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Project on mutual funds as an investment avenue

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Project on mutual funds as an investment avenue

Project on mutual funds as an investment avenue

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    Project on mutual funds as an investment avenue Project on mutual funds as an investment avenue Document Transcript

    • A SUMMER PROJECT REPORT ON MUTUAL FUND AS AN INVESTMENT AVENUE AT PRESENTED TO ARNI SCHOOL OF BUSINESS MANAGEMENT KATHGARG, INDORA (HP) 2009-11 PRESENTED BY RANJEET SINGH SAINI ID:-AEMB0060A/09Projectsformba.blogspot.com
    • (A) MUTUAL FUND1. INTRODUCTION A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (pro rata). Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an inventible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy A Mutual fund is the ideal investment vehicle for today’s complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc. A draft offer document is to be prepared at the time of launching the fund. Typically, it pre specifies the investment objectives of the fund, the risk associated, the costs involved in the process and the broad rules for entry into and exit from the fundProjectsformba.blogspot.com
    • and other areas of operation. In India, as in most countries, these sponsors need approval from a regulator, SEBI (Securities exchange Board of India) in our case. SEBI looks at track records of the sponsor and its financial strength in granting approval to the fund for commencing operations. A sponsor then hires an asset management company to invest the funds according to the investment objective. It also hires another entity to be the custodian of the assets of the fund and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund. In the Indian context, the sponsors promote the Asset Management Company also,in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in theAsset Management Company (AMC). E.g. Birla Global Finance is the sponsor of theBirla Sun Life Asset Management Company Ltd., which has floated different mutualfunds schemes and also acts as an asset manager for the funds collected under theschemes.Characteristics: • A mutual fund actually belongs to the investors who have pooled their funds. • A mutual fund is managed by investment professionals and other service providers, who earn a fee for their services, from the fund. • The pool of funds is invested in a portfolio of marketable investments. The value of the portfolio is updated every day. • The investor’s share in the fund is denominated by ‘units’. The value of the units changes with change in the portfolio’s value, every day. The value of one unit of investment is called the Net Asset Value or NAV.Projectsformba.blogspot.com
    • 2. HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY:The mutual fund industry in India started in 1963 with the formation of Unit Trust ofIndia, at the initiative of the Government of India and Reserve Bank the. The history ofmutual funds in India can be broadly divided into four distinct phases.First Phase: 1964-1987An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by theReserve Bank of India and functioned under the Regulatory and administrative control ofthe RBI. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank ofIndia (IDBI) took over the regulatory and administrative control in place of RBI. The firstscheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700crores of AUM.Second Phase: 1987-1993 (Entry of Public Sector Funds)In 1987 marked the entry of non- UTI, public sector mutual funds set up by public sectorbanks and Life Insurance Corporation of India (LIC) and General Insurance Corporation ofIndia (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June1987.Third Phase: 1993-2003 (Entry of Private Sector Funds)With the entry of private sector funds in 1993, a new era started in the Indian mutual fundindustry, giving the Indian investors a wider choice of fund families. Also, 1993 was theyear in which the first Mutual Fund Regulations came into being, under which all mutualfunds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (nowProjectsformba.blogspot.com
    • merged with Franklin Templeton) was the first private sector mutual fund registered inJuly 1993. The industry now functions under the SEBI (Mutual Fund) Regulations1996.As at the end of January 2003; there were 33 mutual funds with total assets of Rs.1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets undermanagement was way ahead of other mutual funds.Fourth Phase – Since February 2003In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI wasbifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust ofIndia with assets under management of Rs.29, 835 crores as at the end of January 2003,representing broadly, the assets of US 64 scheme, assured return and certain otherschemes.The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC.It is registered with SEBI and functions under the Mutual Fund Regulations.Projectsformba.blogspot.com
    • The graph indicates the growth of assets over the years.GROWTH IN ASSETS UNDER MANAGEMENTNote:Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the UnitTrust of India effective from February 2003. The Assets under management of the Specified Projectsformba.blogspot.com
    • Undertaking of the Unit Trust of India has therefore been excluded from the total assets of theindustry as a whole from February 2003 onwards. 3. MUTUAL FUND STRUCTURE The Structure Consists The structure of mutual funds in India is governed by the SEBI Regulations, 1996. These regulations make it mandatory for mutual funds to have a 3-tier structure of Sponsors- Trustee-AMC (Asset Management Company). The Sponsor is the promoter of mutual fund, and appoints the Trustee. The Trustees are responsible to the investors in the mutual funds, and appoint the AMC for managing the investment portfolio. The AMC is the Projectsformba.blogspot.com
    • business face of the mutual funds, as it manages all the affairs of mutual funds. Themutual funds and AMC have to be registered by the SEBI.SponsorSponsor is the person who acting alone or in combination with another body corporateestablishes a mutual fund. Sponsor must contribute at least 40% of the net worth of theInvestment Managed and meet the eligibility criteria prescribed under the Securities andExchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is notresponsible or liable for any loss or shortfall resulting from the operation of the Schemesbeyond the initial contribution made by it towards setting up of the Mutual FundTrustThe Mutual Fund is constituted as a trust in accordance with the provisions of the IndianTrusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian RegistrationAct, 1908.TrusteeTrustee is usually a company (corporate body) or a Board of Trustees (body ofindividuals). The main responsibility of the Trustee is to safeguard the interest of the unitholders and inter-alia ensure that the AMC functions in the interest of investors and inaccordance with the Securities and Exchange Board of India (Mutual Funds) Regulations,1996, the provisions of the Trust Deed and the Offer Documents of the respectiveSchemes. At least 2/3rd directors of the Trustee are independent directors who are notassociated with the Sponsor in any manner.Asset Management Company (AMC)Projectsformba.blogspot.com
    • The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. TheAMC is required to be approved by the Securities and Exchange Board of India (SEBI) toact as an asset management company of the Mutual Fund. At least 50% of the directors ofthe AMC are independent directors who are not associated with the Sponsor in anymanner. The AMC must have a net worth of at least 10 crores at all times.Registrar and Transfer AgentThe AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent tothe Mutual Fund. The Registrar processes the application form, redemption requests anddispatches account statements to the unit holders.CustodianA custodian handles the investment back office of a mutual fund. Its responsibilitiesinclude receipt and delivery of securities, collection of income, distribution of dividends,and segregation of assets between schemes. The sponsor of a mutual fund cannot act as acustodian to the fund. For example, Deutsche Bank is a custodian, but it cannot serviceDeutsche Mutual Fund, its mutual fund arm.DepositoryIndian capital markets are moving away from having physical certificates for securities, toownership of these securities in ‘dematerialized’ form with a Depository.Projectsformba.blogspot.com
    • 4.MUTUAL FUND OPERATIONMutual Fund Operation Flow Chart Fund managers investors Invest inPass toInvestor stock &securities Generate returnProjectsformba.blogspot.com
    • 5.TYPES OF MUTUAL FUNDDiagramA Mutual Fund may float several schemes, which may be classified on the basis of itsstructure, its investment objectives and other objectives.Open – Ended SchemesProjectsformba.blogspot.com
