity shares of companies. An equity scheme seeks to provide returns by way of capital appreciation. As a class of assets, equities are subject to greater fluctuations. Hence, the NAVs of these schemes will also fluctuate frequently. Equity schemes are more volatile, but offer better returns. 2. Balanced Funds: The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. 3. Index Funds: An Index Fund is a mutual fund that tries to mirror a market index, like Nifty or BSE Sensex , as closely as possible by investing in all the stocks that comprise that index in proportions equal to the weight age of those stocks in the index. 4. Income/debt oriented Funds: These schemes invest mainly in income-bearing instruments like bonds, debentures, government securities, commercial paper, etc. These instruments are much less volatile than equity schemes. Their volatility depends essentially on the health of the economy e.g., rupee depreciation, fiscal deficit, inflationary pressure. Performance of such schemes also depends on bond ratings. 21
  22. 22. 3) Equity FundsAs explained earlier, such funds invest only in stocks, the riskiest of assetclasses. With share prices fluctuating daily, such funds show volatileperformance, even losses. However, these funds can yield great capitalappreciation as, historically, equities have outperformed all asset classes. Atpresent, there are four types of equity funds available in the market. In theincreasing order of risk, these are: a) Index fundsThese funds track a key stock market index, like the BSE (Bombay StockExchange) Sensex or the NSE (National Stock Exchange) S&P CNX Nifty.Hence, their portfolio mirrors the index they track, both in terms ofcomposition and the individual stock weightages. For instance, an indexfund that tracks the Sensex will invest only in the Sensex stocks. The idea isto replicate the performance of the benchmarked index to near accuracy.Index funds don’t need fund managers, as there is no stock selectioninvolved.Investing through index funds is a passive investment strategy, as a fund’sperformance will invariably mimic the index concerned, barring a minor"tracking error". Usually, there’s a difference between the total returns givenby a stock index and those given by index funds benchmarked to it. Termedas tracking error, it arises because the index fund charges management fees,marketing expenses and transaction costs (impact cost and brokerage) to itsunit holders. So, if the Sensex appreciates 10 per cent during a particular 22
  23. 23. period while an index fund mirroring the Sensex rises 9 per cent, the fund issaid to have a tracking error of 1 per cent. To illustrate with an example, assume you invested Rs 1,000 in an indexfund based on the Sensex on 1 April 1978, when the index was launched(base: 100). In August, when the Sensex was at 3.457, your investmentwould be worth Rs 34,570, which works out to an annualised return of 17.2per cent. A tracking error of 1 per cent would bring down your annualisedreturn to 16.2 per cent. Obviously, lower the tracking error, the better are theindex funds. b) Diversified fundsSuch funds have the mandate to invest in the entire universe of stocks.Although by definition, such funds are meant to have a diversified portfolio(spread across industries and companies), the stock selection is entirely theprerogative of the fund manager. This discretionary power in the hands ofthe fund manager can work both ways for an equity fund. On the one hand,astute stock-picking by a fund manager can enable the fund to delivermarket-beating returns; on the other hand, if the fund manager’s pickslanguish, the returns will be far lower. Returns from a diversified funddepend a lot on the fund manager’s capabilities to make the right investmentdecisions. A portfolio concentrated in a few sectors or companies is a highrisk, high return proposition. 23
  24. 24. c) Tax-saving fundsAlso known as ELSS or equity-linked savings schemes, these funds offerbenefits under Section 88 of the Income-Tax Act. So, on an investment ofup to Rs 10,000 a year in an ELSS, one can claim a tax exemption of 20 percent from his taxable income. One can invest more than Rs 10,000, but thenhe won’t get the Section 88 benefits for the amount in excess of Rs 10,000.The only drawback to ELSS is that one has to lock into the scheme for threeyears.In terms of investment profile, tax-saving funds are like diversified funds.The one difference is that because of the three year lock-in clause, tax-saving funds get more time to reap the benefits from their stock picks, unlikeplain diversified funds, whose portfolios sometimes tend to get dictated byredemption compulsions. d) Sector fundsThe riskiest among equity funds, sector funds invest only in stocks of aspecific industry, say IT or FMCG. A sector fund’s NAV will zoom if thesector performs well; however, if the sector languishes, the scheme’s NAVtoo will stay depressed. Barring a few defensive, evergreen sectors likeFMCG and pharma, most other industries alternate between periods ofstrong growth and bouts of slowdowns. The way to make money from sectorfunds is to catch these cycles–get in when the sector is poised for anupswing and exit before it slips back. 24
