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    investors-preferences-towards-mutual-funds-with-reference-to-kotak-kmamc investors-preferences-towards-mutual-funds-with-reference-to-kotak-kmamc Document Transcript

    • Investors preferences towards Mutual Funds of Kotak1.1 GENERAL INTRODUCTIONMutual fund is a pool of funds which is divided into units of equal value and sold toinvesting public and the funds so collected are utilized for collective investments invarious capitals and money market instrument. In today’s market people invest moneyto gain more. So when they take into account, they mostly look out for InvestmentCompany where they can get more income.Investment companies can be classified into closed-end and open-end investmentcompanies. Closed-end is when it is readily transferable in the market. Open-endfunds sell their own shares to investors and ready to buy back their old shares. If wetalk about the investment options today, in India we have so many investmentcompanies like UTI, LIC etc, all have their own special ways of servicing thecustomers. The investors also feel that they are worth to be the part of that company.These days’ people mainly look for avoiding tax so normally they look out for someinvestments which can help them in doing so. When it comes to this point of view,people mainly look out for mutual fund.Mutual fund is a trust at law; it is a special type of managed, pooled portfoliofinancial company or financial service organization that sells shares/units/stocks initself, to the public to obtain its resources and it invests the savings so mobilized orpooled in a large, diversified, & sound portfolio of equity shares, bonds, moneymarket instruments etc., Redeemable trust certificates are sold to investors at net assetvalue (NAV) plus a small commission. All interest/dividend and principal repaymentsare distributed to the holders of the certificates.R.V. Institute of Management 1
    • Investors preferences towards Mutual Funds of Kotak1.2 THEORETICAL BACKGROUNDMeaning of Mutual FundsMutual fund is a pool of funds which is divided into units of equal value and sold toinvesting public and the funds so collected are utilized for collective investment invarious capital and money market instrument. Investment is a commitment of aperson’s funds to derive future income in the form of interest, dividends, rent,premiums, pension benefits or the appreciation of the value of their principal capital.Investments have a return but there can be no return without risk.DefinitionsDifferent persons in different words have defined mutual fund.The SEBI (MF) Regulations, 1993 defines mutual fund as “A fund established in theform of a trust by a sponsor to raise money by the trustees through the sale of units tothe public under one or more schemes for investing in securities in accordance withthese regulations.” Investment is the allocation of monetary resources to assets that are expectedto yield some gain or positive return over a given period of time. These assets rangefrom safe investments to risky investments. Investments in this form are also called‘Financial Investments’.R.V. Institute of Management 2
    • Investors preferences towards Mutual Funds of KotakCharacteristics of MF  A mutual fund actually belongs to the investors who have pooled their funds. The ownership of the MF is in the hands of the investors.  A MF is managed by investment professionals and other service providers, who earn a fee for their services from the fund.  The pool of funds is invested in a portfolio of marketable investment. The value of the portfolio is updated every day.  The investor’s share in the fund is denominated by units. The value of the units changes with change in the portfolio’s value, every day. The value of one unit of investment is called as the net assets value or NAV.  The investment portfolio of the Mutual fund is vested according to the stated Investment objectives of the fund.Investment CompanyA company or trust that uses its capital to invest in other companies. There are twoprincipal types – closed-ended and the open-ended. Shares in closed-endedinvestment companies, some of which are listed on the New York Stock Exchange arereadily transferable in the open market and are bought and sold like other shares.Open-ended funds sell their own shares to investors, stand ready to buy back their oldshares and are not listed. These funds are so called because their capitalization is notfixed; they issue more shares as people want them.R.V. Institute of Management 3
    • Investors preferences towards Mutual Funds of KotakFig.1.1 Concept of Mutual Fund Industry When an investor subscribes for the units of a mutual fund, he becomes partowner of the assets of the fund in the same proportion as his contribution amount putup with the corpus (the total amount of the fund). Mutual Fund investor is also knownas a mutual fund shareholder or a unit holder. Any change in the value of theinvestments made into capital market instruments (such as shares, debentures etc) isreflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the marketvalue of the Mutual Fund schemes assets net of its liabilities. NAV of a scheme iscalculated by dividing the market value of schemes assets by the total number ofunits issued to the investors.R.V. Institute of Management 4
    • Investors preferences towards Mutual Funds of KotakCONSTITUENTS OF MUTUAL FUND There are many entities involved and the diagram below illustrates the constitution of a mutual fund:Fig.1.2 Constituents of Mutual Fund IndustryFormation process starts from sponsor {the investment advisor or manager}. Sponsorselects & appoints the Board of Trustees.Trustees again hire or contract a separate AMC that is run by professional managers.The AMC conducts the necessary research & based on it, manages the fund orportfolio. It is responsible for floating, managing, redeeming the schemes; it alsohandles the administrative chares. It receives the fees for the services rendered by it.The custodian is responsible for co-ordination with brokers, the actual transfer &storage of stocks, & handling the property of the trust.R.V. Institute of Management 5
    • Investors preferences towards Mutual Funds of KotakFinally the unit holders are investors from who a pool of money is collected &invested according to the stated investment objectives. Mutual fund investors are likeshare holders & they own the fund. They are neither lenders nor the deposit holders inthe fund. Unlike a holder of stock of company, unit holders have no voting rights.Organization of a Mutual FundAll mutual funds comprise four constituents – Sponsors, Trustees, Asset ManagementCompany (AMC) and Custodians.1. Sponsors:The sponsors initiate the idea to set up a mutual fund. It could be a registeredcompany, scheduled bank or financial institution. A sponsor has to satisfy certainconditions, such as capital, record (at least five years’ operation in financial services),de-fault free dealings and general reputation of fairness. The sponsors appoint theTrustee, AMC and Custodian. Once the AMC is formed, the sponsor is just astakeholder.2. Trust/ Board of Trustees:Trustees hold a fiduciary responsibility towards unit holders by protecting theirinterests. Trustees float and market schemes, and secure necessary approvals. Theycheck if the AMC’s investments are within well-defined limits, whether the fund’sassets are protected, and also ensure that unit holders get their due returns. They alsoreview any due diligence by the AMC. For major decisions concerning the fund, theyhave to take the unit holders consent. They submit reports every six months to SEBI;investors get an annual report. Trustees are paid annually out of the fund’s assets – 0.5percent of the weekly net asset value.R.V. Institute of Management 6
    • Investors preferences towards Mutual Funds of Kotak3. Fund Managers/ AMC:They are the ones who manage money of the investors. An AMC takes decisions,compensates investors through dividends, maintains proper accounting andinformation for pricing of units, calculates the NAV, and provides information onlisted schemes. It also exercises due diligence on investments, and submits quarterlyreports to the trustees. A fund’s AMC can neither act for any other fund nor undertakeany business other than asset management. Its net worth should not fall below Rs. 10crore. And, its fee should not exceed 1.25 percent if collections are below Rs. 100crore and 1 percent if collections are above Rs. 100 crore. SEBI can pull up an AMCif it deviates from its prescribed role.4. Custodian:Often an independent organization, it takes custody of securities and other assets ofmutual fund. Its responsibilities include receipt and delivery of securities, collectingincome-distributing dividends, safekeeping of the units and segregating assets andsettlements between schemes. Their charges range between 0.15-0.20 percent of thenet value of the holding. Custodians can service more than one fund.R.V. Institute of Management 7