    • As the name implies the size of the scheme (fund) is open – i.e. not specified or pre- determined. Entry to the fund is always open, the investor who can subscribe at anytime. Such fund stands ready to buy or sell its securities at anytime. The key feature of Open- ended schemes is Liquidity. It implies that the capitalization of the fund is constantly changing as investors sell or buy their shares. Further, the shares or units are normally not traded on the stock exchange but are repurchased by the funds at announced rates. Open- ended schemes have comparatively better liquidity despite the fact that these are not listed. The reason is that investors can any time approach mutual fund for sale of such units. No intermediaries are required. Moreover, the realizable amount is certain since repurchase is at a price based on declared net asset value (NAV). The portfolio mix of such schemes has to be investments, which are actively traded in the market. Otherwise it will not be possible to calculate NAV. This is the reason that generally open-ended schemes are equity based. In Open-ended schemes, the option of dividend reinvestment is available.Close-Ended Schemes A Close – ended schemes have a definite period after which their shares/units are redeemed. The scheme is open for subscription only during a specified period at the time of launch of a scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close- ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. In these types of schemes, the size of the fund kept to be constant. SEBI regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.Projectsformba.blogspot.com
    • Interval schemes Interval Schemes combine the features of both open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV based prices.Mutual Fund schemes by Investment Objectives:EQUITY FUNDSThese funds invest a major part of their corpus in equities. The composition of the fundmay vary from scheme to scheme and the fund manager’s outlook on various scrip’s.The Equity Funds are sub-classified depending upon their investment objective, asfollows: 1. Growth Fund: Aim to provide capital appreciations over the medium to long term. These schemes normally invest a majority of their funds in equities and are willing to bear short term decline in value for possible future appreciation. These schemes are not for investors seeking regular income or needing their money back in the short- term 2. Diversified Equity Fund: Diversified equity funds are the most popular among investors. They invest in many stocks across many sectors, and because they have the freedom to chop and churn their portfolios as they like, diversified equity fundsProjectsformba.blogspot.com
    • are a good proxy to the stock market. If a general exposure to equities is what you want, they are a good option. They can invest in all listed stocks, and even in unlisted stocks. They can invest in which ever sector they like, in what ever ratio they like. 3. Equity – Linked Savings Schemes (ELSS): Equity – linked savings schemes (ELSS) are diversified equity funds that additionally offer income tax benefits to individuals. ELSS is one of the many section 80c instruments, along with the more popular debt options like the PPF, NSC and infrastructure bonds. In this Section 80c grouping. ELSS is unique. Being the only instrument to offer a total equity exposure. 4. Index Fund: An index fund is a diversified equity fund; with a difference- a fund manager has absolutely no say in stock selection. At all times, the portfolio of an index fund mirrors an index, both in its choice of stocks and their percentage holding. As of March 2004, equity index funds tracked either the Sensex or the Nifty. So, an index fund that mirrors the Sensex will invest only in the 30 Sensex stocks, which too in the same proportion as their weight age in the index. 5. Sector Fund: Sector funds invest in stocks from only one sector, or a handful of sectors. The objective is to capitalize on the story in the sectors, and offer investors a window to profit from such opportunities. It’s a very narrow focus, because of which sector funds are considered the riskiest among all equity funds. 6. Mid – Cap Fund: These are diversified funds that target companies on the fast – growth trajectory. In the long run, share prices are driven by growth in a company’s turnover and profits. Market players refer to them as ‘mid-sized companies’ and ‘mid-cap stocks’ with size in this context being benchmarked to a company’s marketProjectsformba.blogspot.com
    • value. So, while a typical large cap stock would have a market capitalization of over Rs 1,000 crores, a mid-cap stock would have a market value of Rs 250-2,000 crores.DEBT FUNDSThese Funds invest a major portion of their corpus in debt papers. Government authorities,private companies, banks and financial institutions are some of the major issuers of debtpapers. By investing in debt instruments, these funds ensure low risk and provide stableincome to the investors.Debt funds are further classified as: 1. Gilt Funds: Invest their corpus in securities issued by Government, popularly known as GOI debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government. 2. Income Funds: Income funds aim to maximize debt returns for the medium to longer term. Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. 3. MIPs: Invests around 80% of their total corpus in debt instruments while the rest of the portion is invested in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes. 4. Short Term Plans (STPs): Meant for investors with an investment horizon of 3-6 months. These funds primarily invest in short term papers like Certificate ofProjectsformba.blogspot.com
    • Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures. 5. Liquid Funds: Also known as Money Market Schemes, These funds are meant to provide easy liquidity and preservation of capital. These schemes invest in short- term instruments like Treasury Bills, inter-bank call money market etc. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds. 6. Floating Rate Funds: These income funds are more insulated from interest rate than their conventional peers. In other words, interest rate changes, which cause the NAV of a conventional debt fund to go up or down, have little, or no, impact on NAVs of floating rate funds.BALANCED FUNDSThese funds, as the name suggests, are a mix of both equity and debt funds. They invest inboth equities and fixed income securities, which are in line with pre-defined investmentobjective of the scheme. These schemes aim to provide investors with the best of both theworlds. Equity part provides growth and the debt part provides stability in returns.Each category of funds is backed by an investment philosophy, which is pre-defined in theobjectives of the fund. The investor can align his own investment needs with the fundsobjective and invest accordingly.HYBRID FUNDS:-Projectsformba.blogspot.com
    • 1. Growth and Income Fund: Strike a balance capital appreciation and income for the investors. In these funds portfolio is a mix between companies with good dividend paying record and those with potential capital appreciation. These funds are less risky than growth funds bit more than income funds. 2. Asset Allocation Fund: These funds follow variable asset allocation policy. These move in an out of an asset class (equity, debt, money market or even non-financial assets). Asset allocation funds are those, which follow more stable allocation policies like balanced funds. Those, which flexible allocation policies, are like aggressive speculative funds.6. COMPARISON OF MUTUAL FUNDProjectsformba.blogspot.com
    • InvestMutual Investment Who Should ment RiskFund Objective Portfolio Invest Horiz on 3Equity Long-term Capital Aggressive investors High Risk Stocks & Shares years +Funds Appreciation Long term Inv. Capital Balanced ratio ofBalanced Growth & Regular Market Risk equity and debt funds Moderate & 2Funds Income and Interest to ensure higher Aggressive years + Risk returns at lower risk To generate returns that are NAV varies Portfolio indices like 3Index Funds commensurate with with index Aggressive investors. BSE, NIFTY etc years + returns of performance respective indices 12 Interest Rate Government Salaried & conservativeGilt Funds Security & Income months Risk securities investors + Credit Risk & Debentures, 12 Salaried & conservativeBond Funds Regular Income Interest Rate Govt securities, months investors Risk Corporate Bonds + Treasury Bills, Liquidity + Certificate of Park funds in current 2 daysMoney Moderate Income + Negligible Deposits, A/cs or short-term - 3Market Reservation of Commercial Papers, Bank Dep. weeks Capital Call MoneyShort-term Call Money,Funds 3 weeks CommPapers,(Floating - Liquidity + Little Interest Those with surplus - Treasury Bills, CDs,short-term) Moderate Income Rate short-term funds 3 Short-term Govt. months securities.Projectsformba.blogspot.com
    • 7.ADVANTAGES OF MUTUAL FUNDDiagram 6 Affordability Diversification Variety Regulations Professional Tax Benefits MgmtMutual Funds offer several benefits to an investor that are unmatched by the otherinvestment options. Last six years have been the most turbulent as well as exiting ones forthe industry. New players have come in, while others have decided to close shop by eitherselling off or merging with others. Product innovation is now passé with the game shiftingto performance delivery in fund management as well as service. Those directly associatedwith the fund management industry like distributors, registrars and transfer agents, andeven the regulators have become more mature and responsible. 1. Affordability : Small investors with low investment fund are unable to invest in high-grade or blue chip stocks. An investor through Mutual Funds can be benefited from a portfolio including of high priced stock. 2. Diversification : Investors investment is spread across different securities (stocks, bonds, money market, real estate, fixed deposits etc.) and different sectors (auto, textile, IT etc.). This kind of a diversification add to the stability ofProjectsformba.blogspot.com