  25. 25. 4) Difference between direct equity and mutual funds A mutual fund is the ideal investment vehicle for today’s complex andmodern financial scenario. Markets for equity shares, bonds and other fixedincome instruments, real estate, derivatives and other assets have becomemature and information driven. Price changes in these assets are driven byglobal events occurring in faraway places. A typical individual is unlikely tohave the knowledge, skills, inclination and time to keep track of events,understand their implications and act speedily. An individual also finds itdifficult to keep track of ownership of his assets, investments, brokeragedues and bank transactions etc. Investing in Mutual Fund is convenient because of two basic reasons. Allinvestment carry risks, especially equity investment that bears larger risks,their returns are more volatile and uneven. To cut down the risk one needs toput money in several instruments rather than in one or two products. AMutual Fund can effectively spread its investments across various sectors ofthe economy and amongst several products. Risk diversification is the Key.Secondly ’where to invest and where not to’, is a specialized business. Onemay not have the expertise, time and resources of a well-managed fund. 25
  26. 26. ADVANTAGES OF A MUTUAL FUND 1. Professional Management Qualified professionals manage money, but they are not alone. They have a research team that continuously analyses the performance and prospects of companies. They also select suitable investments to achieve the objectives of the scheme, so you see that it is a continuous process that takes time and expertise that will add value to investment. These fund managers are in a better position to manage investments and get higher returns. 2. Diversification The cliché, "don’t put all eggs in one basket" really applies to the concept of intelligent investing. Diversification lowers risk of loss by spreading money across various industries. It is a rare occasion when all stocks decline at the same time and in the same proportion. Sector funds will spread investment across only one industry and it would not be wise for portfolio to be skewed towards these types of funds for obvious reasons. 3. Choice of Schemes Mutual funds offer a variety of schemes that will suit investors needs over a lifetime. When they enter a new stage in life, all needed to do is sit down with investment advisor who will help to rearrange portfolio to suit altered lifestyle. 26
  27. 27. 4. Affordability A small investor may find that it is not possible to buy shares of larger corporations. Mutual funds generally buy and sell securities in large volumes that allow investors to benefit from lower trading costs. The smallest investor can get started on mutual funds because of the minimal investment requirements. One can invest with a minimum of Rs. 500 in a Systematic Investment Plan on a regular basis.5. Tax Benefits Investments held by investors for a period of 12 months or more qualify for Capital gains and will be taxed accordingly (10% of the amount by which the investment appreciated, or 20% after factoring in the benefit of cost indexation, whichever is lower). These investments also get the benefit of indexation.6. Liquidity With open-end funds, you can redeem all or part of investment any time you wish and receive the current value of the shares or the NAV related price. Funds are more liquid than most investments in shares, deposits and bonds and the process is standardized, making it quick and efficient so that you can get cash in hand as soon as possible. 27
  28. 28. 7. Rupee Cost Averaging Through using this concept of investing the same amount regularly, mutual funds give investor the advantage of getting the average unit price over the long-term. This reduces risk and also allows you to discipline self by actually investing every month or quarterly and not making sporadic investments.8. The Transparency of Mutual Funds The performance of a mutual fund is reviewed by various publications and rating agencies, making it easy for investors to compare one to the other. Once you are part of a mutual fund scheme, you are provided with regular updates, for example daily NAVs, as well as information on the specific investments made and the fund manager’s strategy and outlook of the scheme.9. Easy To Administer Mutual funds units in modern times are not issued in the form of certificates, with a minimum denomination rather they are issued as account statement switch a facility to hold units in fraction upto 4 decimal points.10.Highly Regulated The governing of mutual funds by SEBI ensures that the fund activities are carried out in the best interest of the investors. 28