    • Investors preferences towards Mutual Funds of KotakInvestment Alternatives I. Direct Investment Alternatives A. Fixed Principal Investments i. Cash ii. Savings account iii. Savings Certificate iv. Government Bonds v. Corporate Bonds and Debentures B. Variable Principle Securities i. Equity Shares ii. Convertible Debentures or Preference Securities C. Non-Security Investments i. Real Estate ii. Mortgages iii. Commodities iv. Business Ventures v. Art, Antiques and Other Valuables II. Indirect Investment Alternatives A. Pension Fund B. Provident Fund C. Insurance D. Investment Companies E. Unit Trust of India and Other Trust Funds F. Mutual FundsR.V. Institute of Management 8
    • Investors preferences towards Mutual Funds of Kotak1.3 A comparison of different investment options with respect to theirPerformance is as shown in the following table. Options Returns Safety Volatility Liquidity Convenience Equity High Low High High/Low Moderate FI Bond Moderate High Moderate Moderate High Debentures Moderate Moderate Moderate Low Low Company FD Moderate Low Low Low Moderate PPF Moderate High Low Moderate High LIC Low High Low Low Moderate Gold Moderate High Moderate Moderate Low Real Estate High Moderate High Low Low Mutual Fund High High Moderate High High Bank Deposit Low High Low High HighFinancial Institutions:R.V. Institute of Management 9
    • Investors preferences towards Mutual Funds of KotakFinancial institutions are business organizations that act as mobilizes & depositors ofsavings & purveyors of credit or finance. Financial Institutions are engaged in theseactivities  Financing by way of loans, advances, and so on any activity except its own.  Acquisition of shares/ stocks/ bonds/ debentures/ securities  Hire- purchase  Any class of insurance, stock- broking, etc.  Chit funds and  Collection of money by way of subscription/ sale of units or other instruments/ any other manner and their disbursement.Fig 1.4. Typical Financial SystemR.V. Institute of Management 10
    • Investors preferences towards Mutual Funds of Kotak Financial System Financial Financial Financial Financial Institutions Services Markets Instruments (Claims, assets,Regulator Intermediaries Non- Others intermediaries Primary Secondaryy Banking Non- banking Short Medium Long term term term Organized Unorganized Primary Secondary Capital Money Market Market LEGAL & REGULATORY FRAME WORK: R.V. Institute of Management 11
    • Investors preferences towards Mutual Funds of KotakMutual funds are regulated by the SEBI (Mutual Fund) Regulations 1996. SEBI is theregulator of all funds except off share funds. Where as Bank-sponsored mutual fundsare jointly regulated jointly by SEBI & RBI.RBI also regulates money market & Government. Securities Markets, in whichmutual funds invest. Since the AMC & Trustee Company is Companies, they areregulated by the department of Company affairs. They have to send periodic reports tothe Registrar of the Company (ROC) & the Company Law Board (CLB).Regulatory institutions:These institutions regulate Indian financial system. The major regulatory arms of theGovernment of India are —  Reserve Bank of India (RBI)  Securities Exchange Board of India (SEBI) and  Association of Mutual Fund Industry (AMFI)Fig.1.5. The Structure of Mutual Fund Industry Regulatory BodiesR.V. Institute of Management 12
    • Investors preferences towards Mutual Funds of Kotak SEBI RBI AMFI Mutual Funds Sponsor Trustee AMC Custodian Investor Public Sector Funds Private Sector Funds UTI Bank Financial Institutions Sponsored Sponsored Schemes Domestic Offshore Open ended Closed endedGrowth Income Balanced Sect oral Special purpose Tax savingFunds Funds Funds Funds Funds FundsTHE RESERVE BANK OF INDIA (RBI):R.V. Institute of Management 13
    • Investors preferences towards Mutual Funds of KotakThe RBI as the central bank of the country is the center of the Indian financial andmonetary system. As the apex institution it has been guiding monitoring, regulatingcontrolling and promoting the destiny of the Indian Financial System since itsinception. It started functioning from April 1, 1935 on the terms of the reserve Bankof India Act 1934. It was a shareholders’ institution till January 1949, after which itbecome a state-owned institution under the reserve Bank (transfer to publicownership) of India Act, 1948. FUNCTIONS OF RBI F Central banking functions U N C T Supervisory functions I O Promotional functions N S Monetary planning and control systemSECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)R.V. Institute of Management 14
    • Investors preferences towards Mutual Funds of KotakThe SEBI was established on April.12.1982 through an administrative order, but itbecame a statutory and really powerful organization only since 1992. SEBI was set upon 21st February.1992 through an ordinance issued on 30th January.1992. The SEBIAct on 4th April.1992 replaced the ordinance. The SEBI is under the overall controlof the ministry of Finance, and it has head office at Mumbai. It has now become avery important constituent of the financial regulatory framework in India.OBJECTIVES:  To regulate stock exchanges & securities industry to promote their orderly functioning.  To protect the interest of investors so that there is a steady flow of savings in to the capital market and educating individual investors.  To prevent trading malpractices and aims at achieving a balance between self- regulation by securities industry and its statutory regulation.ASSOCIATION OF MUTUAL FUND INDUSTRY (AMFI)R.V. Institute of Management 15
    • Investors preferences towards Mutual Funds of Kotak AMFI is an Industry Association. AMFI is not yet the Self RegulatoryOrganization (SRO), though SEBI consults AMFI on a number of issues. AMFI canonly issue guidelines. The objectives of AMFI are-  To define and maintain high professional and ethical standards in all areas of operation of mutual fund industry  To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all matters concerning the mutual fund industry.  To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry.  To undertake nation wide investor awareness programme so as to promote proper understanding of the concept and working of mutual funds.  To disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies.INDIAN MUTUAL FUND INDUSTRYStructure Of The Indian Mutual Fund IndustryR.V. Institute of Management 16
    • Investors preferences towards Mutual Funds of KotakStructure wise Mutual fund Industry can be classified in to three categories:Unit Trust of IndiaThe Indian Mutual Fund industry is dominated by the Unit Trust of India, which has atotal corpus of Rs.51,100 crore collected from over 20 million investors. The UTI hasmany funds/ schemes in all categories i.e. Equity, Balanced, Debt, Money Market etc.With some being open ended and some being closed ended. The Unit scheme 1964commonly referred to as US 64, which is a balanced fund, it is the biggest schemewith a corpus of about 10,000 crore.Public Sector Mutual FundsThe second largest categories of mutual funds are the ones floated by nationalizedbanks. Canbank asset management floated by Canara Bank and SBI FundsManagement floated by State Bank of India are the largest of these. GIC AMC floatedby General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LICare some of the other prominent ones. The aggregate corpus of the funds managed bythis category of AMC’s is around Rs. 8,300 crore.Private Sector Mutual fundThe third largest categories of mutual funds are the ones floated by the Private SectorDomestic Mutual funds and the Private Sector Foreign Mutual Funds. The largest ofthese in Private Sector Domestic Mutual funds are Cholamandalam AssetManagement Co.Ltd., J.M Capital Management Co. Ltd., Escort Asset ManagementLtd., Birla Sun Life Asset Management Pvt.Ltd., and in Private Sector ForeignMutual Funds these are Alliance Capital Asset Management Pvt.Ltd., PrudentialICICI Management Co. Ltd. The aggregate corpus of the assets managed by thiscategory of AMC’s is about Rs. 42,200 crore .History of the Indian Mutual Fund IndustryR.V. Institute of Management 17
    • Investors preferences towards Mutual Funds of KotakThe mutual fund industry in India started in 1963 with the formation of Unit Trust ofIndia, at the initiative of the Government of India and Reserve Bank the. The historyof mutual funds in India can be broadly divided into four distinct phasesFirst Phase – 1964-87An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up bythe Reserve Bank of India and functioned under the Regulatory and administrativecontrol of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI andthe Industrial Development Bank of India (IDBI) took over the regulatory andadministrative control in place of RBI. The first scheme launched by UTI was UnitScheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets undermanagement.Second 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 Can bank Mutual Fund (Dec 87), PunjabNational 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 mutualfund in June 1989 while GIC had set up its mutual fund in December 1990. At the endof 1993, the mutual fund industry had assets under management of Rs.47, 004 crores. Amount 1992- Assets Mobilis Mobilised 93 Under ation asR.V. Institute of Management 18
