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    Project on mutual funds is the better investments plan Project on mutual funds is the better investments plan Document Transcript

    • Projectsformba.blospot.com A PROJECT REPORT ON “MUTUAL FUNDS IS THE BETTER INVESTMENTS PLAN” Submitted in partial fulfillment for MASTER OF BUSINESS ADMIMISTRATION Programme of INSTITUTE OF MANAGEMENT TECHNOLOGY GHAZIABAD Batch2005-08Submitted by :- Under Guidance :-AKHILESH MISHRA CA SHARAD CHAUHANMBA( Three Year Programme) Manager AccountsBatch (2005-2008) Uttam Sugar Mills LimitedEnrolment No-52102689 Corprote office Noida Department of Business Management INSTITUTE OF MANAGEMENT TECHNOLOGY GHAZIABAD Projectsformba.blospot.com
    • Projectsformba.blospot.com ACKNOWLEDGEMENTWith regard to my Project with Mutual Fund I would like to thank each and every onewho offered help, guideline and support whenever required. First and foremost I would like to express gratitude to Manager SBI kanwaliRoad Dehradoon and other staffs for their support and guidance in the Project work.. Iam extremely grateful to my guide, CA Sharad Chauhan for their valuable guidanceand timely suggestions. I would like to thank all faculty members of Uttam Sugar MillsLimited for the valuable guidance& support. I would also like to extend my thanks to my members and friends for theirsupport specially .MCA Anuj Panday officer I.T.Uttam Sugar Mills Limited Sharanpur& Mr. Rajeev Goyal consultant, Sales tax, income tax .And lastly, I would like toexpress my gratefulness to the parent’s for seeing me through it all.AKHILESH MISHRA Projectsformba.blospot.com
    • Projectsformba.blospot.comProjectsformba.blospot.com
    • Projectsformba.blospot.com CERTIFICATEThis is to certify that Mr. Akhilesh Mishra a student of IMT-CDL Ghazibad has completedproject work on “MUTUAL FUNDS IS THE BETTER INVESTMENTS PLAN” under myguidance and supervision. I certify that this is an original work and has not been copied from any source.Signature of GuideName of Project Guide CA Sharad ChauhanDate- Projectsformba.blospot.com
    • Projectsformba.blospot.com DECLERATIONI hereby declare that this Project Report entitled “THE MUTUAL FUND IS BETTERINVESTMENT PLAN in SBI Mutual Fund submitted in the partial fulfillment of therequirement of Master of Business Administration (MBA) of INSTITUTE OFMANAGEMET TECHNOLOGY, GHAZIABAD is based on primary & secondarydata found by me in various departments, books, magazines and websites & Collectedby me in under guidance of C.A. Sharad Chauhan.DATE: AKHILESH MISHRA MBA (Three Years) Enrollment No.52102689 Projectsformba.blospot.com
    • Projectsformba.blospot.com EXECUTIVE SUMMARYIn few years Mutual Fund has emerged as a tool for ensuring one’s financial wellbeing. Mutual Funds have not only contributed to the India growth story but have alsohelped families tap into the success of Indian Industry. As information and awarenessis rising more and more people are enjoying the benefits of investing in mutual funds.The main reason the number of retail mutual fund investors remains small is that ninein ten people with incomes in India do not know that mutual funds exist. But oncepeople are aware of mutual fund investment opportunities, the number who decide toinvest in mutual funds increases to as many as one in five people. The trick forconverting a person with no knowledge of mutual funds to a new Mutual Fundcustomer is to understand which of the potential investors are more likely to buymutual funds and to use the right arguments in the sales process that customers willaccept as important and relevant to their decision.This Project gave me a great learning experience and at the same time it gave meenough scope to implement my analytical ability. The analysis and advice presented inthis Project Report is based on market research on the saving and investment practicesof the investors and preferences of the investors for investment in Mutual Funds. ThisReport will help to know about the investors’ Preferences in Mutual Fund means Arethey prefer any particular Asset Management Company (AMC), Which type of Productthey prefer, Which Option (Growth or Dividend) they prefer or Which InvestmentStrategy they follow (Systematic Investment Plan or One time Plan). This Project as awhole can be divided into two parts. Projectsformba.blospot.com
    • Projectsformba.blospot.comThe first part gives an insight about Mutual Fund and its various aspects, the CompanyProfile, Objectives of the study, Research Methodology. One can have a briefknowledge about Mutual Fund and its basics through the Project.The second part of the Project consists of data and its analysis collected through surveydone on 200 people. For the collection of Primary data I made a questionnaire andsurveyed of 200 people. I also taken interview of many People those who were comingat the SBI Branch where I done my Project. I visited other AMCs in Dehradoon to getsome knowledge related to my topic. I studied about the products and strategies ofother AMCs in Dehradoon to know why people prefer to invest in those AMCs. ThisProject covers the topic “THE MUTUAL FUND IS BETTER INVESTMENT PLAN.”The data collected has been well organized and presented. I hope the research findingsand conclusion will be of use. Projectsformba.blospot.com
    • Projectsformba.blospot.com CONTENTSAcknowledgementDeclarationExecutive SummaryChapter - 1 INTRODUCTIONChapter - 2 COMPANY PROFILEChapter - 3 OBJECTIVES AND SCOPEChapter - 4 RESEARCH METHODOLOGYChapter - 5 DATA ANALYSIS AND INTERPRETATIONChapter - 6 FINDINGS AND CONCLUSIONSChapter - 7 SUGGESTIONS & RECOMMENDATIONS BIBLIOGRAPHY MUTUAL FUNDS Projectsformba.blospot.com
    • Projectsformba.blospot.comALL ABOUT MUTUAL FUNDS  WHAT IS MUTUAL FUND  BY STRUCTURE  BY NATURE  EQUITY FUND  DEBT FUNDS  BY INVESTMENT OBJECTIVE  OTHER SCHEMES  PROS & CONS OF INVESTING IN MUTUAL FUNDS  ADVANTAGES OF INVESTING MUTUAL FUNDS  DISADVANTAGES OF INVESTING MUTUAL FUNDS  MUTUAL FUNDS INDUSTRY IN INDIA  MAJOR PLAYERS OF MUTUAL FUNDS IN INDIA  HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY  CATEGORIES OF MUTUAL FUNDS  INVESTMENT STRATEGIES  WORKING OF A MUTUAL FUND  GUIDELINES OF THE SEBI FOR MUTUAL FUND  COMPANIES DISTRIBUTION CHANNELS  DOES FUND PERFORMANCE AND RANKING PERSIST?  PORTFOLIO ANALYSIS TOOLS Projectsformba.blospot.com
    • Projectsformba.blospot.comRESEARCH REPORT  OBJECTIVE OF RESEARCH  SCOPE OF THE STUDY  DATA SOURCES  SAMPLING  DATA ANALYSIS  QUESTIONNAIRE Projectsformba.blospot.com
    • Projectsformba.blospot.comChapter - 1IntroductionProjectsformba.blospot.com
    • Projectsformba.blospot.comINTRODUCTION TO MUTUAL FUND AND ITS VARIOUSASPECTS.Mutual fund is a trust that pools the savings of a number of investors who share acommon financial goal. This pool of money is invested in accordance with a statedobjective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to allinvestors. The money thus collected is then invested in capital market instruments suchas shares, debentures and other securities. The income earned through theseinvestments and the capital appreciations realized are shared by its unit holders inproportion the number of units owned by them. Thus a Mutual Fund is the mostsuitable investment for the common man as it offers an opportunity to invest in adiversified, professionally managed basket of securities at a relatively low cost. AMutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholderparticipates in the gain or loss of the fund. Units are issued and can be redeemed asneeded. The funds Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries andsectors and thus the risk is reduced. Diversification reduces the risk because all stocksmay not move in the same direction in the same proportion at the same time. Mutualfund issues units to the investors in accordance with quantum of money invested bythem. Investors of mutual funds are known as unit holders. Projectsformba.blospot.com
    • Projectsformba.blospot.comWhen an investor subscribes for the units of a mutual fund, he becomes part owner ofthe assets of the fund in the same proportion as his contribution amount put up with thecorpus (the total amount of the fund). Mutual Fund investor is also known as a mutualfund shareholder or a unit holder.Any change in the value of the investments made into capital market instruments (suchas shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme.NAV is defined as the market value of the Mutual Fund schemes assets net of itsliabilities. NAV of a scheme is calculated by dividing the market value of schemesassets by the total number of units issued to the investors. Projectsformba.blospot.com
    • Projectsformba.blospot.comADVANTAGES OF MUTUAL FUND• Portfolio Diversification• Professional management• Reduction / Diversification of Risk• Liquidity• Flexibility & Convenience• Reduction in Transaction cost• Safety of regulated environment• Choice of schemes• TransparencyDISADVANTAGE OF MUTUAL FUND• No control over Cost in the Hands of an Investor• No tailor-made Portfolios• Managing a Portfolio Funds• Difficulty in selecting a Suitable Fund Scheme Projectsformba.blospot.com
    • Projectsformba.blospot.comHISTORY OF THE INDIAN MUTUAL FUND INDUSTRYThe 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. Though thegrowth was slow, but it accelerated from the year 1987 when non-UTI players enteredthe Industry.In the past decade, Indian mutual fund industry had seen a dramatic improvement, bothqualities wise as well as quantity wise. Before, the monopoly of the market had seen anending phase; the Assets Under Management (AUM) was Rs67 billion. The privatesector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and tillApril 2004; it reached the height if Rs. 1540 billion.The Mutual Fund Industry is obviously growing at a tremendous space with the mutualfund industry can be broadly put into four phases according to the development of thesector. Each phase is briefly described as under.First Phase – 1964-87Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by theReserve Bank of India and functioned under the Regulatory and administrative controlof the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and theIndustrial Development Bank of India (IDBI) took over the regulatory andadministrative control in place of RBI. The first scheme launched by UTI was UnitScheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets undermanagement. Projectsformba.blospot.com