    • returns, reduces the risk for example during one period of time equities might under perform but bonds and money market instruments might do well do well and may protect principal investment as well as help to meet return objectives. 3. Variety : Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors 4. Professional Management: Mutual Funds employ the services of experienced and skilled professionals and dedicated investment research team. The whole team analyses the performance and balance sheet of companies and selects them to achieve the objectives of the scheme. 5. Tax Benefits: Depending on the scheme of mutual funds, tax shelter is also available. As per the Union Budget-99, income earned through dividends from mutual funds is 100% tax free. Under ELSS of open-ended equity-oriented funds an exemption is provided up to Rs. 100,000/- under section 80C. 6. Regulation: All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.8. DISADVANTAGES OF MUTUAL FUND:The following are the disadvantages of investing through mutual fund: • No control over cost: Since investors do not directly monitor the fund’s operations, they cannot control the costs effectively. Regulators therefore usually limit the expenses of mutual funds. • No tailor-made portfolio: Mutual fund portfolios are created and marketed by AMCs, into which investors invest. They cannot made tailor made portfolio.Projectsformba.blogspot.com
    • • Managing a portfolio of funds: As the number of funds increase, in order to tailor a portfolio for himself, an investor may be holding portfolio funds, with the costs of monitoring them and using hem, being incurred by him. • Delay in Redemption: The redemption of the funds though has liquidity in 24- hours to 3 days takes formal application as well as needs time for redemption. This becomes cumbersome for the investors. • Non-availability of loans: Mutual funds are not accepted as security against loan. The investor cannot deposit the mutual funds against taking any kind of bank loans though they may be his assets.9. RISK INVOLVED IN MUTUAL FUND :THE RISK-RETURN TRADE-OFFThe most important relationship to understand is the risk-return trade-off. Higher the riskgreater the returns/loss and lower the risk lesser the returns/loss.Projectsformba.blogspot.com
    • Hence it is up to you, the investor to decide how much risk you are willing to take. Inorder to do this you must first be aware of the different types of risks involved with yourinvestment decision.MARKET RISK:Sometimes prices and yields of all securities rise and fall. Broad outside influencesaffecting the market in general lead to this. This is true, may it be big corporations orsmaller mid-sized companies. This is known as Market Risk. A Systematic InvestmentPlan (“SIP”) that works on the concept of Rupee Cost Averaging (“RCA”) might helpmitigate this risk.CREDIT RISK:The debt servicing ability (may it be interest payments or repayment of principal) of acompany through its cash flows determines the Credit Risk faced by you. This credit riskis measured by independent rating agencies like CRISIL who rate companies and theirpaper. An ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poorcredit quality. A well-diversified portfolio might help mitigate this risk.INFLATION RISK:Things you hear people talk about: “Rs. 100 today is worth more than Rs. 100 tomorrow.”“Remember the time when a bus ride costed 50 paisa?”“Mehangai Ka Jamana Hai.”The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot oftimes people make conservative investment decisions to protect their capital but end upwith a sum of money that can buy less than what the principal could at the time of theProjectsformba.blogspot.com
    • investment. This happens when inflation grows faster than the return on your investment.A well-diversified portfolio with some investment in equities might help mitigate this risk.INTEREST RATE RISK:In a free market economy interest rates are difficult if not impossible to predict. Changesin interest rates affect the prices of bonds as well as equities. If interest rates raise theprices of bonds fall and vice versa. Equity might be negatively affected as well in a risinginterest rate environment. A well-diversified portfolio might help mitigate this risk.POLITICAL/GOVERNMENT POLICY RISK:Changes in government policy and political decision can change the investmentenvironment. They can create a favorable environment for investment or vice versa.LIQUIDITY RISK:Liquidity risk arises when it becomes difficult to sell the securities that one has purchased.Liquidity Risk can be partly mitigated by diversification, staggering of maturities as wellas internal risk controls that lean towards purchase of liquid securities.10.NET ASSET VALUE Net Asset Value (NAV)Projectsformba.blogspot.com
    • The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit". We also abide by the same convention. Definition of NAV Net Asset Value, or NAV, is the sum total of the market value of all the shares held in the portfolio including cash, less the liabilities, divided by the total number of units outstanding. Thus, NAV of a mutual fund unit is nothing but the book value. Calculation of NAV The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below. Asset value is equal to Sum of market value of shares/debentures + Liquid assets/cash held, if any + Dividends/interest accrued Amount due on unpaid assetsProjectsformba.blogspot.com
    • Expenses accrued but not paid Other liabilitiesNAV per unit = ------------------------------------------------------------------ No. of units outstanding of the scheme Details on the above items For liquid shares/debentures, valuation is done on the basis of the last or closing market price on the principal exchange where the security is traded For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be estimated. For shares, this could be the book value per share or an estimated market price if suitable benchmarks are available. For debentures and bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting for illiquidity. The value of fixed interest bearing securities moves in a direction opposite to interest rate changes Valuation of debentures and bonds is a big problem since most of them are unlisted and thinly traded. This gives considerable leeway to the AMCs on valuation and some of the AMCs are believed to take advantage of this and adopt flexible valuation policies depending on the situation.Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, withevery passing day, interest is said to be accrued, at the daily interest rate, which iscalculated by dividing the periodic interest payment with the number of days in eachPeriod. Thus, accrued interest on a particular day is equal to the daily interest ratemultiplied by the number of days since the last interest payment date.Projectsformba.blogspot.com
    • Usually, dividends are proposed at the time of the Annual General meeting and becomedue on the record date. There is a gap between the dates on which it becomes due and theactual payment date. In the intermediate period, it is deemed to be "accrued".Expenses including management fees, custody charges etc. are calculated on a daily basis.NAV and its impact on the returnsWe feel that a MF with lower NAV will give better returns. This again is due to the wrongperception about NAV. An example will make it clear that returns are independent of theNAV.Say, you have Rs 10,000 to invest. You have two options, wherein the funds are same asfar as the portfolio is concerned. But say one Fund X has an NAV of Rs 10 and anotherFund Y has NAV of Rs 50. You will get 1000 units of Fund X or 200 units of Fund Y.After one year, both funds would have grown equally as their portfolio is same, say by25%. Then NAV after one year would be Rs 12.50 for Fund X and Rs 62.50 for Fund Y.The value of your investment would be 1000*12.50 = Rs 12,500 for Fund X and 200*62.5= Rs 12,500 for Fund Y. Thus your returns would be same irrespective of the NAV.It is quality of fund, which would make a difference to your returns. In fact for equityshares also broadly this logic would apply.Misconception about NAVThis situation arises from the perception that a fund at Rs 10 is cheaper than say Rs 15 orRs 100. However, this perception is totally wrong and investors would be much better offonce they appreciate this fact.Projectsformba.blogspot.com
