Research work on k30 scheme

__________________________________Mutual fund market and kotak scheme analysis
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A
PROJECT REPORT
ON
MUTUAL FUND MARKET
AND RESEARCH WORK ON KOTAK K30 SCHEME
FOR
R.H.KOTHARI INDUSTRY LTD.
SUBMITTED TO UNIVERSITY OF PUNE IN PARTIAL
FULFILLMENT OF 2 YEAR FULL TIMECOURSE MASTER
IN BUSINESS ADMINISTRATION (M.B.A. UNIV.)
SUBMITTED BY
AKHIL TRIVEDI
M.B.A. II
(BATCH 2005-2007)
VISHWAKARMA INSTITUTE OF MANAGEMENT
(PUNE)

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1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. WHAT IS MUTUAL FUND AND EXPLANATION IN DETAILS
4. TYPES OF MUTUAL FUNDS SCHEMES
5. BASIC FUNDAMENTAL OF MUTUAL FUNDS
6. A PERSONAL INVESTMENT PLAN
7. SURVEY ANALYSIS
8. MARKETING PLAN
9. MARKETING STRATEGIES
10. MARKET TRENDS
11. FUTURE SCENARIO
12. RESEARCH METHODOLOGY
13. CONCLUSION
14. RECOMMENDATION
15. BIBLOGRAPHY
EXECUTIVE SUMMARY
Mutual Funds have gained popularity as an investment vehicle over the past two years. Though

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technically, must have been in India since 1964 through Unit Trust of India , the industry has only
recently after new private sector funds and funds backed by global investment houses set up shop in
India.
Mutual Funds have often been associated with equitystock markets. While that is industry, the debt or
fixed income side has also gained prominence in the recent past. In fact, now mutual funds offer
instruments! schemes for all types of investors from -the risk averse to high risk takers.
The project lays a great stress on investor education. The primary objective is to explain in clear and
simple language, the benefits and pitfalls of investing in mutual funds. There is a gap in the market
about quality information on Mutual Funds. Most of the information is either inadequate or biased
towards a particular scheme/fund or a particular category. This project attempts to look at the subject
from the point of view of an ordinary investor who has little time or inclination to get into the technical
details of Mutual Funds.
The first portion of the project explains the basics of a Mutual Fund including the history and evolution
of the history. Then it highlights the types of Mutual Funds and the recent trends in the industry. A
section follows this on how to choose the right fund for you which covers all things one should look at
before investing in a fund.
The chapter on ranking of mutual funds is aimed at selecting the star performers amongst the 590 or
more schemes available in the market.
The second portion deals with doubts and questions that arise in investors' mind about Mutual Funds.
The FAQs cover questions with explanatory answers to all possible queries.
INTRODUCTION
A GLOBALLY PROVEN INVESTMENT AVENUE
Worldwide, Mutual Fund or Unit Trust as it is referred to in some parts of the world, has a long and
successful history. The popularity of Mutual Funds has increased manifold in developed financial

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markets, like the United States. As at the end of March 2006, in the US alone there were 8,002 mutual
funds with total assets of over US$ 9.36 trillion (Rs.427Iakh crores).
In India, the mutual fund industry started with the setting up of the Unit Trust of India in 1964. Public
sector banks and financial institutions were allowed to establish mutual funds in 1987. Since 1993,
private sector and foreign institutions were permitted to set up mutual funds.
In February 2003, following the repeal of the Unit Trust of India Act 1963 the erstwhile UTI was
bifurcated into two separate entities viz. The Specified Undertaking of the Unit Trust of India,
representing broadly, the assets of US 64 scheme, assured returns and certain other schemes and UTI
Mutual Fund conforming to SEBI Mutual Fund Regulations.
As at the end of March 2006, there were 29 mutual funds, which managed assets of Rs. 2,31,862 crores (
US $ 52 Billion) under 592schemes. This fast growing industry is regulated by the Securities and
Exchange Board of India (SEBI).
THEORETICAL BACKGROUND
Financial markets are the backbone of any economic system. Indian economic growth is inevitable, but
stability and dynamism of the financial system is imperative to aid allocation of scarce capital across
crucial sectors of the economy. The Indian financial system had for long been dominated by government
sponsored financial institutions and . nationalized commercial banks. However, in recent years the
private sector has been showing steady progress in the areas of banking, asset management and other
financial services. Mutual Funds is one such financial institution, which has now become a favorable
investment option for the Indian investor.

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Equity Market
The current slide in the market is mostly due to profit booking at higher levels. Nothing has changed
fundamentally for the Indian economy. The Indian economy appears to be entering into a higher
trajectory of growth. Due to some concerns over interest rates in domestic market and increased interest
rates in US, stock market has seen correction in the last few days of October-2005. FIIs were sellers in
Indian stock market. We expect this is a temporary phenomenon. The bull run is expected to continue in
coming days. Most of bluechip stocks have corrected very well and now available at better rates from
which we can see decent upside. Investors should use this correction phase for building investment
portfolio. While growth has averaged 5-6% in the past, the reforms initiated in the last few years have
improved the business environment and the Indian economy is expected to be amongst the top 5
economies over the next 20 years. The latest economic data has reinforced our view that capital
formation is on the rise and the manufacturing sector could start witnessing capacity additions in the
future as demand picks up. Overall, the economic fundamentals are strong with various drivers such as
infrastructure spending, retail lending, positive demographics, outsourcing opportunities and a potential
capex recovery, in place. One of India's key advantages is that it does not rely excessively
on external demand as a source of growth. As a result, India has much better balance in its growth model
than the rest of the region - giving it a built-in macro resilience that other Asian economies lack.
With Sensex at 8500, many would wonder, are there any worthwhile investment opportunities. It is easy
to give reasons in retrospection suggesting the index growth from 6100 in May 2005 to 8500 in
September 2005. Although majority of the market is abuzz on the huge foreign institutional inflows
(FIIs have pumped in US$9bn up to September 2005 as against US$8.5bn in 2004), these have been
attracted by the strong historical performance and expectation of good corporate earnings growth over
the next few years. The long-term structural story remains intact. We expect India to post a consistent
GDP growth of 6.5-7% over the next few years, which would continue to attract foreign investor
attention.

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The direction of the equity markets over the medium to long term looking very positive. Economic
growth is expected to improve demand for goods and services across sectors and this should lead to
better profit growth for the corporate sector. Global investors are positive on emerging markets in
general and India in particular given the superior growth of these economies vis-à-vis the developed
economies over the next few decades. And given the low equity ownership amongst Indian households
continues to be very low, this trend seems to be changing on the back of the buoyancy in the stock
markets and declining returns from traditional savings avenues, combined with various tax reforms
undertaken by the government. If the proposed pension reforms are implemented, it should give a
further fillip to the domestic markets over the long term.
So the moot question remains, where do we invest our money? The major Indian index namely Sensex is
currently trading at around 17.8x its historical earnings and an expected one year forward earnings
multiple of around 15.5x. This compares India at par with most of the emerging market indices. At the
current levels we feel four major factors would affect the market movement. Firstly corporate earnings,
secondly FII inflows, thirdly rising interest rates and finally rising crude oil price impact on the
economy. While crude prices have not impacted the market sentiment, which could be because of
the balance sheet strength gained by companies over the last few years through good financial
performance, the same could dent going forward. However, we expect the companies with relatively
stronger balance sheets to help sustain the high crude price impact.
WHAT IS A MUTUALFUND?
A Mutual Fund is a trust that pools the savings of a Number of investors who share a common financial
Goal. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual
Funds.
These investors buy units of a particular Mutual Fund Scheme that has a defined investment objective
and Strategy.
The money thus collected is then invested by the fund manager in different types of securities. These
could range from shares to debentures to money market instruments, depending upon the scheme's stated

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objectives. The income earned through these investments and the capital appreciation realised by the
scheme are shared by its unit holders in proportion to the number of units owned by them.
Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to
invest in a diversified, professionally managed basket of securities at a relatively low cost.
Mutual funds are open-ended investment funds, meaning that new investors can contribute money to
the fund at any time, and existing investors can return their units or shares to the fund for redemption at
any time. When you redeem your units or shares of a mutual fund you will receive a cheque based on
the current market value of the fund s portfolio.
Growth of Assets(Rs.In Crores)
0
50000
100000
150000
200000
250000
1 2 3 4 5 6
Assets

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Number of Schemes
1980
1990
2000
2010
1 2 3 4 5 6
Schemes
Several parties are involved in the organization and Operation of a mutual fund, including:
Mutual Fund Manager: Establishes one or more mutual funds, markets them and oversees their
general administration.
Portfolio Adviser: The professional money manager appointed by the Mutual Fund Manager to direct
the fund s investments. The Mutual Fund Manager also often acts as the Portfolio Adviser.
Principal Distributor: Coordinates the sale of the fund to investors, either directly or through a
network of registered dealers.

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Custodian: The bank or trust company appointed by the Mutual Fund Manager to hold all of the
securities owned by the fund.
Transfer Agent and Registrar: The group responsible for maintaining a list of all investors in the
fund.
Auditor: The independent accountants retained by the Mutual Fund Manager to audit each year, and
report on the financial statements of the fund.
Trustee: The entity that has title to the securities owned by the fund (when the fund is organized as a
trust, instead of as a corporation) on behalf of the unitholder.

