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CHAPTER 1
INTRODUCTION
1.1) ABOUT THE NJ INDIA INVEST

“NJ INDIA INVESTS PVT. LTD” is a Mutual Fund Distribution company.
The company on behalf of various AMCs and its mutual fund schemes collects
money from prospective investors and provides services to them. At present the
company is dealing with all types of mutual fund schemes.

Two promoters Neeraj Choksi and Jignesh Desai at Surat established the
company in the year 1994. At that time the company was in the business of
investment revenue like SSNL, RBI bonds, IDBI bonds, direct equity, etc. In the
year 1996 the company started Mutual Fund Distribution business. And today
the company is involved in only mutual fund distribution business. The
Companies corporate head office is at Surat.

The main area of business for the company is Gujarat. The company is
having 30 branches in the state. Outside Gujarat the company is having six
branches. The company is covered whole of Gujarat state in mutual fund
distribution business.

Apart from Gujarat State the company is having its branches at Banglore,
Ghatkopar (Mumnbai), Indore, Mumbai Main and Pune. The company has
covered almost whole of Gujarat so the company is now focusing to expand its
business outside Gujarat. In near future the company is planning to open three
branches outside Gujarat in Jaipur, Raipur and Chennai.

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ORGANIZATION CHART

Managing Directors

Jt. Mr. Neeraj Choksi
Jt. Mr. Jignesh Desai

Vice President

Technology Human Account
Dept. resource Dept.
Sales Dept.
Dept. Head Head
Mr. Rajiv Head Mr. Atul
Mr. Dhaval
Topiwala Desai

Senior
Senior Officers Senior Officers
Officers

Junior Junior Junior

Officers
Officers Officers

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Thinking at NJ India Invest

To provide reliable information

To honor our service commitments

To maintain all record in privacy

To preserve client capital

To provide appropriate feedback

To guide their future investment

To restructure investment plan on demand

Finally to provide complete solution & peace of mind on the investment
front

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VISION STATEMENT:

“TO BE THE LEADER IN OUR SECTOR OF

BUSINESS THROUGH: TOTAL CUSTOMER

SATISFACTION, COMMITMENT

TO EXCELLENCE, DETERMINATION TO

SUCCEED & FINALLY TO ROVIDE PEACE OF MIND

ON INVESTMENT FRONT TO SOCIETY”

MISSION STATEMENT:
ENSURE CREATION OF VALUE BY PROVIDING A

DIFFERENTIATING EDGE TO THE ACTIVITIES OF

OUR CUSTOMERS, INVESTORS, AND DISTRIBUTORS

THROUGH TECHNNOVATIVE SOLUTIONS WHILE

FULFILLING OUR SOCIAL OBLIGATIONS AND MAINTAINING

HIGH PROFESSIONAL AND ETHICAL STANDARDS

ALONG WITH THE SERVICE STANDARDS

QUALITY POLICY OF NJ INDIAINVEST:

NJ AIMS AT PROVIDING HIGH QUALITY SERVICE ON INVESTMENT
FRONT THROUGH SYSTEMATIC &PROFESSIONAL APPROACH BACKED
BY TOTAL MANAGEMENTCOMMITMENT & TEAM WORK. TO ACHIEVE
CUSTOMER SATISFACTIONAT A COST THAT REPRESENTS VALUE. WE AS
A WHOLE ARE COMMITTED TO PRACTICE A POLICY “RIGHT AT THE
FIRST TIME” & THEN CONTINEOUS IMPROVEMENT IN OUR ACTION &
DEALING

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AMC’S WITH NJ INDIAINVEST:

Alliance Capital Mutual Fund

Birla Mutual Fund

Cholamandalam Cazenove Mutual Fund

DSP Merrill Lynch Mutual Fund

Dundee Mutual Fund

Escorts Mutual Fund

First India Mutual Fund

Franklin Templeton Mutual Fund

Pioneer ITI

HDFC Mutual Fund

HSBC Mutual Fund

IDBI Principal

IL & FS Mutual Fund

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ING Savings Trust

JM Mutual Fund

LIC Mutual Fund

Prudential ICICI Mutual Fund

Reliance Capital

SBI Mutual

Standard Chartered Mutual Fund

Sun F&C Mutual Fund

Sundaram Mutual Fund

Tata Mutual

Unit Trust Of India

Zurich India Mutual Fund

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NJ INDIAINVEST’S ACHIEVEMENT:-

NJ India Invest is a growing company that can be very well proved from the
below achievements.
 They have gained a dominant place in the Indian mutual funds
distribution business
 Certified by the Association of Mutual Funds as AMFI registered
Mutual Funds advisors
 Won the Pru Chairman’s award twice in the year 2000 and 2002 for
outstanding performance in the scheme of Prudential ICICI Mutual
Fund. The chairman, prudential, presented the award at London both
the times.
 Won many other awards and certificates for outstanding performance
in various Mutual Funds schemes.
 It has acquired about 15 to 17% share of total mutual fund business
of Gujarat.
 Received the award for the year 2003-04 from HDFC mutual fund for
highest selling of mutual funds. NJ’s director at Scotland received the
award.
 Assets Under Management (AUM) more than 950 crores.
 NJ India Invest has tie up with almost 25 AMC out of 37 operating in
the Mutual Fund industry

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RECOGNITIONS:

Some of the awards & recognitions that we have received in past..
Year 2000:
For Outstanding Performance presented by Chairman, Prudential Plc. at
London
Year 2002:
For Outstanding Performance presented by Group Chief Executive,
Prudential Plc. at London
Year 2003:
For Outstanding Performance presented by Group Chief Executive,
Prudential Plc. at London
Year 2004:
Among Most Valued Business Associates presented by HDFC Standard Life
at Edinburgh, Scotland
Year 2004:
For Outstanding Performance by Deputy CEO, Prudential Singapore at
Malaysia
Year 2006:
Award for mobilizing the Highest Number of SIPs at National Level by
Fidelity Mutual Fund Plc at Mumbai
Year 2006:
Award – Vietnam

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1.2) ABOUT THE MUTUAL FUND INDUSTRY
The Indian Financial Market:

The economy of any country is widely influenced by the financial market of
that country. There is a strong link between the economy progress and the
financial system with institutional arrangement and prevailing delivery system.

The Indian economy is on the path of progress and the projection of GDP
growth rate in Budget-2005 is around 8%. The financial system has a strong
impact on GDP growth rate. The Indian financial system is divided into two parts
organized and unorganized.

The organized sector constitutes of Commercial Banks, FIs, Insurance
companies, Mutual Funds, Unit Trusts, etc. The Indian financial system has
also the involvement of public sector institutions.

Financial institutions being the important part of financial system in India
help to realize the opportunities for savings and real investment in the economy.
The FIs help in growth of economy, boosting the investment in various sectors of
economy and also the growth of GDP and per capita income.

The Investment Options:

In India the investor has wide variety of investment options available to
him. Economic well being in the long run depends significantly on how wisely he
invests. Every investment options have two main aspects i.e. risk and return.
The investor has the choice of investment in capital markets of the country and
also in financial institution of the country like Banks and Insurance companies.
The various tools of investment available to investor are as follows -:

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 Equity Shares
 Bank Deposits
 Investment in Debt Market
 Post Office Savings
 Government Securities
 Life Insurance
 Real Estate
 National Saving Certificate (NSC)
 Kisan Vikas Patra (KVP)
 Mutual Fund Schemes

The investor can invest in any of the above investment tool depending on his
investment objective and need. Generally in India the investor prefer to invest in
banks and in post office savings account. But in last few years the trend have
changed and investors are moving towards capital markets.