    • Two funds with same portfolio are same, no matter what their NAV is. NAV is immaterial.Why people carry this perception is because they assume that the NAV of a MF is similarto the market price of an equity share. This, however, is not true.11. BASIC CONCEPTS OF LOADS : 1. Entry Load: The load charged at the time of investment is known as entry load. It’s meant to cover the cost that the AMC spends in the process of acquiring subscriber’s commission payable to brokers, advertisements, register expenses etc. The load is recovered by way of charging a sale price higher than the prevailing NAV. 2. Exist Load: Some AMC do not charge an entry load but they charged an exist load i.e., they deduct a load before paying out the redemption proceeds. Psychologically, investors are much more willing to pay exist loads as compared to entry loads. 3. Unit: Units mean the investment of the unit holders in a scheme. Each unit represents one undivided share in the assets of a scheme. The value of each unit changes, depending on the performance of the fund.12.FACTORS AFFECTING MUTUAL FUND1. Governmental InfluencesMutual fund business is a highly regulated business throughout the world as it seeks toensure that quality and fairly priced schemes are available. Governmental intervention thusin mutual fund market usually is most needed to ensure that insurers are reliable. And inthe developing countries the additional goal may be promotion of domestic mutual fundindustry and ensuring the national mutual fund industry contributes to overall economicProjectsformba.blogspot.com
    • development. In a non technical sense mutual fund is purchased in a good faith so the dutyof government intervention in mutual fund industry is to ensure that this principle ofmutual fund is never defeated.The ideology of government plays an important role in mutual fund industry also. Forexample in the past during 1991, the P .V Narsimha Rao government strongly believed inliberalization also liberalized the mutual fund sector which helped to allow private playersin the industry from 1993 and enhancing joint ventures with foreign companies.The present government with more focuses on foreign direct investments has declared tofavor the rise FDI in mutual fund to 49% which further enhances competition in theindustry.2. Taxation PolicySocial equity being one of the motives behind tax collections, government give certainexemptions from such levying. One such exemption is deduction incurred by taxpayerstowards investment in mutual fund coverage. Similarly, capital invested in infrastructurebonds etc is offered with certain concession under tax laws. The central idea behind suchexemptions is that the capitals so allocated by individuals reduce the ultimate burden onthe public infrastructure or helps in creating such infrastructural facilities.The income tax rules related to the mutual fund transactions can be classified under:[A] Exemptions available to companies or businesses[B] Exemptions available to insured individuals[A] Exemptions available to companies • Expenses deductible from commission earned by distributor, banker, national distributor.Projectsformba.blogspot.com
    • • Tax concessions under risk management practices of an enterprise • In growth option equity schemes there no long term capital gain by company. • In dividend option equity schemes there no tax. • Return received by charitable trust is total exempted from tax. • Else schemes give to advantage of tax saving, growth potential and return.[B] Tax rules governing investment by individualsDeduction in respect of ELSS schemes (sec 80C):Investment in this fund would enable you to avail the benefits under clause (xiii) of asection 80C of the Income Tax Act investment made in the schemes up to 1 lakh by theeligible investor for deduction under this section of the Act.Since it will be an income deduction an investment of Rs 1 lakh in this fund can save offRs. 33600 from your tax payable liability (assuming you are in the highest tax bracket)Investor will receive tax free dividend in above case.Investor will also receive tax free dividend by investing equity schemes in dividend optionInvestors also receive tax free return by investing equity schemes in growth option for longterm capital gain. C Tax planningsAn individual can think of health ELSS schemes purchase as a tool of tax planningexercise. For example people who are marginally affected by tax liability can be as wellpurchase a ELSS fund get benefits of Rs. 33600 from tax. In this way tax burden isbecome less by purchasing ELSS fund.Thus tax law offer benefit to individuals/companies by way of exemptions/deductions ofexpenditure incurred towards purchase of mutual fund various schemes coverage fromtotal taxable income.Projectsformba.blogspot.com
    • 3. Foreign Trade RegulationsWith the vast potential for mutual fund in India due its large population in the countrymany foreign companies are ready to enter into the Indian market. But companies can bepermitted in India through joint ventures with an Indian partner as well as come separatelyand the foreign equity shall be restricted to only 25%. Another statement also tells thatIndian subsidiaries of foreign companies shall not be allowed to participate in bankingsector unless they entered in to joint ventures with the Indian partners.But at present the mutual fund regulator is in favor of hike in FDI cap from 25% to 49%,and is finalizing a report that will be submitted to the government for a comprehensivelegislation for the industry. The security exchange board of India and association of mutualfund India have been advocating a hike in FDI limit for mutual fund companies so that theforeign partners can infuse additional funds in these companies to sustain their growth.The government will need to amend the separate mutual fund Act for FDI capital as wellas domestic company as this is the statutory provision unlike sectors like civil aviation andtelecom, which have come through notification.4. National IncomeThe relative importance of the mutual fund Market within a country will also be dependentupon economic development. With greater rates of economic growth, consumption ofinvestment should increase as a result of increased income, and an increased stock ofassets requiring mutual fund. Furthermore, the development of mutual fund is likely tofacilitate greater economic growth, implying that economic growth may be endogenous.Consistent with these arguments, studies find that the level of financial development andProjectsformba.blogspot.com
    • economic development are positively related to the level of mutual fund across emergingmarkets.5. Consumptions and SavingsThe gross capital formation of any country is important for indication of its growth in thefuture years. It is quite necessary to set up the rate of capital formation so that a large stockof machines, tools and equipments are accumulated in a country. Experience ofdevelopment in other countries suggests that a high rate of capital formation was achievedto trigger rapid rate of economic growth. With the hike in foreign capital coming to Indiathe rate of capital formation is becoming boom to insurers, which has given themopportunities. It is heartening to them to note that latest savings rate of 28% is highest tillnow and with the growth rate near to 8% is bringing a pool of buyer’s purchasing power.This directly influences the demand for mutual fund products.6. EmploymentThe effect of employment on mutual fund industry is as direct as that on economicdevelopment of any country. With the rising levels of employment the effect on mutualfund industry is positive because employment adds to the insured properties and assetsfrom every prospective be it due to organized or unorganized.7. InflationThe midterm policy review the strong macroeconomic indicators and RBI has revised itsGDP growth estimates to the upper limit of the earlier projection range 8% inflation (WPI)Projectsformba.blogspot.com
    • has been steadily moving up in recent times and RBI has highlighted that primary articlesprices have been on of the key contributors. However one needs to keep in mind thatrecent increase in global oil prices.8. Money supplyThe central banks has indicated that credit growth and money supply number are likely tobe above its prosecution for the current fiscal year, the statement “to consider promptly allpossible measures as appropriate to the evolving global and domestics situation “isindicative of phased increase in FII limits for gilt investment could help in depending thesecurities market and is part of the road map towards fuller convertibility.9. InterestInterest is major factor for investment when a person find less return from investment toolthan people move towards the higher returns tool of investment.10. Risk factorAll investments in Mutual Fund and securities are subject to market risks and the NAV ofthe fund may go up or down depending on the factors and forces affecting the securitymarket. There can be no assurance that the fund’s objective will be achieved. Pastperformance of the sponsors/Mutual fund/schemes/AMC is not necessarily indicative ofthe future results. The name of the schemes does not in any manner indicate their quality,their future prospects or returns.The specific risk would be credit, market, illiquidity, judgmental error, interest rate, swapsand forward rates.Projectsformba.blogspot.com
    • 11. Demographic environmentThe demographic environment significantly affects the demand for the mutual fundindustry. Factors like the average age of the population, levels of education, householdstructures income distribution, life style and the extent of industrialization as well asurbanization terribly influences the demand of mutual fund schemesIn India the average age of the population is at an increasing trend following the improvedmedical technology and better awareness of health care requirements. As a result, the riskof investment death is decreasing while connectivity is increasing. Simultaneously thedemand for pension funds and income fund is expected to grow. Forexample at the time of independence the average age of dying for Indians was 45.Presently it has increased to 65 following better healthcare, improvements in medicalscience and more health consciousness among the common man. By 2010 it is expected torise to 75. Hence risk profile is also changing. Earlier people are thanking about safely butat present people thinking about capital growth.12. Social FactorsThe social environment covers the customs, habits, level of education, tastes and standardof living of people in the society. Today’s social environment is greatly influenced to amajor extent by the changes in technological aspects. With the rapid progress intechnology and economic liberalization, the physical boundaries are gradually vanishing.As a result, the social life of the people and their views towards risk and uncertainty of lifeand health are gradually changing.Projectsformba.blogspot.com