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TYPES OF MUTUAL FUND SCHEMES
There are a wide variety of Mutual Fund schemes that cater to your needs, whatever your age, financial
position, risk tolerance and return expectations. Whether as the foundation of your investment
programme or as a supplement, Mutual Fund schemes can help you meet your financial goals.
(AI) By Structure
Open-Ended Schemes
These do not have a fixed maturity. You deal directly with the Mutual Fund for your investments and
redemptions. The key feature is liquidity. You can conveniently buy and sell your units at Net Asset
Value ("NAV") related prices.
Close-Ended Schemes
Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called close-ended
schemes. You can invest directly in the scheme at the time of the initial issue and thereafter you can buy
or sell the units of the scheme on the stock exchanges where they are listed. The market price at the
stock exchange could vary from the scheme's NAV on account of demand and supply situation, Unit
holders' expectations and other market factors.
One of the characteristics of the close-ended schemes is that they are generally traded at a discount to
NAV but closer to maturity, the discount narrows. Some close-ended schemes give you an additional
option of selling your units directly to the Mutual Fund through periodic repurchase at NAV related
prices. SEBI Regulations ensure that at least one of the two exit routes are provided to the investor.
Interval Schemes

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These 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 predetermined intervals at NAV related prices.
(B) By Investment Objective
Growth Schemes
Aim to provide capital appreciation over the medium to long term. These schemes normally invest a
majority of their funds in equities and are willing to bear short-term decline in value for possible future
appreciation. These schemes are not for investors seeking regular income or needing their money back
in the short term.
Income Schemes
Aim to provide regular and steady income to investors. These schemes generally invest in fixed income
securities such as bonds and corporate debentures.
Capital appreciation in such schemes may be limited.
Ideal for
Retired people and others with a need for capital Stability and regular income
Investor who need some income to supplement their earnings.
Balanced Schemes
Aim to provide both growth and income by periodically distributing a part of the income and capital
gains they earn. They invest in both shares and fixed income securities in the proportion indicated in
their offer documents. In a rising stock market the NAV of these schemes may not normally keep pace,
or fall equally when the market falls.
Ideal for:
Investors looking for a combination of income and moderate growth.

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Money Market/Liquid Schemes
Aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally
invest in safer, short-term instruments such as treasury bills, certificates of deposit, commercial paper
and inter bank call money. Returns on these schemes may fluctuate, depending upon the interest rates
prevailing in the market.
Ideal for:
corporate and individual investors as a means to park their surplus funds for short periods or
awaiting a more favorable investment alternative.
Other Schemes
Tax Saving Schemes
These schemes offer tax rebates to the investors under tax laws as prescribed from time to time. This is
made possible because the Government offers tax incentives for investment in specified avenues.
For example, Equity Linked Savings Schemes (ELSS) and Pension Schemes. The details of such tax
saving schemes are provided in the relevant offer documents.
Ideal for:
Investors seeking tax rebates.
Special Schemes
This category includes index schemes that attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50, or industry specific schemes (which invest in specific industries)
or sectoral schemes (which invest exclusively in segments such as A Group shares or initial public
offerings).

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Index fund schemes are ideal for investors who are satisfied with a return approximately equal to that of
an index.
Sectoral fund schemes are ideal for investors who have already decided to invest in a particular sector or
segment. Keep in mind that anyone scheme may not meet all your requirements for all time. You need to
place your money judiciously in different schemes to be able to get the combination of growth, income
and stability that is right for you. Remember, as always, higher the return you seek higher the risk you
should be prepared to take.
A few frequently used terms are explained here below:
Net Asset Value ("NAV")
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the
net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This
is also called Bid Price.
Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their
units on maturity. Such prices are NAV related.
Sales Load
Is a charge collected by a scheme when it sells the units. Also called , 'Front-end' load. Schemes that do
not charge a load are called 'No Load' schemes.

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Repurchase or 'Back-end' Load
Is a charge collected by a scheme when it buys back the units from the unit holders.
BASIC FUNDAMENTALS OF MUTUAL FUND
WHY SHOULD YOU INVEST IN MUTUAL FUNDS?
The advantages of investing in a Mutual Fund are:
1. Professional Management: You avail of the services of experienced and skilled professionals who are
backed by a dedicated investment research team which analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.
2. Diversification: Mutual Funds invest in a number of companies across a broad 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 achieve this diversification through a Mutual Fund with far
less money than you can do on your own.
3. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you avoid
many problems such as bad deliveries, delayed payments and unnecessary follow up with brokers and
companies. Mutual Funds save your time and make investing easy and convenient.
4. 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.

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5. Low Costs: Mutual Funds 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.
6. Liquidity: In open-ended schemes, you can get your money back promptly at net asset value related
prices from the Mutual Fund itself. With close-ended schemes, you can sell your units on a stock
exchange at the prevailing market price or avail of the facility of
direct repurchase at NAV related prices which some close-ended and interval schemes offer you
periodically. '
7. Transparency: 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.
8. 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.
9. Choice of Schemes: Mutual Funds offer a family of schemes to suit your varying needs over a
lifetime.
10. Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions
of strict regulations designed to protect the interests of 'investors. The operations of Mutual Funds are
regularly monitored by SEBI.
UNDERSTANDINGAND MANAGING RISK
All investments whether in shares, debentures or deposits involve risk: share value may go down
depending upon the performance of the company, the industry, state of capital markets and the
economy; generally, however, longer the term, lesser the risk; companies may default in payment of
interest/ principal on their debentures/bonds/deposits; the rate of interest on an investment may fall short

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of the rate of inflation reducing the purchasing power. While risk cannot be eliminated, skillful
management can minimize risk. Mutual Funds help to reduce risk through diversification and
professional management. The experience and expertise of Mutual Fund managers in selecting
fundamentally sound securities and timing their purchases and sales, help them to build a diversified
portfolio that minimizes risk and maximizes returns.
HOW TO INVEST IN MUTUAL FUNDS.
Step One - Identify your investment needs. Your financial goals will vary, based on your age, lifestyle,
financial independence, family commitments, level of income and expenses among many other factors.
Therefore, the first step is to assess your needs.
Begin by asking yourself these questions:
l. What are my investment objectives and needs?
Probable Answers: I need regular income or need to buy a home or finance a wedding or educate my
children or a combination of all these needs.
2.How much risk am I willing to take?
Probable Answers: I can only take a minimum amount of risk or I am willing to accept the fact that my
investment value may fluctuate or that there may be a short-term loss in order to achieve a long-term
potential gain.
3. What are my cash flow requirements?
Probable Answers: I need a regular cash flow or I need a lump sum amount to meet a specific need after
a certain period or I don't require a current cash flow but I want to build my assets for the future. By
going through such an exercise, you will know what you want out of your investment and can set the
foundation for a sound Mutual Fund investment strategy.
Step Two - Choose the right Mutual Fund.

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Once you have a clear strategy in mind, you now have to choose which Mutual Fund and scheme you
want to invest in. The offer document of the scheme tells you its objectives and provides supplementary
details like the track record of other schemes managed by the same Fund Manager. Some factors to
evaluate before choosing a particular Mutual Fund are:
the track record of performance over the last few years in relation to the appropriate yardstick
and similar funds in the same category.
how well the Mutual Fund is organised to provide efficient, prompt and personalized service.
degree of transparency as reflected in frequency and quality of their communications.
Step Three - Select the ideal mix of Schemes. Investing in just one Mutual Fund scheme may not meet
all your investment needs. You may consider investing in a combination of schemes to achieve your
specific goals.
The following charts could prove useful in selecting a combination of schemes that satisfy your needs.
This plan may suit
Investor seeking Income & moderate growth.
Investor looking for growth & stability with moderate risk
Aggressive Plan
70%
15%
5%
10%
Growth Scheme
IncomeScheme
Money market Scheme
Balanced Scheme
Conservative Plan
10%
50%
30%
10%
Growth Scheme
IncomeScheme
Money market
Scheme
Balanced Scheme

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This plan may suit
Retired & other investor who needs to preserve capital & earn regular income
Step Four - Invest regularly
For most of ,the approach that works best is to invest a fixed amount at specific intervals, say every
month . By investing a fixed sum each month, you buy fewer units when the price is higher and more
units when the price is low, thus bringing down your average cost per unit. This is called rupee cost
averaging and is a disciplined investment strategy followed by investors all over the world. With many
open-ended schemes offering systematic investment plans, this regular investing habit is made easy for
you.
Step Five - Keep your taxes in mind
As per the current tax laws, Dividend/Income Distribution made by mutual funds is exempt from
Income Tax in the hands of investor. Further, there are other benefits available for investment in Mutual
Funds under the provisions of the prevailing tax laws. You may therefore consult your tax advisor or
Chartered Accountant for specific advice to achieve maximum tax efficiency by investing in Mutual
Funds
Step Six- Start early It is desirable to start investing early and stick to a regular investment plan. If you
start now, you will make more than if you wait and invest later. The power of compounding lets you
earn income on income and your money multiplies at a compounded rate of return.
Step Seven -The final step all you need to do now is to get in touch with a Mutual Fund or your
agent/broker and start investing. Reap the rewards in the years to come. Mutual Funds are suitable for
every kind of investor-whether starting a career or retiring, conservative or risk taking , growth oriented
or income seeking.