    • Investors preferences towards Mutual Funds of Kotak % of gross Management Domesti c Savings 11,057 UTI 38,247 5.2% Public 1,964 8,757 0.9% Sector 13,021 Total 47,004 6.1%Third Phase – 1993-2003 (Entry of Private Sector Funds)With the entry of private sector funds in 1993, a new era started in the Indian mutualfund industry, giving the Indian investors a wider choice of fund families. Also, 1993was 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 morecomprehensive and revised Mutual Fund Regulations in 1996. The industry nowfunctions under the SEBI (Mutual Fund) Regulations 1996. The number of mutualfund houses went on increasing, with many foreign mutual funds setting up funds inIndia and also the industry has witnessed several mergers and acquisitions. As at theend of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805crores. The Unit Trust of India with Rs.44, 541 crores of assets under managementwas way ahead of other mutual funds.R.V. Institute of Management 19
    • Investors preferences towards Mutual Funds of KotakFourth 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 UnitTrust of India with assets under management of Rs.29,835 crores as at the end ofJanuary 2003, representing broadly, the assets of US 64 scheme, assured return andcertain other schemes. The Specified Undertaking of Unit Trust of India, functioningunder an administrator and under the rules framed by Government of India and doesnot come under the purview of the Mutual Fund Regulations.The 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. With thebifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 croresof assets under management and with the setting up of a UTI Mutual Fund,conforming to the SEBI Mutual Fund Regulations, and with recent mergers takingplace among different private sector funds, the mutual fund industry has entered itscurrent phase of consolidation and growth. As at the end of October 31, 2003, therewere 31 funds, which manage assets of Rs.126726 crores under 386 schemes.R.V. Institute of Management 20
    • Investors preferences towards Mutual Funds of KotakThe graph indicates the growth of assets over the years. GROWTH IN ASSETS UNDER MANAGEMENTR.V. Institute of Management 21
    • Investors preferences towards Mutual Funds of KotakFuture of Mutual Funds in IndiaBy December 2004, Indian mutual fund industry reached Rs 1,50,537 crore.It is estimated that by 2010 March-end, the total assets of all scheduled commercialbanks should be Rs 40,90,000 crore.The annual composite rate of growth is expected 13.4% during the rest of the decade.In the last 5 years we have seen annual growth rate of 9%. According to the currentgrowth rate, by year 2010, mutual fund assets will be double.Let us discuss with the following table: Table 1.6Aggregate deposits of Scheduled Banks in India (Rs.Crore) Mar-0Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Sep-04 4-Dec 4Deposits 605410 851593 989141 1131188 1280853 - 1567251 1622579Change in % 15 14 13 12 - 18 3over last yrSource – RBIMutual Fund AUM’s GrowthMonth/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sep-04 4-Dec 13762 15114MF AUMs 68984 93717 83131 94017 75306 149300 6 1Change in % over last yr 26 13 12 25 45 9 1Source - AMFIR.V. Institute of Management 22
    • Investors preferences towards Mutual Funds of KotakSome facts for the growth of mutual funds in India : • 100% growth in the last 6 years. • Number of foreign AMCs are in the que to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide. • Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. • We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion. • B and C class cities are growing rapidly. Today most of the mutual funds are concentrating on the A class cities. Soon they will find scope in the growing cities. • Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products. • SEBI allowing the MFs to launch commodity mutual funds. • Emphasis on better corporate governance. • Trying to curb the late trading practices. • Introduction of Financial Planners who can provide need based advice.R.V. Institute of Management 23
    • Investors preferences towards Mutual Funds of KotakGlobal Scenario Of Mutual Fund Industry  The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S.  Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital are non-bank mutual funds in this group.  In the U.S. the total number of schemes is higher than that of the listed companies.  Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway.  In the U.S. about 9.7 million households will manage their assets on- line by the year 2003, such a facility is not yet of avail in India.  On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets.  72% of the core customer base of mutual funds in the top 50-broking firms in the U.S. is expected to trade on-line by 2003.R.V. Institute of Management 24
    • Investors preferences towards Mutual Funds of KotakADVANTAGES OF MUTUAL FUNDS: -If mutual funds are emerging as the favorite investment vehicle, it is because of themany advantages they have over other forms and avenues of investing, particularlyfor the investor who has limited resources available in terms of capital and ability tocarry out detailed research and market monitoring. The following are the majoradvantages offered by mutual funds to all investors: • Portfolio diversification: Mutual Funds normally invest in a well-diversified portfolio or securities. Each investor in a fund is a part owner of all of the fund’s assets. This enables him to hold a diversified investment portfolio even with a small amount of investment that would otherwise require big capital. • Professional Management: Even if and investor has a big amount of capital available to him, he benefits from the professional management skills brought in the management of the investor’s portfolio. The investment management skills, along with the needed research into available investment options, ensure a much better return than what an investor can manage on his own. Few investors have the skills and resources of their own to succeed in today’s fast moving, global and sophisticated markets.R.V. Institute of Management 25
    • Investors preferences towards Mutual Funds of Kotak • Reduction/Diversification of Risk: An investor in a mutual fund acquires a diversified portfolio, no matter how small his investment. Diversification reduces the risk of loss, as compared to investing directly in one or two shares or debentures or other instruments. When and investor invests directly, all in the pool of funds with other investors, any loss on one or two securities is also shared with other investors. This risk reduction is one of the most important benefits of a collective investment vehicle like the mutual fund. • Reduction of transaction cost: What is true of risk is also true of the transaction costs. A direct investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund. He has the benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit passed on to its investors. • Liquidity: Often, investors hold shares or bonds they cannot directly, easily and quickly sell. Investment in a mutual fund, on the other hand, is more liquid. An investor can liquidate the investment, by selling the units to the fund if open- end or selling them in the market if the fund is closed-end, and collect funds at the end of a period specified by the mutual fund or the stock market.R.V. Institute of Management 26
    • Investors preferences towards Mutual Funds of Kotak • Convenience and Flexibility: Mutual Fund management companies offer many investor services that a direct market investor cannot get. Investors can easily transfer their holdings from one scheme to the other; get updated market information, and so on.RISK FACTORS ASSOCIATED WITH MUTUAL FUNDS  Mutual funds & securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved.  Past performance of the Sponsor or that of existing Schemes of the Fund does not indicate the future performance of the Schemes.  As with any securities investment, the NAV of the Units issued under the scheme can go up or down depending on the factors and forces affecting the capital and money market.  Tax laws may change, affecting the return on investment in Units.R.V. Institute of Management 27
    • Investors preferences towards Mutual Funds of KotakTYPES OF MUTUAL FUND SCHEMES I. Schemes according to Maturity Period: A mutual fund scheme can be classified into open-ended scheme or close- ended scheme depending on its maturity period. i. Open-ended Fund/ Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity. ii. Close-ended Fund/ Scheme A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual funds NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.R.V. Institute of Management 28
    • Investors preferences towards Mutual Funds of Kotak II. Schemes according to Investment Objective: A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows: i. Growth / Equity Oriented Scheme The aim of Growth funds is to provide capital appreciation over the medium to long-term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. ii. Income / Debt Oriented Scheme The aim of the income funds is to provide regular and steady investors. Such scheme generally invests in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. The NAVs of such funds are affected because of change in interest rates in the country.R.V. Institute of Management 29