Investment Attributes:

Rate of Return
The rate of return is a very important aspect of the investment tool. The
rate of return is high in equity markets and it is low in post office savings and
bank deposits. It means the more riskier the instrument the more the return will
be.

Risk
The rate of return from investments like equity shares, real estate, etc vary
rather widely. The risk of an investment refers to the variability of its rate of
return. Bank deposits, post office savings, investment in debt market are less
risky and have fixed return.

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Liquidity
An investment is highly liquid if:
a) It can be transacted quickly
b) The transaction cost is low
c) The price change between two successive transactions is negligible

The liquidity of market may be judged in terms of its depth, breadth, and
resilience. Depth refers to the existence of buy as well as sells orders around the
current market price. Breadth implies the presence of such orders in substantial
volume. Resilience means that new orders emerge in response to price changes.
High marketability is desirable characteristics and low marketability is an
undesirable characteristic.

Tax Benefits
Some investments provide tax benefits, other does not. Tax benefits are of
three kinds: Initial tax benefit, Continuing tax benefit and Terminal tax benefit.
Initial tax benefit refers to the relief enjoyed at the time of making the
investment. Continuing tax benefit represents the tax shield associated with the
periodic returns from the investment e.g. Insurance, bank interest, etc. Terminal
tax benefit refers to relief from taxation when an investment is realized or
liquidated.

Convenience
Convenience broadly refers to the ease with which the investment can be
made and looked after. Ready availability of investment and easy monitoring of
investment can judge convenience. The degree of convenience associated with
investments varies widely. On one hand there is deposit in savings bank account
that can be readily available and does not require maintenance effort. On the
other hand is purchase of real estate that may involve a lot of procedural and

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legal hassles at the time of acquisition and a great deal of maintenance effort
subsequently.
Phases of Development in Mutual Fund:

Ever since the first Mutual Fund – UTI (1964) was launched this industry
has witnessed numerous changes and growth. It has seen the entry of public
sector and private sector Mutual Funds, establishment of a regulatory authority,
the SEBI, which established the Mutual Fund Regulations in 1993 and other
regulations for the healthy growth of the industry and investor protection.

Initially, till almost the end of 1980s the growth of this industry was very
slow. The reasons can be attributed to the government controls and over
regulations of financial services industry. The economic policies set at the center
consisted of state planning and development objectives that made financial
institutions assist them in their activities through the savings collected.
Moreover, there were severe business entry barriers, which restricted growth of
this industry, mobilization of savings as well as creation of assets. This lasted till
around 1986-87, until then a single institution, namely, the UTI that was formed
by the government of India, controlled the market.

Precisely, the Mutual fund industry witnessed three interrelated stages of
development in terms of entry of players.

Phase 1: July 1964 – November 1987
Phase 2: November 1987 – October 1993
Phase 3: October 1993 onwards
Phase 4: Since 2003
Phase 1: Monopoly of UTI
This was one period where by the market one single institution UTI, which
basically prepared ground for the future Mutual Funds Industry, operated. The

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first decade of UTI (1964 – 74) was a sort of formative period, whereby on the
basis on the popularity it gained through its first and many other launches.

The second decade of operations was more of consolidation and expansion.
The key issues of this decade were:
a) UTI was delinked from RBI
b) Introduction of open-ended growth funds.
c) Six new schemes introduced during 1981 – 84
d) Unit holders – 17 lacks; Investable funds – Rs. 1000 crores.

During the period from 1984 – 87, innovative and widely accepted schemes
like children’s Gift Growth Fund (1986) and Master share (1987) were launched.
By the end of June 1987, unit capital of UTI was Rs. 3726.11 crores and
investible funds totaled over Rs. 4563 crores with unit holding accounts being
29.79 lacks. By the end of 1980s, winds of change had started blowing in Indian
economy and UTI has to prepare itself to face challenges.

Phase 2: Public Sector Composition

This period was significant in this industry due to the entry of non-UTI
public sector Mutual Funds, which indirectly brought with them competition. As
the economy opened up, public sector FIs established Mutual Funds, but then
the exclusive domain of public sector still continued. This series of Non – UTI
Mutual Funds launched this period were-:
a) November 1987 – SBI Mutual Fund
b) December 1987 – Canbank Mutual Fund Scheme
c) June 1989 – LIC Mutual Fund Scheme
d) January 1990 – Indian Bank Mutual Fund Scheme

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The entry of public sector was not only beneficial in just monetary terms,
but also in the number of players and attracting small investor. The cumulative
resource mobilization rose from 4563.68 crores in 1987 to 19911 crores in 1990.
Another three entrants BOI MF, GIC MF, and PNB MF followed this. This all
helped in increasing the collections, which went up to the tune of Rs.37480
crores in 1991-92.

Till the year 1989, there were no regulatory guidelines for either setting up or
regulating Mutual Funds. Until and unless October 1989, whereby, RBI set
down first such guidelines applicable only to mutual funds floated by the banks.
Government of India later on in 1990 issued comprehensive guidelines covering
all Mutual Funds and making them mandatory to register themselves with the
SEBI. These guidelines pertained to issues like registration, management,
investment objectives, disclosure, pricing and valuation of securities and so no.

This was revised by SEBI (1993), effective from January 20, 1993. The
regulation was made also for the formation of AMC as well as listing of close-
ended schemes. As a protection to investors, disclosure norms were also
lightened. Another major development during this period was the entry of private
sector into the opening market.

Phase 3: Emergence of Competitive Market

This was an era where by serious competition was observed in the Mutual
Fund Industry due to the entrance of the private sector funds in 1993. This was
all due to a few operational advantages that they could enjoy like,
a) Most of them launched jointly by India org. and some foreign AMCs,
gave them the advantage of access to the latest technology and foreign
fund management strategies.
b) Ability to attract best managerial talents.

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c) Initiating Mutual Funds were easier due to already established
infrastructure inputs created by public sector Mutual Funds.

The first among the private sector launches was Kothari Pioneer Mutual
Fund, which launched the open-ended prima Fund in November 1993. This was
followed by a series of private sector mutual funds.

In 1993-94 seven new schemes were introduced which included,
Prudential ICICI MF, 2oth century MF, Morgan Satnley MF, Tauraus MF, etc.

PHASE – 4 Since 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified Undertaking
of the Unit Trust of India with assets under management of Rs.29, 835 crores as
at the end of January 2003, representing broadly, the assets of US 64 scheme,
assured return and certain other schemes. The Specified Undertaking of Unit
Trust of India, functioning under an administrator and under the rules framed
by Government of India and does not 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 is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March 2000
more than Rs.76, 000 crores of assets under management and with the setting
up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and growth.
As at the end of October 31, 2003, there were 31 funds, which manage assets of
Rs.126726 crores under 386 schemes.

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The mutual fund industry in India began with the setting up of the Unit
Trust In India (UTI) in 1964 by the Government of India. During the last 36
years, UTI has grown to be a dominant player in the industry with assets of over
Rs. 76,547 Crores as of March 31, 2000. The UTI is governed by a special
legislation, the Unit Trust of India Act, 1963. In 1987 public sector banks and
insurance companies were permitted to set up mutual funds and accordingly
since 1987, 6 public sector banks have set up mutual funds. Also the two
Insurance companies LIC and GIC established mutual funds. Securities
Exchange Board Of India (SEBI) formulated the Mutual Fund (Regulation) 1993,
which for the first time established a comprehensive regulatory framework for
the mutual fund industry. Since then several mutual funds have been set up by
the private and joint sectors.