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YOUR RIGHTS AS A MUTUAL FUND UNITHOLDER
As a unitholder in a Mutual Fund scheme coming Under the SEBI (Mutual Funds) Regulations, you are
entitled to:
1. Receive unit certificates or statements of accounts Confirming your title within 30 days from the date
of closure of the subscription under open-end schemes or within 6 weeks from the date your request for
a unit certificate is received by the Mutual Fund.
2. Receive information about the investment policies, investment objectives, financial position and
general affairs of the scheme.
3. Receive dividend within 30 days of their declaration and receive the redemption or repurchase
proceeds within 10 days from the date of redemption or repurchase.
4. Vote in accordance with the Regulations to
a change the Asset Management Company;
b. wind up the schemes.
5. To receive communication from the Trustee about change in the fundamental attributes of any scheme
or any other changes which would modify the scheme and affect the interest of the unit holders and to
have option to exit at prevailing Net Asset Value without any exit load in such cases.
6. Inspect the documents of the Mutual Funds specified in the scheme's offer document.
In addition to your rights, you can expect the Following from mutual fund. To publish their NAV , in
accordance with the regulations daily in case of open-ended schemes and once a week, in case of close-
ended schemes. To disclose your schemes' entire portfolio twice a year, unaudited financial results half
yearly and audited annual accounts once a year. In addition many mutual funds send out newsletters
periodically. To adhere to a Code of Ethics which require that investment decisions are taken in the best
interests of the unit holders.

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What are the potential advantages of investing in mutual funds?
There are many reasons why people invest in mutual funds:
Diversification: Investing in a number of different securities helps reduce the risk of investing. When
you buy a mutual fund, you are buying an interest in a portfolio of dozens of different securities, giving
you instant diversification, at least within the type of securities held in the fund.
Affordability: With many mutual funds, you can begin buying units with a relatively small amount of
money(e.g., Rs 5000 for the initial purchase). Some mutual funds also let you buy more units on a
regular basis with even smaller installments (e.g., Rs 500 per month).
Professional Management: Mutual funds are managed by professionals who are experienced in
investing money and who have the skills and resources tore search many different investment
opportunities.
Liquidity: Units or shares of mutual funds can be redeemed at any time.
Flexibility: Many mutual fund companies administer several different mutual funds (e.g., money
market ,fixed-income, growth, balanced and international funds) and allow you to switch between funds
within their fund family at little or no charge. This can enable you to change the balance of your
portfolio as your personal needs or market conditions change.
Performance Monitoring: The value of most mutual funds is reported daily in the financial press and
on many internet sites, allowing you to continually monitor the performance of your investment.
What are some of the potential disadvantages?
When you invest in a mutual fund you place your money in the hands of a professional manager. The
return on your investment will depend heavily on that manager s skill and judgement. Even the best

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portfolio advisers are wrongs one times, and studies have shown that few portfolio advisers are able to
consistently out-perform the market. Check the fund manager s track record over a period of time when
choosing a fund.
As a mutual fund investor, you will also be paying, through management expenses and commissions, for
management services and for various administrative and sales costs. Those fees and commissions reduce
the return on your investment and are charged, in almost all cases, whether the fund performs well or
not. Sales commissions and redemption fees can have a very significant impact on your return if you
decide to redeem your mutual fund investment in the short-term.
How will I know if mutual funds are right for me?
For most investors, choosing a qualified financial adviser is an important first step in any investment
program With the help of your financial adviser(s), you ll want to establish your investment goals,
assess your risk tolerance, and develop a personal investment strategy. Ask your financial adviser if
mutual funds are an appropriate investment for you. Discuss what type of fund best matches your
personal investment strategy, then ask for some specific suggestions.
Once you have identified some funds that seem to meet your investment needs, read the prospectus and
financial statements for each one.
Consider:
Investment Objectives: Are the fund s investment objectives consistent with your own? Can the fund
provide the level of regular income you need? Does it provide the type of diversification you re looking
for? If you have other investments, how will this fund affect the overall balance of your portfolio?
Risk: Are you comfortable with the level of risk associated with the fund? If you have other
investments, would this fund tend to increase or decrease your overall risk exposure? Unlike GICs or
savings accounts, mutual funds are not covered by deposit insurance. Values of most mutual funds will
fluctuate and you can lose money depending on changes in the marketplace.

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Time Horizons: Does the investment fit with your expected investment time horizon? For example, if
you re investing for a relatively short time, will sales charges and redemption fees offset any possible
gains? Might the value of the fund be down just when you need to redeem your investment?
Expected Return: Does the fund have the potential to provide the returns you need to meet your goals?
Remember, predicting the return of any mutual fund requires that you predict the future something that
can never be done with certainty. Past performance will tell you about the fund s historical volatility and
its performance relative to competing funds, but it is not are liable indicator of future performance. The
return you can expect from a mutual fund is closely related to its risk. The lower the risk of the fund, the
lower the return you should expect. Be realistic in your expectations.
Costs: Fees and commissions associated with mutual funds will affect your overall return and can
vary widely from one fund to the next. Higher fees and commissions do not necessarily mean better
performance. Check and compare fees and commissions before you invest.
Service Provider: Do you know something about the mutual fund firm offering the mutual funds for
sale? Consider who operates the mutual fund and who provides the services necessary for its operations.
You ll also want to look at the performance history of the fund manager who selects the securities to be
held in the fund.
Flexibility: Will you be entitled to switch your investment to other funds in the same fund family ?
Can you afford the minimum initial investment? Does the fund offer other
features such as regular monthly purchase plans or redemption plans that are attractive to you?
Tax Considerations: Is the mutual fund a qualifying investment for your RRSP, Registered
Retirement Income Fund (RRIF) or other registered plan? If you are investing in the fund outside a
registered plan, do you understand the tax implications of the distributions of income or capital gains
that the fund may make to you?
Who can sell mutual funds?

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Like other securities, mutual funds must be sold through dealers who are registered with the securities
regulator in your province or territory. The names of registered dealers in your area can be found in the
telephone book. Most financial institutions such as banks, credit unions and trust companies also
have subsidiaries that are registered to sell mutual funds. You will also be able to find information about
dealers and salespersons from your provincial securities regulator or its web site.
What should I expect from the salesperson when I buy a mutual fund?
You should expect your salesperson:
to deal with you fairly, honestly and in good faith;
to discuss with you your general investment objectives and tolerance for risk;
to make recommendations that are consistent with your objectives and risk tolerance;
to disclose to you any significant conflicts of interest (the form of disclosure may vary depending
on the nature of the conflict);
to promptly deliver a disclosure document (simplified prospectus) and current financial
information for any mutual fund you buy;
to relay your purchase order to the fund on the day you place it, or on the next business day if the
order was given after normal business hours;
Research Methodology
Research Methodology is a systematic method of discovering new facts or verifying old facts, their
sequence, inter-relationship, casual explanation and the natural laws which governs them.
Research Methodology explained by Redman and Mory are as follows systematized effort to gain new
knowledge Research Methodology is original contribution to the existing stock of knowledge making
for its advancement. It is the purist of truth with the help of study. Observation, comparison and
experiment. In short also covers the systematic method of finding solution to a problem is research. It
also covers the systematic approach concerning generalization and the formulation of the theory.

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Different stages involved in research consists of enacting the problem, formulating a hypothesis,
collecting the facts or data, analyzing the facts and reaching certain conclusion either in the form of
solution towards the concerned problem or in generalization for some theoretical formulation.
In Research Methodology mainly Data plays an important role.
The Data is divided in two parts:
a) Primary Data.
b) Secondary Data.
Primary Data is the data, which is collected directly by direct personal interview,
interview, indirect oral investigation, Information received through local agents,
drafting a schedule, drafting a questionnaire.
Secondary Data is the data, which is collected from the various books, magazine and material, reports.
The data which is stored in the organization and provide by the FINANCE people are also secondary
data. The various information is taken out regarding that subject as well other subject from various
sources and stored. The last years data stored can also be secondary data. This data is kept for the
internal use of the organizatio
The FINANCE manual is for the internal use of the organization they are secondary data which help
people to gain information. In this report the data plays a very crucial role. For this report the data was
provided to me by FINANCE department and other departmental head in the organization.
The Primary and Secondary data which is specified above was provided by:
a) Dy- Manager - finance.
b) Other department head.
Due to discussion with these people lot data as well latest information was known by these people who
was very beneficial and was primary data to me. This is the Research Methodology used in the project.
The primary and secondary data method has been used in this project. Unless the data is collected no
project can be complete. So both these data is very important in the project.