    • Projectsformba.blospot.comSecond Phase – 1987-1993 (Entry of Public Sector Funds)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 InsuranceCorporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fundestablished in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab NationalBank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, themutual fund industry had assets under management of Rs.47,004 crores.Third Phase – 1993-2003 (Entry of Private Sector Funds)1993 was the year in which the first Mutual Fund Regulations came into being, underwhich all mutual funds, except UTI were to be registered and governed. The erstwhileKothari Pioneer (now merged with Franklin Templeton) was the first private sectormutual fund registered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensiveand revised Mutual Fund Regulations in 1996. The industry now functions under theSEBI (Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33mutual funds with total assets of Rs. 1,21,805 crores.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 Projectsformba.blospot.com
    • Projectsformba.blospot.comof India with assets under management of Rs.29,835 crores as at the end of January2003, representing broadly, the assets of US 64 scheme, assured return and certainother schemesThe second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It isregistered with SEBI and functions under the Mutual Fund Regulations. consolidationand growth. As at the end of September, 2004, there were 29 funds, which manageassets of Rs.153108 crores under 421 schemes. Projectsformba.blospot.com
    • Projectsformba.blospot.comCATEGORIES OF MUTUAL FUND: Projectsformba.blospot.com
    • Projectsformba.blospot.com Mutual funds can be classified as follow : Based on their structure:• Open-ended funds: Investors can buy and sell the units from the fund, at any point of time.• Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity. Based on their investment objective: Equity funds: These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as: Projectsformba.blospot.com
    • Projectsformba.blospot.com i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty istracked. Their portfolio mirrors the benchmark index both in terms of compositionand individual stock weightages.ii) Equity diversified funds- 100% of the capital is invested in equities spreadingacross different sectors and stocks.iii|) Dividend yield funds- it is similar to the equity diversified funds except that theyinvest in companies offering high dividend yields.iv) Thematic funds- Invest 100% of the assets in sectors which are related throughsome theme.e.g. -An infrastructure fund invests in power, construction, cements sectors etc.v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sectorfund will invest in banking stocks.vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.Balanced fund: Their investment portfolio includes both debt and equity. As a result, onthe risk-return ladder, they fall between equity and debt funds. Balanced funds are the idealmutual funds vehicle for investors who prefer spreading their risk across various instruments.Following are balanced funds classes:i) Debt-oriented funds -Investment below 65% in equities.ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt. Projectsformba.blospot.com
    • Projectsformba.blospot.comDebt fund: They invest only in debt instruments, and are a good option for investorsaverse to idea of taking risk associated with equities. Therefore, they invest exclusivelyin fixed-income instruments like bonds, debentures, Government of India securities;and money market instruments such as certificates of deposit (CD), commercial paper(CP) and call money. Put your money into any of these debt funds depending on yourinvestment horizon and needs.i) Liquid funds- These funds invest 100% in money market instruments, a largeportion being invested in call money market.ii) Gilt funds ST- They invest 100% of their portfolio in government securities of andT-bills.iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debtinstruments which have variable coupon rate.iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing between cash market and derivatives market. Funds are allocated to equities,derivatives and money markets. Higher proportion (around 75%) is put in moneymarkets, in the absence of arbitrage opportunities.v) Gilt funds LT- They invest 100% of their portfolio in long-term governmentsecurities. Projectsformba.blospot.com
    • Projectsformba.blospot.comvi) Income funds LT- Typically, such funds invest a major portion of the portfolio inlong-term debt papers.vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and anexposure of 10%-30% to equities.viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line withthat of the fund. Projectsformba.blospot.com
    • Projectsformba.blospot.comINVESTMENT STRATEGIES1. Systematic Investment Plan: under this a fixed sum is invested each month on afixed date of a month. Payment is made through post dated cheques or direct debitfacilities. The investor gets fewer units when the NAV is high and more units when theNAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)2. Systematic Transfer Plan: under this an investor invest in debt oriented fund andgive instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of thesame mutual fund.3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fundthen he can withdraw a fixed amount each month. Projectsformba.blospot.com
    • Projectsformba.blospot.com RISK V/S. RETURN:Projectsformba.blospot.com
    • Projectsformba.blospot.com Chapter – 2 Company ProfileINTRODUCTION TO SBI MUTUAL FUNDSBI Funds Management Pvt. Ltd. is one of the leading fund houses in thecountry with an investor base of over 4.6 million and over 20 years of rich Projectsformba.blospot.com
    • Projectsformba.blospot.comexperience in fund management consistently delivering value to its investors.SBI Funds Management Pvt. Ltd. is a joint venture between The State Bank ofIndia one of Indias largest banking enterprises, and Société Générale AssetManagement (France), one of the worlds leading fund management companiesthat manages over US$ 500 Billion worldwide.Today the fund house manages over Rs 28500 crores of assets and has a diverseprofile of investors actively parking their investments across 36 active schemes.In 20 years of operation, the fund has launched 38 schemes and successfullyredeemed 15 of them, and in the process, has rewarded our investors withconsistent returns. Schemes of the Mutual Fund have time after timeoutperformed benchmark indices, honored us with 15 awards of performanceand have emerged as the preferred investment for millions of investors. Thetrust reposed on us by over 4.6 million investors is a genuine tribute to ourexpertise in fund management.SBI Funds Management Pvt. Ltd. serves its vast family of investors through anetwork of over 130 points of acceptance, 28 Investor Service Centres, 46Investor Service Desks and 56 District Organizers.SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent India Opportunities Fund.Growth through innovation and stable investment policies is the SBI MF credo.PRODUCTS OF SBI MUTUAL FUNDEquity schemes Projectsformba.blospot.com
    • Projectsformba.blospot.comThe investments of these schemes will predominantly be in the stock marketsand endeavor will be to provide investors the opportunity to benefit from thehigher returns which stock markets can provide. However they are also exposedto the volatility and attendant risks of stock markets and hence should bechosen only by such investors who have high risk taking capacities and arewilling to think long term. Equity Funds include diversified Equity Funds,Sectoral Funds and Index Funds. Diversified Equity Funds invest in variousstocks across different sectors while sectoral funds which are specialized EquityFunds restrict their investments only to shares of a particular sector and hence,are riskier than Diversified Equity Funds. Index Funds invest passively only inthe stocks of a particular index and the performance of such funds move withthe movements of the index.  Magnum COMMA Fund  Magnum Equity Fund  Magnum Global Fund  Magnum Index Fund  Magnum Midcap Fund  Magnum Multicap Fund  Magnum Multiplier plus 1993  Magnum Sectoral Funds Umbrella  MSFU- Emerging Business Fund  MSFU- IT Fund  MSFU- Pharma Fund Projectsformba.blospot.com
    • Projectsformba.blospot.com  MSFU- Contra Fund  MSFU- FMCG Fund  SBI Arbitrage Opportunities Fund  SBI Blue chip Fund  SBI Infrastructure Fund - Series I  SBI Magnum Taxgain Scheme 1993  SBI ONE India Fund  SBI TAX ADVANTAGE FUND - SERIES IDebt schemesDebt Funds invest only in debt instruments such as Corporate Bonds,Government Securities and Money Market instruments either completelyavoiding any investments in the stock markets as in Income Funds or Gilt Fundsor having a small exposure to equities as in Monthly Income Plans or ChildrensPlan. Hence they are safer than equity funds. At the same time the expectedreturns from debt funds would be lower. Such investments are advisable for therisk-averse investor and as a part of the investment portfolio for other investors. • Magnum Children’s benefit Plan • Magnum Gilt Fund • Magnum Income Fund • Magnum Insta Cash Fund Projectsformba.blospot.com