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Mutual Funds:

Introduction:

The first investment trust established in Scotland by Robert Fleming and
the first mutual fund of the world “The Massachusetts Investors Trust” open-
ended scheme was launched in Boston, USA in 1924. It was 40 years later that
the mutual fund institution, namely the ‘Unit Trust of India’ was established in
India in 1964 and awareness about it, has only been since late 1980s. As of date
in US alone there are 5000 MFs with the total assets over $3 billion.

The Mutual Fund is the ideal investment vehicle for today’s complex
financial scenario. Markets for equity shares, bonds and other fixed income
instrument, real estate, derivatives and other asset have become information
driven.

Mutual funds are comparatively better option for investment due to
various benefits. First benefit is that fund manager who has wide experience in
capital market properly manages investor’s funds. Also with proper management
of funds returns on mutual fund schemes are maintained. The liquidity option,
which is the main investment attribute, can also chosen according to one’s
investment objective and need.

The mutual fund industry is growing at a faster pace. In future mutual
fund will be a better option for retail investors who want to invest their money in
capital market. Bank deposits and insurance investments have lock-in periods

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and so retail investors can have another option for investment i.e. Mutual Fund
where investor can get liquidity with satisfactory returns.

What is Mutual Fund?

A mutual fund is essentially a diversified portfolio of financial instruments
- these could be equities, debentures / bonds or money market instruments.
Pooling together contributions from various investors creates a mutual fund. The
corpus of the fund is then deployed in investment alternatives that help to meet
predefined investment objectives.

The fund receives help in achieving the common investment objectives
from its fund manager (normally an asset management company). The fund
compensates its fund manager through a fee, and also bears the other expenses
incurred in managing it. The income earned through these investments, and the
capital appreciation realized by the fund, are shared by its investors in
proportion to the number of units of the fund owned by them (pro rata).

The Mutual Fund is the most ideal investment vehicle in today’s world for
various reasons. The capital markets including equity shares, bonds and other
fixed income instruments have matured. Also a typical individual does not have
enough knowledge, skills and inclination of the happening event in the economy,
understanding their implication and act speedily.

In short, Mutual Funds help in achieving expertise In all the three areas of
research, investing and transaction processing.

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HOW MUTUAL FUND WORKS?

Investors
Pool their
Money with
Passed
Back to
Investor

Fund
Returns Manager
Generates
Invest In Capital Market

Structure of Indian Mutual Funds:

Mutual Fund industry is highly regulated in developed countries keeping
in view the protection of investor’s interest as well as to maintain operational
transparency. There is clear demarcation between open-ended schemes and
close-ended schemes for which usually tow different type of structural and

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management approaches are followed. Open-ended follows ‘trust approach’ while
close-ended schemes follow ‘corporate approach’. The management and
operations are guided by separate regulatory mechanisms, separate controlling
authorities as well.

SEBI Regulations Act, 1996, guides the formations and operations of
Mutual Funds. A Mutual Fund comprises of four separate entities i.e. Sponsor,
Mutual Fund Trust, AMC and Custodian.

STRUCTURE OF MUTUAL FUND:

Unit
Holders

Sponsors

Trustees AMC

Mutual Fund Transfer Agent

SEBI

Sponsor:

Sponsor can be any person; acting alone or in a combination with another
corporate body, establishes the Mutual Funds and get it registered with SEBI.

As per SEBI regulations sponsor is required to contribute 40% of
minimum net worth of the AMC. It must also have sound track record. Mutual
Fund shall be constituted in form of a trust and sponsor in favor of trustees

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shall in form of a deed, duly registered under the provisions of Indian
Registration Act, execute the instrument of trust.
For e.g. In Reliance Capital Mutual Fund the Sponsor is Reliance Capital
Limited.
Board of Trustees:

Board of Trustees manages Mutual Fund and the sponsor executed the
trust deeds. Mutual Funds raise money through sale of units under one or more
schemes for investing in securities. As per SEBI Regulations, 1996 half of the
trustees should be independent persons and they should not be employees of
AMC. As a trustee of Mutual Fund, he cannot be appointed as a trustee of
another Mutual Fund, until and unless he is an independent person or has
permission from Mutual Fund where his is a trustee. Trustee has right to
appoint custodian and supervise their activities.
For e.g. In Reliance Capital Mutual Fund the Trustee is Reliance Capital Trustee
Co. Limited.

Asset Management Company:

AMC is appointed by the trustees to float the schemes and manage the
funds raised by selling units under the scheme. They are to act as per SEBI
guidelines like they should be registered under the SEBI. Also the net worth of
the AMC should be in cash and all assets should be in the name of AMC. The
director of AMC should be a person of reputed high standing and at least have
five years experience in relevant field. AMC are required to disclose scheme
particulars and base of calculation of NAV.

Custodian:

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As per SEBI Regulations Mutual Funds shall have a custodian who is not
any way associated with the AMC. It carry outs the activity of safekeeping the
securities or participating, in any clearing system. The custodian should not be
associated with AMC or act as a sponsor or trustee of any Mutual Fund.
For e.g. In Reliance Capital Mutual Fund the Custodian is Deutsche Bank AG
TYPES OF MUTUAL FUNDS:

Mutual fund schemes may be classified on the basis of its structure and its
investment objectives.

• By Structure:
Open-ended funds:

An open-ended fund 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-
ended schemes is liquidity.

Close-ended funds:

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 fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit routes is provided to

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the investor i.e. either repurchase facility or through listing on stock exchanges.
These mutual funds scheme disclose NAV generally on weekly basis.

Interval Schemes:

These schemes combine the features of open-ended and Close-ended
schemes. They may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals at NAV based prices.

• By Investment Objectives:
Growth Funds:

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 option at a later date.
Growth schemes are good for investors having a long-term outlook seeking
appreciation over a period of time.

Income Funds:

The aim of Income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such as
bonds, corporate debentures government securities and money market

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instrument. Such funds are less risky compared to equity schemes. These funds
are not affected by fluctuations in equity market. However, opportunities of
capital appreciation are also limited in such funds. The NAV of such funds is
affected because of change in interest rates in the country. If the interest rates
fall, NAV of such funds are likely to increase in the short run and vice versa.
However, long-term investors may not bother about these fluctuations
Balanced Funds:

The aim of balanced 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 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.

Money Market Funds:

These funds are also income funds and their aim is to provide easy
liquidity, preservation of capital and moderate income. These schemes invest
exclusively in safer short-term instruments such as treasury bills, certificates of
deposit, commercial paper and inter-bank call money, government securities,
etc. Returns on these schemes fluctuate much less compared to other funds.
These funds are appropriate for corporate and individual investors as a means to
park their surplus funds for short periods.

Gilt Funds:

These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate due to

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change in interest rates and other economic factors, as is the case with income
of debt-oriented schemes.

Index Funds:

Index Funds republic 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, through not
exactly by the same percentage due to some factors known as “tracking Error” in
technical terms. Necessary disclosures in this regard are made in the offer
document of the mutual fund scheme.

