![A REPORT ON Indian Mutual Fund Industry: Post Recession SUBMITTED BYAbhishek SaurabhFA09002MINT WEALTH MANAGEMENT A report submitted in partial fulfillment of the requirements of PGDM Program of theJAGAN INSTITUTE OF MANAGEMENT STUDIESDELHI Company Guide: Faculty Guide: Mr. Vikram Dhawan Mrs. Yukti AhujaExecutive Director, JIMS, Sector 5Mint Wealth Management Delhi Date of Submission: July 26, 2010<br />CERTIFICATE<br />This is to certify that the project work done on INDIAN MUTUAL FUND INDUSTRY: POST RECESSION is an original work carried out by Mr. ABHISHEK SAURABH under my supervision and guidance. The project report is submitted towards the partial fulfillment of two – year, full time Post Graduate Diploma in Management.<br />This work has not been submitted anywhere else for any other degree/diploma. The work was carried out from 21/5/2010 to 5/7/2010 in MINT WEALTH MANAGEMENT.<br />Name & Sign of Industry Guide<br />Date: 21/7/2010 Name & Sign of Faculty<br />Student’s Name and Sign <br />ABHISHEK SAURABH<br />Roll No. FA09002 <br />Acknowledgement <br />I wish to express my gratitude to Mint Wealth Management for giving me an opportunity to be a part of their esteem organization and enhance my knowledge by granting permission to do Summer Internship Program under their kind guidance.<br />I am grateful to Mr. Vikram Dhawan (Director), company guide, and Mr. Abhishek Vaidya (Sales Manager, Reliance Life), for his invaluable guidance and cooperation during the course of the program. He provided us with his assistance and support whenever needed that has been instrumental in completion of this program.<br />I am also sincerely thankful to my faculty guide, Mrs. Yukti yahuja (Faculty, JIMS-Rohini, Sector-5) who had an immense patient to take up my all queries and suggest me her invaluable suggestions. Her guidance and encouragement has showed the path of fulfillment to my project. <br />I am grateful to Mrs. Shellika Aggarwal, my Team Leader for her helpful guidance to stick to the right path in the project. Her guidance during the final analysis was very useful.<br />DECLARATION<br />I hereby declare that Project Report entitled “ Indian Mutual Fund Industry: Post Recession” submitted to JIMS ROHINI , is a record of an original work done by me under the guidance of Mrs. Yukti Ahuja , Faculty and Mentor, JIMS ROHINI, and this project work is submitted in the partial fulfillment of the requirements for the award of the Diploma in Management . The results embodied in this Thesis have not been submitted to any other University or Institute for the award of any degree or diploma.<br /> Abhishek Saurabh <br />Preface<br />Practical training is an important part of management courses. Theoretical studies in classroom are not sufficient to understand the functioning of complex and large sized organization, managerial climate and the real problems coming in the way of management of Man, Material, Machines and Money.<br />Practical training supplements the theoretical studies i.e. it covers what is left uncovered in the classrooms .It offers an exposure to real practice of management in business organization. It exposes student to an invaluable treasure of experience.<br />In the forthcoming pages an attempt has been made to present a comprehensive report concerning different aspects of my study. The overall knowledge gained by me will reflect in the report itself.<br />Table of Contents<br />Serial NoTopicPage No. 1. Executive Summary72.Company Profile83.Mutual Funds94.Mutual Fund Industry Structure105.Structural Framework116.Evolution of Mutual Fund157.Classification of Mutual Fund178. List of Mutual Fund Under Consideration239.Analysis2410.Summary5111.Research Methodology5312.Learning5413.Bibliography56<br /> <br /> Executive Summary<br />Indian Financial System has gone a long way from paper based share certificates to online traded funds. The mutual fund industry has also seen up and downs and has swum across tides like Harshad Mehta scam and US 64 scam of UTI. SEBI regulates Mutual Fund Industry now and it is a three-tier industry ruling out any possibility of another scam. However the latest storm that hit India was the economic meltdown of USA. The stock market took a plunge downward and the Mutual Fund holders lost an enormous amount of money. When I joined as an intern in Mint Wealth Management I had to sell Mutual Funds but the biggest challenge in front of me was to convince people that they would not lose money in mutual funds and even if there is a recession the market will eventually improve. So I took on the study of Indian Mutual Fund Industry and the effect of recession on the industry. This project studies the mutual fund industry in India and performance of some selected funds. Meanwhile I also included the fund manager’s performance and the investment area and asset allocation of the various funds.