25
SURVEY ANALYSIS
OBJECTIVES
I conducted a survey to assess the popularity and awareness among people about the, mutual funds. For
the purpose we chose a random sample of 50 end consumers in the city of Mumbai. The methodology
adopted was that of questionnaire. The question addressed the basic questions relating to investment in
mutual Funds like the rationale of investment
Sampling Method
The sampling method so as to obtain a representative sample is the Non- Probability Sampling methods.
Under non-probability sampling, we selected the respondents to the survey on the basis of Judgment
sampling with Convenience taken into account.
Research instrument

26
The research instrument used for this survey is a structured questionnaire. The questionnaire contains
both open-ended and close ended questions. The questionnaire provides a provision with respect to
rating scales.
Assumptions
The sample selected represents the population fully.
The data has been collected by administering an open and close ended questionnaire to sample of
end investors with the assumption that the primary data collected is true and reflects the actual
preferences of the investors.
The sample selected has thorough knowledge of the subject.
Limitations of Study
The respondents who have not given any information are not included in the sample but do come
under the population.
Factors like change in tax and regulatory framework has not been considered.
Analysis Interpretation Of Data
Chart 1: Penetration of mutual funds among respondents.
Penetration of mutual funds among
respondents.
84%
16%
mutual funds
others
Out of the 60 respondents only 50 (84%) had invested in any kind of mutual fund scheme. This shows

27
that the penetration of mutual funds among the populace is still low in spite of the industry's presence in
India for more than 36 years. This reach is in a city like Mumbai which is considered the commercial
hub for the country; one can easily imagine the penetration level in other smaller cities/towns.
Chart 2: Age wise distribution of investment pattern
Age wise distribution of investment patterm
0
10
20
30
40
50
60
20-40 40-55 Above 55
Distribution
Age
Series1
As can be seen from the above charts that for the age group 20-40 the percentage is 50% percent which
shows that the popularity of mutual funds is at its peak among the people in the age group and is the
lowest for age group above 55. This pattern may be due to the fact that 40-55 the time frame when a
person has maximum responsibilities and may be unwilling to put money into schemes do not offer
assured returns or safety. 25-40 one has few responsibilities and can afford take higher risks. People
above 55 are either retired or nearing retirement so they might have some excess cash and hence they
too are willing to take some amount of risks.
Chart 3: Gender wise distribution of investment

28
Gender wise distribution of
investment.
72%
28%
male
female
In our sample of 60 respondents only 72% of the male respondents invested in mutual funds which is
more or less in line with over all proportion of people (73.33%).In India it is found that women are weak
in making decision where to invest the money. Women in India are found to keep there funds ideal
rather than invest some where.
Due to lack of knowledge & awareness women participants in investing is less compared to that of male.
In a survey only 28% women were found who are aware of mutual funds. Here in the survey, percentage
gap between male and female is too much more.
Chart 4: Distribution of income
income wise distribution
upto 1lakhs
52%
1-3 lakhs
28%
3-5lakhs
14%
above 5 lakhs
6%
upto 1lakhs
1-3 lakhs
3-5lakhs
above 5 lakhs

29
Mutual seem to have reached their peak in their reach among people in the income group 5 lakhs and
above as all 3 of the respondents in our sample falling in that income bracket have invested in mutual
funds. For incomes groups upto1 lakh & 1-3 lakhs the reach is penetration is more than 80% which is
acceptable. The only surprising trend is that for income group 3-5 lakhs the penetration seems to be only
14% wl improved immediately.
OBSERVATIONS:
Fixed deposits still have high values in the Indian economy as vehicles are concerned.
Number of people having mutual funds or Shares as first choice are( requires the mutual funds to
do a rethinking as shares are fraught wit than mutual funds still a large number of people prefer
to enter the rather than through mutual funds, this could mean that there is a mutual funds in
these individuals. It is these individuals that could for mutual funds and the need to pull
themselves up and gear up to attract these investors through better designed schemes, simplified
procedures.
One disturbing trend that has come out of this analysis is that 26 out of 60 respondents have
ranked government securities as the last choice even though these have sovereign guarantee and
are absolutely safe. This means Gilt funds have to be careful while designing their schemes as
the preference for government
securities is quite low. This low preference could be either due to filling interest
rates or due to the cumbersome procedures involved in acquisition, redemption of these
securities or due to lack of well developed secondary market for Gilts.
On second number is Public provident fund which has been ranked as number one by 12 and
number two by 24 which makes it a close second to fixed deposits,
Chart 5: Information source

30
print
46%
T.V
28%
newsletter
14%
friends
6%
others
6%
print
T.V
newsletter
friends
others
46% of the respondents came to know about mutual funds through the print media like newspapers and
magazines, hence it may be concluded that the print media is the most effective way of getting the
investors' attention towards the mutual funds. Second most popular medium turned out to be the
television .The potential of newsletters & friends as a medium of promotion doesn't seem to be have
utilized fully as the people who were influenced by television & print media even though it is one of the
major mass communication media.
Chart 6: Influencing factor

31
influencing factor
own choice
44%
friends
20%
proffesionals
30%
others
6%
own choice friends proffesionals others
As expected a person's own judgment and perception is the most prominent factor in the investment
decision. 30% of the respondents took a professionals device while another 26% were influenced by
friends experience or advice. Both these present an avenue for the mutual fund companies to influence
more and more investors and increase their depth in the market.
Chart 7: Investment rationale
Investment rationale
safety
40%
higher returns
26%
0%
liquidity
14%
appreciations
6%
tax benefits
14%
safety higher returns liquidity appreciations tax benefits
Safety seems to be the uppermost concern in people while taking investment decisions. Next important
factor that people look for while making an investment decision is the tax benefit. Safety and tax
benefits taken together influence more than 50% of the peoples investment decision.

32
There are only 26% who are interested in higher returns. Others are ready to invest but with secure
future. There investment carry less risk and more return.
Chart 8: Satisfaction with investment choices.
Satisfaction with investment choices
yes
60%
no
30%
cant say
10%
yes
no
cant say
Most of the people are satisfied with their investment choices while Asset Management companies can
'take advantage of and win them over 30% of the people are not happy with their investment decisions
which could be a potential avenue for mutual funds waiting to be tapped. Here there 10% people who
cant say anything about their satisfaction with their investment choice and in the survey 60% people are
found who have greater satisfaction in their investment choice this in because of their awareness of
mutual fund and other investment options.

33
Chart 9: Regulatory framework
Regulatory framework
0
10
20
30
40
50
60
yes no cant say
Series1
Around 48% of the people are not satisfied with the regulatory framework available for
mutual funds. The regulatory authorities need to take a serious view of this feeling among
the investors and take some concrete Steps for the direction of developing faith in the
regulatory system for Asset Management Companies (AMCs). Some of the suggestions
given by the respondents are:
RBI and SEBI guideline should be tightened.
Manipulations in the equity prices should be closely monitored. . The framework
should be more investor friendly.
Clear-cut guidelines. Accountability of the auditors /inspectors. . Disclosure
norms should be more stringent
Regulatory bodies should be more proactive rather than post active and reacting
after something goes wrong.
Each scheme should be treated as profit center and closely watched by experts

34
Chart 10: Popularity of various funds
After the analysis of what factors affect people's investment decision let us have a look at
how the various Mutual funds have fared for our sample group of small investors.
Popularity of various funds
17
22
15 16
18
12
0
5
10
15
20
25
Kotak
mahindra
UTI Sundram
finance
SBI Reliance DSP merill
lynch
Series1
It can be observe from the above chart that the popularity of the mutual funds Kotak is
much popular among others mutual fund. Even UTI also have popularity from various
fund. The main reason why UTI is much popular is duration from which plays in the
market. UTI was the first among mutual fund who has started its function in 1964.

35
MARKETING PIAN
A marketing plan for mutual fund services needs to stress the firm-product-customer
relationship. The following are the points for consideration
Product Design and Range
1. Mutual fund products (schemes) are basically investment-oriented and the savings
mobilized by them are invariably invested in. the instruments (shares, debentures)
projected in the schemes. There is little scope for flexibility.
2. Due care needs to be taken while designing particular products taking into account
expected changes in capital stock market in view of future investment return.
3. The changing profile of customers (investors) must be taken into account in identifying
savings market. Different segments of the potential savings market have afferent
expectations long-term growth, regular income tax benefits, and so on. New products
must be aimed at satisfying one or more objectives. Fax laws and other related
regulations also play an important role in designing a new product because benefits can
be offered to investors within the existing framework of tax regulations.
India lags behind countries like the USA, the UK and Japan in terms of innovative
products. Most of the products launched in India are either income or income-cum
growth schemes; few are pure growth schemes. Investor options have been restricted due
to limited product range. This has probably happened on account of lack of experience
and the risk-averse, conservative attitude of mutual fund management.
Like product planning, product launching is a crucial clement in marketing. Many Indian
mutual funds have performed poorly due to wrong, timing of launch. Market research can
help to assess the needs of potential customers, availability of existing products and
future growth in demand. Before formally launching a new product, test marketing can be
conducted.

36
Brand Policy
Brand name highlights the market segments, inherent benefits and investment objectives,
and ensures customers loyalty.
Brand identity is an important marketing factor because it facilitates product
identification at the market place. In India, most of the products are linked to the names
of the mutual funds. However, there are products not linked to the names of
organizations: the 'Dhan Series' is identified with LIC Mutual Fund, 'Master Series' with
UTI and "Magnum with SBI Mutual Funds. It can be said that Indian funds have been
quite successful in brand policy and brand identification.
Pricing Policy
The price of a service should he related to the achieving of marketing and organizational
goals. The price of mutual fund products in inextricably linked with returns.
Indian mutual funds follow the historic pricing structure. The schemes may (also) provide
for the price at which the units may be subscribed or sold to the independent participants
in the scheme and the prices at which such units may at any time be repurchase prices at
least once in a week. Mutual funds are also to ensure that the difference between the sale
and repurchase prices does not exceed 7 per cent of the sale price.
Cost
The costs of investing in mutual funds in India are not as high as in the US, the UK and
Japan. This is because SERI has strictly laid down the limits of various expenses.
According to SEBI regulations, the AMC can charge the mutual funds with investment,
management and advisory fees, which are fully disclosed in the prospectus. Accordingly,
the initial expenses under one scheme cannot be more that 6 per cent of the funds raised.
These expenses include:
Issue cost of sponsoring the fund and its scheme.
Recurring expenses, including -marketing, selling, agents' and brokers'
commissions, transaction costs, registrars' and transfer agents'(R&T) fees so on.
Incentives are often offered to investors for early payment.
Agents 'commission is paid out of the funds collected.