• Other Types of Funds:
Load Funds And No – Load Funds:

A Load Fund is one that charges a percentage of NAV for entry or exit.
That is, each time one buys or sells units in the fund, a charge will be payable.
This charge is used by the mutual fund for marketing and distribution expenses.
Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is
1%, then the investors who buy would be required to pay Rs.10.10 and those
who offer their units for repurchase to the mutual fund will get only Rs.9.90 per
unit. The investors should take the loads into consideration while making
investment as these affect their yields/returns. However, the investors should
also consider the performance track record and service standards of the mutual

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fund, which are more important. Efficient funds may give higher returns in spite
of loads.

A no-load fund is one that does not charge for entry or exit. It means the
investors can enter the fund/scheme at NAV and no additional charges are
payable on purchase or sale of units.

Sector Specific Funds:
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.
They may also seek advice of an expert. For e.g. Reliance Power sector fund,
Reliance Pharma Fund.

Tax Saving Funds:
These schemes offer tax rebates to the investors under specific provisions
of the Income Tax Act, 1961 as the Government offers tax incentives for
investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS).
Pension schemes launched by the mutual funds also offer tax benefits. These
schemes are growth oriented and invest pre-dominantly in equities. Their growth
opportunities and risks associated are like any equity-oriented scheme

Special Purpose Funds:

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Special purpose funds are those fund that target a specific customer
segments such as children, women, retired people etc. Making their fund
oriented towards the need of the group they are targeting.

Off Shore Funds:
These funds will have non – residential investors and are regulated by the
provision of the foreign countries where they are registered. Further these funds
are governed by the rules and procedures laid down for the purpose of approving
and monitoring their performance by the department of economic affairs,
Ministry of Finance and the direction of RBI.
Advantages of Mutual Fund:

Mutual funds serve as a link between the saving public and the capital
markets. They mobilize savings from the investors and bring them to borrowers
in the capital markets. Today mutual funds are fast emerging and the favorite
investment vehicle because of the many advantages they have over other forms
and avenues of investing. The major advantages offered by mutual funds to all
investors are:

Professional Management:

Mutual Funds provide the services of experienced and skilled
professionals, backed by a dedicated investment research team that analyses the
performance and prospects of companies and selects suitable investments to
achieve the objectives of the scheme.

Diversification:

Mutual Funds invest in a number of companies across abroad cross-
section of industries and sectors. This diversification reduces the risk because
seldom do all stocks decline at the same time and in the same proportion. You

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achieve this diversification through a Mutual Fund with far less money than you
can do on your own.

Convenient Administration:

Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with brokers
and companies. Mutual Funds save your time and make investing easy and
convenient.

Return Potential:

Over a medium to long-term, Mutual Funds have the potential to provide a
higher return as they invest in a diversified basket of selected securities.

Low Cost:

Mutual Finds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.

Liquidity:

In open-end schemes, the investor gets the money back promptly at net
asset value related prices from the Mutual Fund. In closed-end schemes, the
units can be sold on a stock exchange at the prevailing market price or the
investor can avail of the facility of direct repurchase at NA V related prices by the
Mutual Fund.

Transparency:

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You get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the proportion
invested in each class of assets and the fund manager's investment strategy and
outlook.

Flexibility:

Through features such as regular investment plans, regular withdrawal
plans and dividend reinvestment plans, you can systematically invest . or
withdraw funds according to your needs and convenience.

Affordability:

Investors individually may lack sufficient funds to invest in high- grade
stock. A mutual fund because of its large corpus allows even a small investor to
take the benefit of its investment strategy.

Choice of schemes:
Mutual Funds offer a family of schemes to suit your varying needs over a
lifetime.

Well Regulated:

All Mutual Funds are registered with SEBI and they function within the
provision of strict regulations designed to protect the interests of investors. The
operations of Mutual Funds are regularly monitored by SEBI.

Limitations of Mutual Funds:

Entry and Exit Costs:

32

Mutual Fund is an investment avenue, which offers liquidity to the
investor. To reduce the level of liquidity some of AMCs’ levy entry and exit loads
based on NAV of any mutual fund scheme. Due to such charges investor has to
bear the cost of liquidity, which sometimes becomes expensive for the investor.

Fund Management Costs:

The fund management costs are deducted from the fund, which includes
marketing and initial costs deducted at the time of entry itself called ‘load’. Then
there is annual asset management fee and expenses, together called the expense
ration. These all costs affect the NAV.

Cost of Churning:

The portfolio of a fund does not remain constant. The extent to which the
portfolio changes is a function of the style of the individual fund manager. It is
also dependent on the volatility of the fund size i.e. whether the fund constantly
receives fresh subscriptions and redemptions. Such portfolio changes have
associated costs of brokerage, custody fees, and registration fees, etc. that lowers
the portfolio returns commensurately.

Waiting Time before investment:

It takes time for a Mutual Fund to invest money. It is difficult to invest all funds
in one day. It takes time to identify the best investment opportunity. These
under perform the fund. In open-ended schemes there is additional load for
redemption and fund manager has to keep some money in liquid assets.

33

Tax Benefit of Mutual Funds:

Mutual fund enjoys the following tax benefits-:

 Under section10 (33) of Income Tax Act, Mutual Fund Investor is exempt
from paying any tax on the dividend-received up to Rs.9000 by him from
Mutual Fund irrespective of type of funds.

 Under section 88 of Income Tax Act, 20% of the amount invested in
specified Mutual Funds (referred to as ‘tax savings schemes’) is deductible
form the tax payable by the investor in a particular year subject to a
maximum of Rs.2000 per investor.

 Under section 10(23D) of Income Tax Act, the Mutual Fund is completely
exempt from paying taxes on dividend/interest/capital gains earned by it.
While this is benefit to the fund, it is indirect benefit to the unit-holders as
well.

Defining Mutual Fund Risk:

Mutual funds face risks based on the investments they hold. For example,
a bond fund faces interest rate risk and income risk. Bond values are inversely
related to interest rates. If interest rates go up, bond values will go down and
vice versa. Bond income is also affected by the changes in interest rates. Bond
yields are directly related to interest rates falling as interest rates fall and rising
as interest rates.

34

Similarly, a sector stock fund is at risk that its price will decline due to
developments in its industry. A stock fund that invests across many industries is
more sheltered from this risk defined as industry risk.

Followings are glossary of some risks to consider when investing in mutual
funds.

The risk ret urn t rade - of f …..
off
Investment horizon

Sector funds
Potential for return

Growth Funds
Index, Active diversified

Balanced Funds
Ratio of Debt : Equity

Debt Funds

Liquid Fund

Risk

Call Risk
The possibilities that falling interest rates will cause a bond issuer to
redeem or call its high yielding bond before the bond’s maturity date

35

Country Risk
The possibility that political events (a war, national election), financial
problems (rising inflation, government default), or natural disasters will weaken
a country’s economy and cause investments in that country to decline.

Credit Risk
The possibilities that a bond issuer will fail to repay interest and principal
in a timely manner. Also called default risk.

Currency Risks
The possibility that returns could be reduced for Americans investing in
foreign securities because of a rise in the value of the U.S. dollar against foreign
currencies. Also called exchange rate risk.

Income Risk
The possibility that a fixed-income fund’s dividends will decline as a result
of falling overall interest rates

Industry Risk
The possibility that a group of stocks in a single industry will decline in
price due to developments in that industry.

Inflation Risk
The possibility that increases in the cost of living will reduce or eliminate a
fund’s real inflation-adjusted returns.