    • Investors preferences towards Mutual Funds of Kotak iii. Balance Fund The aim of balance funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. iv. Gilt Fund These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as are the case with income or debt oriented schemes. v. Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as “tracking error” in technical terms.R.V. Institute of Management 30
    • Investors preferences towards Mutual Funds of Kotak vi. Money-Market Mutual Funds These funds invest in highly liquid and safe securities like commercial paper, banker’s acceptances, and certificates of deposits. Treasury bills… etc., which are called money market instruments.vii. Tax Saving Schemes This schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government. Offers tax incentives for investment in specified avenues. Investment made in Equity Linked Saving Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act 1961.R.V. Institute of Management 31
    • Investors preferences towards Mutual Funds of Kotak2.1 OBJECTIVES OF THE STUDY 1. To track investor’s attitude, performance and behavior with respect to financial institutions and financial products. 2. To find new and more effective ways of ensuring investor satisfaction and to find efficient ways of communicating it. 3. To conduct the study with references to Kotak Mahindra products and the competitive scenario in which Kotak Mahindra operates. 4. To study the structure of investment opportunities.2.2 SCOPE OF THE STUDYThe study includes investors, financial institutions, investors who are interested inKotak Mahindra Asset Management Company’s mutual fund and also the individualswho are interested in the investment on the mutual fund. The individuals withoutinvestment are also included in the scope of the study.R.V. Institute of Management 32
    • Investors preferences towards Mutual Funds of Kotak2.3 STATEMENT OF THE PROBLEMThe investment objective of Kotak Mahindra Asset Management Co is “to generatecapital appreciation from a diversified portfolio of predominantly equity and equityrelated securities or securities issued by central and state government”. Despite thisobjective, the reasons like mutual fund investments are subject to market risk, there isno assurance or guarantee that the objective of the scheme can be achieved and alsothe Net Asset Value (NAV) of the units can go up or down depending on factorsaffecting the capital and money market, many of the investors tend not to invest in themutual fund investment.2.4 OPERATIONAL DEFINITIONS OF CONCEPTSNET ASSET VALUE (NAV): -Net Asset Value (NAV) denotes the performance of particular scheme of a mutualfund Mutual Funds invest he money collected from the investors in securities markets.In simple words, Net Asset Value is the market value of the securities held by thescheme. Since market value of securities changes every day, NAV of a scheme alsovaries on day-to-day basis. The NAV per unit is market value of securities of schemedivided by the total number of units of the scheme on any particular date.R.V. Institute of Management 33
    • Investors preferences towards Mutual Funds of KotakFormula of the calculation of Net Asset Value: Market Value of Investments - LiabilitiesNet Asset Value = -------------------------------------------------------------- No. of units OutstandingHowever, most people refer loosely to the NAV per unit as NAV, ignoring the "perunit".Asset Management Company (AMC)Professional managers run an AMC. The AMC conducts the necessary research &based on it, manages the fund or portfolio. It is responsible for floating, managing,redeeming the schemes; it also handles the administrative chares. It receives the feesfor the services rendered by it.RiskRisk may relate to loss of capital, delay in repayment of capital, non-payment ofinterest, or variability of returns.R.V. Institute of Management 34
    • Investors preferences towards Mutual Funds of Kotak2.5 RESEARCH METHODOLOGYPrimary Analytical Research Method was used for the study. Questionnaire wasprepared and used for collecting the data about individual investors’ preferencetowards various investment avenues, their portfolio behaviors. The research requiredprimary and secondary source of data. The primary data is obtained throughstructured questionnaires which were collected from Investors in Jayanagar Banks andBrokerage Offices such as Axis Bank, Reliance Money, Bajaj Capital etc,. SecondaryData’s are the one which is collected from web site of Kotak Mahindra, investors andcompany records.Sampling DesignThe Sampling technique used in this research is Convenient Judgment SamplingMethod. Judgment Random Sampling, which by using the available information,concerning the population, attempts to design a more efficient sample. The studyincludes investors, financial institutions, investors who are interested in KotakMahindra Asset Management Company’s mutual fund and also the individuals whoare interested in the investment on the mutual fund. The individuals withoutinvestment are also included in the study.Sample SizeA sample size of 100 people was selected for the study. The sample for data collectionwas within the geographical boundaries of Bangalore City, Jayanagar.R.V. Institute of Management 35
    • Investors preferences towards Mutual Funds of KotakSources of DataPrimary data was collected by • Questionnaires • Question schedules • InterviewsSecondary data was collected from • Fact Sheets of the Company • Websites, newspapers and journals.Period of StudyThe study was made during 1st January 2008 to 31st January 2008.R.V. Institute of Management 36
    • Investors preferences towards Mutual Funds of Kotak2.6 LIMITATIONS OF THE STUDY1. A descriptive research was undertaken for the purpose of project. But descriptiveresearch has its own limitations regarding the selection of sample size of sample unit.2. Some of the data gathered from the mutual fund holders may not be reliable.3. Time limit was also a constraint while conducting the study. So, the study does notgive a picture of the whole market.4. Time factor, as a period of one month, for gathering data is inadequate as thegamut of information needs to be synchronized to give much more comprehensiveview of the problems and prospects.5. Detailed and depth research was not conducted due to financial factors.6. The study curtails comparison as it was done only in one city i.e. Bangalore.7. The information provided by the organizations was limited to a far extent due todrawbacks like competition.R.V. Institute of Management 37
    • Investors preferences towards Mutual Funds of Kotak2.7 OVERVIEW OF THE REPORTIn Chapter 1 this report bring out the General Introduction and explains thetheoretical background of the organizationChapter 2 includes the Design of the study. It covers the objectives, scope, statementof the problem, Review of literature, operational definitions, Research Methodology,statement of hypothesis, sampling methods, Data Analysis tool, overview of theReport and the limitations.Chapter 3 includes the profile of the organization, profile of the study unit,organizational chart and functional department of the organization.Chapter 4 includes the analysis. It covers the Analysis & InterpretationChapter 5 includes the summary, which covers findings, contribution of the study,Suggestions, Conclusion, Questionnaire and Bibliography.R.V. Institute of Management 38
    • Investors preferences towards Mutual Funds of Kotak3.1 PROFILE OF THE ORGANISATIONCorporate ProfileKotak Mahindra is one of Indias leading financial institutions, offering completefinancial solutions that encompass every sphere of life. From commercial banking, tostock broking, to mutual funds, to life insurance, to investment banking, the groupcaters to the financial needs of individuals and corporates.Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly ownedsubsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund(KMMF). KMAMC started operations in December 1998 and has over 4 Lacinvestors in various schemes. KMMF offers schemes catering to investors withvarying risk - return profiles and was the first fund house in the country to launch adedicated gilt scheme investing only in government securities. KMMF has beenregistered with SEBI vide registration number MF/038/98/1 dated 23rd June 1998.The sponsor company, Kotak Mahindra Finance Limited (KMFL), was converted intoKotak Mahindra Bank Limited (Kotak Bank) in March 2003 their being granted aBanking License by Reserve Bank of India. KMFL promoted by Mr. Uday S Kotak,Mr. S.A.A.Pinto and Kotak & Co., was incorporated on November 21, 1985, underthe name Kotak Capital Management Finance Limited.R.V. Institute of Management 39