    • Projectsformba.blospot.com • Magnum Income Fund- Floating Rate Plan • Magnum Income Plus Fund • Magnum Insta Cash Fund -Liquid Floater Plan • Magnum Monthly Income Plan • Magnum Monthly Income Plan - Floater • Magnum NRI Investment Fund • SBI Premier Liquid FundBALANCED SCHEMESMagnum Balanced Fund invests in a mix of equity and debt investments. Hencethey are less risky than equity funds, but at the same time providecommensurately lower returns. They provide a good investment opportunity toinvestors who do not wish to be completely exposed to equity markets, but islooking for higher returns than those provided by debt funds. • Magnum Balanced FundCOMPETITORS OF SBI MUTUAL FUND Projectsformba.blospot.com
    • Projectsformba.blospot.comSome of the main competitors of SBI Mutual Fund in Dehradoon are asFollows: i. ICICI Mutual Fund ii. Reliance Mutual Fund iii. UTI Mutual Fund iv. Birla Sun Life Mutual Fund v. Kotak Mutual Fund vi. HDFC Mutual Fund vii. Sundaram Mutual Fund viii. LIC Mutual Fund ix. Principal x. Franklin TempletonAWARDS AND ACHIEVEMENTSSBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award - 8times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year Projectsformba.blospot.com
    • Projectsformba.blospot.com2005-2006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the YearAward 2007 and 5 Awards for our schemes. Projectsformba.blospot.com
    • Projectsformba.blospot.comProjectsformba.blospot.com
    • Projectsformba.blospot.com Chapter - 3Objectives and scope OBJECTIVES OF THE STUDY Projectsformba.blospot.com
    • Projectsformba.blospot.com1. To find out the Preferences of the investors for Asset Management Company.2. To know the Preferences for the portfolios.3. To know why one has invested or not invested in SBI Mutual fund4. To find out the most preferred channel.5. To find out what should do to boost Mutual Fund Industry. Projectsformba.blospot.com
    • Projectsformba.blospot.com Scope of the studyA big boom has been witnessed in Mutual Fund Industry in resent times. A largenumber of new players have entered the market and trying to gain market share in thisrapidly improving market.The research was carried on in Dehradoon. I had been sent at one of the branch of StateBank of India Dehradoon where I completed my Project work. I surveyed on myProject Topic “A study of preferences of the Investors for investment in Mutual Fund”on the visiting customers of the SBI Boring Canal Road Branch.The study will help to know the preferences of the customers, which company,portfolio, mode of investment, option for getting return and so on they prefer. Thisproject report may help the company to make further planning and strategy. Projectsformba.blospot.com
    • Projectsformba.blospot.com Chapter – 4Research Methodology Projectsformba.blospot.com
    • Projectsformba.blospot.com RESEARCH METHODOLOGY This report is based on primary as well secondary data, however primary datacollection was given more importance since it is overhearing factor in attitude studies.One of the most important users of research methodology is that it helps in identifyingthe problem, collecting, analyzing the required information data and providing analternative solution to the problem .It also helps in collecting the vital information thatis required by the top management to assist them for the better decision making bothday to day decision and critical ones.Data sources:Research is totally based on primary data. Secondary data can be used only for thereference. Research has been done by primary data collection, and primary data hasbeen collected by interacting with various people. The secondary data has beencollected through various journals and websites.Duration of Study:The study was carried out for a period of two months, from 30th May to 30th July 2008. Projectsformba.blospot.com
    • Projectsformba.blospot.comSampling: Sampling procedure:The sample was selected of them who are the customers/visitors of State Bank if India,Boring Canal Road Branch, irrespective of them being investors or not or availing theservices or not. It was also collected through personal visits to persons, by formal andinformal talks and through filling up the questionnaire prepared. The data has beenanalyzed by using mathematical/Statistical tool. Sample size:The sample size of my project is limited to 200 people only. Out of which only 120people had invested in Mutual Fund. Other 80 people did not have invested in MutualFund. Sample design:Data has been presented with the help of bar graph, pie charts, line graphs etc. Projectsformba.blospot.com
    • Projectsformba.blospot.comLimitation: Some of the persons were not so responsive. Possibility of error in data collection because many of investors may have not given actual answers of my questionnaire. Sample size is limited to 200 visitors of State Bank of India , Boring Canal Road Branch, Dehradoon out of these only 120 had invested in Mutual Fund. The sample. size may not adequately represent the whole market. Some respondents were reluctant to divulge personal information which can affect the validity of all responses. The research is confined to a certain part of Dehradoon. Projectsformba.blospot.com
    • Projectsformba.blospot.com Chapter – 5Data Analysis & Interpretation Projectsformba.blospot.com
    • Projectsformba.blospot.com ANALYSIS & INTERPRETATION OF THE DATA1. (a) Age distribution of the Investors of Dehradoon Age Group <= 30 31-35 36-40 41-45 46-50 >50 No. of 12 18 30 24 20 16 Investors 35 Investors invested in Mutual Fund 30 25 20 15 30 24 10 18 20 16 5 12 0 <=30 31-35 36-40 41-45 46-50 >50 Age group of the InvestorsInterpretation: According to this chart out of 120 Mutual Fund investors of Dehradoon the most are inthe age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs. Projectsformba.blospot.com
    • Projectsformba.blospot.com(b). Educational Qualification of investors of Dehradoon Educational Qualification Number of Investors Graduate/ Post Graduate 88 Under Graduate 25 Others 7 Total 120 Projectsformba.blospot.com
    • Projectsformba.blospot.com 6% 23% 71% Graduate/Post Graduate Under Graduate OthersInterpretation: Projectsformba.blospot.com
    • Projectsformba.blospot.comOut of 120 Mutual Fund investors 71% of the investors in Dehradoon areGraduate/Post Graduate, 23% are Under Graduate and 6% are others (under HSC).c). Occupation of the investors of Dehradoon Occupation No. of Investors Govt. Service 30 Pvt. Service 45 Business 35 Agriculture 4 Others 6 . 50 No. of Investors 40 30 20 45 35 30 10 4 6 0 Govt. Pvt. Business Agriculture Others Service Service Occupation of the customers Projectsformba.blospot.com
    • Projectsformba.blospot.comInterpretation:In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% areBusinessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are inothers. (d). Monthly Family Income of the Investors of Dehradoon. Income Group No. of Investors <=10,000 5 10,001-15,000 12 15,001-20,000 28 20,001-30,000 43 >30,000 32 50 45 40 No. of Investors 35 30 25 20 43 15 32 28 10 5 12 5 0 <=10 10-15 15-20 20-30 >30 Income Group of the Investorsn (Rs. in Th.) Interpretation: In the Income Group of the investors of Dehradoon, out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. Projectsformba.blospot.com
    • Projectsformba.blospot.com20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthlyincome group of more than Rs. 30,000 and the minimum investors i.e. 4%are in the monthly income group of below Rs. 10,000(2) Investors invested in different kind of investments. Kind of Investments No. of Respondents Saving A/C 195 Fixed deposits 148 Insurance 152 Mutual Fund 120 Post office (NSC) 75 Shares/Debentures 50 Gold/Silver 30 Real Estate 65 65 Kinds of Investment 30 50 er SC ilv 75 /S ce old ) 120 G (N 152 148 ffi ce O an 195 st ur Po s c In A/ 0 50 100 150 200 250 g n vi Sa No.of Respondents Projectsformba.blospot.com
    • Projectsformba.blospot.comInterpretation: From the above graph it can be inferred that out of 200 people,97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits,60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% inGold/Silver and 32.5% in Real Estate.3. Preference of factors while investing Factors (a) Liquidity (b) Low Risk (c) High Return (d) Trust No. of 40 60 64 36 Respondents 18% 20% 32% 30% Liquidity Low Risk High Return TrustInterpretation: Projectsformba.blospot.com
    • Projectsformba.blospot.comOut of 200 People, 32% People prefer to invest where there is High Return, 30% preferto invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust4. Awareness about Mutual Fund and its Operations Response Yes No No. of Respondents 135 65 33% 67% Yes No Projectsformba.blospot.com
    • Projectsformba.blospot.comInterpretation:From the above chart it is inferred that 67% People are aware of Mutual Fund and itsoperations and 33% are not aware of Mutual Fund and its operations. 5. Source of information for customers about Mutual Fund Source of information No. of Respondents Advertisement 18 Peer Group 25 Bank 30 Financial Advisors 62 70 60 Respondents 50 40 No. of 30 62 20 25 30 10 18 0 Advertisement Peer Group Bank Financial Advisors Source of InformationInterpretation: From the above chart it can be inferred that the Financial Advisor is the most important source of information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund Through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement. Projectsformba.blospot.com
    • Projectsformba.blospot.com6. Investors invested in Mutual Fund Response No. of Respondents YES 120 NO 80 Total 200 No 40% Yes 60%Interpretation:Out of 200 People, 60% have invested in Mutual Fund and 40% do not have investedin Mutual Fund. Projectsformba.blospot.com