Interest Rate Risk

36

The possibility that a bond fund will decline in value because of an
increase in interest rates

Market Risk
The possibility that stock fund or bond fund prices overall will decline over
short or even extended periods. Stock and bond markets tend to move in cycles,
with periods when prices rise and other periods when prices fall.

Challenges In Mutual Fund Industry

The challenges faced by Mutual Fund Industry are as follows-:

 The investor profile is changing and they are now becoming more mature
and educated and also aware what’s happening in the markets. Investor
will invest in mutual fund if only they know where their money is going to
be invested and also the risk is low.
 Every year more and more players are entering into mutual fund market.
Currently there are 38 player and more than 600 schemes in the market.
So the mutual fund market itself has become competitive.
 Mutual Fund is a fast growing market and they are giving tough
competition to banks deposits and Insurance companies. So the industry
is expected to perform better and bring some new schemes in the market.
 The product offered by various AMC is almost same so the AMC are forced
to focus on services provided to the investors.
 The AMC has to strengthen their marketing department as competition
has increased.
 Direct dealing with investor rather through additional channel of brokers
will provide better advice and investment objective can be properly
communicated.

37

SEBI GUIDELINES FOR MUTUAL FUND

• Take necessary steps to ensure that the client’s interest is protected.

• Adhere SEBI Mutual fund regulation and guidelines related to selling,
distribution and advertising practices. Be fully conversant with the
key information of the offer document as well as operational
requirement of various schemes.

• Provide full and latest information of schemes to investor in form of
offer document, performance report, fact sheet, portfolio disclosure
and brochures and recommend schemes appropriate for the client
situation and need.

• Highlight the risk of every scheme and avoid misrepresentation and
urge investor to go to the offer document/key information before
deciding for the investment.

• Disclose all material information related to schemes.

• Abstain from indicating or assuring any fix return in any schemes,
unless the offer document is explicit in these regards.

• Maintain the necessary infrastructure to support the AMCs to
maintain high level of service standard to the investor.

38

• Avoid colluding with client in faulty business practice such as
bouncing of cheque, wrong claiming or redemption.

• Avoid commission driven malpractices.

• Avoid making any negative statement for any AMCs or schemes and
ensure that comparison is made with similar product.

• Ensure that all investor related statutory communications are send to
investor in time.

• Maintain confidentiality of all investor deal and transaction.

1.3) Unit Linked Insurance Plans (ULIP)

Unit linked insurance plan (ULIP) is life insurance solution that
provides for the benefits of protection and flexibility in investment. The
investment is denoted as units and is represented by the value that it has
attained called as Net Asset Value (NAV). The policy value at any time varies
according to the value of the underlying assets at the time.

ULIP provides multiple benefits to the consumer. The benefits include:
• Life protection
• Investment and Savings
• Flexibility
• Adjustable Life Cover
• Investment Options
• Transparency
• Options to take additional cover against
• Death due to accident
• Disability
• Critical Illness
• Surgeries

39

• Liquidity
• Tax planning

Unit-Linked Insurance Plans (ULIP)

Unit-linked insurance plans, ULIPs, are distinct from the more familiar
‘with profits’ policies sold for decades by the Life Insurance Corporation.’
With profits’ policies are called so because investment gains (profits) are
distributed to policyholders in the form of a bonus announced every year.

ULIPs also serve the same function of providing insurance
Protection against death and provision of long-term savings, but they are
structured differently. In ‘with profits’ policies, the insurance company
credits the premium to a common pool called the ‘life fund,’ after setting
aside funds for the risk premium on life insurance and management
expenses.

Every year, the insurer calculates how much has to be paid to
Settle death and maturity claims. The surplus in the life fund left after
meeting these liabilities is credited to policyholders’ accounts in the form of
a bonus.

In a ULIP too, the insurer deducts charges towards life insurance
(mortality charges), administration charges and fund management charges.
The rest of money invested in MF in Stocks or bonds.

The policyholder’s share in the fund is represented by the number of
units. The value of the unit is determined by the total value of all the
investments made by the fund divided by the number of units.

If the insurance company offers a range of funds, the insured can

40

direct the company to invest in the fund of his choice. Insurers usually offer
three choices — an equity (growth) fund, balanced fund and a fund, which
invests in bonds. In both ‘with profits’ policies as well as unit-linked
policies, a large part of the first year premium goes towards paying
the agents’ commissions.

Which is better, unit-linked or ‘with profits’?

The two strong arguments in favor of unit-linked plans are that — the
investor knows exactly what is happening to his money and two; it allows
the investor to choose the assets into which he wants his funds invested.

A traditional ‘with profits,’ on the other hand, is a black box and a
policyholder has little knowledge of what is happening. An investor in a
ULIP knows how much he is paying towards mortality, management and
administration charges. He also knows where the insurance company has
invested the money. The investor gets exactly the same returns that the
fund earns, but he also bears the investment risk.

The transparency makes the product more competitive. So if you are
willing to bear the investment risks in order to generate a higher return on
your retirement funds, ULIPs are for you.
Traditional ‘with profits’ policies too invest in the market and generate the
same returns prevailing in the market. But here the insurance company
evens out returns to ensure that policyholders do not lose money in a bad
year. In that sense they are safer.

41

ULIPs also offer flexibility. For instance, a policyholder can ask the
insurance company to liquidate units in his account to meet the mortality
charges if he is unable to pay any premium installment. This eats into his
savings, but ensures that the policy will cover his life.

Are ULIPs similar to mutual funds?

In structure, yes; in objective, no. Because of the high first-year
charges, mutual funds are a better option if you have a five-year horizon.
But if you have a horizon of 10 years or more, then ULIPs have an edge. To
explain this further a ULIP has high first-year charges towards acquisition
(including agents’ commissions).

As a result, they find it difficult to outperform mutual funds in the
first five years. But in the long-term, ULIP managers have several
advantages over mutual fund managers. Since policyholder premiums come
at regular intervals, investments can be planned out more evenly. Mutual
fund managers cannot take a similar long-term view because they have bulk
investors who can move money in and out of schemes at short-notice.

5 steps to selecting the right ULIP

Here's a 5-step investment strategy that will guide investors in the
selection process and enable them to choose the right unit-linked insurance
plans (ULIPs). But before we get there, let's understand what ULIPs are all
about?

42

For the generation of insurance seekers who thrived on insurance
policies with assured returns issued by a single public sector enterprise,
unit-linked insurance plans are a revelation. Traditionally insurance
products have been associated with attractive returns coupled with tax
benefits. The returns part was often so compelling that insurance products
competed with investment products for a place in the investor's portfolio.

Perhaps insurance policies then were symbolic of the times when high
interest rates and the absence of a rational risk-return trade-off were the
norms.

The subsequent softening of interest rates introduced a degree a
much-needed rationality to insurance products like endowment plans;
attractive returns at low risk became a thing of the past. The same period
also coincided with an upturn in equity markets and the emergence of a
new breed of market-linked insurance products like ULIPs.

While in conventional insurance products the insurance component
takes precedence over the savings component, the opposite holds true for
ULIPs. More importantly ULIPs (powered by the presence of a large number
of variants) offer investors the opportunity to select a product which
matches their risk profile; for example an individual with a high risk
appetite can shun traditional endowment plans (which invest about 85% of
their funds in the debt instruments) in favor of a ULIP which invests its
entire corpus in equities.

In traditional insurance products, the sum assured is the corner
stone; in ULIPs premium payments is the key component. ULIPs are
remarkably alike to mutual funds in terms of their structure and
functioning; premium payments made are converted into units and a net
asset value (NAV) is declared for the same.