    • Investors preferences towards Mutual Funds of KotakIn early 1986, the promoters were joined by Late Mr.Harish Mahindra and Mr. AnandG Mahindra and the Company’s name was changed to Kotak Mahindra FinanceLimited. Kotak & Co is a highly respected trading company of Mumbai, withinternational business. KMFL started with a capital base of Rs.30.88 lakhs. Frombeing a provider of a single financial product, KMFL grew substantially during theseventeen years of its existence into a highly diversified financial services companyand has now converted into a Bank. As on September 30, 2005, the net worth ofKotak Bank is around Rs. 800 crore and combined with its subsidiaries, the Group networth (before minority interest) is around Rs. 2,000 crore. There are over 47,000shareholders of Kotak Bank.The Sponsor and its subsidiaries / associates offer wide ranging financial servicessuch as loans, lease and hire purchase, consumer finance, home loans, commercialvehicles and car finance, investment banking, stock broking, primary marketdistribution of equity and debt products and life insurance. The group has offices inover 88 Indian cities and also present internationally in Mauritius, London, Dubai andNew York. Kotak Mahindra (UK) Limited, an ultimate subsidiary of Kotak Bank, isthe first company owned from India to be registered with the Financial ServicesAuthority in UK. Kotak Mahindra Old Mutual Life Insurance Limited is a jointventure between Kotak Bank and Old Mutual Plc based in the UK and with largepresence in the South African insurance market.Some of the other subsidiaries of Kotak Bank are Kotak Mahindra Securities Limited,Kotak Mahindra Prime Limited, Kotak Mahindra International Limited, KotakMahindra Private-Equity Trustee Limited, Kotak Mahindra Investments Limited,Kotak Mahindra Inc., and Kotak Forex Brokerage Limited.The Sponsor has beenconsistently profitable and dividend paying company since inception. All groupcompanies are professionally run companies, employing over 5,000 professional staffincluding CAs, MBAs and Engineers.R.V. Institute of Management 40
    • Investors preferences towards Mutual Funds of KotakCredit recognitions and awards :   NDTV AWARDS, 2006  LIPPER FUND AWARDS, 2006  ICRA AWARDS, 2006  ICRA MFR 1 (December 2004 & December 2005)  OUTLOOK MONEY BEST WEALTH CREATOR DEBT 2003  CRISIL BEST FUND AWARD 20033.2 KOTAK MAHINDRA GROUPR.V. Institute of Management 41
    • Investors preferences towards Mutual Funds of KotakKotak Mahindra is one of Indias leading financial conglomerates, offering completefinancial solutions that encompass every sphere of life. From commercial banking, tostock broking, to mutual funds, to life insurance, to investment banking, the groupcaters to the diverse financial needs of individuals and corporate.The group has a net worth of over Rs. 5,609 crore, employs around 17,100 people inits various businesses and has a distribution network of branches, franchisees,representative offices and satellite offices across 344 cities and towns in India andoffices in New York, London, Dubai, Mauritius and Singapore. The Group servicesaround 3.6 million customer accounts.The journey so farR.V. Institute of Management 42
    • Investors preferences towards Mutual Funds of KotakKey group companies and their businesses  Kotak Mahindra Bank The Kotak Mahindra Groups flagship company, Kotak Mahindra Finance Ltd which was established in 1985, was converted into a bank- Kotak Mahindra Bank Ltd in March 2003 becoming the first Indian company to convert into a Bank. Its banking operations offer a central platform for customer relationships across the groups various businesses. The bank has presence in Commercial Vehicles, Retail Finance, Corporate Banking, Treasury and Housing Finance.  Kotak Mahindra Capital Company Kotak Mahindra Capital Company Limited (KMCC) is Indias premier Investment Bank. KMCCs core business areas include Equity Issuances, Mergers & Acquisitions, Structured Finance and Advisory Services.  Kotak Securities Kotak Securities Ltd. is one of Indias largest brokerage and securities distribution houses. Over the years, Kotak Securities has been one of the leading investment broking houses catering to the needs of both institutional and non-institutional investor categories with presence all over the country through franchisees and coordinators. Kotak Securities Ltd. offers online (through www.kotaksecurities.com) and offline services based on well- researched expertise and financial products to non-institutional investors.R.V. Institute of Management 43
    • Investors preferences towards Mutual Funds of Kotak  Kotak Mahindra Prime Kotak Mahindra Prime Limited (KMP) (formerly known as Kotak Mahindra Primus Limited) has been formed with the objective of financing the retail and wholesale trade of passenger and multi utility vehicles in India. KMP offers customers retail finance for both new as well as used cars and wholesale finance to dealers in the automobile trade. KMP continues to be among the leading car finance companies in India.  Kotak Mahindra Asset Management Company Kotak Mahindra Asset Management Company Kotak Mahindra Asset Management Company (KMAMC), a subsidiary of Kotak Mahindra Bank, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). KMMF manages funds in excess of Rs 20,800 crore and offers schemes catering to investors with varying risk- return profiles. It was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities.  Kotak Mahindra Old Mutual Life Insurance Limited Kotak Mahindra Old Mutual Life Insurance Limited is a joint venture between Kotak Mahindra Bank Ltd. and Old Mutual plc. Kotak Life Insurance helps customers to take important financial decisions at every stage in life by offering them a wide range of innovative life insurance products, to make them financially independent.DIRECTORS TRUSTEE COMPANYR.V. Institute of Management 44
    • Investors preferences towards Mutual Funds of Kotak  Uday S. Kotak B.Com, MMS has been an Executive Vice Chairman and Managing Director of Kotak Mahindra Bank Limited (Formerly known as Kotak Mahindra Finance Limited) since August 1, 2002. Mr. Kotak is the principal founder and promoter of Kotak Mahindra Finance Ltd. He is responsible for the growth of Kotak Mahindra from a fledgling finance company in 1985 to a financial institution providing the full basket of financial services today. He serves as Chairman of the Board.  Mr. Amit Desai is a graduate in Commerce and Law from the Bombay University. He is an advocate and has about 20 years of experience in criminal, economic and revenue laws. Mr. Desai is associated with the Sponsor.  Mr. Girish Sharedalal is a graduate in Commerce and Arts and also a Fellow of the Institute of Chartered Accountants of India. Formerly a Senior Partner of Messrs Dalal, Desai and Kumana, a firm of Chartered Accountants, he has about 44 years of experience in the field of audit, taxation and management consultancy.  Mr. Tushar Mavani is a graduate in Commerce and Law from the Bombay University. He is a partner with Messrs Mulla & Mulla & Craigie Blunt & Caroe and has about 14 years of experience in the legal field.R.V. Institute of Management 45
    • Investors preferences towards Mutual Funds of Kotak  Mr. Anirudha Barwe is a postgraduate in Mathematics and also a Certified Associate of Indian Institute of Bankers,Mumbai. Mr. Barwe has about 43 years of experience in the field of banking and financial services. Mr. Barwe was actively associated with and responsible to a great extent for the success of the Resurgent India Bond issue of SBI. Mr. Barwe retired as the Managing Director of SBI Capital Markets Limited in October 1998. After retirement, Mr. Barwe worked with IDFC as Chief Financial Officer for 3 years.  Mr. Chandrashekhar Sathe is a graduate with B. Tech.(Chemical Engineering) from IIT, Mumbai. He has over 27 years experience in Banking and Finance. He has been a part of the Senior Management team of the Kotak Mahindra Group since 1992 and was responsible for setting up the Fixed Income Securities capability of Kotak Mahindra Capital Company. Mr. Sathe is a widely consulted expert on Foreign Exchange and Money Markets in India and is a frequent contributor to financial newspapers, magazines and TV News channels. Mr. Sathe was the Chief Executive Officer of the AMC for the period, 1st April, 1998 to 30th November, 2001 and currently heads the Risk Management function at Kotak Mahindra Bank Limited. Mr. Sathe is associated with the Sponsor.R.V. Institute of Management 46
    • Investors preferences towards Mutual Funds of Kotak3.3 SCHEME DETAILS OF KOTAK MAHINDRA1. KOTAK 30Objective: - The investment objective is to generate capital appreciation from aportfolio of predominantly equity and equity related securities with investment in,generally not more than 30 stock.Structure :- Open Ended Equity Growth SchemeMinimum investment:- Rs 5,0002. KOTAK TECHObjective: - The investment objective is to generate capital appreciation from apredominantly equity and equity related securities issued by multinationalcompanies.Structure: - Open Ended Equity Growth Scheme.Minimum investment:- Rs 5,000R.V. Institute of Management 47
    • Investors preferences towards Mutual Funds of Kotak3. KOTAK MNCObjective: - The investment objective is to generate capital appreciation from aportfolio of predominantly equity and equity related securities issued by multinationalcompanies.Structure: - Open Ended Equity Growth SchemeMinimum investment: - Rs 5,0004. KOTAK BALANCEObjective: - The investment objective is to achieve growth by investing in Equityand equity related instruments, balanced with income generation by Investing in debtand money market instrumentsStructure :- Open Ended Balanced Scheme.Minimum investment:- Rs 5,000R.V. Institute of Management 48