  29. 29. DISADVANTAGES OF MUTUAL FUNDSThe following are some of the reasons which are deterrent to mutual fundinvestment: • Costs despite Negative Returns — Investors must pay sales charges, annual fees, and other expenses regardless of how the fund performs. And, depending on the timing of their investment, investors may also have to pay taxes on any capital gains distribution they receive — even if the fund went on to perform poorly after they bought shares. • Lack of Control — Investors typically cannot ascertain the exact make-up of a funds portfolio at any given time, nor can they directly influence which securities the fund manager buys and sells or the timing of those trades. • Price Uncertainty — with an individual stock, you can obtain real- time (or close to real-time) pricing information with relative ease by checking financial websites or by calling your broker. You can also monitor how a stocks price changes from hour to hour — or even second to second. By contrast, with a mutual fund, the price at which you purchase or redeem shares will typically depend on the funds NAV, which the fund might not calculate until many hours after youve placed your order. In general, mutual funds must calculate their NAV at least once every business day, typically after the major U.S. exchanges close. 29
  30. 30. Some mutual fund schemes with the point of attractiveness to investors-Comparison of best performing mutual funds with index Equityschemes: Equity schemes are those that invest predominantly in equity shares ofcompanies. An equity scheme seeks to provide returns by way of capitalappreciation. As a class of assets, equities are subject to greater fluctuations.Hence, the NAVs of these schemes will also fluctuate frequently. Equityschemes are more volatile, but offer better returns. These can be furtherclassified into three types:1. Diversified Equity schemes:The aim of diversified equity funds is to provide the investor with capitalappreciation over a medium to long period (generally 2 – 5 years). The fundinvests in equity shares of companies from a diverse array of industries andbalances (or tries to) the portfolio so as to prevent any adverse impact onreturns due to a downturn in one or two sectors.2. Equity Linked Saving Schemes (ELSS):These schemes generally offer tax rebates to the investor under section 88 ofthe Income Tax law. These schemes generally diversify the equity risk byinvesting in a wider array of stocks across sectors. ELSS is usuallyconsidered a variant of diversified equity scheme but with a tax friendlyoffer 30
  31. 31. 3. Sectoral Fund/ Industry Specific schemes:Industry Specific Schemes invest only in the industries specified in the offerdocument. The investment of these funds is limited to specific industries likeInfoTech, FMCG, and Pharmaceuticals etc. These are ideal for investorswho have already decided to invest in particular sector or segment. SectoralFunds tend to have a very high risk-reward ratio and investors should becareful of putting all their eggs in one basket. 31
  32. 32. CHAPTER 2Scope of the studyGeographical scopeThe data for the research was collected from five zones of Delhi – namelyB1 Community Centre – Janak Puri, Pacific Mall, C.P., Nehru Place andM2K Rohini.Product scopeThe research was conducted to find out about the preference of the targetpopulation for Equity Diversified Mutual Funds and Direct Equity. Besidesthis the research was conducted to know about reasons for preferring mutualfunds and direct equity funds.Target PopulationThe target population mainly included service class people. Henceconvenient sampling was used in deciding on the target population.Research DesignFirst an exploratory research was conducted to get some insights about thetopic. Secondary data analysis was performed. It was followed byquestionnaire filling. Findings of the exploratory research were regarded asinput to further research. This research will be followed by descriptivedesign. 32
  33. 33. Data CollectionSecondary DataSecondary data was collected from various sources such as internet andfinancial magazines.Primary DataIn Primary data, structured questionnaire was made and the targetrespondents were asked to fill the questionnaire.Questionnaire DesignObjective was to make respondents little familiar with the context of thequestions. This was also aimed at collecting data about the sample profilethat’ll be subsequently analyzed so that the scope of the project is fullyexplored.Question 1 was aimed to check the awareness level of the respondent aboutvarious investment avenues.Question 2 was an open ended question intended to find out some morefactors which people consider important while investing.Question 3 was aimed to understand the most preferred mode of investment.Question 4 was designed to understand the types of mutual fund wherepeople have invested.Question 5 was designed to understand the importance of past returns inmaking decisions about various investment schemes. 33
  34. 34. Question 6 was designed to understand if returns were the only criteria forevaluating the performance.Question 7 was designed to understand the approach of people in makinginvestment.Question 8 was designed to find out what factors are considered importantby people who invest different investments.Question 9 was formulated to know the period of portfolio review done bypeople.Question 10 was put to find out the long term and short term investors.Question 11 was asked to find out how actively investors change theirportfolio.Question 12 was asked to compare the equity diversified mutual funds anddirect equity.Question 13 & 15 were asked to judge the factors why people prefer toinvest in Mutual Funds and Direct Equity.Question 14 was asked to find out the availability of information sources forvarious schemes. 34