37
Distribution And Promotion Of Products
A new mutual fund product may have all the desired qualities but that does not ensure its
spontaneous acceptance by customers. Success would greatly depend on appropriate
market segments for the product, selection of appropriate distribution channels and
promotional aids are essential. The identification of market segments is crucial for the
promotion and distribution of products. Market segments are identified on the basis of
nature of the product, direct and indirect benefits of the product requirements of the
customers, product usage rule, Indian mutual funds still depend mostly on retailing, a
distinct change has been noted m marketing strategy .i.e. major market intermediaries are
agents appointed by respective mutual funds, brokers who are members of stock
exchange and arc registered with the mutual fund, institutional and corporate agents.
Public sector mutual funds like LIC MF and UTI have an edge over other due to their
well-established agency network. In order to tap the savings potential in rural India,
mutual funds are paying greater attention to rural marketing. UTI has taken specific steps
to promote units in rural areas
Customer Service
The marketing of services is significantly influenced by the quality of service and the
interpersonal relationship between customers and the service organization. Servicing has
great significance in the mutual fund industry. Prompt and timely service in using
certificate cheques and attending to any customer problems would make a distinct
difference. Expected rates of return being more or less the same for all the schemes; it is
the quality of service, which becomes the deciding factor.
In order to ensure quality service to customers, service audit would be of great help to
monitor the range of services usually rendered by mutual funds. These are sales related
complaint-related and suggestion-related services. Service standards can be fixed on the
basis of expectation levels of customers which can be found through market surveys.
It must be remembered that marketing is a dynamic process and aims not only at 'sale' but
also at 'resale' and an enduring relationship with customers.

38
MARKETING STRATEGIES ADOPTED BY THE MUTUAL FUNDS
The present marketing strategies of mutual funds can be divided into two main headings:
Direct marketing
Selling through intermediaries
Joint calls
DIRECT MARKETING
This constitutes 20 percent of the total sales of mutual funds. Some of the important tools
used in this type of selling are:
Personal Selling: In this case the customer support officer of the fund at a particular
branch takes appointment from the potential prospect. Once the appointment is fixed, the
branch officer also called Business Development Associate (BDA) in some funds then
meets the prospect and gives him all details about the various schemes being offered by
his fund. The conversion rate in this mode of selling is in between 30% -40%.
Telemarketing: In this ease the emphasis is to inform the people about the fund. The
names and phone numbers of the people are picked at random from telephone directory.
Sometimes people belonging to a particular profession are also contacted through 'phone
and are then informed about the fund. Generally the conversion rate in this form of
marketing is 15% - 20%.
Direct mail: This one of the most common method followed by all mutual funds.
Addresses of people are picked at random from telephone directory. The customer
support officer (CSO) then mails the literature of the schemes offered by the fund. The
follow up starts after 3-4 days of mailing the literature. The CSO calls on the people to
whom the literature was mailed. Answers their queries and is generally successful in
taking appointments with those people. It is then the job of BOA to try his best to convert
that prospect into a customer.

39
Advertisements in newspapers and macaws: The funds regularly advertise in business
newspapers and magazines besides in leading national dailies. The purpose is to keep
investors aware about the schemes offered by the fund and their performance.
Hoardings and Banners: In this case the hoardings and banners of the fund are put A
Important locations of the city where the movement of the people is very high. Generally
hoardings arc put near UTI offices in order to tap people who are at present Investing in
UTI schemes. The hoarding and banner generally contains information either about one
particular scheme or brief information about all schemes of fund.
Selling Through Intermediaries: Intermediaries contribute towards 80% of the total
sales of mutual funds. These are the people/distributors who are in direct touch with the
Investor They perform an important role in attracting new customers. Most of these
Intermediaries are also involved in selling shares and other investment instruments. They
do a commendable job in convincing investors to invest in mutual funds. A lot depends
on the after sale services offered by the intermediary to the customer. Customers prefer to
work with those intermediaries who give them right information about the fund and keep
them abreast with the latest changes taking place in the market especially if they have any
bearing on the fund in which they have invested.
Regular Meetings with distributors: Most of the, funds conduct monthly/bi-monthly
meetings with their distributors. The objective is to hear their complaints regarding
service aspects from funds side and other queries related to the market situation.
Sometimes, special training programmers are also conducted for the new agents/
distributors. Training involves giving details about the products of the fond, their present
performance in the market, what the competitors are doing and what they do to increase
the sales of the fund.
Joint Calls: This is generally done when the prospect seems to be a high net worth
investor. The BDA and the agent (who is located close to the HNI's residence or area of
operation) together visit the prospect and brief him about the fund. The conversion rate is
very high in this situation, generally, around 60%. Both the fund and the agent provide
even after sale services in this particular case.

40
MARKETING OF FUNDS: CHALLENGES AND OPPORTUNITIES
When we consider marketing, we have to see the issues in totality, because we cannot
judge an elephant by its trunk or by its tail but we have to see it in its totality. When we
say marketing of mutual funds, it means, includes and encompasses the following
aspects:
Assessing of investors needs and market research
Responding to investors needs;
Product designing;
Studying the macro environment;
Timing of the launch of the product
Choosing the distribution network;
Preparing offer documents and other literature
Getting feedback about sales;
Studying performance indicators about fund performance like N A V
Sending certificates in time and other after fia1es services
Honoring the commitments made for redemptions and repurchase
Paying dividends and other entitlements
Creating positive image about the fund and changing the nature of the market itself. The
above are the aspects of marketing of mutual funds, in totality. Even if there is a single
weak-link among the factors, which are mentioned above, no mutual fund can
successfully market its funds.

41
Some of the older public and private sector players will either close shop or be taken
over. Out often public sector players five will sell out, close down or merge with stronger
players in three to four years. In the private sector this trend has already started with two
mergers and one takeover. Here too some of them will down their shutters in the near
future to come.
The market will witness a flurry of new players entering the arena. There will be a large
number of offers from various asset management companies in the time to come. Some
big names like fidelity, Principal, Old Mutual etc. arc looking at Indian market seriously.
One important reason for it is that most major players already have presence here and
hence these big names would hardly like to get left behind.
BANKS MUTUAL FUNDS
Returns low better
Administration
expenses high low
Risks low moderate
Investment option less more
Network high penetration low but improving
Liquidity at cost better
Quality of assets not transparent transparent
Interest calculation minimum balance everyday
Guarantee none none

42
Inspired Marketing will help Mutual Funds walk away with the blank Deposits
Bankers better watch out The Indian mutual fund industry will soon start relieving the
banking system of its priced deposits. Innovative distribution, marketing and aggressive
concept selling will drive savings into the lap of the Indian Mutual Fund industry in the
next millennium, fond managers predicted at the Second Economic Times Roundtable on
mutual funds held last week. Fund chiefs predicted that ease of transactions, thanks to
technology and increased awareness, would lead to more investors putting their money
into mutual funds. The day was not far, they said, when small savings account too began
moving into mutual funds. Significantly, fund chiefs were unanimous that the credibility
gap, which the industry suffered for the past few years, did not exist any more. All the
fund chiefs were unanimous that performance, service and support were all imperative
for growth.
"Performance, transparency and after sales service and genuine retail investor interest as
opposed to hot corporate money, an important contributor to many mutual fund schemes,
will drive the industry growth. " Performance, transparency, after sales customer service
and genuine retail investor interest are opposed to hot corporate money, an important
contributor to many mutual fund schemes, will drive the industry growth
"Tata Mutual Fund chief K.N. Atmaramani said. On the state of market in general, fund
chiefs attempted to allay fears that an overvalued market may pose hurdles to stock
picking.
According to them, while investors may feel that information technology pharmaceuticals
and consumer' goods stocks - or the BSE Sensex for that matter - might have peaked, new
opportunities are opening up in areas like retail, healthcare and even in internet business.
Fund chiefs also made a case for the code to prevent mutual funds from projecting short-
term gains in an attempt to attract investors into their schemes. They were of the view
that, "Mutual Funds have to agree to present performances in an annualized fashion, over
a longer period. The industry as a whole should standardize its performance."
India is at the first stage of a revolution that has already peaked in the US. The US boasts
of a mutual fund asset base that is much higher than its bank deposits. In India, mutual

43
fund assets are not even 12% of the bank deposits, but this trend is beginning to, change.
This is forcing a large number of banks to adopt the concept of narrow banking wherein
the deposits are kept in Gilt and me other assets which improves liquidity and reduces
risk. The basic fact is that hanks cannot be ignored and they will not close down
completely. Their role as intermediaries cannot be ignored. It is just that mutual funds
would change the way banks do business in future.