43

Investors have the choice of enhancing their insurance cover,
modifying premium payments and even opting for a distinct asset allocation
than the one they originally opted for.

Also if an unforeseen eventuality were to occur, in case of traditional
products, the sum assured is paid along with accumulated bonuses;
conversely in ULIPs, the insured is paid either the sum assured or corpus
amount whichever is higher.

Insurance seekers have never been exposed to this kind of flexibility
in traditional insurance products and it would be fair to say that ULIPs
represent the new face of insurance. While few would dispute the value-add
that ULIPs can provide to one's insurance portfolio and financial planning;
the same is not without its flipside.

For the uninitiated, understanding the functioning of ULIPs can be
quite a handful! The presence of what seem to be relatively higher expenses,
rigidly defined insurance and investment components and the impact of
markets on the corpus clearly make ULIPs a complex proposition.
Traditionally the insurance seeker's role was a passive one restricted to
making premium payments; ULIPs require greater participation from both
the insured and the insurance advisor. As is the case with most evolved
investment avenues, making informed decisions is the key if investors in
ULIPs wish to truly gain from their investments. The various aspects of
ULIPs dealt with in this publication will certainly further the ULIP investor's
cause.

How to select the right ULIP

44

Often the disappointment stemmed from poor and inappropriate
selection. We present a 5-step investment strategy that will guide investors
in the selection process and enable them to choose the right ULIP.

1. Understand the concept of ULIPs

Do as much homework as possible before investing in an ULIP. This
way you will be fully aware of what you are getting into and make an
informed decision. More importantly, it will ensure that you are not faced
with any unpleasant surprises at a later stage. Our experience suggests that
investors on most occasions fail to realize what they are getting into and
unscrupulous agents should get a lot of 'credit' for the same.

Gather information on ULIPs, the various options available and
understand their working. Read ULIP-related information available on
financial Web sites, newspapers and sales literature circulated by insurance
companies.

2. Focus on your need and risk profile

Identify a plan that is best suited for you (in terms of allocation of
money between equity and debt instruments). Your risk appetite should be
the deciding criterion in choosing the plan.

As a result if you have a high-risk appetite, then an aggressive
investment option with a higher equity component is likely to be more
suited. Similarly your existing investment portfolio and the equity-debt
allocation therein also need to be given due importance before selecting a
plan. Opting for a plan that is lop-sided in favor of equities, only with the
objective of clocking attractive returns can and does spell disaster in most
cases.

45

3. Compare ULIP products from various insurance companies

Compare products offered by various insurance companies on
parameters like expenses, premium payments and performance among
others. For example, information on premium payments will help you get a
better picture of the minimum outlay since ULIPs work on premium
payments as opposed to sum assured in the case of conventional insurance
products.

Compare the ULIPs' performance i.e. find out how the debt, equity
and balanced schemes are performing; also study the portfolios of various
plans. Expenses are a significant factor in ULIPs; hence an assessment on
this parameter is warranted as well.

Enquire about the top-up facility offered by ULIPs i.e. additional lump
sum investments, which can be made to enhance the policy's savings
portion. This option enables policyholders to increase the premium
amounts, thereby providing presenting an opportunity to gainfully invest
any surplus funds available.

Find out about the number of times you can make free switches (i.e.
change the asset allocation of your ULIP account) from one investment plan
to another. Some insurance companies offer multiple free switches every
year while others do so only after the completion of a stipulated period.

4. Go for an experienced insurance advisor

Select an advisor who is not only conversant with the functioning of
debt and equity markets, but also independent and unbiased. Ask for
references of clients he has serviced earlier and cross-check his service
standards. When your agent recommends a ULIP from a given company, put

46

forth some product-related questions to test him and also ask him why the
products from other insurers should not be considered.

Insurance advice at all times must be unbiased and independent; also
your agent must be willing to inform you about the pros and cons of buying
a particular plan. His job should not be restricted to doing paper work like
filling forms and delivering receipts; instead he should keep track of your
plan and offer you advice on a regular basis.

5. Does your ULIP offer a minimum guarantee?

In a market-linked product, protecting the investment's downside can
be a huge advantage. Find out if the ULIP you are considering offers a
minimum guarantee and what costs have to be borne for the same.

47

CHAPTER 2
RESEARCH METHODOLOGY

Research Problem:

As this survey is all about to know the market of ULIP. The firm will
come to know about the money invested in mutual funds, by this it can plan
accordingly. This survey will also measure the awareness of ULIP and
mutual funds; the firm can expand their “Fundz Partners” base by that. The
firm can increase their turnover by knowing the money invested through
ULIP in mutual fund. So I have conducted a research titled as “A survey on
market of ULIP among Life Insurance Advisors”

Research Objective:

Primary Objective:

 To know the market of ULIP among Life Insurance Advisors.

48

Secondary Objective:

 To know factors affecting choice of ULIP.
 To know the benefits of ULIP.
 To know about the different options preferred in ULIP by clients.
 To know whether Life Insurance Advisors are interested in MF or not.
 To know whether Life Insurance Advisors are aware about NJ India
Invest.
 To know the potential for Mutual Fund business in Gandhinagar.

Research Design:

The report uses Descriptive Research Design for the purpose of
survey, as it will enable to understand the characteristics of a particular
group of advisors and their tendency towards the selection of ULIP.

Sampling Method:

The report uses Non probability random sampling for data collection
purpose by survey.

Sample Size:

The sample size is 150 LIA to have better idea and representative ness
of the population being surveyed.

Research Instrument:

49

A detailed questionnaire shall be used for purpose of survey and it is
attached with this proposal.

Data analysis tool:

 For the greater validity of the results found it is better to use the
statistical software using computers i.e. SPSS (Statistical Package for
Social Science). I have used Frequency tables and Factor Analysis in
SPSS.
 I have also used Microsoft Excel for the data analysis.
CHAPTER 3
DATA ANALYSIS AND INTREPRETATION

1. Since how long you are working as a Life Insurance
Advisor?
Frequency Table:
Frequency Percent
Less Than 1 Year 6 4
1 to 3 Years 22 14.7
3 to 5 Years 34 22.7
5 to 10 Years 42 28
More Than 10 Years 46 30.7
Total 150 100

50

Graph:
Frequency

Less Than 1
Year, 6, 4%

More Than 10 1 to 3 Years, 22,
Years, 46, 30% 15% Less Than 1 Year
1 to 3 Years
3 to 5 Years
3 to 5 Years, 34, 5 to 10 Years
23% More Than 10 Years

5 to 10 Years, 42,
28%

Intrepretation:

In the above Pie Chart 30% of L.I. Advisors are having experience of more
than 10 years, 28% of L.I. Advisors having experience of 5 to 10 years, 23%
having experience between 3 to 5 years, 15 % are having experience
between 1 to 3 years and 4% are having experience of less than 1 year.
2. Please tick mark the name of firm(s) in which you are
advisor.
Frequency Table:

Life Ins. Life Ins. Life Ins. Life Ins. Life Ins. Life Ins.
Firm-LIC Firm-I Pru Firm-Kotak Firm-Bajaj Firm-Aviva Firm-Other

134 10 1 2 2 4

Graph:

51

Interpretation
In the above Bar Chart out of 150 advisors 134(89%) are working with LIC,
10(7%) with ICICI Prudential, 1 with Kotak, 2 with Bajaj, 2 with Aviva
and 4 with other advisory firms.