  35. 35. Sampling • Sample Framework The sample framework consists of a people who have invested in any funds or investment schemes. • Sample Design The sample was taken using convenient sampling. • Sample size The sample size was around 50 respondents.Procedure for data collectionFor the purpose of primary data collection the target population wasadministered with a questionnaire which had both structured as well asunstructured questions. 35
  36. 36. SELECTION CRITERIA FOR SCHEMES:Selection of equity diversified funds are done here on the basis of theirReturn, risk , liquidity, affordability, entry-exit load, and performance overthe years. Also, 1. Only open ended funds are considered while choosing best equity related mutual funds. 2. Among growth and dividend schemes, only growth scheme has been taken so as to avoid repetition (as portfolio remains same for both the options) 3. Selection has been done on the basis of last 1 year performance. 36
  37. 37. Equity diversified funds The five funds I have chosen after comparing their performance vis-à-vis the other mutual funds in this category of funds are: Equity Diversified Asset Size NAV 1yr 2yr 3yr (Rs. cr.) (Rs./Unit)Magnum Global Fund (G) 1,361.77 42.49 13.4 56.6 61.7ICICI Pru Services Indus. (G) 465.98 15.66 31.7 -- --ICICI Pru Dynamic Plan (G) 1,962.93 65.16 17.8 58.7 48.0Reliance Growth Fund (G) 3,263.71 269.46 12.9 49.2 49.5Birla Frontline Equity (G) 147.76 51.37 23.4 48.7 35.3 As on April 19, 2007 37
  38. 38. SBI MAGNUM GLOBAL FUND 94 - GROWTHObjectiveAims at providing growth opportunities through investment in equities.Scheme Performance (%) as on Apr 17 , 200714 days 1 month 3 months 1 year 3 yrs* Inception*5.51 5.36 -8.76 14.5 61.54 13.38Top 10 Holdings as on Mar 30, 2007Company Nature Value (Cr.) %Term Deposit Debt 300 22.03Infotech Enterprises Limited EQ 59.1 4.34Havells India Ltd EQ 42.49 3.12Shree Cement Ltd EQ 42.08 3.09Thermax Limited EQ 35.27 2.59United Phosphorus Limited (New) EQ 34.59 2.54JaiPrakash Associates Ltd. EQ 34.04 2.5Dishman Pharmaceuticals & Chemicals EQ 31.87 2.34Crompton Greaves Ltd EQ 28.05 2.06Bharat Earth Movers Ltd EQ 27.51 2.02Mutual FundSBI Mutual Fund191, Maker TowerE, Cuffe ParadeMumbaiTel.-22180221,,Asset Management CompanySBI Funds Management Ltd.191, Maker Tower E Wing,Cuffe ParadeMumbai - 400005Tel.- 22180221,22180225RegistrarNA*Returns are annualizedEmail Address partnerforlife@sbimf.comNet Asset Value (Rs/Unit) 42.43 As On Apr 18, 2007 38
  39. 39. Fund InformationType of Scheme Open EndedNature of Scheme EquityInception Date Sep 30, 1994Face Value(Rs/Unit) 10Fund Size (Rs. in crores) 1361.77 on Mar 30, 2007Increase/Decrease since Feb 28, 2007 (Rs. in 131.56crores)Rolled Over To Open EndedMinimum Investment (Rs) 2000Purchase Redemptions DailyNAV Calculation Daily Amount Bet. 0 to 49999999 then Entry load isEntry Load 2.25%. and Amount greater than 50000000 then Entry load is 0%. If redeemed bet. 0 Months to 6 Months; and Amount Bet. 0 to 49999999 then Exit load is 1%.Exit Load and Amount greater than 50000000 then Exit load is 0%.Last Dividend Declared 24 % On Nov 22, 2004Top Industry Allocation as on Mar 30, 2007Housing & Construction 8.83%Computers - Software & Education 7.51%Banks 6.98%Electricals & Electrical Equipments 6.15%Pharmaceuticals 5.78%Cement 4.9%Engineering & Industrial Machinery 4.61%Steel 3.05%Diversified 3%Chemicals 2.54%Asset Allocation as on Mar 30, 2007Equity Debt Money Market64.32 22.03 13.65 39
  40. 40. PRUDENTIAL ICICI SERVICE INDUSTRIES FUND - GROWTHObjectiveTo provide capital appreciation and income distribution to unitholders by investing predominantly in equity/equity related instruments of companies involved in service industries and the balance in debt securitiesand money market instruments including call money.Scheme Performance (%) as on Apr 17 , 200714 days 1 month 3 months 1 year 3 yrs* Inception*7.93 8.52 -3.57 33.85 NA 38.47Top 10 Holdings as on Mar 30, 2007Company Nature Value (Cr.) %Nucleus Software Exports Ltd EQ 24.24 5.2Nifty EQ 20.75 4.45ICICI BANK LTD. EQ 19.2 4.12Jain Irrigation Systems Ltd EQ 16.82 3.61India Infoline EQ 15.76 3.38Jagran Prakashan Ltd EQ 15.33 3.29Bharat Electronics Ltd EQ 14.74 3.16Punjab National Bank EQ 13.72 2.94Wipro Ltd EQ 12.66 2.72Aditya Birla Nuvo Limited. EQ 12.48 2.68Mutual FundPrudential ICICI Mutual Fund8th Floor, Peninsula Tower, Ganpatrao Kadam Marg,Off Senapati Bapat Marg, Lower ParelMumbaiTel.-24997000,24999777,Asset Management CompanyPrudential ICICI Asset Management Company Ltd.8th Floor, Peninsula TowerGanpatrao Kadam Marg, Lower ParelMumbai – 400013Tel.- 24997000, 24999777RegistrarNA*Returns are annualizedEmail Address enquiry@pruicici.comNet Asset Value (Rs/Unit) 15.71 As On Apr 18, 2007 40