    • These factors of social life are affecting human motivations and emotions related to thephysical and mental incapacities, loss of health and death. In general there are extremesapprehensions of one’s death, though it is certain. The perception of an individual towardrisk and capital growth depends on the social culture and religious belief. In the urbanizedarea people does think about investment and capital growth. These beliefs ultimatelyinfluence the buying behavior of a consumer.13. EducationEducation is major factor of demand for mutual fund product. if the education levels ishigher than the people know the benefits of mutual fund the use mutual fund as investmenttool and also take rise capital growth.MUTUAL FUND PLAYERSThe Indian mutual fund industry is mainly divided into three kinds of categories. These categories include public sector players, nationalized banks and private sector and foreign players.UTI Mutual Fund was one of the leading Mutual Fund companies in India till May 2006with a corpus of more than Rs.31, 000 Crore and it is the public sector mutual fund.Bank of Baroda, Punjab National Bank, Can Bank and SBI are the major nationalizedbanks mutual fund.At present mutual fund industry is mainly dominated by private and foreign sector playerswhich include major players like Prudential ICICI Mutual Fund, HDFC Mutual Fund,Reliance Mutual Fund etc. are private sector mutual funds players while FranklinTempleton etc. are major foreign mutual fund players. At present there are more than 33players operating in Indian. The brief introduction of major players is given as follows.Projectsformba.blogspot.com
    • ABN AMRO Mutual FundABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India)Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India)Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABNAMRO Mutual Fund.Birla Sun Life Mutual FundBirla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun LifeFinancial. Sun Life Financial is a global organization evolved in 1871 and is beingrepresented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart fromIndia. Birla Sun Life Mutual Fund follows a conservative long-term approach toinvestment. Recently it crossed AUM of Rs. 10,000 Crore.Bank of Baroda Mutual FundBank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 underthe sponsorship of Bank of Baroda. BOB Asset Management Company Limited is theAMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche BankAG is the custodian.HDFC Mutual FundHDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely HousingDevelopment Finance Corporation Limited and Standard Life Investments Limited.HSBC Mutual FundHSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and CapitalMarkets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fundacts as the Trustee Company of HSBC Mutual Fund.ING Vysya Mutual FundProjectsformba.blogspot.com
    • ING 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 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 was setupon 13th of October 1993 with two sponsors, Prudential PLC. and ICICI Ltd. The TrusteeCompany formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI AssetManagement Company Limited incorporated on 22nd of June 1993.Sahara Mutual FundSahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial CorporationLtd. as the sponsor. Sahara Asset Management Company Private Limited incorporated onAugust 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of theAMC 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 cr. approximately. Todayit is the largest Bank sponsored Mutual Fund in India. They have already launched 35Schemes out of which 15 have already yielded handsome returns to investors. State Bankof India Mutual Fund has more than Rs. 5,500 Crore as AUM. Now it has an investor baseof over 8 Lakhs spread over 18 schemes.Projectsformba.blogspot.com
    • Tata Mutual FundTata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsor for TataMutual Fund is Tata Sons Ltd., and Tata Investment Corporation Ltd. The investmentmanager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited.Tata Asset Management Limiteds is one of the fastest in the country with more than Rs.7,703 Crore (as on April 30, 2005) of AUM.Kotak Mahindra Mutual FundKotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It ispresently having more than 1,99,818 investors in its various schemes. KMAMC started itsoperations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering toinvestors with varying risk - return profiles. It was the first company to launch dedicatedgilt scheme investing only in government securities.Reliance Mutual FundReliance Mutual Fund (RMF) 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 Capital Mutual Fund, whichwas changed on March 11, 2004. Reliance Mutual Fund was formed for launching ofvarious 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 set up on March 13, 2000 sponsored by StandardChartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. StandardProjectsformba.blogspot.com
    • Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated withSEBI on December 20,1999.Franklin Templeton India Mutual FundThe group, Franklin Templeton Investments is a California (USA) based company with aglobal AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financialservices groups in the world. Investors can buy or sell the Mutual Fund through theirfinancial advisor or through mail or through their website. They have Open endDiversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes,Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Incomeschemes and Open end Fund of Funds schemes to offer.Morgan Stanley Mutual Fund IndiaMorgan Stanley is a worldwide financial services company and it’s leading in the marketin securities, investment management and credit services. Morgan Stanley InvestmentManagement (MISM) was established in the year 1975. It provides customized assetmanagement services and products to governments, corporations, pension funds and non-profit organizations. Its services are also extended to high net worth individuals and retailinvestors. In India it is known as Morgan Stanley Investment Management Private Limited(MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the firstclose end diversified equity scheme serving the needs of Indian retail investors focusing ona long-term capital appreciation.Escorts Mutual FundEscorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as itssponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC wasincorporated on December 1, 1995 with the name Escorts Asset Management Limited.Projectsformba.blogspot.com
    • Benchmark Mutual FundBenchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt.Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company.Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark AssetManagement Company Pvt. Ltd. is the AMC.Can bank Mutual FundCan bank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as thesponsor. Can bank Investment Management Services Ltd. incorporated on March 2, 1993is 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 FundLife Insurance Corporation of India set up 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 business on 29th April 1994. The Trustees of LIC Mutual Fund have appointedJeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers forLIC Mutual Fund.GIC Mutual FundGIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), aGovernment of India undertaking and the four Public Sector General InsuranceCompanies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd.Projectsformba.blogspot.com
    • (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII)and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act,1882.Projectsformba.blogspot.com