44
RECIPE FOR MUTUAL FUND PERFORMANCEMORE BANGS FOR THE
BUCK
On a closer scrutiny an income fund seems to have done well followed by balanced funds
unitarily, it can be attributed to bad equity market conditions and good debt market
conditions. There is obviously more to it than that.
The number of investors who invested in the growth schemes far out number the other
categories. Hence there is a large-scale resentment among mutual fund investors today.
The question now is whether the poor performance is attributable totally to bad market
condition or if there are other ignored fundamental problems which the industry is yet to
address it self to? While to an extent the poor market condition is responsible for the
poor market condition is responsible for the poor show , there are others serious issues
which the industry has overlooked so fur. The three areas require in-depth rethinking:
Product conceptualization
Investment strategy
Outsourcing
Product conceptualization
The first and foremost ill that is plaguing the industry is lack of innovation. Abroad, ld is
a very innovative industry. In India, the industry has squarely failed in conceptualization
and innovation.
While is a huge potential to tap the individual savings of the investors, the industry has
overlooked their needs so far. To tailor products to a particular need is not easy. It is a
professional job and a lot of thought should be given to it. There are basically two f
conceptualizing a mutual fund product. They are
Investment target based and
Need based

45
The investment target based mutual fund products are the one which we are used to so
far. They design their theme based on the target where the money is going to be invested.
pure growth scheme will invest 90 per cent in equity shares, 5 per cent in fixed-income
yielding securities and the balance in the money market. Here the theme is growth and
the growth is based on investments in equity shares. Another variety is need based. Here
the theme is based on investor's specific needs. For e.g. the Children Gift Growth scheme
[CGGF] UTI is a classic case where the theme is based on the need for the children as
they grow. Here there is no explicit mention as to where the fund is going to derive the
growth from. The fund has the freedom to invest either in equity market or in debt market
depending on the attractiveness.
Packaged portfolio concept
The major reason for the poor performance of 50% schemes out of 592 should be
attributed mainly to poor stock picking skills. Otherwise there is no reason why 17
schemes should generate double-digit returns in the same time-frame. Almost all the
investors who have invested in the mutual funds do realize the fact that in the long run it
is the stock market that will provide extraordinary returns. Time and again this is tested
by statistical analysis. Today a well informed investor will not have doubts in his mind
about future performance of blue chips like HLL, Infosys, Castrol, Bajaj Auto, lTC, and
Colgate etc. But unfortunately, he is not in a position to invest in these scripts due to their
high price though they are relatively cheap].Certainly beyond the reach of an intelligent,
ordinary, middle-class executive. The classification is done separately for man and
woman as their needs and desires differ quite considerably. The classification is also done
based on the stages of life. The product to be tailored should carefully link the effect of
periodic savings on achievements of the above needs/desires. Then, there is a great deal
of innovative mutual fund products that can emerge out of every segment of the above
needs and desires of individuals. As we zero-in on a specific need, like the one described
above, the target investors become a focused group. With innovative marketing ideas, it
becomes that much easier to sell the idea than to have a very broad theme like growth and
attack the universe as the target! Today, we have barely catered to the specific needs of
the individual Almost all the 592 schemes analyzed are plain vanilla variety of growth,
income or balanced. To an extent, we can give credit to UTI & LIC which have
succeeded in tailoring schemes based on children needs, medical needs, etc

46
Investment strategies
The second ill that is troubling the industry is poor fund management track record for
most of the fund managers. Smart funds which have topped their performance are the
ones who have quickly reallocated their assets on time. While funds which are prohibited
from doing this like a pure equity fund or pure income fund did face a tough task. Even
here clever fund managers shifted their portfolio well to include highly liquid blue chip
stocks even at the cost of booking loss in mid-cap illiquid non-performing stocks.
A good investment strategy would then aim to achieve the following:
Protection of capital from erosion or alternatively guaranteeing capital safety.
Possess excellent research capabilities to ensure market timing and investment
strategy formulation.
Outsourcing
The most important aspect for the success of a mutual fund is the ability to outsource
certain critical activity. This is quite a new thinking, given the Indian obsession to do
everything in-house. Abroad, there are certain mutual funds which outsource to the extent
of 100 per cent! from product design to investor servicing. Though the concept of
outsourcing has been prevalent in manufacturing, it has yet to come of age in fund
management
It will ensure rapid penetration at the quickest possible time at the most economical cost.
It also gives flexibility for the mutual fund to change them if their performance is sloppy.
Aspects like investor servicing, information needs, research, fund management, etc. can
be effectively outsourced in the context of a mutual fund.
Product conceptualization Outsourcing Investment Strategies
1.Innovation 1.Cost control 1.Capital protection
2.Superior design 2.Flexibility 2.Market timing
3.Adaptability 3.Choice 3.Assest quality

47
INVESTMENT OBJECTIVE
To generate capital appreciation from a portfolio of predominantly equity and equity related
securities with investment in, generally, not more than 30 stocks.
SCHEME PHILOSOPHY
Kotak 30 is a diversified equity growth scheme, with a portfolio of generally not more than
30 choicest stocks, handpicked by our fund management team. The portfolio comprises of
stocks with an emphasis on financial strength of the company, quality of management,
brands and franchises, its track record and the market liquidity of the stock regardless of the
sector to which they belong.The scheme is suitable for investors with a time horizon of 2 to 3
years.
KOTAK 30 PERFORMANCE
As On July 31, 2006 Kotak 30
BSE
Sensitive
Index
S&P CNX
Nifty
1 YEAR 41.8 40.2 35.7
3 YEARS 52.6 41.2 38.0
5 YEARS 39.0 26.8 24.2
SINCE ALLOTMENT (DEC 29,
1998)
29.8 18.1 18.4

48
DIVIDEND HISTORY
Date Cum Dividend NAV Rate (Rs./unit)
DEC-27-05 Rs. 27.711 1.00
JUN-03-05 Rs. 20.345 1.00
NOV-05-04 Rs. 18.060 1.50
JAN-31-04 Rs. 21.093 5.00
OCT-20-03 Rs. 18.983 2.00
DEC-28-01 Rs. 11.036 1.00
OCT-09-00 Rs. 17.556 2.00
DEC-11-99 Rs. 22.954 2.00
FACE VALUE : RS. 10/UNIT.
DIVIDEND DISTRIBUTION IS SUBJECT TO AVAILABILITY AND ADEQUACY OF
DISTRIBUTABLE SURPLUS.
AFTER DIVIDEND IS DISTRIBUTED, THE NAV FALLS TO THE EXTENT OF THE
DIVIDEND AND DISTRIBUTION TAXES, IF ANY.

49
PORTFOLIO OF KOTAK 30 AS ON 31-July-2006
Issuer / Instrument Industry/Rating Quantity
Marke
t Value
(Rs.in
Lakhs)
% to
Net
Assets
Equity & Equity related
Listed/Awaiting listing on
Stock Exchange
Infosys Technologies Ltd. Software 136600
2,261.4
8
8.66%
Bharat Heavy Electrical Ltd.
Industrial
Capital Goods
89000
1,820.2
3
6.97%
Larsen And Toubro Ltd.
Industrial
Capital Goods
69000
1,524.5
9
5.83%
Reliance Industries Ltd.
Petroleum
Products
145000
1,419.2
6
5.43%

50
Mahindra & Mahindra Ltd.
Auto 238000
1,404.4
4
5.38%
Wipro Ltd. Software 250000
1,227.0
0
4.70%
Grasim Industries Ltd. Cement 53000
1,102.5
6
4.22%
ITC Ltd.
Consumer
Non Durables
600000
1,004.4
0
3.84%
Bajaj Auto Ltd. Auto 40000 984.88 3.77%
I-Flex Solutions Ltd. Software 63850 847.19 3.24%
Steel Authority of India Ltd. Ferrous Metals 1204000 845.81 3.24%
Sun Pharmaceuticals Industries Ltd. Pharmaceuticals 101550 829.10 3.17%
EID Parry (India) Ltd.
Consumer
Non Durables
413095 775.38 2.97%
Nestle India Ltd.
Consumer
Non Durables
73800 737.74 2.82%
HDFC Ltd. Finance 60000 706.44 2.70%
Sterlite Industries (India) Ltd
Non Ferrous
Metals
175000 656.51 2.51%
Siemens Ltd.
Industrial
Capital Goods
73000 646.85 2.48%
Deccan Chronicle Holdings Ltd.
Media
and Entertainment
167316 644.75 2.47%
Punjab National Bank Banks 160000 608.40 2.33%
Aditya Birla Nuvo Limited Textile Products 83666 606.29 2.32%
The Associated Cement Companies Ltd Cement 65000 548.47 2.10%
ICICI Bank Ltd. Banks 95000 526.16 2.01%
Lupin Ltd. Pharmaceuticals 52600 472.19 1.81%

51
Hindustan Lever Ltd.
Consumer
Non Durables
200000 465.40 1.78%
Mahindra Gesco Developers Ltd. Construction 58000 309.05 1.18%
TajGVK Hotels & Resorts Ltd. Hotels 147250 264.46 1.01%
Oil & Natural Gas Corporation Ltd. Oil 200 2.35 0.01%
Listed/Awaiting listing on Stock
Exchange - Total
23,241.
38
88.95
%
Futures
Oil & Natural Gas Corporation Ltd.-
AUG2006
30000 343.83 1.32%
Sun Pharmaceuticals Industries Ltd.-
AUG2006
19350 155.78 0.60%
Futures (Market value represents
Notional Value) - Total
499.61 1.92%
Collateral Borrowing & Lending
Obligation
1,250.0
0
4.78%
Term Deposits 800.00 3.06%
Net Current Assets/(Liabilities) 337.86 1.29%
Grand Total
26,128.
85
100.00
%