  41. 41. Fund InformationType of Scheme Open EndedNature of Scheme EquityInception Date Nov 11, 2005Face Value(Rs/Unit) 10Fund Size (Rs. in crores) 465.9787 on Mar 30, 2007Increase/Decrease since Feb 28, 2007 (Rs. in 41.954crores)Minimum Investment (Rs) 5000Purchase Redemptions DailyNAV Calculation Daily Amount Bet. 0 to 49999999 then Entry load isEntry Load 2.25%. and Amount greater than 50000000 then Entry load is 0%. If redeemed bet. 0 Months to 6 Months; and Amount Bet. 0 to 49999999 then Exit load is 1%.Exit Load and Amount greater than 50000000 then Exit load is 0%. If redeemed after 6 Months; Exit load is 0%.Top Industry Allocation as on Mar 30, 2007Banks 24.881%Computers - Software & Education 24.2607%Pharmaceuticals 8.64%Miscellaneous 6.948%Housing & Construction 5.2501%Plastic 5.2243%Electronics 4.6377%Auto & Auto ancilliaries 4.4105%Printing & Stationary 3.2905%Telecom 2.9289%Asset Allocation as on Mar 30, 2007Equity Debt Money Market90.98 1.01 8.01 41
  42. 42. PRUDENTIAL ICICI DYNAMIC PLAN - GROWTHObjectiveSeeks to generate capital appreciation by actively investing in equity and equity related securities. Fordefensive considerations, the Scheme may invest in debt, money market instruments and derivatives.Scheme Performance (%) as on Apr 17 , 200714 days 1 month 3 months 1 year 3 yrs* Inception*6.74 7.6 -4.31 20.42 47.45 52.19Top 10 Holdings as on Mar 30, 2007Company Nature Value (Cr.) %Reliance Industries Ltd EQ 137.03 6.8Nifty EQ 134.89 6.69Tata Consultancy Services Ltd. EQ 132.01 6.55ICICI BANK LTD. Debt 111.42 5.53Infosys Technologies Ltd EQ 109.89 5.45ICICI BANK LTD. EQ 98.69 4.9Deccan Chronicle Holdings Ltd EQ 89.15 4.42ITC Ltd EQ 71.04 3.52State Bank of India EQ 59.67 2.96Oil & Natural Gas Corpn Ltd EQ 59.43 2.95Mutual FundPrudential ICICI Mutual Fund8th Floor, Peninsula Tower, Ganpatrao Kadam Marg,Off Senapati Bapat Marg, Lower ParelMumbaiTel.-24997000,24999777,Asset Management CompanyPrudential ICICI Asset Management Company Ltd.8th Floor, Peninsula TowerGanpatrao Kadam Marg, Lower ParelMumbai – 400013Tel.- 24997000, 24999777RegistrarNA*Returns are annualized 42
  43. 43. Email Address enquiry@pruicici.comNet Asset Value (Rs/Unit) 65.4576 As On Apr 18, 2007Fund InformationType of Scheme Open EndedNature of Scheme EquityInception Date Oct 18, 2002Face Value(Rs/Unit) 10Fund Size (Rs. in crores) 2015.4082 on Mar 30, 2007Increase/Decrease since Feb 28, 2007 (Rs. in 205.825crores)Minimum Investment (Rs) 5000Purchase Redemptions DailyNAV Calculation Daily Amount Bet. 0 to 49999999 then Entry load isEntry Load 2.25%. and Amount greater than 50000000 then Entry load is 0%.Exit Load Exit Load is 0%.Top Industry Allocation as on Mar 30, 2007Banks 34.2554%Computers - Software & Education 16.9829%Diversified 11.6376%Miscellaneous 11.1168%Auto & Auto ancilliaries 6.6698%Oil & Gas, Petroleum & Refinery 4.1303%Tobacco & Pan Masala 3.5249%Steel 2.9893%Engineering & Industrial Machinery 2.8463%Telecom 2.6469%Asset Allocation as on Mar 30, 2007Equity Debt Money Market88.99 6.27 4.74 43
  44. 44. RELIANCE GROWTH - GROWTHObjectiveSeeks to provide Long Term Capital AppreciationScheme Performance (%) as on Apr 17 , 200714 days 1 month 3 months 1 year 3 yrs* Inception*6.89 8.45 -3.39 14.63 49.3 33.06Top 10 Holdings as on Mar 30, 2007Company Nature Value (Cr.) %JSW Steel Limited. EQ 156.35 4.79Reliance Industries Ltd EQ 127.26 3.9Jindal Saw Ltd. EQ 121.98 3.74Bharat Earth Movers Ltd EQ 119.5 3.66Divis Laboratories Limited EQ 87.23 2.67Gujarat State Fertilizers & Chemicals Ltd EQ 69.64 2.13Lupin Ltd. EQ 69.36 2.13Cambridge Solutions Ltd. EQ 67.66 2.07Jain Irrigation Systems Ltd EQ 65.93 2.02JaiPrakash Associates Ltd. EQ 65.41 2Mutual FundReliance Mutual FundKamala Mills Compound, Trade World, B - Wing7th Floor, Senapati Bapat Marg, Lower parel (West)MumbaiTel.-30414800,,Asset Management CompanyReliance Capital Asset Management Ltd.Kamala Mills Compound, Trade World, B - Wing7th Floor, Senapati bapat marg, Lower parel (West)Mumbai - 400013Tel.- 30414800,RegistrarNA*Returns are annualized 44
  45. 45. Email AddressNet Asset Value (Rs/Unit) 270.51 As On Apr 18, 2007Fund InformationType of Scheme Open EndedNature of Scheme EquityInception Date Oct 7, 1995Face Value(Rs/Unit) 10Fund Size (Rs. in crores) 3263.71 on Mar 30, 2007Increase/Decrease since Feb 28, 2007 (Rs. in 19.79crores)Rolled Over To Open EndedMinimum Investment (Rs) 5000Purchase Redemptions DailyNAV Calculation DailyFund Manager Kunj Bansal Amount Bet. 0 to 19999999 then Entry load is 2.25%. and Amount Bet. 20000000 to 49999999Entry Load then Entry load is 1.25%. and Amount greater than 50000000 then Entry load is 0%.Exit Load Exit Load is 0%.Top Industry Allocation as on Mar 30, 2007Steel 11.377%Computers - Software & Education 8.3493%Diversified 7.5886%Pharmaceuticals 6.8423%Engineering & Industrial Machinery 5.437%Auto & Auto ancilliaries 5.3191%Banks 4.5433%Chemicals 3.8827%Housing & Construction 3.4685%Telecom 3.2962%Asset Allocation as on Mar 30, 2007Equity Debt Money Market86.66 0 13.34 45