    • (B) COMPANY INFORMATION1. HISTORYNJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financialproducts and services in India. Established in year 1994, NJ has over a decade of richexposure in financial investments space and portfolio advisory services. From a humblebeginning, NJ over the years has evolved out to be a professionally managed, qualityconscious and customer focused financial / investment advisory & distribution firm. NJ prides in being a professionally managed, quality focused and customer centricorganization. The strength of NJ lies in the strong domain knowledge in investmentconsultancy and the delivery of sustainable value to clients with support from cutting-edgetechnology platform, developed in-house by NJ.At NJ we believe in … • having single window, multiple solutions that are integrated for simplicity and sapience • making innovations, accessions, value-additions, a constant process • providing customers with solutions for tomorrow which will keep them above the curve, today NJ has over INR 30 billion* of mutual fund assets under advice with a widepresence in over 135 locations* in 21states* in India. The numbers are reflections of thetrust, commitment and value that NJ shares with its clients. NJ Wealth Advisors, a division of NJ, focuses on providing financial planning andportfolio advisory services to premium clients of high net-worth. At NJ Wealth Advisors,we have developed processes that focus on providing the best in terms of the advice andthe ongoing management of your portfolio and financial plans. At NJ, our experience, knowledge and understanding enables us to provide you withthe expected value, in an enhanced way. As a leading player in the industry, we continueto successfully meet the expectations of our clients, through meaningful andcomprehensive solutions offered by NJ Wealth AdvisorsProjectsformba.blogspot.com
    • 2.VISION & MISSION OF NJ India invest• VisionTo be the leader in our field of business through, • Total Customer Satisfaction • Commitment to Excellence • Determination to Succeed with strict adherence to compliance • Successful Wealth Creation of our Customers• Mission Ensure creation of the desired value for our customers, employees and associates,through constant improvement, innovation and commitment to service & quality. Toprovide solutions which meet expectations and maintain high professional & ethicalstandards along with the adherence to the service commitments3.PHILOSOPHYAt NJ our Service and Investing philosophy inspire and shape the thoughts, beliefs,attitude, actions and decisions of our employees. If NJ would resemble a body, ourphilosophy would be our spirit which drives our body.Service Philosophy:Our primary measure of success is customer satisfaction … We are committed to provide our customers with continuous, long-termimprovements and value-additions to meet the needs in an exceptional way. In our effortsto consistently deliver the best service possible to our customers, all employees of NJ willmake every effort to: • think of the customer first, take responsibility, and make prompt service to the customer a priority • deliver upon the commitments & promises made on time • anticipate, visualize, understand, meet, exceed our customer’s needsProjectsformba.blogspot.com
    • • bring energy, passion & excellence in everything we do • be honest and ethical, in action & attitude, and keep the customer’s interest supreme • strengthen customer relationships by providing service in a thoughtful & proactive manner and meet the expectations, effectively •Investing Philosophy: We aim to provide Need-based solutions for long-term wealth creation We aim to provide all customers of NJ, directly or indirectly, with true, unbiased,need-based solutions and advice that best meets their stated & un-stated needs. In ourefforts to provide quality financial & investment advice, we believe that • Clients want need-based solutions, which fits them • Long-term wealth creation is simple and straight • Asset-Allocation is the ideal & the best way for long-term wealth creation • Educating and disclosing all the important facets which the customer needs to be aware of, is important • The solutions must be unbiased, feasible, practical, executable, measurable and flexible • Constant monitoring and proper after-sales service is critical to complete the on- going process At NJ our aim is to earn the trust and respect of the employees, customers,partners, regulators, industry members and the community at large by following ourservice and investing philosophy with commitment and without exceptions.4.MANAGEMENTThe management at NJ brings together a team of people with wide experience andknowledge in the financial services domain. The management provides direction andguidance to the whole organisation. The management has strong visions for NJ as aglobally respected company providing comprehensive services in financial sector.The ‘Customer First’ philosophy in deeply ingrained in the management at NJ. The aimof the management is to bring the best to the customers in terms of • Range of products and services offered • Quality Customer ServiceProjectsformba.blogspot.com
    • All the key members of the organisation put in great focus on the processes & systemsunder the diverse functions of business. The management also focuses on utilizingtechnology as the key enabler for all the activities and to leverage the technology forenhancing overall customer experience.The key members of the management are:Mr. Neeraj Choksi Jt. Managing DirectorMr. Jignesh Desai Jt. Managing DirectorSales Team:Mr. Misbah Baxamusa National HeadMr. Naveen Rathod V.P.Executive Team:Mr. Shirish Patel Information TechnologyMr. Vinayak Rajput Finance & OperationsMr. Abhishek Dubey Marketing & DevelopmentMr. Viral Shah ResearchMr. Dhaval Desai Human Resources5.SERVICE STANDARDSService in words, service in actionService is the key to unlocking customer satisfaction, which again is key for sustainabilityof any business. At NJ we understand this very well. NJ has set strict processes in place todeliver quality services to customers. At NJ strict quality service standards are set and awell-defined process is established and followed religiously by our quality customerservice teams. Performance is evaluated on a frequent basis and glitches are ironed out. But quality service also involves quality people in addition to processes. NJ givessignificant focus to the proper training and development of the people involved in theservice delivery chain.Further we,Projectsformba.blogspot.com
    • • Have well-defined "Privacy Policy" to keep clients’ information confidential & internal audits done on the same at regular intervals • Receive various statistics which are analyzed on an ongoing basis to improve the service standardsWe are committed to improve and enhance our services and undertake new serviceinitiatives. Such and other services differentiate us with other service providers in theindustry.Our Service Commitments … The service commitments are to guide the actions of the people at NJ. Clearly stated,customers can freely communicate any such actions/events wherein they feel that any ofthe following commitments have been breached / compromised. At NJ we desire to honourour commitments at all points of time and to all our customers without any bias. • To provide customer-focussed need-based valued services • To provide reliable, accurate and timely information • To maintain all records in privacy • To optimize services/benefits at least justifiable cost • To develop and grow the customers’ business • To provide constructive after sales service • To honour our service commitments6.PRODUCTS Life Vista Life is counted not in years, but in moments. Moments of truth, joy, achievement and satisfaction. Of peace, tranquility, and freedom. At NJ, we bring such moments to life.Connecting GoalsLife Vista is for individuals who are looking for goal oriented planning. The client wouldtypically have a family, with multiple goals directed at meeting the obligations/goals inlife. Meeting obligations like education and marriage of children, meeting basic needs likepurchase of property, or business assets, would ideally be on agenda for such clients.Retirement planning would also be an important goal in life along with securing the futurefor those dependent.Projectsformba.blogspot.com
    • Process of Connecting Goals With Life Vista we take the onus to help you achieve your goals in life. Our teamwould undertake a detailed financial planning exercise for you. An ideal personalised,financial plan would then be recommended after detailed study. The team would thenconstantly monitor the progress of your plan. Any changes in the environment that mayhappen during the interim period would be incorporated into your plan. At Life Vista ourobjective is to connect you with your goals and your dreams with reality.How we can help youWe will do a detailed study of your goals and objectives in life and would help you bydevising a comprehensive plan to help you achieve them. We would also regularly monitoryour plans to make sure that you are always on track to achieve your goals. Asset Vista Wealth is not an end. Neither is it a beginning. Wealth is a process, a journey. A journey of power, achievement and responsibility . At NJ we ensure that this journey continues and grows.Projectsformba.blogspot.com
    • Creating Wealth Asset Vista is ideal for individuals or corporates looking for portfolio managementservices. Typically, the client would have sizeable investments made into multiple assetsand/or products. The need for Asset Vista may arise due to time constraints, the size of theinvestments, or the need for professional advice. The objective may be to have effectivemanagement of portfolio aimed at capital creation with capital protection at the backdrop. Process of Wealth Creation Asset Vista sees your portfolio as a reflection of your profile aimed to fulfill theidentified objectives. Asset Vista would include a detailed risk assessment andrecommendation of an ideal asset allocation for you. Post asset allocation, a portfoliowould be prepared and dynamically managed on an ongoing basis. Asset Vista wouldensure that your portfolio is logical, strategic, and in tune with the changing environmentand always on track to achieve the defined objectives.How we can help youWe will seek to manage and monitor your portfolio as per your objectives and your riskprofile. We would manage your portfolio the Asset Allocation way which is the mosteffective & ideal way to manage investments. You would also have access to consolidatedportfolio reports that enable you to see all your investments into multiple avenues at asingle place.Projectsformba.blogspot.com