    • Investors preferences towards Mutual Funds of Kotak5. KOTAK INCOME PLUSObjective: - To enhance returns over a portfolio of debt instruments with a moderateexposure in Equity & Equity related instrumentsStructure:- Open Ended Income SchemeMinimum Investment: - Rs 5,0006. KOTAK GILTObjective: - To generate risk free returns through investments in sovereign Securitiesissued by the central government and / or a state government and / or reverse reposin such securitiesStructure: - Open Ended Dedicated Gilt SchemeMinimum Investment: - Savings & investment Plan; Rs 5,000 Serial Plans; Rs 10 lakhsR.V. Institute of Management 49
    • Investors preferences towards Mutual Funds of Kotak7. KOTAK BONDObjective: - To create a portfolio of debt and money market instruments ofdifferent maturities so as to spread the risk across a wide maturity Horizon & differentkinds of issuers in the debt market Kotak Bond Short Term Plan To provide reasonable returns and high level of liquidity by investing in debt & money market instruments of different maturities, So as to spread the risk across different kinds of issuers in the debt market.Structure: - Open Ended Debt SchemeMinimum Investment: - Deposit Plan Rs 5,000 Wholesale Plan: Rs 1 lakh Short Term Plan: Rs5, 000 Institutional Plan; Rs 1 croreR.V. Institute of Management 50
    • Investors preferences towards Mutual Funds of Kotak8. KOTAK LIQUIDObjective; - To provide reasonable returns and high level of liquidity by Investing indebt and money market instruments of different Maturities so as to spread the riskacross different kinds of Issuers in the debt marketsStructure; - Open Ended Debt SchemeMinimum Investment: - Rs 5,000 Institutional plan: Rs 1 crore Institutional Premium Plan: Rs 20 crores9. KOTAK FLOATERObjective: - To reduce the interest rate risk associated with investments in fixed rateinstruments by investing predominantly in floating rate securities, money marketInstruments and using appropriate derivativesStructure: Open Ended Debt SchemeMinimum Investment: Rs 5,000.R.V. Institute of Management 51
    • Investors preferences towards Mutual Funds of Kotak10. KOTAK DYNAMIC INCOMEObjective: To maximize returns through an active management of a portfolio of debtand securities.Structure: Open Ended Debt SchemeMinimum Investment: Rs 5,00011. KOTAK GLOBAL INDIAObjective: To generate capital appreciation from a diversified portfolio ofpredominantly equity and equity related securities issued by globally competitiveIndian Companies.Highlights  Investment in a diversified equity portfolio of Globally Competitive Indian Companies.  Tax advantage  Recurring Investment Facility available during continuous offer.  Redemption on all Working days.3.4 FACILITIES PROVIDED BY KOTAK MAHINDRAR.V. Institute of Management 52
    • Investors preferences towards Mutual Funds of Kotak1. Systematic Investment Plan (SIP): Management of ones finances to attain a defined goal calls for a lot ofdiscipline, many a times self-imposed. Our Systematic Investment Plan is a tool,which can help you, inject this discipline in your financial management efforts. OurSystematic Investment Plan (SIP) provides you the facility to periodically invest afixed sum over any defined period of time (6 months or more) in a disciplinedmanner. SIPs help in arresting uncertainties associated with trying to time the marketand thus, in the long term tends to iron out market fluctuations. It brings down youraverage cost of acquisition of units. As you would allocate a fixed sum every month,you would buy more units when the prices of our units are lower than when they arehigher.2. Systematic Withdrawal Plan (SWP): Our Systematic Withdrawal Plan (SWP) is designed receive a regular stream ofpayouts in a defined frequency and to book profits periodically Through our SWP youcan redeem defined sums at a pre-defined frequency by giving a one-time instructionto us. You may choose to regularly withdraw either a fixed sum or just theappreciation on your investments.This facility caters to two segments of investor needs:1) Investors wanting defined, regular funds inflow from their investments.2) Investors interested in booking gains at a regular interval.R.V. Institute of Management 53
    • Investors preferences towards Mutual Funds of Kotak3. Systematic Transfer Plan (STP): Systematic Transfer Plan (SWP) caters a phased entry into the Equity marketsrather than putting in all your money at one trench and to book profits from yourequity holdings. Through our STP you can choose to switch your investments fromone Kotak Mutual scheme to another at a predefined frequency by giving a one-timeinstruction to us. You also have a choice between switching a fixed sum or only theappreciation on your investments.You can choose to transfer either a fixed sum every defined period or only theappreciation on your investments over that period from one scheme to another. Thelater is helpful, where you do not want the transfer to disturb your capitalcontribution.4. Direct Credit Facility: Our Direct Credit Facility comes automatically to you (unless youchoose otherwise) if you hold an account with any of the 12 banks listed below:ABN AMRO Bank HSBC Indusind BankCiti Bank HDFC Kotak Mahindra BankCenturion Bank of Punjab ICICI Standard CharteredDeutsche Bank IDBI Bank UTI BankDirect Credit is safer, faster and convenient compared to the conventional chequepayout mechanism.R.V. Institute of Management 54
    • Investors preferences towards Mutual Funds of Kotak5. ECS of Dividends:ECS (Electronic Clearing Service) is a Reserve Bank of India offering to facilitate,among others, faster and seamless payout of dividends directly into your bankaccount.ECS as a mechanism for payout of Dividends is faster, convenient, cost-effective andhassle-free. Besides, you dont run the risk of loss of dividend instruments in transitand the associated delays in obtaining a duplicate instrument. This facility is currentlyoffered across all banks in over 48 locations.6. Online Transactions Facility: Our Online Transactions Facility allows you to have instant access to yourinvestments at any time from anywhere just at the click of a button.Heres a list of all facilities you can avail by signing in for our Online TransactionsFacility: -Redemption. -Switch Over. -Account Statement.R.V. Institute of Management 55
    • Investors preferences towards Mutual Funds of Kotak7. Email Communication: The world over, e-mail has been revolutionizing communication. No moreneed to have paper trails; e-mail makes communication real-time, easy to store andretrieve and cost-effective.You can now opt to receive all your communication from us over e-mail:- Account Statement for your investments -Transaction Confirmations -Daily NAVs and Dividend Updates -Market Reviews -Information on product launches, service initiatives, dividends, etc. -Annual Reports -Other Statutory Communication8. SMS Services: With cell phones fast qualifying for an assured parking in everypocket, we could not resist allowing you that extra convenience to be in touch withyour investments whenever you wish, wherever you are.Try our SMS facility to : -Access the latest NAVs and Dividends for our various schemes on SMS. -Receive information on product launches, service initiatives, dividends, etc. on SMS. -Post your queries to our Dedicated Services Desk.R.V. Institute of Management 56
    • Investors preferences towards Mutual Funds of Kotak9. Updates from Markets:  Market Review-Weekly Market Review [ended 29th February 2008]  Performance-Monthly Performance Snapshot [as on 31/12/2007]  Half Yearly Accounts and Portfolio- March 2007&September 2007  Fact Sheet- Current Month, Yearly Fact Sheet  KMAMC Annual Report-2006 - 2007  Credit Policy for 2007-08R.V. Institute of Management 57
    • Investors preferences towards Mutual Funds of Kotak4.1 ANALYSIS AND INTERPRETATIONTABLE NO 2.1 – TO SEE THE RESPONDENT IS AN INCOME TAX ASSESSEE.Sl. No. Attributes No. of respondents Percentage1 Yes 76 762 No 24 24 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 76% of the respondents say thatthey are income tax assesses and the rest 24% say that they are not.This is illustrated in the following graph.R.V. Institute of Management 58
    • Investors preferences towards Mutual Funds of KotakGRAPH NO.1 – TO SEE THE RESPONDENT IS AN INCOME TAX ASSESSEE. 76 80 Percentage 60 40 24 20 0 Yes No AttributesSource: - Table No: 2.1R.V. Institute of Management 59
    • Investors preferences towards Mutual Funds of KotakTABLE NO 2.2. TO SEE WHETHER REPONDENTS INVEST FOR TAXEXEMPTION OR TAX SAVINGSSl. No. Attributes No. of respondents Percentage1 Yes 70 702 No 30 30 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 70% of the respondents say thatthey invest for tax exemption and the rest 30% say that they do not.This is illustrated in the following graph.R.V. Institute of Management 60
    • Investors preferences towards Mutual Funds of KotakGRAPH NO 2. TO SEE WHETHER REPONDENTS INVEST FOR TAXEXEMPTION OR TAX SAVINGS 80 70 Percentage 60 40 30 20 0 Yes No AttributesSource: Table No: 2.2R.V. Institute of Management 61