  46. 46. BIRLA SUNLIFE FRONTLINE EQUITY FUND - GROWTHObjectivePrimary objective is growth of capital and secondary objective is income generation and distribution ofdividend.Scheme Performance (%) as on Apr 17 , 200714 days 1 month 3 months 1 year 3 yrs* Inception*7.58 9.77 -1.78 25.58 34.68 20.81Top 10 Holdings as on Mar 30, 2007Company Nature Value (Cr.) %Crompton Greaves Ltd EQ 7.28 4.93Bharati Tele - Ventures EQ 6.82 4.62Bharat Heavy Electricals Ltd EQ 6.09 4.12Hindustan Lever Ltd EQ 5.64 3.82Tata Consultancy Services Ltd. EQ 5.12 3.46ICICI BANK LTD. EQ 5.12 3.46Mahindra & Mahindra Ltd EQ 4.68 3.17Maruti Udyog Ltd EQ 4.51 3.05United Phosphorus Limited (New) EQ 4.47 3.02Siemens Ltd EQ 4.4 2.98Mutual FundBirla Mutual FundAhura Centre , 2nd Floor, A. 96/A-D,Mahakali Caves Road, Andheri (E)MumbaiTel.-56928000, ,Asset Management CompanyBirla Sunlife Asset Management Company Ltd.2nd Floor, Tower B Ahura Centre, 96 A D,Mahakali Caves Road, Andheri(E)Mumbai - 400093Tel.- 56928000,RegistrarNA*Returns are annualizedEmail Address bmfmail@birlasunlife.comNet Asset Value (Rs/Unit) 51.25 As On Apr 17, 2007 46
  47. 47. Fund InformationType of Scheme Open EndedNature of Scheme EquityInception Date Aug 30, 2002Face Value(Rs/Unit) 10Fund Size (Rs. in crores) 147.7555 on Mar 30, 2007Increase/Decrease since Feb 28, 2007 (Rs. in 20.114crores)Previous Name Alliance Frontline Equity FundMinimum Investment (Rs) 5000Purchase Redemptions DailyNAV Calculation Daily Amount Bet. 0 to 49999999 then Entry load isEntry Load 2.25%. and Amount greater than 50000000 then Entry load is 0%.Exit Load Exit Load is 0%.Top Industry Allocation as on Mar 30, 2007Banks 14.6851%Computers - Software & Education 13.3958%Telecom 10.2279%Auto & Auto ancilliaries 10.155%Electricals & Electrical Equipments 9.0495%Diversified 7.5506%Engineering & Industrial Machinery 4.1312%Pharmaceuticals 3.3174%Chemicals 3.0241%Electronics 2.9805%Special FeaturesAims to track the sectoral weights of BSE 200 index.Asset Allocation as on Mar 30, 2007Equity Debt Money Market9.61 0 10.39 47
  48. 48. Direct EquityThe four stocks are chosen on the basis of their past returns and Beta . • Reliance Industries • Tata Motors • State Bank of India • Infosys Technologies 48
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  53. 53. FINDINGS AND ANALYSISIn this chapter the findings of the performance evaluation of the variousequity diversified mutual funds and direct equity with respect to benchmarksis listed. The mutual funds and stocks have been chosen on the basis of theirreturns over past three years. The benchmark chosen is BSE Sensex for thecomparison. The mutual funds chosen are: 1. SBI Magnum Global Fund (G) 2. ICICI Prudential Services Indus.(G) 3. ICICI Prudential Dynamic Plan (G) 4. Reliance Growth Fund (G) 5. Birla Frontline Equity (G)Direct Equity chosen for purpose are: 1. Reliance Industries 2. Tata Motors 3. State Bank of India 4. Infosys Technologies 53
  54. 54. Risk and return analysis: FUND MARKET SD RETURN RETURN MARKET EQUITY DIVERSIFIED SBI Magnum Global Fund (G) 13.40% 15.89% 1.75% ICICI Prudential Services 31.70% 15.89% 1.75% Indus.(G) ICICI Prudential Dynamic 17.80% 15.89% 1.75% Plan (G) Reliance Growth Fund (G) 12.90% 15.89% 1.75% Birla Frontline Equity (G) 23.40% 15.89% 1.75% 54
  55. 55. DIRECT EQUITY FUND MARKET SD FUND SD MARKET FUND BETA RETURN RETURN Reliance 71.85% 2.18% 15.89% 1.75% 1.01 Tata Motors -21.97% 2.56% 15.89% 1.75% 1.13 SBI 2.57% 2.28% 15.89% 1.75% 0.91Infosys Technologies 35.04% 2.03% 15.89% 1.75% 0.92The above table presents the risk and return statistics for the sample funds,stocks and market. Of the 5 funds selected 3 show higher returns than themarket, which indicates that 60% of the funds show higher returns than themarket.In case of individual stocks, Reliance Industries and Infosys Technologiesearned a higher return than the market while the other two stocks namely,SBI earned a lower return and Tata Motors returns were negative.The average returns for the equity diversified funds was 19.84% while theaverage return after investing in individual stocks was 21.87%. However, Inboth cases the returns earned were more than the market/benchmark averageof BSE Sensex.The average risk for the equity diversified is less than the benchmark’s riskwhich is 1.75%. This indicates that the funds have taken lower risks than themarket. 55
  56. 56. On the other hand, the average risk for individual stocks is much higherthan the equity diversified funds and market standard deviation as well. Thisindicates that investing in direct equity is far more riskier than equitydiversified funds. 56
  57. 57. INVESTOR SURVEY ANALYSISTo understand the investor’s preference following questions have beenasked:1. Investment avenues you are aware of: Bonds Investment avenues you are aware of Bank 40 FDs 30 respondents Mutual Funds 20 (Equity/Debt) 10 Direct Equity 0 Bullion investment avenues Gilts Real estateMost of the people are aware of Banks and Direct Equity investments.Mutual Funds are being considered an attractive investment opportunity bythe investors. However, awareness about FDs and Gilts is lowcomparatively.2. Factors considered while investing gave several different answers as itwas an open ended question. The answers ranged from liquidity,attractiveness, growth of industry (in case of shares), return, risk, etc. 57