    • 7.SERVICES PROVIDED TO CLIENT As NJ Wealth Advisor’s Global Private Client, you get comprehensive set ofservices that ensure you stay informed, insightful, in command, of your investments at alltimes.  Comprehensive Financial Planning We all have many responsibilities and goals in our lives. We have dreams andaspirations for a better future. But quite often we are not sure as to how we will fulfillthese goals and aspirations. Life changes over time. We may never be sure what todayProjectsformba.blogspot.com
    • holds for us tomorrow. What if something goes wrong? How do we make sure that we getwhat we wish? A comprehensive Financial Plan is what you need. At NJ Wealth Advisors we offeryou with Comprehensive Financial Planning solutions which would involve …  A detailed study of your goals  Preparation of a comprehensive Financial Plan  Monitoring of the Financial Plan on an on-going basis At NJ Wealth Advisors we offer you with comprehensive Financial PlanningServices under the product – Life Vista.  Quality Portfolio Advisory Making money is easy. Managing money is difficult. And managing money intoday’s complex financial markets with multiple products on an ongoing basis becomeseven more difficult.As investors we often may feel the lack of time and energy to undertake monitoring andmanaging of our investments in multiple avenues. This requires both dedicated efforts andskills in portfolio management.At NJ Wealth Advisors we realise the need for quality, unbiased portfolio advisoryservices. At NJ we would aim to manage your portfolio with a superior, time tested andmuch effective way of Asset Allocation keeping in mind your risk profile.At NJ Wealth Advisors we offer you with quality Portfolio Advisory Services underthe product – Asset Vista.  Consolidated ReportingQuality online Wealth Account: As a premium client you would have access to one of the best online investmentaccounts that offer comprehensive reports, many of which are unique in nature and givevaluable insights on our investmentsProjectsformba.blogspot.com
    • Our online Wealth Account covers almost all the investment avenues that you mayhave: • Mutual Funds – All AMCs, All Schemes • Direct Equity • Life Insurance • Physical Assets – Gold and Property • Private Equity – Business • Debt Products o Bank Deposits and Company Deposits o RBI / Infrastructure Bonds o Postal Savings – KVP, MIS, NSC o Debentures o Small Savings – PPF, NSS You would have access to Consolidated Net Asset Reports which would give youa single view of all your investments into different avenues as given above.Further, within each of the Asset class we have many more reports and utilities. Some ofthe reports covered are …Consolidated:Consolidated Asset Allocation, Consolidated Net Asset, Interest Income, Profit & LossMutual Funds:Valuation, Transaction, Profit & Loss, Performance, Portfolio reports like - AMC /Sector / Equity / Credit / Debt Exposure, Weighted Average Maturity, Dividend history,etcDirect Equity:Demat accounts, Transaction, Valuation, Profit & LossLife Insurance:Policy Report, Premium Reminder, Cash FlowDebt:Transaction, Interest Income, Maturity reports for different AsseProjectsformba.blogspot.com
    • 8. 360° – ADVISORY PLATFORM NJ believes in “360° – Advisory Platform” philosophy …With this philosophy, we try to offer all possible products, services and support which anAdvisor would need in his business.The support functions are generally in the following areas … • Business Planning and Strategy • Training and Development – Self and of employees • Products and Service Offerings • Business Branding • Marketing • Sales and Development • Technology • Advisors Resources - Tools, Calculators, etc.. • Research • CommunicationsProjectsformba.blogspot.com
    • With this comprehensive supporting platform, the NJ Fundz Partners stays ahead of thecurve in each respect compared to other Advisors/competitors in the market.Needless to say, the complete NJ Fundz offering is hard to resis (C) RESEARCH METHODOLOGY 1. RESEARCH PROBLEM:To know investor’s behavior regarding mutual fund as an investment avenue.2. RESEARCH OBJECTIVES (PRIMARY) : To know investor’s behavior regarding mutual fund as an investment avenue. RESEARCH OBJECTIVES (SECONDARY)· To identify the objectives of the investors for investing in a mutual fund.· To identify the investment patterns of investors.· To find out which scheme is better according to investors.· To study investors’ perceptions about level of satisfaction while investing in mutualfunds.3. RESEARCH PLAN :· DATA SOURCE We have used primary data source to collect the data regarding investors’ behavior formutual fund as an investment avenue. The survey was conducted across jammu.· RESEARCH APPROACH Survey approach was under taken to know the behavior of investor regarding mutualfund as an investment avenue.· RESEARCH INSTRUMENTProjectsformba.blogspot.com
    • Questionnaire was the instrument of collecting dataSAMPLING PLAN Sample unit: All the investors who are occasionally or regularly investing in financialassets and non-financial assetsSample size: Survey population comprises of the total reputed businessman, Professionals, andindividual investor was approx 70.Sampling method:In this study as suggested by the company a sample of reputed Businessman,Professionals, and individual investor’s was selected and it was selected through non-probability, convenience sampling method. Because all the Businessman, Professionals,and individual investor’s could not be interviewed as per our requirement but according totheir availability and accessibility we meet them.Contact methodThe total sample size for survey was 70 investors by personal interviewProjectsformba.blogspot.com
    • 4. SURVEY ANALYSIS AND INTERPRETATION :GenderThere are 15 females and 55 males as respondents male 55 female 15 Gender of respondents(% ) 21% males females 79%Projectsformba.blogspot.com
    • Q1 what is your age? AGEPARTICULARS NO.20-30 2030-40 2540-50 1350-60 1060-ABOVE 2TOTAL 70 From the above table we can say that awareness for investment in youngster has been increased & that’s why out of 70, 20 are youngster who do investment and they come in the age group of 20-30, then comes age group of 30-40 from which 25people do investment and other age group are 40-50 where they do investment of 13, 10 belongs to age group of 50-60 they do the investment, and 2 belongs to the age group of60-above they do their investment. We can say that youngsters are more careful for their investment.Q2 what is your profession? PROFESSIONPARTICULARS NO.BUSINESS 4JOB IN PRIVATE SECTOR 14JOB IN PUBLIC SECTOR 35OTHERS 17TOTAL 100Projectsformba.blogspot.com
    • Now 70 people doing investment out of which 35 people are from public sector, 14 arefrom private sector, 4 are having their business and 17 are others which include retiredpeople, housewives and student. Reason for investment by all people was to secure thefuture and reason given by people doing the job in private was their higher salary andunsecured job.Projectsformba.blogspot.com
    • Q3 Do you invest in mutual fund ? PARTICULARS YES 21 NO 49 TOTAL 70From 70 people 21 of them are doing investment in mutual fund and 49 of them are notinvesting in mutual fund but they do investment in other sectors for which information isgiven in the next question.Q4 If you are not investing in mutual fund then where do you invest (in proportion)? INVESTMENT PROPORTION EXCEPT MF?PARTICULARS NOINSURANCE 40EQUIYTY MARKET 10GOVT. SCHEME 30REAL ESTATE 5COMMODITIES 15TOTAL 100.00People who were not investing in mutual fund they do invest in sectors like insurance,equity market, government schemes (includes banks, bonds &other scheme ), real estate,commodities even people those who do invest in mutual fund they also invest in differentsectors. Out of 100%, 10% people do invest in equity market, 40% invest in insurance,30% in government scheme, 5% do invest in real estate and 15% do invest incommodities. People do invest in equity market due to higher returns available in it.Projectsformba.blogspot.com
    • Q5 Rank the company according to your preference from top (1) to bottom (11)?RANK THE MF FROM TOP 1 TO BOTTOM 11?PARTICULARS NORELIANCE 11BIRLA 3TATA 3LOTUS 0SBI 31HDFC 0ICICI 21FRANKLIN TEMP. 0SUNDARAM 0UTI 1BENCHMARK 0TOTAL 70People who were investing in mutual fund had given the rank to different mutual fundcompanies on the basis of what they think about that particular company and had givenranks to different companies. Here in this data 31 people had given SBI as 1 st rank and thesecond highest is ICICI where 21 people has given it as 1st rank and the reasons behindgiving 1st rank were their return, good credit in market and tax saving benefit.Q6 Do you compare the returns or other benefits of mf schemes before investing? ANNUAL REPORT CHECKINGPARTICULARSYES 28NO 42TOTAL 70It is necessary to compare the returns and other benefits because people do invest in forhigher returns so they compare with other companies also. Here 28 people compare theProjectsformba.blogspot.com