<br />Company Profile<br />MINT WEALTH MANAGEMENT PVT. LTD<br />Established in 2004, mint wealth management Pvt. Ltd deals in share market trading as well as sales of various financial instruments like life insurance policies and mutual funds. It has a customer base of nearly 400 who trade on a regular basis. Apart from it, the company also has a tie up with INDIA INFOLINE PVT LTD whose customer base it manages. The company is also foraying in the real estate sector in the near future.<br />It is head quartered at Neta ji Subhash Place ,New Delhi, and has 2 more branches in Delhi itself. For the technical support on mutual funds the company has a tie up with NJ fundz which provides it with solutions on various issues including training needs. I have attended a training module by NJ fundz where I got the basic training on the mutual funds and their functionality.<br /> <br />ADDRESS OF THE COMPANY<br /> 508, A-9, GD ITL North-ex Towers<br /> Netaji Subhash Place<br /> Delhi-110034<br /> Website: HYPERLINK quot;
http://www.mintindia.inquot;
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_blankquot;
www.mintindia.in<br />Mutual Funds <br />Before we understand what is mutual fund, it’s very important to know the area in which mutual funds works, the basic understanding of stocks and bonds. <br />Stocks: Stocks represent shares of ownership in a public company. Examples of public companies include Reliance, ONGC and Infosys. Stocks are considered to be the most common owned investment traded on the market. <br />Bonds: Bonds are basically the money, which you lend to the government or a company, and in return you can receive interest on your invested amount, which is back over predetermined amounts of time. Bonds are considered to be the most common lending investment traded on the market. There are many other types of investments other than stocks and bonds (including annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds. <br />What Is Mutual Fund <br />A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.<br /> Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. <br />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. <br />Mutual Fund Industry Structure In India<br />Structural Framework Of Mutual Fund Industry With Example<br />Terms Related To Industry:<br />,[object Object]](https://image.slidesharecdn.com/indianmutualfundindustry-100906141439-phpapp02/85/indian-mutual-fund-industry-1-320.jpg)
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Indian mutual fund industry
- 2. Trustee
- 4. Registrar & Transfer Agents
- 5. Selling and Distribution Agents
- 6. Custodian
- 7. Sponsor
- 8. The sponsor establishes the mutual fund and registers the same with SEBI. It appoints the Trustees, the AMC and Custodians with prior approvals of SEBI and in accordance with SEBI regulations. Sponsor must have a 5-year track record of business interest in the financial markets. Above all the sponsor should have been making profit in at least 3 out of 5 in the time period stated above.
- 9. Trustees
- 10. In India mutual fund is a form of a Public Trust created under the Indian trust Act 1882. The fund sponsor acts as the settler of the trust, contributes the initial capital and appoints the trustees to hold the trust for benefit of the unit holders. There must be at least 4 members in the board of trustees and at least 2/3 of the members of the board of trustees must be independent. Trustee of one mutual fund cannot be a trustee of another mutual fund. They are the primary guardians of the unit-holders’ funds and assets. The 3rd schedule of SEBI regulations specifies the content of trust deed.
- 12. Trustees appoint the AMC, in consultation with the sponsor and according to SEBI Regulations. All Mutual Fund Schemes floated by the AMC have to be approved by the Trustees.
- 13. Trustees can seek remedial actions from AMC, and in cases dismiss the AMC.
- 15. Trustees must ensure due diligence on the part of AMC in the appointment of constituents and business associates. Trustees must furnish to the SEBI, on half yearly basis a report on the activities of the AMC. Trustees must ensure compliance with SEBI regulations. SEBI Regulations require that the meeting of the trustees should be held at least once in every two months.
- 16. AMC
- 17. Regulatory requirements for AMC
- 18. Only SEBI registered AMC can be appointed as investment managers of mutual funds. AMC must have a minimum net worth of Rs. 10 Cr at all times. An AMC cannot be an AMC or Trustee, of another Mutual Fund. AMC’ s cannot indulge in any other business, other than that of asset management. At least half of the members of the Board of an AMC have to be independent. The 4th Schedule of SEBI regulations spells out rights and obligations of both trustees and AMCs.
- 19. The agreement between the Trustees and the AMC is known as “Investment Management Agreement”.
- 20. Who appoints the AMC and defines its functions?
- 21. The sponsors, or the trustees, if authorized by the trust deed appoint the AMC. The AMC is usually a private limited co., in which the sponsors and their associates or JV partners, are shareholders. The AMC has to be a SEBI registered entity, with a minimum net worth of Rs. 10 Cr. The trustees sign an investment management agreement with the AMC, which spells out the functions of the AMC.