  58. 58. 3. Your portfolio includes majority of: Govt. securities Portfolio includes majority of and bonds equity linked 12 Mutual Funds 10 Real estate 8 Responden 6 ts 4 Bullion’s 2 0 Equity shares Investment Commodity Avenues F.DsThis question gave an insight into the type of investors. Most people preferto invest in Bullions and Government securities and Bonds due to less riskfactor associated with these investments. Equity shares are preferred bypeople who have knowledge about market and others prefer mutual funds asan investment option. 58
  59. 59. 5. Types of Mutual funds invested in : Type of Mutual fund invested in 60 53 50 42 40 33 30 30 23 20 20 12 10 0 Equity diversified Equity index Equity tax planning Balanced:equity Balanced:debt Money Market DebtFrom the above graph we find that most of the investors have invested inequity oriented schemes whether it is diversified; index based or tax savingschemes. The result could be attributed to the higher returns generated bythe funds as against debt schemes and in the given market scenario with ahighly buoyant market this seems to be a suitable selection. 59
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  61. 61. 6. Past returns as a good measure of performance : Past returns as a good measure of performance 27% 73% yes noThe graph suggests that a majority of the investors consider returns as agood measure of performance evaluation. However, whether the investorsconsider returns to be a sufficient criterion or not would be shown in thefollowing graph: 61
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  63. 63. 6. Past returns as the only measure of performance: Past returns as the only measure for performance evaluation 44% 56% yes noFrom the graph it is indicated that a majority of the individuals considerreturns to be the only criteria to judge a funds’ performance. This suggeststhat most of them do not use any other measures like risk adjusted returnsand other considerations while evaluating the performance of a mutual fund. 63
  64. 64. 7. Approach in making Investment 23% 39% a) You take educated view on the Investments b) You take friendly advice and make decision c) You rely totally on your investment advisor 38%Out of 50 people surveyed, approximately 39% of investors rely totally oninvestment advisors, while 38% prefers to take friendly advice and rest(23%) take educated view on investments for investing in the various funds. 64
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  66. 66. 8. While investing, you are more concerned about: While investing, you are concerned with : 38% 42% a) Safety of principal b) Earning interests above the inflation rate c) Earning high returns 20%Before investing, one needs to be sure of the safety, risk attached with theparticular investments and the returns earned. 42% of the people were moreconcerned about the safety of principle and 38% people were moreinterested in earning higher returns. 66
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  68. 68. 9. How often do you monitor your portfolio?Out of 50 people surveyed, approximately 32% of investors monitor theirinvestment daily; while 24% monitors twice a month and only 8% of therespondents monitor their portfolio after more than a month. 68
  69. 69. 10. How long do you invest?It was really a tough choice for investors as many of the respondents werenot sure about their investment tenure. About half of them agreed that theylike to book the profit as and when they reach the targeted return. Only 4%agreed that they are very long term player and don’t change the portfoliooften. Around 12% told, they like to book their portfolio within 3-5 years,whereas 20% were those who were mid-term player. Surprisingly, only 16%turned out to be short- term player. 69
  70. 70. 11. How your portfolio allocation has changed over the timeOut of 50 people surveyed, 70% of the respondents said that they have madesignificant changes in their portfolio, while 26% have changed theirportfolio and rest (4%) didn’t changed their portfolio at all. 70
  71. 71. 12. You prefer to invest in Equity through? a) Equity –linked Mutual Funds b) Direct investment in stock market c) Both 15% 52% 33%This answer helped in doing a comparative analysis between Direct Equityand Equity linked Mutual funds. 52% people prefer to invest in equitylinked mutual funds because of more diversification and less risk associatedwith these funds. 33% people prefer to invest in Direct Equity who have thetime and knowledge to track the market and predict changes hoping to gethigher returns. 71
  72. 72. 13. You prefer Mutual Funds (Equity) because (as per their first choice)Major reason for preferring Equity diversified Mutual Funds wasDiversification of portfolio and lack of time. This helped to reduce risk withdecent returns to the investors. 72
  73. 73. 14. Sources of information for mutual funds sources of information 70 68 60 53 50 40percentage of people using 33 33 the source 30 23 20 12 12 10 10 0 magazines mutual fund prospectus relationship financial mutual fund others websites manager newspapers funds tracking periodic agency reportThe graph indicates that the most popular source of information for mutualfunds is the relationship managers of the banks or investment agents that theinvestors rely on for their investments. Another important source is theprospectus of the fund and of other funds, mutual fund websites are anotherimportant source of this information. 73