3. How many clients do you have?
Frequency Table:

Frequency Percent

1 to 25 7 4.7
26 to 50 8 5.3
Valid 51 to 100 24 16.0
101 or More 111 74.0
Total 150 100.0

52

Graph:

Frequency

1 to 25, 7, 5%
26 to 50, 8, 5%
51 to 100, 24,
16% 1 to 25
26 to 50
51 to 100
101 or More

101 or More, 111,
74%

Intrepretation:
In the above Pie Chart out of 150 advisors 111(74%) are having client base
of more than 101, 24(16%) are having 51 to 100 client base, 8(5%) are
having 26 to 50 client base and 7(5%) are having client base of 1 to 25.

4. How many of your clients are having ULIP?
Frequency Table:

Frequency Percent

53

1 to 10 31 20.7
11 to 30 62 41.3
31 to 50 29 19.3
Valid
51 to 70 14 9.3
71 or More 14 9.3
Total 150 100.0
Graph:

Frequency

14, 9%
31, 21%
14, 9%
1 to 10
11 to 30
31 to 50
29, 19% 51 to 70
71 or More

62, 42%

Interpretation:
Above Pie Chart shows the clients of ULIP scheme Out of total Client base.
From 150 advisors 62(42%) are having 11 to 30 clients, 31(21%) are
having 1 to 10 clients, 29(19%) are having 31 to 50 clients, 14(9%) are
having 51 to 70 clients and 14(9%) are having client base of more than
71.

5. What is the amount of assets under your management
under ULIP scheme?
Frequency Table:

Frequency Percent

54

1 to 100000 15 10.0
100001 to 300000 18 12.0
300001 to 500000 16 10.7
Valid
500001 to 1000000 37 24.7
More than 1000000 64 42.7
Total 150 100.0

Graph:

Frequency

1 to 100000, 15,
10%
100001 to 1 to 100000
More than
300000, 18, 12%
1000000, 64, 100001 to 300000
42% 300001 to 300001 to 500000
500000, 16, 11% 500001 to 1000000
More than 1000000

500001 to
1000000, 37,
25%

Intrepretation:

In the above Pie Chart out of 150 advisors 64(42%) have generated Assets
under Management (AUM) of more than 10 Lacs, 37(25%) have AUM
between 500001 to 1000000. 18(12%) have AUM between 100001 to

55

300000, 16(11%) have AUM between 300001 to 500000 and 15(10%) have
AUM up to 100000.

6. What are the factors, which affect the choice of ULIP?

Frequency Table:

Flexibilit Liquidit Tax Expenses Dual
Benefit Benefit
y y

56

Strongly
Disagre 7 1 3 6 3
e
Disagre
1 1 4 9 0
e
Neutral 18 13 7 29 3
Agree 58 67 75 83 21
Strongly
66 68 61 23 123
Agree
Total 150 150 150 150 150

Graph:

Factors affecting choice of ULIP
140 123
120 Strongly
No.of Respondents

100 Disagree
83 Disagree
75
80 66 67 68
58 61 Neutral
60
40 29 Agree
18 23 21
13
20 7
1 1 1 3 4 7 6 9 3 0 3 Strongly Agree
0
Flexibility Liquidity Tax Benefit Expences Dual Benefit
Factors

Intrepretation:

From the above graph, Dual Benefit is the most influencing factor
83 advisors believe that expenses charged are high. 50% respondents
believe that ULIP offers tax benefit, which attracts clients. Liquidity is good.

57

FACTOR ANALYSIS

KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .645
Approx. Chi-Square 88.910
Bartlett's Test of Sphericity df 10
Sig. .000

Here KMO Bartlett’s test has been done to know the validity of the
data. The test value is 0.645, which suggests that the data is able to run the
Factor Analysis.

Communalities

Initial Extraction

6.Flexibility 1.000 .619
6.Liquidity 1.000 .724
6.Tax Benefit 1.000 .309
6.Expenses 1.000 .690
6.Dual benefit 1.000 .708
Extraction Method: Principal Component Analysis.

58

Total Variance Explained
Extraction Sums of Rotation Sums of Squared
Initial Eigenvalues
Squared Loadings Loadings
% of Cumu- Cumu- % of
Comp- % of Cumu-
Total Vari- lative Total lative Total Vari-
onent Vari-ance lative %
ance % % ance
1 1.990 39.807 39.807 1.990 39.807 39.807 1.526 30.525 30.525
2 1.060 21.192 60.999 1.060 21.192 60.999 1.524 30.475 60.999
3 .840 16.801 77.800

4 .574 11.486 89.286

5 .536 10.714 100.000

From the above table we can say that out of the 5 factors affecting the
choice of ULIP, 2 factors are selected and it covers the total variance of 61%.
So we can say that these two factors have dominance over the other factors
while selecting ULIP scheme and because of these two factors people are
attracted to invest in ULIP.

Component Matrix (a)
Component
1 2
6.Flexibility .667 .416
6.Liquidity .596 .607
6.Tax Benefit .553 5.580E-02

59

6.Expenses .633 -.538
6.Dual benefit .695 -.475
a 2 components extracted.

Rotated Component Matrix (a)
Component
1 2
6.Flexibility .766 .177
6.Liquidity .851 -8.444E-03
6.Tax Benefit .431 .351
6.Expenses 6.778E-02 .828
6.Dual benefit .157 .827
Rotation Method: Varimax with Kaiser Normalization.
A Rotation converged in 3 iterations.

From the component matrix we cannot have exact picture of the
factors while selecting ULIP scheme. So we should go with the rotated
component matrix, in which the components are once again rotated.
From the rotated component matrix we can see that, the first
component includes Flexibility, Liquidity and Tax benefit. The second
component includes Expenses and Dual benefit.

60

7. Rank the benefits of ULIP to your clients?

Frequency Table:
B.Rank -
1 B.Rank-2 B.Rank-3 B.Rank-4 B.Rank-5
Flexibility 36 27 35 32 20
Liquidity 15 46 44 31 14

Tax Benefit
10 26 28 49 37

Long Term Horizon
9 22 22 30 67
Dual Benefit
80 29 21 8 12
Total 150 150 150 150 150

Graph:
Bebefit Ranking

90
80
No.of Respondents

80
67
70

60 Flexibility
49 Liquidity
50 46 44
37 Tax Benef it
40 36 35
3231 30 Long Term Horizon
27 29 28
30 26
22 2221 Dual Benef it
20
20 15 14
10 9 12
8
10

0
B.Rank - 1 B.Rank-2 B.Rank-3 B.Rank-4 B.Rank-5
Be ne fits

61

Intrepretation:

From the above Bar chart we can say that 80(53%) advisors have
given first rank to Dual Benefit, 46(31%) advisors have given second rank to
Liquidity, 35(23%) advisors have given third rank to Flexibility, and 49
(33%) advisors have given fourth rank to Tax Benefit and 67 (45%) advisor
have given fifth rank to Long Term Horizon.
8. Rank the Options that are most preferred by your clients.