    • Projectsformba.blospot.com7. Reason for not invested in Mutual Fund Reason No. of Respondents Not Aware 65 Higher Risk 5 Not any Specific Reason 10 6% 13% 81% Not Aware Higher Risk Not AnyInterpretation:Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of MutualFund, 13% said there is likely to be higher risk and 6% do not have any specific reason.8. Investors invested in different Assets Management Co. (AMC) Projectsformba.blospot.com
    • Projectsformba.blospot.com Name of AMC No. of Investors SBIMF 55 UTI 75 HDFC 30 Reliance 75 ICICI Prudential 56 Kotak 45 Others 70 Others 70 HDFC 30 Name of AMC Kotak 45 SBIMF 55 ICICI 56 Reliance 75 UTI 75 0 20 40 60 80 No. of InvestorsInterpretation:In Dehradoon most of the Investors preferred UTI and Reliance Mutual Fund. Out of120 Investors 62.5% have invested in each of them, only 46% have invested in SBIMF,47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC. Projectsformba.blospot.com
    • Projectsformba.blospot.com9. Reason for invested in SBIMF Reason No. of Respondents Associated with SBI 35 Better Return 5 Agents Advice 15 27% 9% 64% Associated with SBI Better Return Agents AdviceInterpretation:Out of 55 investors of SBIMF 64% have invested because of its association withBrand SBI, 27% invested on Agent’s Advice, 9% invested because of better return.10. Reason for not invested in SBIMF Projectsformba.blospot.com
    • Projectsformba.blospot.com Reason No. of Respondents Not Aware 25 Less Return 18 Agent’s Advice 22 34% 38% 28% Not Aware Less Return Agents AdviceInterpretation:Out of 65 people who have not invested in SBIMF, 38% were not aware with SBIMF,28% do not have invested due to less return and 34% due to Agent’s Advice.11. Preference of Investors for future investment in Mutual Fund Name of AMC No. of Investors SBIMF 76 UTI 45 HDFC 35 Reliance 82 ICICI Prudential 80 Projectsformba.blospot.com
    • Projectsformba.blospot.com Kotak 60 Others 75 Others 75 Kotak 60 Name of AMC ICICI Prudential 80 Reliance 82 HDFC 35 UTI 45 SBIMF 76 0 20 40 60 80 100 No. of InvestorsInterpretation:Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63%in SBIMF, 62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC MutualFund.12. Channel Preferred by the Investors for Mutual Fund Investment Channel Financial Advisor Bank AMC No. of Respondents 72 18 30 Projectsformba.blospot.com
    • Projectsformba.blospot.com 25% 60% 15% Financial Advisor Bank AMCInterpretation:Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% throughAMC and 15% through Bank.13. Mode of Investment Preferred by the Investors Mode of Investment One time Investment Systematic Investment Plan (SIP) No. of Respondents 78 42 Projectsformba.blospot.com
    • Projectsformba.blospot.com 35% 65% One time Investment SIPInterpretation:Out of 120 Investors 65% preferred One time Investment and 35 % Preferred throughSystematic Investment Plan.14. Preferred Portfolios by the Investors Portfolio No. of Investors Equity 56 Debt 20 Balanced 44 Projectsformba.blospot.com
    • Projectsformba.blospot.com 37% 46% 17% Equity Debt BalanceInterpretation:From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17%preferred Debt portfolio15. Option for getting Return Preferred by the Investors Option Dividend Payout Dividend Growth Reinvestment No. of Respondents 25 10 85 Projectsformba.blospot.com
    • Projectsformba.blospot.com 21% 8% 71% Dividend Payout Dividend Reinvestment GrowthInterpretation:From the above graph 71% preferred Growth Option, 21% preferred Dividend Payoutand 8% preferred Dividend Reinvestment Option.16. Preference of Investors whether to invest in Sectoral Funds Response No. of Respondents Yes 25 No 95 Projectsformba.blospot.com
    • Projectsformba.blospot.com 21% 79% Yes NoInterpretation:Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund becausethere is maximum risk and 21% prefer to invest in Sectoral Fund. Chapter – 6 Projectsformba.blospot.com
    • Projectsformba.blospot.com Findings and Conclusion Findings In Dehradoon in the Age Group of 36-40 years were more in numbers. The second most Investors were in the age group of 41-45 years and the least were in the age group of below 30 years. In Dehradoon most of the Investors were Graduate or Post Graduate and below HSC there were very few in numbers. Projectsformba.blospot.com
    • Projectsformba.blospot.com In Occupation group most of the Investors were Govt. employees, the second most Investors were Private employees and the least were associated with Agriculture. In family Income group, between Rs. 20,001- 30,000 were more in numbers, the second most were in the Income group of more than Rs.30,000 and the least were in the group of below Rs. 10,000. About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits, Only 60% Respondents invested in Mutual fund. Mostly Respondents preferred High Return while investment, the second most preferred Low Risk then liquidity and the least preferred Trust. Only 67% Respondents were aware about Mutual fund and its operations and 33% were not. Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not have invested in Mutual fund. Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is not any specific reason for not invested in Mutual Fund and 6% told there is likely to be higher risk in Mutual Fund. Projectsformba.blospot.com
    • Projectsformba.blospot.com Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI Prudential has also good Brand Position among investors, SBIMF places after ICICI Prudential according to the Respondents. Out of 55 investors of SBIMF 64% have invested due to its association with the Brand SBI, 27% Invested because of Advisor’s Advice and 9% due to better return. Most of the investors who did not invested in SBIMF due to not Aware of SBIMF, the second most due to Agent’s advice and rest due to Less Return. For Future investment the maximum Respondents preferred Reliance Mutual Fund, the second most preferred ICICI Prudential, SBIMF has been preferred after them. 60% Investors preferred to Invest through Financial Advisors, 25% through AMC (means Direct Investment) and 15% through Bank. 65% preferred One Time Investment and 35% preferred SIP out of both type of Mode of Investment. The most preferred Portfolio was Equity, the second most was Balance (mixture of both equity and debt), and the least preferred Portfolio was Debt portfolio. Projectsformba.blospot.com
    • Projectsformba.blospot.com  Maximum Number of Investors Preferred Growth Option for returns, the second most preferred Dividend Payout and then Dividend Reinvestment.  Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted to invest in Sectoral Fund. ConclusionRunning a successful Mutual Fund requires complete understanding of thepeculiarities of the Indian Stock Market and also the psyche of the smallinvestors. This study has made an attempt to understand the financial Projectsformba.blospot.com
    • Projectsformba.blospot.combehavior of Mutual Fund investors in connection with the preferences ofBrand (AMC), Products, Channels etc. I observed that many of peoplehave fear of Mutual Fund. They think their money will not be secure inMutual Fund. They need the knowledge of Mutual Fund and its relatedterms. Many of people do not have invested in mutual fund due to lack ofawareness although they have money to invest. As the awareness andincome is growing the number of mutual fund investors are also growing.“Brand” plays important role for the investment. People invest in thoseCompanies where they have faith or they are well known with them. Thereare many AMCs in Dehradoon but only some are performing well due toBrand awareness. Some AMCs are not performing well although some ofthe schemes of them are giving good return because of not awarenessabout Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are wellknown Brand, they are performing well and their Assets UnderManagement is larger than others whose Brand name are not well knownlike Principle, Sunderam, etc.Distribution channels are also important for the investment in mutual fund.Financial Advisors are the most preferred channel for the investment inmutual fund. They can change investors’ mind from one investment option Projectsformba.blospot.com
    • Projectsformba.blospot.comto others. Many of investors directly invest their money through AMCbecause they do not have to pay entry load. Only those people investdirectly who know well about mutual fund and its operations and thosehave time. Projectsformba.blospot.com
    • Projectsformba.blospot.com Chapter – 7 Suggestions AndRecommendations Suggestions and Recommendations The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that Projectsformba.blospot.com
    • Projectsformba.blospot.com ignorance is no longer bliss and what they are losing by not investing.  Mutual funds offer a lot of benefit which no other single option could offer. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time.  Mutual Fund Company needs to give the training of the Individual Financial Advisors about the Fund/Scheme and its objective, because they are the main source to influence the investors. Before making any investment Financial Advisors should first enquire about the risk tolerance of the investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration. Projectsformba.blospot.com
    • Projectsformba.blospot.com Younger people aged under 35 will be a key new customer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off. Customers with graduate level education are easier to sell to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality. Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons. BIBLIOGRAPHY • NEWS PAPERS • OUTLOOK MONEY Projectsformba.blospot.com
    • Projectsformba.blospot.com• TELEVISION CHANNEL (CNBC AAWAJ)• MUTUAL FUND HAND BOOK• FACT SHEET AND STATEMENT• WWW.SBIMF.COM• WWW.MONEYCONTROL.COM• WWW.AMFIINDIA.COM• WWW.ONLINERESEARCHONLINE.COM• WWW. MUTUALFUNDSINDIA.COMProjectsformba.blospot.com