    • Investors preferences towards Mutual Funds of KotakTABLE NO 2.3. INVESTMENT PREFERENCE OF RESPONDENTSSl. No. Attributes No. of respondents Percentage1 Fixed Deposits 33 332 Real Estate 27 273 Insurance 21 214 Mutual Fund 9 95 Gold 9 9 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 33% of the respondents invest infixed deposits, 27% invest in Real Estate, 21% in Insurance, 9% in Mutual Fund andthe rest 9% say that they invest in gold.This is illustrated in the following graph.GRAPH NO 3. INVESTMENT PREFERENCE OF RESPONDENTSR.V. Institute of Management 62
    • Investors preferences towards Mutual Funds of Kotak 35 33 30 27 25 Percentage 21 20 15 9 9 10 5 0 d e e it s d un nc at ol os G st lF ra ep lE su ua D ea In ut d R M xe Fi AttributesSource: Table No: 2.3TABLE NO 2.4 REASONS OF INVESTMENT PREFERENCE OFRESPONDENTSR.V. Institute of Management 63
    • Investors preferences towards Mutual Funds of KotakSl. No. Attributes No. of respondents Percentage1 Less Risk 28 282 Good Returns 21 213 Liquidity 12 124 Assured Returns 36 365 Other Reasons 3 3 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 28% of the respondents preferinvestment due to less risk, 21% due to good returns, 12% due to liquidity, 36% dueto assured returns and the rest 3% do it due to other reasons.This is illustrated in the following graph.GRAPH NO 4. REASONS OF INVESTMENT PREFERENCE OFRESPONDENTSR.V. Institute of Management 64
    • Investors preferences towards Mutual Funds of Kotak 40 36 35 Percentage 30 28 25 21 20 15 12 10 5 3 0 Less Risk Good Liquidity Assured Other Returns Returns Reasons AttributeSource: Table No: 2.4TABLE NO 2.5. CURRENT INVESTMENT PORTFOLIO OF RESPONDENTSSl. No. Attributes No. of respondents PercentageR.V. Institute of Management 65
    • Investors preferences towards Mutual Funds of Kotak1 Govt securities and bonds 61 612 Mutual funds & company FD’s 18 183 Equity Shares 21 21 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 61% of the respondents invest inGovt securities and bonds, 18% in Mutual funds and company fixed deposits and therest 21% in equity shares.This is illustrated in the following graph:GRAPH NO 5. CURRENT INVESTMENT PORTFOLIO OF RESPONDENTSR.V. Institute of Management 66
    • Investors preferences towards Mutual Funds of Kotak 70 61 Percentage 60 50 40 30 21 18 20 10 0 Govt securities Mutual funds & Equity Shares and bonds company FD’s AttributesSource: Table No: 2.5TABLE NO 2.6. NATURE OF INVESTMENT THAT THE RESPONDENTS LIKER.V. Institute of Management 67
    • Investors preferences towards Mutual Funds of KotakSl. No. Attributes No. of respondents Percentage1 Steadily 61 612 At average rate 27 273 Fast 12 12 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 61% of the respondents like theirinvestment to grow steadily, 27% in an average rate and the rest 12% in a fast rate.This is illustrated in the following graph.GRAPH NO 6. NATURE OF INVESTMENT THAT THE RESPONDENTS LIKER.V. Institute of Management 68
    • Investors preferences towards Mutual Funds of Kotak 70 61 Percentage 60 50 40 27 30 20 12 10 0 Steadily At average rate Fast AttributesSource: Table No: 2.6TABLE NO 2.7 PERCENTAGE OF INCOME THAT THE RESPONDENTSINVESTR.V. Institute of Management 69
    • Investors preferences towards Mutual Funds of KotakSl. No. Attributes No. of respondents Percentage1 5% 24 242 5% - 10% 37 373 More than 10% 39 39 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 24% of the respondents invest5% of their total income, 37% invests 5-10% and the rest 39% invest more than 10%.This is illustrated in the following graph.GRAPH NO 7. PERCENTAGE OF INCOME THAT THE RESPONDENTSINVESTR.V. Institute of Management 70
    • Investors preferences towards Mutual Funds of Kotak 45 39 40 37 35 Percentage 30 24 25 20 15 10 5 0 5% 5% - 10% More than 10% AttributeSource: Table No: 2.7TABLE NO 2.8 TO SEE WHETHER THE RESPONDENT IS AN INVESTOR OFMUTUAL FUNDSl. No. Attributes No. of respondents PercentageR.V. Institute of Management 71
    • Investors preferences towards Mutual Funds of Kotak1 Yes 27 272 No 73 73 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, only 27% of the respondents areinvestors of mutual funds and the rest 73% are not.This is illustrated in the following graph.GRAPH NO 8. TO SEE WHETHER THE RESPONDENT IS AN INVESTOR OFMUTUAL FUNDR.V. Institute of Management 72
    • Investors preferences towards Mutual Funds of Kotak 80 73 70 60 Percentage 50 40 30 27 20 10 0 Yes No AttributeSource: Table: 2.8.TABLE NO 2.9 REASONS FOR NOT INVESTING IN MUTUAL FUNDSSl. No. Attributes No. of respondents Percentage1 Awareness 15 15R.V. Institute of Management 73
    • Investors preferences towards Mutual Funds of Kotak2 Risky 58 583 Returns not assured 27 27 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 15% of the respondents do notinvest in mutual funds because of lack of awareness, 58% as it is risky and the rest27% as the returns are not assured.This is illustrated in the following graph.GRAPH NO 9. REASONS FOR NOT INVESTING IN MUTUAL FUNDSR.V. Institute of Management 74
    • Investors preferences towards Mutual Funds of Kotak 70 58 60 50 Percentage 40 30 27 20 15 10 0 Awareness Risky Returns not assured AttributeSource: Table No: 2.9TABLE NO 2.10 REASONS FOR INVESTING IN MUTUAL FUNDSR.V. Institute of Management 75
    • Investors preferences towards Mutual Funds of KotakSl. No. Attributes No. of respondents Percentage1 Less Risky 21 212 Liquidity 30 303 Professional Mgmt 24 244 Fast Appreciation 25 25 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 21% of the respondents feel thatinvesting in mutual funds are less risky and hence they invest, 30% invest due toliquidity, 24% due to Professional management and the rest 25% due to fastappreciation.This is illustrated in the following graph.GRAPH NO 10. REASONS FOR INVESTING IN MUTUAL FUNDSR.V. Institute of Management 76
    • Investors preferences towards Mutual Funds of Kotak 35 30 30 24 25 Percentage 21 25 20 15 10 5 0 n ty y t gm io isk di at i R M qu ci ss al re Li on pp Le si A es st of Fa Pr AttributeSource: Table No: 2.10TABLE NO 2.11 KIND OF MUTUAL FUND THAT THE RESPONDENTSPREFERR.V. Institute of Management 77
    • Investors preferences towards Mutual Funds of KotakSl. No. Attributes No. of respondents Percentage1 Open-ended 57 572 Closed-ended 43 43 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 57% of the respondents preferopen-ended mutual funds and the rest 43% closed-ended ones.This is illustrated in the following graph.GRAPH NO 11. KIND OF MUTUAL FUND THAT THE RESPONDENTSPREFERR.V. Institute of Management 78
    • Investors preferences towards Mutual Funds of Kotak 60 57 50 43 Percentage 40 30 20 10 0 Open-ended Closed-ended AttributesSource: Table No: 2.11TABLE NO 2.12 TYPE OF SCHEME THE RESPONDENTS PREFERSl. No. Attributes No. of respondents Percentage1 Equity 49 492 Debit 42 423 Balance 9 9 Total 100 100R.V. Institute of Management 79
    • Investors preferences towards Mutual Funds of KotakSource: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 49% of the respondents preferequity type of scheme, 42% prefer debit type of scheme and the rest 9% due tobalance type of scheme.This is illustrated in the following graph.GRAPH NO 12. TYPE OF SCHEME THE RESPONDENTS PREFERR.V. Institute of Management 80
    • Investors preferences towards Mutual Funds of Kotak 60 49 50 42 40 Percentage 30 20 9 10 0 Equity Debit Balance AttributesSource: Table No: 2.12TABLE NO 2.13. THE PREFERENCE AMONG DIFFERENT MUTUAL FUNDSR.V. Institute of Management 81
    • Investors preferences towards Mutual Funds of KotakSl. No. Attributes No. of respondents Percentage1 UTI 25 252 Kotak 15 153 HDFC 23 234 Birla Sun Life 20 205 LIC 17 17 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 15% of the respondents preferUTI mutual funds, 15% prefer Kotak, 30% prefer HDFC, 19% Templeton and the rest21% prefer LIC.This is illustrated in the following graph.GRAPH NO 13. THE PREFERENCE AMONG DIFFERENT MUTUAL FUNDSR.V. Institute of Management 82
    • Investors preferences towards Mutual Funds of Kotak 30 25 25 23 20 20 Percentage 17 15 15 10 5 0 UTI Kotak HDFC Birla Sun LIC life AttributesSource: Table No: 2.13TABLE NO 2.14 TO ANALYSE WHETHER THE RESPONDENT SEES THEBRAND NAME WHILE INVESTINGR.V. Institute of Management 83
    • Investors preferences towards Mutual Funds of KotakSl. No. Attributes No. of respondents Percentage1 Yes 94 942 No 06 06 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 94% of the respondents seebrand name while investing and the rest 6% are not.This is illustrated in the following graph.GRAPH NO 14. TO ANALYSE WHETHER THE RESPONDENT SEES THEBRAND NAME WHILE INVESTINGR.V. Institute of Management 84
    • Investors preferences towards Mutual Funds of Kotak 100 94 90 80 70 Percentage 60 50 40 30 20 10 6 0 Yes No AttributeSource: Table: 2.14TABLE NO 2.15 IMMEDIATE REACTIONS IN CASE OF SUDDEN DIP INSTOCK MARKETSl. No. Attributes No. of respondents PercentageR.V. Institute of Management 85
    • Investors preferences towards Mutual Funds of Kotak1 Would withdraw the investment 39 392 Would wait and watch 55 553 Would invest more in it 6 6 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 39% of the respondents wouldwithdraw the investment, 55% would wait and watch the show and the rest 6% saythat they would invest more.This is illustrated in the following graph.GRAPH NO 15. IMMEDIATE REACTION IN CASE OF SUDDEN DIP IN STOCKMARKETR.V. Institute of Management 86