52
KOTAK MAHINDRA K-30 - SIZE DOES MATTER
After a long bull the BSE Sense x finally started its upward journey during April in 1999.
Surely, the question doing the rounds is whether this rise is based on strong fundamentals of
the-economy or fueled by speculative activities. And for how long this momentum can be
sustained. These are also some of the highly contested topics among the analysts and the
investors. But harping on these things is not a game of the mutual funds which claim to play
it clean and safe. They are the least bothered entities about the market movements and the
timing, as they claim.
This case study, in its quest to find answers to these questions and many more, strives to
delve deeper into the performance of a fund, K-30. The entire study revolves around the
fund's investment strategy, its style of portfolio management, an in-depth analysis of the
portfolio composition and last but not the least quantitative evaluation of the performance,
applying relevant evaluation models.
K-30 is an equity oriented open-ended fund From the house of Kotak Mahindra AMC.
Launched on December 22,1998, it was the time when the stock market was down. The fund
was able to pick up some of the best stocks at fairly cheaper valuations (see .'Stock Speak).
After a wait of nearly four months i.e. From the April-end onwards the stock prices started
flaring up. Some of the factors like revival of economies of East-Asian nations has increased
FDI and a good monsoon helped sentiments look up. Increase in trade with USA and Europe
added to the rise in industrial activities. This, apart From the booming IT sector provided the
much needed support to fuel the stock market. The boom culminated in Sense x roaring past
the 5000 level in October, 1999.
A break-up of the performance of the K-30's NAV over a period of one year since inception
beautifully depicts its movement during this period. The NAV of the fund was Rs. 14.64 , as
on March 31, 1999. The return since inception till then worked out to around 46 percent. The
NAV fell marginally to Rs. 13.22 on April 9,1999. The return since inception till that date
was over 32 percent. The NAV outperformed the BSE Sensex by a huge margin of over 16
percent. There was a reshuffling of the portfolio between April and July 1999. That helped
the NA V to appreciate handsomely. The NA V rose to Rs. 15.90, as on August 6, 1999
thereby giving a return of around 60 percent since inception. Between August and October

53
1999, the portfolio was in for another rebalancing. As a result of this reshuffling, the
portfolio's exposure to market heavyweights like Infosys, Satyam, Zee and Hughes Software
increased significantly. This resulted in N A V vaulting to Rs.21.3 8 level, as on December
22, 1999. Thus, exactly within a year since its inception the fund's NA V got more than
doubled. The return since inception works out to 113.80 percent, over this period. And, after
considering the entry load of 1.50 percent the return since inception works out to 85.91
percent
One interesting thing that emerges From this study is that there has been a continuous see
saw kind of shift in the sectoral exposure of the portfolio, especially with regard to the IT
sector. The exposure to the IT sector was 34.86 percent of the net investible corpus of the
fund on March 31. 1999. During April 1999 it was pulled down to 28.7 percent which
surprisingly was below that of the FMCG sector (31.1 percent). During August 1999 the fund
trimmed the exposure to the IT sector further to 24.81 percent. But in a sudden reversal of the
earlier strategy, the exposure to the sector was pushed up substantially to 37.61 percent, its
highest ever level, in the beginning of the current year 2000. This shows that the fund
manager has, From the very beginning, actively churned the portfolio.
And, he has been pursuing a dynamic asset allocation strategy. Ironically, it is the troika of
i.e. IT, Pharma and FMCG, which has been at the core of this see-saw.
Focus on Growth
The investment objective of K 30 mutual fund is to generate capital appreciation From a
portfolio of predominantly equity and equity related securities. The portfolio composition is
designed in such a way as to comprise equity of not more than 30 companies at any point of
time which mayor may not be the same companies which constitute the BSE Sensex or NSE
Nifty index.
The fund lays great emphasis on a small universe of equities as well as their constant
monitoring rather than indulging in an aimless stock chase. The fund strongly believes that
having a portfolio constituting a greater number of investments does not necessarily result
either in superior returns or significant. Reduction in risk through diversification. On the
other hand, it does reduce the attention which can be given to each stock and to the portfolio

54
as a whole The fund further argues that one of the ground rules of investing in stocks is never
to spread yourself thin over too many scrip's. It believes that less is indeed more. The K-30
scheme restricts itself generally to only 30 scrip's because of this belief.
It's a good thinking on the part of the fund because monitoring as well as managing a large
number of shares not only require a lot of time and effort but also entail greater risks,
comparatively
Simply put, with increase in number of companies, in a given portfolio, the interplay among
them, or the correlation factor, becomes more pronounced, which, if not managed carefully,
can increase the portfolio risk thereby constraining the growth. The trick here lies in having a
basket of securities where the correlation among them is minimal so that an optimum trade-
off of risk and return can be achieved. Keeping in tune with the changing times, the fund
aims to use derivatives to hedge exposures as and in a manner approved by SEBI. On the
anvil is, also, the plan to seek permission to invest in GDR/ ADR ofIndian companies for the
K 30 portfolio.
Low turnover is the key
The fund aims to follow a specified target for portfolio turnover. It states that the portfolio
turnover will normally not exceed 150 percent once the corpus is invested. The turnover,
here, means the simple average of the aggregate of purchases and sales net of the following
The turnover caused on account of investing the initial, corpus;
The turnover caused on account of investing in debt and money market securities;
The turnover caused on account of fresh purchases
And redemptions by Unit holders. As the purchases and sales invite transaction costs viz.
brokerage, stamp duty and custodial charges, a predetermined turnover limit becomes
essential to enable portfolio restructuring when warranted.

55
Focus on Intrinsic Value
The fund seeks to invest 90 percent of its investible corpus in equity and equity related
securities and rest in debt and money market instruments. As far as the equity component is
concerned the fund aims to invest in diverse sectors such as information technology,
pharmaceuticals, FMCG, automotives, services, utilities, petroleum and engineering.
The fund aims to invest in stocks which it believes are priced at a material discount to their
intrinsic value. Such intrinsic value will be a function of both past performance and future
growth prospects. For selecting particular stocks as well as determining the potential value of
such stocks, the fund has a set of parameters to guide it in choosing the stocks which satisfy
the selection criteria.
The foremost among these criteria is the financial strength of the companies as indicated by
well recognized financial parameters. Some of the important parameters which the fund
looks at are total cash flow, return on capital employed (ROCE), return on net worth
(RONW), dividend per share and earnings per share. The second criteria is the quality of the
management and track record. The fund looks for those companies which have highly
competent management and those companies which practice the code of corporate
governance. And, it also looks at the companies which are regular tax payer and have a sound
tax planning in place. Consistency in performance by the companies over a period of time is
also one of the factors which the fund takes into consideration.
Third significant consideration is that the companies should be less prone to recessions or
business cycles either because of the nature of their businesses or because of superior
strategies followed by their management.
Fourth criteria are that the companies should pursue a strategy to build strong brands for their
products or services and they should be capable of building strong franchises. And lastly, the
market liquidity of the stocks. If a company does not have sufficient number of floating
stocks, the fund does not consider it fit for making investments

56
Guiding force of dynamism
It is the triumvirate of IT, Pharma and FMCG which has constituted more than fifty
percent of the investible corpus of the fund, since inception. The portfolio of K 30 fund
comprises of around 30 stocks, spread across 12 industries. This provides a fair degree of
protection from risk arising out of being concentrated in a few industries.
But what is worrying about the portfolio is its unusually high concentration in the IT
sector. Though the fund claims that one of the ground rules of investing is not to spread
one's portfolio too thin over too many stocks, it is also equally not very wise to get highly
exposed to a few stocks. Diversification strategy needs to be oriented more towards
trimming the concentration in order to further lower the risk.
If we look at the portfolio composition of K 30 fund it becomes pretty clear that the
portfolio has seen a lot of structural changes in terms of sectoral exposure. Rebalancing
on a regular basis, during the first year, has been one of the main features of the portfolio,
since inception. And, it won't be an exaggeration to say that throughout the fund has
adopted a dynamic asset allocation strategy. The dynamic asset allocation strategy, in
simple words, involves a process of shifting the exposure of the portfolio among various
asset classes such as equities, debts etc. at regular intervals. The method focuses on
combining assets whose expected returns are not highly correlated so as to obtain the best
possible expected return, given the level of risk assumed.
Apart from a regular shift in sectoral exposure, the investments in money market
instruments have also been increased to a high of 12.70 percent in January, this year,
from a low of2.87 percent in March, 1999.Though the assets of the fund too have
increased to around 90 crore in between, the strategy seems to be to spread the risk.
In quest of a right blend
The portfolio of K-30 fund has been on a continuous reshuffling spree, ever since it was
launched in December 1998. A brief study of the portfolio composition strategy which
has been in search of a right blend of stocks and sectors guides us through some of the

57
interesting trends it went through over a period of time, since its inception.
A glance at the portfolio composition suggests that Information Technology sector has
been the most dominant sector in K-30 fund's portfolio in terms of exposure.
The dominance of Information Technology stocks in the portfolio of the K 30 fund is
quite understandable, given the fact that the fund aspires to produce superior returns
through a balanced exposure to specific sectors. It is another thing that the exposure to IT
sector has been more than the desired exposure. Anticipation of a higher growth might be
the reason.
The apprehension about the high concentration in the sector is not unfounded as the kind
of valuation these technology stocks are getting have not been fully justified by their
respective performances. The valuations in case of these stocks seem to be over stretched.
Because the kind of prices investors are willing to pay is based on expectations of future
performance of the companies concerned. And there is no guarantee that performances
will match investors' perception. What will happen once a company fails to meet the
investors' expectations? To seek an answer one does not have to go far.
The price performance of Infosys on the bourses during the current month (January 2000)
itself gives enough indication of what future has in store for the soaring technology
scrip's prices. In the first few trading sessions, in January 2000, the price of Infosys
jumped up to Rs. 15,000 a share. But during the next few sessions the price started
declining and touched the level ofRs. 12,000. Thus in a few strokes it shed Rs. 3000 per
share. The sheer loss in M-Cap of the stock had a telling effect on the bourses as well.
The exposure to the IT sector reached an time high of37.61 percent in January 2000,
From 34.56 percent in March, 1999. Among the IT stocks, Infosys has the lion's share.
The exposure to the stock is at 12.45 percent. Satyam, Pentafour Communications (now,
Pentasoft Technologies), Polaris, Citicorp Securities, BFL Software, Hughes Software,
Software Solutions are the other technology scrip's in the portfolio of the K-30 fund.