    • Projectsformba.blospot.com Mutual FundsAll About Mutual Funds Before we understand what is mutual fund, it’s very important to know the area in whichmutual funds works, the basic understanding of stocks and bonds.Stocks : Stocks represent shares of ownership in a public company. Examples of public companiesinclude Reliance, ONGC and Infosys. Stocks are considered to be the most common ownedinvestment traded on the market. Projectsformba.blospot.com
    • Projectsformba.blospot.comBonds : Bonds are basically the money which you lend to the government or a company, and inreturn you can receive interest on your invested amount, which is back over predetermined amountsof time. Bonds are considered to be the most common lending investment traded on the market. Thereare many other types of investments other than stocks and bonds (including annuities, real estate, andprecious metals), but the majority of mutual funds invest in stocks and/or bonds.What Is Mutual Fund A mutual fund is just the connecting bridge or a financial intermediary that allows a group ofinvestors to pool their money together with a predetermined investment objective. The mutual fundwill have a fund manager who is responsible for investing the gathered money into specific securities(stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutualfund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others theyare very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund,investors can purchase stocks or bonds with much lower trading costs than if they tried to do it ontheir own. But the biggest advantage to mutual funds is diversification, by minimizing risk &maximizing returns. Thus a Mutual Fund is the most suitable investment for the common man as it offers anopportunity to invest in a diversified, professionally managed basket of securities at a relatively lowcost. The flow chart below describes broadly the working of a mutual fundUnit Trust of India is the first Mutual Fund set up under a separate act, UTI Act in 1963, and startedits operations in 1964 with the issue of units under the scheme US-64.Overview of existing schemes existed in mutual fund category Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position,risk tolerance and return expectations etc. The table below gives an overview into the existing types ofschemes in the Industry. Projectsformba.blospot.com
    • Projectsformba.blospot.comType of Mutual Fund SchemesBY STRUCTURE Open Ended Schemes An open-end fund is one that is available for subscription all through the year. These do nothave a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")related prices. The key feature of open-end schemes is liquidity. Close Ended Schemes A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15years. The fund is open for subscription only during a specified period. Investors can invest in thescheme at the time of the initial public issue and thereafter they can buy or sell the units of the schemeon the stock exchanges where they are listed. In order to provide an exit route to the investors, someclose-ended funds give an option of selling back the units to the Mutual Fund through periodicrepurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes isprovided to the investor. Interval Schemes Interval Schemes are that scheme, which combines the features of open-ended and close-endedschemes. The units may be traded on the stock exchange or may be open for sale or redemptionduring pre-determined intervals at NAV related prices.BY NATURE1. Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure of thefund may vary different for different schemes and the fund manager’s outlook on different stocks. TheEquity Funds are sub-classified depending upon their investment objective, as follows: • Diversified Equity Funds • Mid-Cap Funds • Sector Specific Funds Projectsformba.blospot.com
    • Projectsformba.blospot.com • Tax Savings Funds (ELSS) Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix.2. Debt funds:The objective of these Funds is to invest in debt papers. Government authorities, private companies,banks and financial institutions are some of the major issuers of debt papers. By investing in debtinstruments, these funds ensure low risk and provide stable income to the investors. Debt funds arefurther classified as: • Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India 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. • Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. • MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure 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. • Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures. • Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. 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. Projectsformba.blospot.com
    • Projectsformba.blospot.com3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest inboth equities and fixed income securities, which are in line with pre-defined investment objective ofthe scheme. These schemes aim to provide investors with the best of both the worlds. Equity partprovide growth and the debt part provides stability in returns.Further the mutual funds can be broadly classified on the basis of investment parameter viz,Each category of funds is backed by an investment philosophy, which is pre-defined in the objectivesof the fund. The investor can align his own investment needs with the funds objective and investaccordingly.BY INVESTMENT OBJECTIVE • Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation. Projectsformba.blospot.com
    • Projectsformba.blospot.com • Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. • Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50). • Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.OTHER SCHEMES • Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate. • Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index. • Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. Projectsformba.blospot.com
    • Projectsformba.blospot.comTypes of returnsThere are three ways, where the total returns provided by mutual funds can be enjoyed by investors: • Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. • If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. • If fund holdings increase in price but are not sold by the fund manager, the funds shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.Pros & cons of investing in mutual funds: For investments in mutual fund, one must keep in mind about the Pros and cons ofinvestments in mutual fund.Advantages of Investing Mutual Funds: Projectsformba.blospot.com
    • Projectsformba.blospot.com1. Professional Management - The basic advantage of funds is that, they are professional managed,by well qualified professional. Investors purchase funds because they do not have the time or theexpertise to manage their own portfolio. A mutual fund is considered to be relatively less expensiveway to make and monitor their investments.2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds,the investors risk is spread out and minimized up to certain extent. The idea behind diversification isto invest in a large number of assets so that a loss in any particular investment is minimized by gainsin others.3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help toreducing transaction costs, and help to bring down the average cost of the unit for their investors.4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate theirholdings as and when they want.5. Simplicity - Investments in mutual fund is considered to be easy, compare to other availableinstruments in the market, and the minimum investment is small. Most AMC also have automaticpurchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.Disadvantages of Investing Mutual Funds: Projectsformba.blospot.com
    • Projectsformba.blospot.com1. Professional Management- Some funds doesn’t perform in neither the market, as theirmanagement is not dynamic enough to explore the available opportunity in the market, thus manyinvestors debate over whether or not the so-called professionals are any better than mutual fund orinvestor himself, for picking up stocks.2. Costs – The biggest source of AMC income, is generally from the entry & exit load which theycharge from an investors, at the time of purchase. The mutual fund industries are thus charging extracost under layers of jargon.3. Dilution - Because funds have small holdings across different companies, high returns from a fewinvestments often dont make much difference on the overall return. Dilution is also the result of asuccessful fund getting too big. When money pours into funds that have had strong success, themanager often has trouble finding a good investment for all the new money.4. Taxes - when making decisions about your money, fund managers dont consider your personal taxsituation. For example, when a fund manager sells a security, a capital-gain tax is triggered, whichaffects how profitable the individual is from the sale. It might have been more advantageous for theindividual to defer the capital gains liability.Mutual Funds Industry in IndiaThe origin of mutual fund industry in India is with the introduction of the concept of mutual fund byUTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when non- Projectsformba.blospot.com
    • Projectsformba.blospot.comUTI players entered the industry.In the past decade, Indian mutual fund industry had seen a dramatic improvements, both quality wiseas well as quantity wise. Before, the monopoly of the market had seen an ending phase, the AssetsUnder Management (AUM) was Rs. 67bn. The private sector entry to the fund family rose the AUMto Rs. 470 in in March 1993 and till April 2004, it reached the height of 1,540 bn.Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than thedeposits of SBI alone, constitute less than 11% of the total deposits held by the Indian bankingindustry.The main reason of its poor growth is that the mutual fund industry in India is new in the country.Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the primeresponsibility of all mutual fund companies, to market the product correctly abreast of selling.The mutual fund industry can be broadly put into four phases according to the development of thesector. Each phase is briefly described as under.The major players in the Indian Mutual Fund Industry are: Major Players of Mutual Funds In India Projectsformba.blospot.com