Frequency Table:
O.Rank-1 O.Rank-2 O.Rank-3 O.Rank-4
Bond Option
1 14 20 115
Income Option
2 58 69 21
Balance Option
5 73 58 14
Growth Option
142 5 3 0
Total 150 150 150 150

Graph:

Ranking given to the Option by the Advisors

160
142
140
No.of Respondents

115
120

100 Bond Option

73 Income Option
80 69
58 58 Balance Option
60 Growth Option
40
20 21
20 14 14
1 2 5 5 3 0
0
O.Rank-1 O.Rank-2 O.Rank-3 O.Rank-4
Rank wise Options

62

Intrepretation:

In the above Bar Chart 142(95%) advisors have given First Priority to
Growth Option, 73(49%) advisors have given Second rank to Balance
Option, 69(46%) advisors have given Third rank to Income Option and
115(77%) advisors have given Fourth rank to Bond Option.(As preferred by
the ULIP Clients.)
9. Are you interested in Mutual Fund business?
Frequency Table:

Frequency Percent

Yes 93 62.0
Valid No 57 38.0
Total 150 100.0

Graph:

63

Frequency

No, 57, 38%

Yes
No

Yes, 93, 62%

Interpretation:
In the above Pie Chart 93(62%) advisors are interested in the business of
Mutual Fund and 57(38%) advisors are not interested in Mutual Fund
Business.

10. Are you aware about NJ India Invest Pvt. Ltd?
Frequency Table:

Frequency Percent

Yes 10 6.7
Valid No 140 93.3
Total 150 100.0

Graph:

64

Frequency

Yes, 10, 7%

Yes
No

No, 140, 93%

Intrepretation:
Above Pie Chart indicates that 140(93%) advisors are not aware about NJ
India Invest, only 10(7%) are aware of NJ India Invest.

11. Gender
Frequency Table:

Frequency Percent
Male 121 80.7
Female 29 19.3
Valid Total 150 100

Graph:

65

Frequency

Female, 29, 19%

Male
Female

Male, 121, 81%

Intrepretation:

In the above Pie Chart out of 150 Advisors 121(81%) are Male and 29(19%)
are Female Advisors.

12. Occupation

Frequency Table:

Business Service Profession Others
22 6 120 2

Graph:

66

Business, 22,
Others, 2, 1%
15%

service, 6, 4%
Business
service
Profession
Others

Profession, 120,
80%

Interpretation:
In the above Pie Chart 80% are Professionals, 15% are Businessmen.

13. Annual Income

Frequency Table:

Frequency Percent

Less than 50000 33 22
50001 to 150000 73 48.7
150001 to 250000 33 22
250001 to 350000 6 4
More than 500000 5 3.3
Total
150 100

67

Graph:

Annual Income of Advisors

80 73
No.of Respondents

70
60
48.7
50
Frequency
40 33 33
Percent
30 22 22
20
10 6 4 5 3.3
0
Less than 50001 to 150001 to 250001 to More than
50000 150000 250000 350000 500000
Annual Income

Intrepretation:

In the above Bar Chart 73(49%) advisors earning between 50001 to 15000,
33(22%) advisors earning between 150001 to 250000, 33(22%) advisors
earning less than 50000, 6(4%) advisors earning between 250001 to 350000
and 5(4%) advisors earning More than 500000.

CHAPTER 4
FINDINGS

 Most of the life insurance advisors are experienced.
 Most of the life insurance advisors are working with the LIC.
 Most of the life insurance advisors have good client base.
 ULIP Scheme clients are less in the total proportion of clients.
 Most of the life insurance advisors have Assets Under Management
more than 7 lacs.

68

 Most of the life insurance advisors are believes that Fund
management charges are high in ULIP.
 Most of the life insurance advisors are believe that Dual Benefit that
is insurance and investment is the most influencing factor while
selecting ULIP.
 Most of the life insurance advisors are believes that Dual Benefit,
Liquidity and Flexibility are the benefits offered by ULIP.
 Most of the life insurance advisors believe that Growth Option and
Balance Option are preferred by ULIP clients.
 Most of the life insurance advisors are interested in starting Mutual
Fund business.
 Majority of the Life Insurance Advisors are Not Aware about NJ India
Invest Pvt. Ltd.
 Most of the life insurance advisors are Professionals.

CHAPTER 5
CONCLUSION

 Dual Benefit- that is Insurance and Investment is the unique
benefit over other traditional insurance schemes.
 Fund management charges are high as compared to other
insurance schemes.

69

 There is good amount of Liquidity in ULIP because its investment
portion is in Mutual Fund Units, which is on daily net asset value
basis.
 Clients of ULIP prefer Growth option in order to achieve capital
appreciation advantage.
 There is a good potential for Mutual Fund business in
Gandhinagar. The company needs to grab opportunity and they
can start their franchise in Gandhinagar.

CHAPTER 6
RECOMMENDATIONS

 For NJ India Invest:
► Many Life Insurance advisors want to do Mutual Fund Business,
and the awareness level of NJ India Invest is very less among

70

them. So the company should start the franchise in Gandhinagar
and increase their Fundz Partner base.
 For the investors:
If someone wants more return on their investment than he
should go for Mutual Funds. But if someone wants Life Insurance
with good return on their investment than he should go for ULIP.

From the Expenses point of view Mutual Fund is more cost
savvy in nature. Because in ULIP the Fund Management Charges are
as high as from 25% to 35-40%, in Mutual Fund it is ranging from
0.5% to 2.50% only of the investment amount. So one should
obviously go with Mutual Funds.

CHAPTER 7
BIBLIOGRAPHY

► www.njfundz.com
► www.licindia.com

71

► www.amfiindia.com
► D.C.Anjaria, AMFI Mutual Fund Testing Program for Distributors and
Employees of Mutual Fund in India, Third Edition, May 2006.
► Donald Cooper and Pamela Schindler, Business Research Methods,
Eighth Edition, Tata Macgrow Hill Publishing Company Limited.

CHAPTER 8
APPENDIX

Questionnaire:

1) Since how long you are working as a Life Insurance Advisor?

72

- Less than one year
- 1 to 3 years
- 3 to 5 years
- 5 to 10 years
- More than 10 years
2) Please tick mark the name of firm(s) in which
You are advisor?
- LIC
-ICICI Prudential
-Kotak Mahindra
-Bajaj Allianz
-Aviva Life Insurance
- Others (please specify)
3) How many clients do you have?
- 1 to 25
- 26 to 50
- 51 to 100
- 101 or more
4) How many of your clients are having ULIP?
- 1 to 10
- 11 to 30
- 31 to 50
- 50 to 70
- 71 or more

5) What is the amount of assets under your management under ULIP
Scheme? (In Rs.)
- 1 to 100000
- 100001 to 300000
- 300001 to 500000
- 500001 to 1000000

73

- 1000001 or more

6) What are the factors which affect the choice of ULIP?

Strongly Strongly
Variables Disagree Neutral Agree
Disagree Agree
Flexibility
Liquidity
Tax Benefit
Expenses
Dual
Benefit

7) Rank the Benefits of ULIP to your Clients.
- Flexibility
- Liquidity
- Tax benefit
- Long term horizon
- Dual Benefit (Investment option with Insurance)
8) Rank the options that are most preferred by your clients.
- Bond Option
- Income Option
- Balance Option
- Growth Option
9) Are you interested in Mutual Fund Business?
- Yes
- No
10) Are you aware about NJ India Invest Pvt. Ltd?
- Yes
- No

Personal Information:

74

Name : __________ Address: ____________________________
Contact No: ___________
Occupation:
- Business
- Service
- Profession
- Other (Specify) __________

Income (Rs. Per Annum):
- Less than 50000
- 50001 to 150000
- 150001 to 250000
- 250001 to 350000
- 350001 to 500000
- 500001 or More.

Thank you for giving me your valuable information and time.

75

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