58
One of the heavyweights in K-30's portfolio, Infosys has been among the front runners in
the ongoing Bull Run. Financial for the third quarter ended December 31,1999 look quite
impressive. Contrary to the general expectations, the drop in revenues From Y2K related
projects, to 5.8 percent in the said quarter From 9.4 percent in the second quarter of the
same fiscal, did not have any adverse impact on the bottom lines. The company has been
able to successfully make the transition to E-Commerce business From Y2K related
projects. Revenues From E-Commerce increased From Rs. 6.4 crore to Rs. 15.6 crore
during the said period
The higher proportion of E-Commerce revenues has helped Infosys improve its operating
profit margins in the third quarter of 1999-2000 by 1.67 percentage points to 40.35
percent. It has also successfully added 23 new clients in the quarter, of which seven are in
the area of e-business and voice and communication technologies.
During the quarter, the company undertook two very exciting new projects. The first one
is related to the execution of projects in the area of optical networking fur a leading
developer of next generation optical transport products. The second one is the
development of an internet based pricing tool for a large drug store chain in the US. The
successful execution of these two products will certainly establish Infosys' credentials as
a top class global software player.
The stock holds promise for strong growth in medium to long-term, given its top quality
management and proven track record, even at this level (Rs. 12,000, as on January 6,
2000). But an exposure of 12.45 percent is certainly unwarranted, From diversification
point of view.
Satyam Computer, one of the leading domestic techno logy scrip's, though does not boast
of a strong management like Infosys but has a very fascinating business story. Its
business model is quite unique, in the sense that unlike other ISPs (Internet Service
Providers) it not only offers the internet access but almost the entire gamut of software
solutions. Today, Satyam is an access provider, a portal company, a corporate network
service provider and an E-Commerce provider all rolled into one. This not only provides
a greater synergy to the company, but also offers tremendous opportunity to grow. Its

59
business model's most exciting aspect is the fact that the high investments required are
spread across £Our different business streams; which means that payback is much faster.
This also translates into evenly distributed cost, full utilization of the assets and
generation of high returns. . From the fund's point of view the Satyam scrip is a good
medium to long-term bet. The fund also participated in the initial public offerings of
Hughes software and Polaris Lab, both From the IT sector. Hughes software is a leading
communications software company. The promoter of the company, Hughes Electronics
Corporation, a subsidiary of General Motors, is engaged in telecom, information and
entertainment services. Hughes Software is engaged primarily in developing package
software, providing software consultancy services and other ancillary product and
services for the telecommunications industry. The company's major client has so far been
its parent which accounts for 74 percent of its revenue. This shows the overdependence
on one client for revenue but on the other hand also provides a stable revenue base. The
parent's worldwide marketing and distribution network has come handy for the company,
as major part of its balance 26 percent comes from exports.
The FMCG sector accounts for 11.22 percent of the net investible corpus of the K-30
fund, as per the latest portfolio composition figure. The scrip's which form a part of the
fund's portfolio are HLL, Cad bury India, Indian Shaving Products and International Best
Foods (IBL). IBL's inclusion in the fund's portfolio is very interesting as it is not on the
buy list of many funds.
Unlike other FMCG companies, IBL has been keeping a low profile for a long time,
despite being in possession of some of the top brands like Captain Cook, Knorr, Brown &
Poison, Taria Dalal etc. The company has zeroed in on four areas of competency in
which it would expand its product base. These are - sweet, savory, staples and drinks.
The rationale behind the move to enter areas besides custards and jellies was to grow the
turnover, and to be part of the housewife's daily repertoire.
In order to gain greater market penetration, IBL has rapidly increased its distribution
reach from 600 to 1,600 and the number of outlets from one lakh to 2.5 lakh. And, given
the increased demand for packaged atta and salt among the urbanites, the company stands

60
a good chance to grow in future given the strong brand equity of its products. But a lot
will depend on the company's ability to counter the competition from biggies like HLL,
Nestle and Tata:
The company also hopes to cater to the export markets of South Africa and South-East
Asia. If it fructifies, this can bring substantial revenue to the company.
The vision of the company is to be the BEST run foods company through strong brand
leadership in specialized ethnic and international food categories. A food for thought!
Though, the company has been reporting losses for the two consecutive years, the long
term potential appears bright. The fund has cut exposure to the stock :from 1.67 percent,
in August, 1999, to 0.83 percent, as on January 6, 2000. Quite similarly, the exposure to
HLL has also been pared to 5.07 percent :from a high of 10.20 percent during the same
period. The move seems to be in line with the market mood which has kept shifting the
focus among the IT, Pharma, FMCG and Cyclicals, all through 1999 and is still going on.
The Pharmaceutical sector accounts for 10.39 percent of the net corpus of the fund. In
fact, the exposure to the sector is slightly lower than the FMCG sector. The exposure to
Ranbaxy at 3.21 percent-is the highest among the other pharmacy stocks in the fund's
portfolio. Cipla, Knoll, Pfizer, SB Pharma and Novartis are the other scrip's from the
sector.
One of the top counters in the portfolio From this sector, Ranbaxy is front runner among
the domestic Pharma companies in R&D arena. Concentration on dosage form sales,
globalizing the operations with on-guard presence in key advanced and emerging markets
and enhancing the intellectual wealth through a strong R&D and a regulatory base have
given the company a significant competitive advantage. The company's global marketing
strategy of building large brands is well on track. It crossed a major milestone in its
internationalization drive with the launch of Cefaclor and Ranitidine formulations in the
US market. It has become the first Indian company to market its products in this large
generics market under its own label.

61
In the last five-six years, Ranbaxy has steadily increased its intellectual wealth and
experiential knowledge, especially in the advanced and emerging international markets.
One of the company's key success factors has been its ability in regulatory filings with
respective drug authorities in the US, UK, South Africa, Australia and New Zealand.
These drives are expected to push the company in the forefront of global market arena.
The company is a good long-term bet for the fund.
Companies like Cipla, Knoll, Novartis, SmithKline Beecham Pharma and Pfizer have
also been showing considerable advancement on the R&D front. Although Pfizer has
been marred with controversies over its parent's plan to set up a hundred percent
subsidiary. These are the good long-term bets where the fund needs to stay invested in.
After IT, FMCG and Pharma sector, one sector that has gained importance in the
portfolio ofK-30 is Media. Zee Telefilms is the only scrip from the sector in which the
exposure of the portfolio is at 7.52 percent. In fact, the exposure to Zee Telefilms is well
above the technology stocks except Infosys. This shows the strong faith the fund has in
Zee. After the famous deal with the Star group last year. Zee has been seeing phenomenal
growth. A lot of initiatives are being taken to propel the group's foray in internet related
ventures which will further push the growth of the company. Launch of some of the
regional language channels and with few more in the pipeline (this includes proposal for
launching of English channels), and' on top of it all the restructuring drive which is under
way, the stock will see unlocking of its underlying value in the medium-long term.
Nonetheless, the substantially high exposure to the stock is required to be diluted in favor
of other scrip's From the same sector in order to achieve adequate diversification.
From the engineering sector, Asia Brown Boveri (ABB), LG Brothers and Blue Star are
the three scrip's in the portfolio. Together, they account for 2.61 percent of the net assets
of the fund; of which the exposure to ABB is 1.36 percent. A look at the ABB throws
some light on strategy of the fund to hold on to the stock.
ABB is a global technology and engineering conglomerate. The company is in the
process of reinventing itself and is in the process of creating a lighter and faster
organizational model for growth. The company has embarked on an ambitious project

62
which involves separating the power business from its core business and concentrating on
industrial IT solutions. Its industrial IT concept bridges the gap between traditional IT
and process technology solutions by integrating plant-centric operations like planning and
scheduling of production, maintenance with business systems like ERP, MIS, inventory
and supply chain management. The restructuring process was started by the company in
the end of 1998 and is aimed at metamorphosing it into a knowledge-based company
from an asset-based company.
The company's focus on industrial IT is expected to fetch it 30-40 percent annual growth.
Industrial IT solutions open a new horizon to core sector domestic industries to become
globally competitive. And, ABB is set to tap the changing automation needs of these
industries in a big way with an integration From process automation to-business systems
and the internet. The acquisition of Elsag Bailey by ABB has added strength to the
company's industrial IT concept by widening the product portfolio as well as process
expertise.
In 1999, ABB'S Automation business executed orders worth Rs. 450 crore for companies
like Reliance, GAIL, Grasim Cement, IOC, Neelanchal Ispat, Tata Steel, lTC, ONGC a
Its Automation business is targeted to cross Rs. 1,000 crore in three years and continues
to be a key revenue earner.
The restructuring will provide the much needed impetus to I the future growth of the
company. The fund's exposure to the ABB counter will payoff in the medium to longterm
once the restructuring is over.
In the Cement sector, the fund has got exposure in India Cement and L&T, though the
latter is not actually a purely cement company but in the portfolio it has been classified
so. The exposure to the sector is at 4.73 percent. The L&T scrip is also a good
restructuring story. It is formulating new strategy to become much more competitive. The
company is planning a major restructuring drive to catapult it into the top bracket in its
major lines of businesses. At present, the EPC division contributes to around 57 percent
of the company's total sales. And, while the company plans to give additional thrust to

Research work on k30 scheme

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