    • Investors preferences towards Mutual Funds of Kotak 60 55 50 39 Percentage 40 30 20 10 6 0 Would Would wait and Would invest withdraw the watch more in it investment AttributesSource: Table No: 2.15TABLE NO 2.16 TO KNOW THAT THE RESPONDENTS HAVE HEARD OFKOTAK MUTUAL FUNDR.V. Institute of Management 87
    • Investors preferences towards Mutual Funds of KotakSl. No. Attributes No. of respondents Percentage1 Yes 100 1002 No 00 00 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, all 100 respondents have heardof Kotak Mutual Fund.This is illustrated in the following graph.GRAPH NO 16. TO KNOW THAT THE RESPONDENTS HAVE HEARD OFKOTAK MUTUAL FUNDR.V. Institute of Management 88
    • Investors preferences towards Mutual Funds of Kotak 120 100 Percentage 100 80 60 40 100 20 0 0 Yes No AttributeSource: Table: 2.16TABLE NO 2.17 VIEWS ON KOTAK MF AND ITS SCHEMESSl. No. Attributes No. of respondents Percentage1 Good 25 252 Moderate 49 49R.V. Institute of Management 89
    • Investors preferences towards Mutual Funds of Kotak3 Not aware 26 26 Total 100 100Source: Primary DataInterpretation:It is clear from the table that out of 100 respondents, 15% of the respondent’s viewthat Kotak MF is good, 36% feel that it is moderate and the rest 49% say that they arenot aware.This is illustrated in the following graph.GRAPH NO 17. VIEWS ON KOTAK MF AND ITS SCHEMESR.V. Institute of Management 90
    • Investors preferences towards Mutual Funds of Kotak 60 49 50 40 Percentage 30 25 26 20 10 0 Good Moderate Not aware AttributesSource: Table No: 2.175.1 FINDINGSR.V. Institute of Management 91
    • Investors preferences towards Mutual Funds of Kotak  Majority of the respondents are income tax assesses and invest for the purpose of Tax exemption or savings..  Most of the respondents prefer to invest in Fixed Deposits, Real Estate and Insurance because of less risk and assured returns.  The investment portfolio of majority of the respondents is in govt securities and bonds.  Though mutual funds exist in the market, the people who tend to invest in it is very low compared to other investments. The reason behind is the high risk factor involved with Mutual Funds.  Majority of the people prefer open-ended equity scheme.  Majority of Investors prefer brand name of the company and then invest in their schemes so UTI as gained more investors as risk is less and there is an assured return.  If there is a sudden dip in Stock Market majority of Investors doesn’t withdraw their money instead wait for some time.  Among the surveyed Investors everyone has heard Kotak Mutual Fund and majority of them have rated Kotak Mutual Fund schemes as Moderate.5.2 CONTRIBUTION OF THE STUDYR.V. Institute of Management 92
    • Investors preferences towards Mutual Funds of KotakFrom this study the financial institutions/Banks can improve in some of the followingfields of services and communications: -1. Help the financial institutions (KM) to provide goods and services in privatesector and convenience factor offered by the public sector.2. Help local banks/small institutions to have big market share (i.e. banks orinstitutions which are mot easily accessible gets more preference even if it is a localbank with out much brand image.)3. Helps the bank and institutions to provide E-banking facility more effectiveand accurate towards investors or customers.4. Help KM to find out, in Kotak Mahindra product perceived as being value formoney.5. Help KM to find out, is KM users are considering KM as one stop shop most ofthe time.5.3 SUGGESTIONSR.V. Institute of Management 93
    • Investors preferences towards Mutual Funds of Kotak1. Proper care should be taken to give the correct guidance to the investors sothat they will invest more.2. Good campaigns can be arranged so that people will know more about MutualFunds and will tend to invest in it.3. Nice advertisements can be entertained so that people will get interest inMutual Funds.4. Kotak can come up with good, attractive schemes for its investors.5. Nowadays Indian Mutual fund Industry is attracting more and more retailinvestors because of economic stability and increasing growth rate, it leads to gradualincrease in the stock market indices.6. Interest rates are falling gradually and mutual fund industry is boomingbecause of this reason investors can move from Bank deposits to mutual funds somutual fund organizations should bring new schemes to satisfy the investors.7. Mutual fund schemes have not gained importance as there is a lack ofawareness about Mutual fund schemes so the executives of the organization shouldtake certain steps to educate the investors.5.4 CONCLUSIONR.V. Institute of Management 94
    • Investors preferences towards Mutual Funds of KotakThe study “Investors preferences towards Mutual Funds” was carried out on behalf ofMutual Funds of Kotak Mahindra Asset Management Company Ltd. The data wascollected from various sources and also through the tools like questionnaires andrelevant interactions with concerned persons. The needs were identified in the form offindings and suitable suggestions were put forth in the form of recommendations tothe concerned authorities for further discussions. A few recommendations have beenconsidered for implementation.  Mutual fund schemes are subject to market risk.  On the basis of above statements it has proved higher the risk higher the return and lower the risk lower the return.  Nowadays Mutual Fund schemes are increasing because of falling interest rates so the organization can provide further new schemes and attract the new customers.  Investment in Mutual fund schemes gives diversified portfolio to investors.  Nowadays Indian Mutual Fund industry is attracting more and more retail investors because of economic stability and increasing growth rate, it leads to gradual increase in the stock market Indices. QUESTIONNAIRE ON INVESTORS PREFERENCES TOWARDS MUTUAL FUNDS WITH REFERENCE TO KOTAK MUTUAL FUNDR.V. Institute of Management 95
    • Investors preferences towards Mutual Funds of KotakDear Sir/Madam, I, Hemanth.S, student of R.V.I.M, would like your kind attention for a fewminutes to answer this questionnaire. This is part of a survey on ‘Investorspreference towards Mutual Funds with reference to Kotak (KMAMC)’ as apartial fulfillment of BBM course. Therefore, I kindly request you to fill the followingquestionnaire. The information provided by you will be used for academic purposeonly & will be kept confidential.1. Name :2. Age :3. Gender : Male () Female ()4. Occupation : Business () Profession () Housewife () Students () Service () Others ()5. Annual Income : Below 100,000 () 100,001 to 200,000 () 200,001 to 300,000 () 300,001 to 500,000 () 500,001 & above ()6. Number of dependents:Please put tick on your answers for the following questionsR.V. Institute of Management 96
    • Investors preferences towards Mutual Funds of Kotak1. Are you an Income Tax Assesse? Yes No No2. Are you investing for tax exemption or tax savings? Yes No3. What kind of invest options you prefer? Fixed Deposit Real Estate Insurance Mutual Fund Gold4. Why you prefer the above option? Less Risk Good Returns Liquidity Assured Returns Other Reasons5. Your current investment portfolio includes majority of Govt. securities and Bonds Mutual funds & company fixed deposits Equity shares6. You would like your investment to grow Steadily At average rate Fast7. What percentage of your income do you invest? Up to 5 %R.V. Institute of Management 97
    • Investors preferences towards Mutual Funds of Kotak 5%--- 10% More than 10%8. Are you an investor in mutual fund? Yes No9. If answer is No, why you are not investing in mutual fund? Awareness Risky Returns not assured10. If answer is Yes, why do you prefer mutual fund? Less risky Liquidity Professional mgt. Fast appreciation11. What kind of mutual fund you prefer? Open- ended Closed-ended12. What type of scheme do you prefer? Equity Debt Balance13. If you are an investor of MF, which Company you prefer? UTIR.V. Institute of Management 98
    • Investors preferences towards Mutual Funds of Kotak Kotak HDFC Birla Sun Life LIC14. While buying a Mutual Fund scheme do you see brand name? Yes No15. How would you react if the Stock Market immediately dips? I would withdraw my money I would wait & watch I I would invest more in it.16. Have you heard of Kotak mutual fund and its scheme? Yes No17. Your views on Kotak mutual fund and its scheme? Good Moderate Not aware Thank you very much for your valuable time & co-operation.R.V. Institute of Management 99
    • Investors preferences towards Mutual Funds of KotakBIBLIOGRAPHY Books Author BookRonald J Jordan ManagementV K Bhalla Investment ManagementBy I.M. Pandey Financial Management 7th EditionL M Bhole Financial Institutions and MarketsPreethi Singh Portfolio ManagementJournals and NewspapersBusiness WorldMintFinancial ExpressWebsiteswww.kotakmutual.comwww.google.comwww.sebi.comwww.mutualfundsindia.comwww.amfiindia.comwww.wikipedia.orgR.V. Institute of Management 100