    • Projectsformba.blospot.com Period (Last&nbsp1 Week)Projectsformba.blospot.com
    • Projectsformba.blospot.com 9.89 2.91-7.88 13TataSIPFund-SeriesI-Growth Mar 26 ,200810.25 2.38 2.39 14SaharaR.E.A.LFund-Growth Mar 25 ,2008 7.64 1.86 -49.5 2 15TataSIPFund-SeriesII -Growth Mar 26 ,2008 Projectsformba.blospot.com
    • Projectsformba.blospot.comA mutual fund is a professionally-managed firm of collective investments that pools money frommany investors and invests it in stocks, bonds, short-term money market instruments, and/or othersecurities.in other words we can say that A Mutual Fund is a trust registered with the Securities andExchange Board of India (SEBI), which pools up the money from individual / corporate investors andinvests the same on behalf of the investors /unit holders, in equity shares, Government securities,Bonds, Call money markets etc., and distributes the profits.The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly calculateddaily based on the total value of the fund divided by the number of shares currently issued andoutstanding. The value of all the securities in the portfolio in calculated daily. From this, all expensesare deducted and the resultant value divided by the number of units in the fund is the fund’s NAV. NAV = Total value of the fund………………. No. of shares currently issued and outstandingAdvantages of a MF – Mutual Funds provide the benefit of cheap access to expensive stocks – Mutual funds diversify the risk of the investor by investing in a basket of assets – A team of professional fund managers manages them with in-depth research inputs from investment analysts. – Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information, which individual investors cannot access. Projectsformba.blospot.com
    • Projectsformba.blospot.comHistory of the Indian mutual fund industry:The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at theinitiative of the Government of India and Reserve Bank. The history of mutual funds in India can bebroadly divided into four distinct phases.First Phase – 1964-87Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank ofIndia and functioned under the Regulatory and administrative control of the Reserve Bank of India. In1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took overthe regulatory and administrative control in place of RBI. The first scheme launched by UTI was UnitScheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.Second Phase – 1987-1993 (Entry of Public Sector Funds)1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and LifeInsurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI MutualFund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund(Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank ofIndia (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industryhad assets under management of Rs.47,004 crores.Third Phase – 1993-2003 (Entry of Private Sector Funds)1993 was the year in which the first Mutual Fund Regulations came into being, under which allmutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (nowmerged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. Projectsformba.blospot.com
    • Projectsformba.blospot.comThe 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revisedMutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total assets of Rs.1,21,805 crores.Fourth Phase – since February 2003In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated intotwo separate entities. One is the Specified Undertaking of the Unit Trust of India with assets undermanagement of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US64 scheme, assured return and certain other schemesThe second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered withSEBI and functions under the Mutual Fund Regulations. consolidation and growth. As at the end ofSeptember, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. Projectsformba.blospot.com
    • Projectsformba.blospot.comCategories of mutual funds: Projectsformba.blospot.com
    • Projectsformba.blospot.comMutual funds can be classified as follow:  Based on their structure: • Open-ended funds: Investors can buy and sell the units from the fund, at any point of time. • Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity.  Based on their investment objective: Equity funds: These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as: i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Theirportfolio mirrors the benchmark index both in terms of composition and individual stockweightages.ii) Equity diversified funds- 100% of the capital is invested in equities spreading across differentsectors and stocks.iii) Dividend yield funds- it is similar to the equity diversified funds except that they invest incompanies offering high dividend yields. Projectsformba.blospot.com
    • Projectsformba.blospot.comiv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme.e.g. -An infrastructure fund invests in power, construction, cements sectors etc.v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund willinvest in banking stocks.vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the risk-returnladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investorswho prefer spreading their risk across various instruments. Following are balanced funds classes:i) Debt-oriented funds -Investment below 65% in equities.ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.Debt fund: They invest only in debt instruments, and are a good option for investors averse to idea oftaking risk associated with equities. Therefore, they invest exclusively in fixed-income instrumentslike bonds, debentures, Government of India securities; and money market instruments such ascertificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of thesedebt funds depending on your investment horizon and needs.i) Liquid funds- These funds invest 100% in money market instruments, a large portion being investedin call money market.ii)Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.iii)Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments whichhave variable coupon rate.iv)Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing betweencash market and derivatives market. Funds are allocated to equities, derivatives and money markets.Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities.v)Gilt funds LT- They invest 100% of their portfolio in long-term government securities.vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term debtpapers. Projectsformba.blospot.com
    • Projectsformba.blospot.comvii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of10%-30% to equities.viii)FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.Investment strategies:1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of amonth. Payment is made through post dated cheques or direct debit facilities. The investor gets fewerunits when the NAV is high and more units when the NAV is low. This is called as the benefit ofRupee Cost Averaging (RCA)2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and giveinstructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund.3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he canwithdraw a fixed amount each month. Projectsformba.blospot.com
    • Projectsformba.blospot.comRisk v/s. return: Projectsformba.blospot.com
    • Projectsformba.blospot.comWorking of a Mutual fund:The entire mutual fund industry operates in a very organized way. The investors, known as unitholders,handover their savings to the AMCs under various schemes. The objective of the investmentshould match with the objective of the fund to best suit the investors’ needs. The AMCs further invest Projectsformba.blospot.com
    • Projectsformba.blospot.comthe funds into various securities according to the investment objective. The return generated from theinvestments is passed on to the investors or reinvested as mentioned in the offer document. Working Of Mutual Fund Projectsformba.blospot.com
    • Projectsformba.blospot.com Mutual Funds Before we understand what is mutual fund, it’s very important to know the area in whichmutual funds works, the basic understanding of stocks and bonds.Stocks : Stocks represent shares of ownership in a public company. Examples of public companiesinclude Reliance, ONGC and Infosys. Stocks are considered to be the most common ownedinvestment traded on the market.Bonds : Bonds are basically the money which you lend to the government or a company, and inreturn you can receive interest on your invested amount, which is back over predetermined amountsof time. Bonds are considered to be the most common lending investment traded on the market. Thereare many other types of investments other than stocks and bonds (including annuities, real estate, andprecious metals), but the majority of mutual funds invest in stocks and/or bonds.What Is Mutual Fund A mutual fund is just the connecting bridge or a financial intermediary that allows a group ofinvestors to pool their money together with a predetermined investment objective. The mutual fundwill have a fund manager who is responsible for investing the gathered money into specific securities(stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutualfund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others theyare very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, Projectsformba.blospot.com