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  75. 75. 15. You prefer direct investment because (as per their first choice)From the graph it is indicated that a majority of the individuals prefers directinvestment in equity because of the higher returns associated with it, while33% of the respondents prefers it because they wants to manage theirportfolio on their own. 75
  76. 76. CONCLUSION After the entire analysis of survey and questionnaires, we find thatmost of the respondents said that they have equity stocks in their portfolio.And among these (who invests in equity) 52%, investors prefer to investthrough Mutual funds and only 33% (17 investors) said that they do investdirectly in equity market. According to survey people prefer to invest into Mutual funds thaninvesting directly into stocks. 46% of the respondents feel that mutual fundsreduce their risk in investing in the market as it gives diversification totheir portfolio. 17% respondents said that it give them the benefit ofprofessional management. Just 14% said it give them liquidity irrespectiveof market conditions. And also lack of time was cited as the reason by 23%of the respondents. Out of those who said that they prefer to directly investin stock market, majority (54%) gave high weightage to high risk and highreturns game. 33% said that they want to be their own fund managers. Also,over 48% agreed that they prefer to book profit as they reach their profittarget. They do believe in churning and enjoy making higher returns. Some investors told that they like to keep a certain percentage of theirportfolio into mutual funds and the rest they want to manage by themselves.It can also be seen from findings that an investor has made higher returns ina long run by investing into direct equities, but if one wants to make a higherreturns in the short run and mid term horizon, then definitely mutual fundsare the best buy. 76
  77. 77. LIMITATIONS• Paucity of time as we have to do this project with our course curriculum doing all other assignments, exams etc.• Indian stock market is semi-efficient market, where sentiments play a major role in price; hence 100% accurate predictions cannot be made about its future path. 77
  78. 78. QUESTIONNAIREObjective: - To find out investor’s preference between mutual fund anddirect equity investment. 1. Investment avenues you are aware of:a) Bonds b) Bank FDs c) Mutual Funds (Equity/Debt)d) Direct Equity e) Bullion f) Gilts g) Real estateh) Any other (please specify) ____________________________________ 2. Factors considered while investing__________________________ 3. Your portfolio includes majority of:a) Govt. securities and bonds b) equity linked Mutual Fundsc) Real estate d) Bullion’se) Equity shares f) Commodityg) F.Ds 4. Types of Mutual funds invested in:a) Equity Diversified b) Equity Indexc) Equity Tax Planning d) Balanced Equitye) Balanced Debt f) Money Marketg) Debt 5. Do you consider past returns as a good measure of a funds performance? YES NO 6. Do you base your performance evaluation on returns only? YES NO 78
  79. 79. 7. Your approach in making Investment is:a) You take educated view on the Investmentsb) You take friendly advice and make decisionc) You rely totally on your investment advisord) Others 8. While investing, you are more concerned about:a) Safety of principalb) Earning interests above the inflation ratec) Earning high returnsd) Others 9. How often do you monitor your portfolio?a) Daily b) Weekly c) Twice in a monthd) Monthly e) More than a month 10. How long do you invest:a) Short term (0-1 yr) b) Midterm (1-3 yrs)c) Long term (3-5yrs) d) More than 5 yearse) Till you reach your target or returns 11.How your portfolio allocation has changed over the timea) Didn’t Changeb) Changedc) Changed significantly 79
  80. 80. 12. You prefer to invest in Equity through:a) Equity –linked Mutual Fundsb) Direct investment in stock marketc) Both 13. You prefer Mutual Funds (Equity) because ( pls rank in order of preference)a) Diversification of portfoliob) Liquidityc) Professionally managedd) Lack of timee) Any other (please specify) _______________ 14.What are the various sources from where you get the performance evaluation data/advice for the funds? Magazines Financial Newspapers Mutual fund websites Mutual funds’ Annual and periodic reports Relationship managers Fund tracking agencies (value research etc.) Prospectus for a new fundAny other please Specify_______________________________________ 15.You prefer to invest in Direct Equity because : a. You make higher returns b. It keeps you busy c. You like to manage your own funds 80
  81. 81. BIBLIOGRAPHY:Magazines: • Mutual fund Insight • Investors India • Business World • Business IndiaWebsites: • www.bseindia.com • www.moneycontrol.com • www.google.co.in • www.capitalmarket.com • www.indiainfoline.com • www.yahoofinance.com • www.mutualfundsindia.com 81

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