    • returns and other benefits of mutual fund scheme before as well as after investing to seehow their investment is spread over in different segments.Q7 which factors do you consider while investing in mutual fund? SAFETYPARTICULARS NOEXT. IMP. 48IMPORTANT 22NEUTRAL 0UNIMPORTANT 0EXT. UNIMP 0TOTAL 70Investors consider different factors before investment and for many reasons they invest indifferent scheme of mutual fund. Here reason for investment is safety of their money andsafety of their future so 48 people consider it ext important, while 22 people says it’simportant for their investment.Many people consider very important to invest in mutual fund to save tax or to take taxbenefit. Therefore 37 people consider it as ext important to invest in tax saving schemewhile 32 people consider it as important for investment,1 person is neutral about it, andnobody consider it as unimportant and ext unimportant.Projectsformba.blogspot.com
    • RETURN EARNINGSPARTICULARS NOEXT. IMP. 26IMPORTANT 44NEUTRAL 0UNIMPORTANT 0EXT. UNIMP 0TOTAL 70Generally people invest in mutual fund companies for higher returns with less risk ascompare equity market and could able to earn good returns.26 people agree that they doinvest in mutual fund for higher returns and consider it as ext important, 44 investors areconsidering it as important . LIQUIDITYPARTICULARS NOEXT. IMP. 6IMPORTANT 34NEUTRAL 25UNIMPORTANT 5EXT. UNIMP 0TOTAL 70Above graph reveals that some of the investors means 6 are giving liquidity moreemphasis because by the way of open ended scheme they can any time liquid theirposition, 5 investors had given negative response about it while 34 of the investors aregiving them least importance and 25 are neutral to itProjectsformba.blogspot.com
    • Q8 How do you monitor the following. NAV PARTICULARS NOMONTHLY 20QUARTELY 26HALF YEARLY 12YEARLY 7NEVER 5TOTAL 70NAV is the net asset value of your investment in units that comes of every week by thisyou can come to know how much of your investment has been increased so it becomesnecessary to monitor but period of monitoring depends on investor. Here 20 of investor domonitor monthly, 26 of investors monitors quarterly, 12 monitor half yearly, 7 monitoryearly,5 never monitor. RISK FACTOR PARTICULARS NOMONTHLY 14QUARTELY 26HALF YEARLY 21YEARLY 5NEVER 4TOTAL 70Risk factor is necessary to be monitor at certain time period though there is not much riskin investing in mutual fund as compare to equity investment but monitoring is necessary tocheck the returns and see that the managed properly. Here 14 of investors monitor itmonthly, 26 of investors monitor it quarterly, 21 do half early yearly and 5 do monitorProjectsformba.blogspot.com
    • yearly. Risk factor is monitored before investment also to check the scheme and to see itsperformance.Projectsformba.blogspot.com
    • PORTFOLIO OF SECURITIES PARTICULARS NOMONTHLY 9QUARTELY 14HALF YEARLY 25YEARLY 15NEVER 7TOTAL 70Portfolio for securities means where the co invest in different sectors as it is decided inadvance so after making decision the AMC invest accordingly and it is been monitoredproper time period as required, 9 of investor do monitor monthly, 14 of investor monitorquarterly, 25 do half yearly, most probably 15 of investors monitor it yearly and 7 nevermonitor. Investor check out portfolio to see where their money is being invested. PROFILE OF FUND MANAGER PARTICULARS NOMONTHLY 1QUARTELY 4HALF YEARLY 15YEARLY 28NEVER 22TOTAL 70Fund manager is the person who manage the fund of investor who had invested theirmoney in their company it is necessary that the fund manager should be qualified enoughto manager the fund of the investor because if he fails to manage the fund the investorsmoney is not secure. So 1 investor monitor profile monthly, 4 do quarterly, 28 do yearlyand 22 never monitor the profile. Generally investors monitor’s the profile beforeinvesting.Projectsformba.blogspot.com
    • Q9 Do you check out the annual reports of your scheme to evaluate the performance of your scheme? ANNUAL REPORT CHECKINGPARTICULARSYES 61NO 9TOTAL 70In the annual report of the scheme all the information of that particular scheme are giveninformation about the performance of the scheme, position of the scheme in the market,portfolio of the scheme that where the investment has been done under this scheme, profileof the fund manager is also given by this the investors can come to know the position andqualification of the fund manager. So most of the investors are monitoring the annualreport.61 investors do monitor the annual report of the scheme, 9 do not monitor theannual report.Projectsformba.blogspot.com
    • Q10 Objectives for investment in mutual fund schemes (rank them from 1most preferred to 4 leastpreferred).OBJECTIVES FOR INVESTMENTPARTICULARS RANK 1 RANK 2 RANK 3 RANK 4 TOTALRETURN/DIVIDEND 15 34 21 0 70APPRECIATION 13 26 30 1 70TAX 42 10 17 1 70LIQUIDITY 0 0 2 68 70TOTAL 70 70 70 70Here in this question the investors have ranked the factors on the basis of their objectivesthat for what reason they had invested in that particular scheme. 15 of investors had givenreturn/dividend 1st rank because every investor want benefits for the risk they had taken byinvesting in that scheme, 13 of investors had given appreciation 1st rank because they wantsomething more including their invested amount.42 of investor has given tax saving as 1strank because while investing in some particular scheme their amount invested isappreciated as well as they get the tax benefit,0 has given 1st rank to liquidity ..Projectsformba.blogspot.com
    • 5. LIMITATION OF THE STUDY: Every research has its own limitation and present research work is no exception to this general rule the inherent limitation of the study are as under:· Interview method, which was followed in the present research work, is relatively more time consuming. In addition to this it is very expensive method, especially when spread geographic sample is taken.· Questionnaire method can be used only when respondents are literate and co-operative.· Sample size was 70 that are not enough to study the awareness of Independent individuals.· As sampling techniques is convenient sampling so it may result in personal bias. Even respondent give bias answers. Time is main constraint of the research as we have been given project as well as study simultaneously.Projectsformba.blogspot.com
    • 6.FINDINGS AND RECOMMENDATIONS :From the above analysis, I found that even though certainly not the best or deepest ofmarkets in the world, it has ignited the growth rate in mutual fund industry to providereasonable options for an ordinary man to invest his savings.With the help of –• Give more importance to safety and return attributes because Independent Financial Advisors are more concern about safety and of giving more benefit of the investments to their clients.• Independent Financial Advisors who are not suggesting their clients to invest in mutual funds due to their lack of knowledge of mutual funds. So, NJ India Invest should ar- range mutual fund awareness Program of their and other independent Financial Advi- sors on regular basis.• By providing better service NJ India Invest should try to attract the Independent Finan- cial Advisors to join with them.• NJ India Invest should arrange special mutual fund awareness program for gener- al public. So they can directly work with NJ India Invest as direct client.• Majority of the Government employees take into consideration tax benefits before mak- ing any investment. So NJ India Invest should highlight tax benefits in mutual funds.• NJ India Invest should launch its brand awareness campaign to be successful in Mutual fund advisory service providero NJ India invest should also concentrate on youngster who are interested in savings so make them aware about different schemes for investment and arrange seminars for col- lege going students, by this company gets more customers connected for long period.o Put hoardings outside the colleges making NJ INDIA known to them and try to attract them.Projectsformba.blogspot.com
    • Key Findings: - Around 50% of the investors invest to maximize their returns and they are ready to take moderate risks in their investment portfolio. Most of the investors give importance to the fact that their investment should grow in value over a period of time. Growth scheme is the most preferred for investment Knowledge about mutual funds and their various schemes is moderate among in- vestors. It is necessary to make Mutual Fund more popular in the eyes of investors as well as distributors and also cater trust which has been lost due to US-64. Most of the investors give importance to return, tax saving etc. Objectives of the investor are to get something in return for their investment and the risk they are taking. Here the objective of the investor between the age of 20-30 is to earn the higher return. While the age group above 30years concentrates on safety and tax saving and they even take care of the liquidity.Projectsformba.blogspot.com
    • BIBLIOGRAPHYBooks referred• Ch 9 and Ch 10 from David J. Luck & Ronald S. Rubin, 2003, Marketing Research, Prentice Hall of India Pvt. Ltd, New Delhi• chap-3 from Mutual Fund in INDIA by Nalini Prava Tripathy, pg no37-84 publication house Excel books.• NJ India Invest monthly fact file.Web Siteswww.amfi.comwww.indiainfoline.comwww.njindiainvest.comwww.mutualfundsearchonline.comProjectsformba.blogspot.com