    • Projectsformba.blospot.cominvestors can purchase stocks or bonds with much lower trading costs than if they tried to do it ontheir own. But the biggest advantage to mutual funds is diversification, by minimizing risk &maximizing returns.Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity toinvest in a diversified, professionally managed basket of securities at a relatively low cost. The flowchart below describes broadly the working of a mutual fund Projectsformba.blospot.com
    • Projectsformba.blospot.comProjectsformba.blospot.com
    • Projectsformba.blospot.comOverview of existing schemes existed in mutual fund category Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position,risk tolerance and return expectations etc. The table below gives an overview into the existing types ofschemes in the Industry. Projectsformba.blospot.com
    • Projectsformba.blospot.comType of Mutual Fund SchemesBY STRUCTUREOpen Ended SchemesAn open-end fund is one that is available for subscription all through the year. These do not have afixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") relatedprices. The key feature of open-end schemes is liquidity.Close Ended Schemes A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15years. The fund is open for subscription only during a specified period. Investors can invest in thescheme at the time of the initial public issue and thereafter they can buy or sell the units of the schemeon the stock exchanges where they are listed. In order to provide an exit route to the investors, someclose-ended funds give an option of selling back the units to the Mutual Fund through periodicrepurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes isprovided to the investor.Interval Schemes Projectsformba.blospot.com
    • Projectsformba.blospot.com Interval Schemes are that scheme, which combines the features of open-ended and close-endedschemes. The units may be traded on the stock exchange or may be open for sale or redemptionduring pre-determined intervals at NAV related prices.BY NATUREUnder this the mutual fund is categorized on the basis of Investment Objective. By nature the mutualfund is categorized as follow: Projectsformba.blospot.com
    • Projectsformba.blospot.com1. Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure of thefund may vary different for different schemes and the fund manager’s outlook on different stocks. TheEquity Funds are sub-classified depending upon their investment objective, as follows: • Diversified Equity Funds Projectsformba.blospot.com
    • Projectsformba.blospot.com • Mid-Cap Funds • Sector Specific Funds • Tax Savings Funds (ELSS) Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix.2. Debt funds:The objective of these Funds is to invest in debt papers. Government authorities, private companies,banks and financial institutions are some of the major issuers of debt papers. By investing in debtinstruments, these funds ensure low risk and provide stable income to the investors. Debt funds arefurther classified as: • Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India 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. • Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. • MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure 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. • Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures. • Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. 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. Projectsformba.blospot.com
    • Projectsformba.blospot.com3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. Theyinvest in both 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 the worlds.Equity part provides growth and the debt part provides stability in returns.Further the mutual funds can be broadly classified on the basis of investment parameter viz,Each category of funds is backed by an investment philosophy, which is pre-defined in the objectivesof the fund. The investor can align his own investment needs with the funds objective and investaccordingly.BY INVESTMENT OBJECTIVE • Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation. Projectsformba.blospot.com
    • Projectsformba.blospot.com • Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. • Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50). • Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.OTHER SCHEMES • Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate. • Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index. • Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. Projectsformba.blospot.com
    • Projectsformba.blospot.comTypes of returns:There are three ways, where the total returns provided by mutual funds can be enjoyed by investors: • Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. • If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. • If fund holdings increase in price but are not sold by the fund manager, the funds shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.Pros & cons of investing in mutual funds: For investments in mutual fund, one must keep in mind about the Pros and cons ofinvestments in mutual fund.Advantages of Investing Mutual Funds: Projectsformba.blospot.com
    • Projectsformba.blospot.com1. Professional Management - The basic advantage of funds is that, they are professional managed,by well qualified professional. Investors purchase funds because they do not have the time or theexpertise to manage their own portfolio. A mutual fund is considered to be relatively less expensiveway to make and monitor their investments.2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds,the investors risk is spread out and minimized up to certain extent. The idea behind diversification isto invest in a large number of assets so that a loss in any particular investment is minimized by gainsin others.3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help toreducing transaction costs, and help to bring down the average cost of the unit for their investors.4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate theirholdings as and when they want.5. Simplicity - Investments in mutual fund is considered to be easy, compare to other availableinstruments in the market, and the minimum investment is small. Most AMC also have automaticpurchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.Disadvantages of Investing Mutual Funds:1. Professional Management- Some funds doesn’t perform in neither the market, as theirmanagement is not dynamic enough to explore the available opportunity in the market, thus manyinvestors debate over whether or not the so-called professionals are any better than mutual fund orinvestor himself, for picking up stocks. Projectsformba.blospot.com
    • Projectsformba.blospot.com2. Costs – The biggest source of AMC income, is generally from the entry & exit load which theycharge from an investors, at the time of purchase. The mutual fund industries are thus charging extracost under layers of jargon.3. Dilution - Because funds have small holdings across different companies, high returns from a fewinvestments often dont make much difference on the overall return. Dilution is also the result of asuccessful fund getting too big. When money pours into funds that have had strong success, themanager often has trouble finding a good investment for all the new money.4. Taxes - when making decisions about your money, fund managers dont consider your personal taxsituation. For example, when a fund manager sells a security, a capital-gain tax is triggered, whichaffects how profitable the individual is from the sale. It might have been more advantageous for theindividual to defer the capital gains liability.Guidelines of the SEBI for Mutual Fund Companies : Projectsformba.blospot.com
    • Projectsformba.blospot.comTo protect the interest of the investors, SEBI formulates policies and regulates the mutualfunds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time totime.SEBI approved Asset Management Company (AMC) manages the funds by makinginvestments in various types of securities. Custodian, registered with SEBI, holds the securitiesof various schemes of the fund in its custody.According to SEBI Regulations, two thirds of the directors of Trustee Company or board oftrustees must be independent.The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutualfunds that the mutual funds function within the strict regulatory framework. Its objective is toincrease public awareness of the mutual fund industry. AMFI also is engaged in upgradingprofessional standards and in promoting best industry practices in diverse areas such asvaluation, disclosure, transparency etc.Documents required (PAN mandatory):Proof of identity :1. Photo PAN card2. In case of non-photo PAN card in addition to copy of PAN card any one of the following:driving license/passport copy/ voter id/ bank photo pass book.Proof of address (any of the following ) :latest telephone bill, latest electricity bill, Passport,latest bank passbook/bank account statement, latest Demat account statement, voter id, drivinglicense, ration card, rent agreement.Offer document: An offer document is issued when the AMCs make New Fund Offer(NFO). Projectsformba.blospot.com
    • Projectsformba.blospot.comIts advisable to every investor to ask for the offer document and read it before investing. Anoffer document consists of the following:Standard Offer Document for Mutual Funds (SEBI Format)  Summary Information  Glossary of Defined Terms  Risk Disclosures  Legal and Regulatory Compliance  Expenses  Condensed Financial Information of Schemes  Constitution of the Mutual Fund  Investment Objectives and Policies  Management of the Fund  Offer Related Information.Key Information Memorandum: a key information memorandum, popularly known as KIM,is attached along with the mutual fund form. And thus every investor get to read it. Its contentsare:1 Name of the fund.2. Iestment objective3. Aset allocation pattern of the scheme.4. Risk profile of the scheme5. Plans & options6. Minimum application amount/ no. of units7. Benchmark index8. Dividend policy9. Name of the fund manager(s)10 . Expenses of the scheme: load structure, recurring expenses11. Performance of the scheme (scheme return v/s. benchmark return)12. Year- wise return for the last 5 financial year.Distribution channels: Projectsformba.blospot.com
    • Projectsformba.blospot.comMutual funds posses a very strong distribution channel so that the ultimate customers doesn’tface any difficulty in the final procurement. The various parties involved in distribution ofmutual funds are:1. Direct marketing by the AMCs: the forms could be obtained from the AMCs directly. Theinvestors can approach to the AMCs for the forms. some of the top AMCs of India are;Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, Sundaram, ICICI, MiraeAssets, Canara Robeco, Lotus India, LIC, UTI etc. whereas foreign AMCs include: StandardChartered, Franklin Templeton, Fidelity, JP Morgan, HSBC, DSP Merill Lynch, etc.2 .Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/sub-broker topopularize their funds. AMCs can enjoy the advantage of large network of these brokers andsub brokers.eg: SBI being the top financial intermediary of India has the greatest network. Sothe AMCs dealing through SBI has access to most of the investors.3. Individual agents, Banks, NBFC: investors can procure the funds through individual agents,independent brokers, banks and several non- banking financial corporations too, whichever hefinds convenient for him.Costs associated:Expenses:AMCs charge an annual fee, or expense ratio that covers administrative expenses, salaries,advertising expenses, brokerage fee, etc. A 1.5% expense ratio means the AMC chargesRs1.50 for every Rs100 in assets under management. A funds expense ratio is typically to thesize of the funds under management and not to the returns earned. Normally, the costs ofrunning a fund grow slower than the growth in the fund size - so, the more assets in the fund,the lower should be its expense ratioLoads: Projectsformba.blospot.com
    • Projectsformba.blospot.comEntry Load/Front-End Load (0-2.25%)- its the commission charged at the time of buyingthe fund to cover the cost of selling, processing etc.Exit Load/Back- End Load (0.25-2.25%)- it is the commission or charged paid when aninvestor exits from a mutual fund, it is imposed to discourage withdrawals. It may reduce tozero with increase in holding period.Measuring and evaluating mutual funds performance:Every investor investing in the mutual funds is driven by the motto of either wealth creation orwealth increment or both. Therefore it’s very necessary to continuously evaluate the funds’performance with the help of factsheets and newsletters, websites, newspapers andprofessional advisors like SBI mutual fund services. If the investors ignore the evaluation offunds’ performance then he can loose hold of it any time. In this ever-changing industry, hecan face any of the following problems:1. Variation in the funds’ performance due to change in its management/ objective.2. The funds’ performance can slip in comparison to similar funds.3. There may be an increase in the various costs associated with the fund.4 .Beta, a technical measure of the risk associated may also surge.5. The funds’ ratings may go down in the various lists published by independent rating agencies.6 .It can merge into another fund or could be acquired by another fund house.Performance measures: Projectsformba.blospot.com
    • Projectsformba.blospot.comEquity funds: the performance of equity funds can be measured on the basis of: NAVGrowth, Total Return; Total Return with Reinvestment at NAV, Annualized Returns andDistributions, Computing Total Return (Per Share Income and Expenses, Per Share CapitalChanges, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Turnover Rate, Fund Size,Transaction Costs, Cash Flow, Leverage.Debt fund: likewise the performance of debt funds can be measured on the basis of: PeerGroup Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs,besides NAV Growth, Total Return and Expense Ratio.Liquid funds: the performance of the highly volatile liquid funds can be measured on thebasis of: Fund Yield, besides NAV Growth, Total Return and Expense Ratio.Concept of benchmarking for performance evaluation:Every fund sets its benchmark according to its investment objective. The funds performance ismeasured in comparison with the benchmark. If the fund generates a greater return than thebenchmark then it is said that the fund has outperformed benchmark , if it is equal tobenchmark then the correlation between them is exactly 1. And if in case the return is lowerthan the benchmark then the fund is said to be underperformed.Some of the benchmarks are :1. Equity funds: market indices such as S&P CNX nifty, BSE100, BSE200, BSE-PSU, BSE500 index, BSE bankex, and other sectoral indices.2. Debt funds: Interest Rates on Alternative Investments as Benchmarks, I-Bex Total Return Index, JPM T-Bill Index Post-Tax Returns on Bank Deposits versus Debt Funds.3. Liquid funds: Short Term Government Instruments’ Interest Rates as Benchmarks, JPM T- Bill Index Projectsformba.blospot.com
    • Projectsformba.blospot.comTo measure the fund’s performance, the comparisons are usually done with:I)with a market index.ii) Funds from the same peer group.iii) Other similar products in which investors invest their funds.Financial planning for investors( ref. to mutual funds):Investors are required to go for financial planning before making investments in any mutualfund. The objective of financial planning is to ensure that the right amount of money isavailable at the right time to the investor to be able to meet his financial goals. It is more thanmere tax planning. Steps in financial planning are: Asset allocation. Selection of fund. Studying the features of a scheme.In case of mutual funds, financial planning is concerned only with broad asset allocation,leaving the actual allocation of securities and their management to fund managers. A fundmanager has to closely follow the objectives stated in the offer document, because financialplans of users are chosen using these objectives.Why has it become one of the largest financial instruments?If we take a look at the recent scenario in the Indian financial market then we can find themarket flooded with a variety of investment options which includes mutual funds, equities,fixed income bonds, corporate debentures, company fixed deposits, bank deposits, PPF, lifeinsurance, gold, real estate etc. all these investment options could be judged on the basis ofvarious parameters such as- return, safety convenience, volatility and liquidity. measuringthese investment options on the basis of the mentioned parameters, we get this in a tabularform Projectsformba.blospot.com
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    • Projectsformba.blospot.comReturnSafetyVolatilityLiquidityConvenienceEquityHighLowHighHighModerateBondsModerateHighModerateModerateHighCo.DebenturesModerateModerateModerateLowLow Projectsformba.blospot.com
    • Projectsformba.blospot.com QUESTIONNAIREA study of preferences of the investors for investment in mutual funds.1. Personal Details: (a). Name:- (b). Add: - Phone:- (c). Age:-(d). Qualification:- Graduation/PG Under Graduate Others (e). Occupation. Pl tick (√) Govt. Ser Pvt. Ser Business Agriculture Others(g). What is your monthly family income approximately? Pl tick (√). Up to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001 and Rs.10,000 15000 20,000 30,000 above Projectsformba.blospot.com
    • Projectsformba.blospot.com2. What kind of investments you have made so far? Pl tick (√). All applicable. a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver h. Real Estate 3. While investing your money, which factor will you prefer?. (a) Liquidity (b) Low Risk (c) High Return (d) Trust4. Are you aware about Mutual Funds and their operations? Pl tick (√). Yes No 5. If yes, how did you know about Mutual Fund? a. Advertisement b. Peer Group c. Banks d. Financial Advisors6. Have you ever invested in Mutual Fund? Pl tick (√). Yes No7. If not invested in Mutual Fund then why? (a) Not aware of MF (b) Higher risk (c) Not any specific reason8. If yes, in which Mutual Fund you have invested? Pl. tick (√). All applicable. a. SBIMF b. UTI c. HDFC d. Reliance e. Kotak f. Other. specify9. If invested in SBIMF, you do so because (Pl. tick (√), all applicable). a. SBIMF is associated with State Bank of India. b. They have a record of giving good returns year after year. c. Agent’ Advice10. If NOT invested in SBIMF, you do so because (Pl. tick (√) all applicable). a. You are not aware of SBIMF. b. SBIMF gives less return compared to the others. c. Agent’ Advice Projectsformba.blospot.com
    • Projectsformba.blospot.com11. When you plan to invest your money in asset management co. which AMC will you prefer? Assets Management Co. a. SBIMF b. UTI c. Reliance d. HDFC e. Kotak f. ICICI12. Which Channel will you prefer while investing in Mutual Fund? (a) Financial Advisor (b) Bank (c) AMC13. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick (√). a. One Time Investment b. Systematic Investment Plan (SIP)14. When you want to invest which type of funds would you choose? a. Having only debt b. Having debt & equity c. Only equity portfolio. portfolio portfolio.15. How would you like to receive the returns every year? Pl. tick (√). a. Dividend payout b. Dividend re-investment c. Growth in NAV16. Instead of general Mutual Funds, would you like to invest in sectorial funds? Please tick (√). Yes No Projectsformba.blospot.com
    • Projectsformba.blospot.comProjectsformba.blospot.com