- 22. Registrar and Transfer Agents
- 23. They are responsible for issuing and redeeming units of the Mutual Fund. Their other services include:
- 24. • Process investor applications
- 25. • Record details of Investors
- 26. • Send information to Investors
- 27. • Process dividend payout
- 28. • Incorporate changes in investor information
- 31. Distribution Agents- Mint Wealth Management
- 32. Above table states the kind of merger and acquisition that can take place in mutual funds industry and the approvals required for the process.
- 33. History of Mutual Funds in India
- 34. The Evolution
- 35. Phase 1 – (1964 – 1987)- Growth of UTI
- 36. •UTI sole player in the industry, created by an Act of Parliament, 1963
- 37. •The first product launched by UTI was Unit Scheme 1964
- 38. •UTI creates products such as ULIP (1971), MIP's, Children Plans (1986), and Offshore Funds etc.
- 39. •MASTERSHARE (1987) was 1st Diversified Equity Investment Scheme in India.
- 41. •SBI mutual fund was the first non -UTI mutual fund, set up in November 1987
- 42. •SBI MF was followed by Canbank MF, LIC MF, Indian Bank MF, BOI MF, GIC and PNB MF
- 43. •SEBI got its regulatory powers in 1992
- 44. Phase 3 – (1993-1996) – Emergence of Private Funds
- 45. •In 1993, Mutual Fund Industry was open to private players.
- 46. •SEBI's first set of regulations for the industry formulated in 1993
- 47. •Kothari Pioneer (now merged with Franklin Templeton) was the first private sector Mutual Fund registered in 1993
- 48. •Significant innovations, mostly initiated by private players
- 49. Phase 4 – (1996-1999) – Growth and SEBI Regulation
- 50. •Implementation of new SEBI regulations led to rapid growth
- 51. •Bank mutual funds were recast as per SEBI guidelines
- 52. •UTI came under voluntary SEBI supervision.
- 53. •Dividends made tax free in 1999.
- 54. •Mutual funds assets in mid-2002 were app. 1,00,000 crore
- 55. •During this phase, both SEBI and AMFI launched investor awareness programs.
- 56. Phase 5 – (1999-2004) – Emergence of a large and uniform industry
- 57. •UTI Act was Repealed in February 2003.
- 58. •AUM by end of 2005 app. INR 1,50,000 crore
- 59. •Rapid growth, significant increase in corpus of private players
- 68. By 2010 all entry loads were removed from the mutual funds and the exit charges were at a bare minimum of 1%
- 70. Mutual Fund Classification
- 71. There are basically 4 types of schemes in terms of classifications:
- 74. Load and No Load Funds
- 76. NAV on 1-1-2008 – Rs. 82.370
- 77. NAV on 30-6-2010 – Rs. 81.927
- 78. Reliance Pharma Fund (G)
- 79. This graph is a comparison between sensex and the Net asset value of Mutual Fund. We see here that the NAVs of the mutual fund and the sensex have both been affected by the recession and they have both recovered after the initial meltdown. However in the case of fund the NAV has exceeded the value on 1-1-2008 but sensex is yet to reach that level. But the value at both the extremes has a very minimal difference and there is every possibility that the sensex will surpass its value on 1-1-2008.
- 80. NAV on 1-1-2008 – Rs.30.914
- 81. NAV on 30-6-2010 – Rs.53.579
- 82. HDFC TOP 200 Fund (G)
- 83. This graph is a comparison between sensex and the Net asset value of Mutual Fund. We see here that the NAVs of the mutual fund and the sensex have both been affected by the recession and they have both recovered after the initial meltdown. However in the case of fund the NAV has exceeded the value on 1-1-2008 but sensex is yet to reach that level. But the value at both the extremes has a very minimal difference and there is every possibility that the sensex will surpass its value on 1-1-2008.
- 84. NAV on 1-1-2008 – Rs. 170.241
- 85. NAV on 30-6-2010 - Rs. 194.604
- 86. ICICI PRU Income-Ins. Plan (G)
- 87. This is a graph that showcases the minimum risk associated with the GILT funds. The value of NAV of the fund is not affected by the share market fluctuations. The NAV value is also steadily increasing and has surpassed the value on 1-1-2008. If we look at the sensex it has more or less recovered but does not have any significant effect on the return of the fund. Hence GILT funds are largely safe to invest in comparison to equity funds.
- 88. NAV on 1-1-2008 – Rs. 24.421
- 89. NAV on 30-6-2010 – Rs.31.558
- 90. IDFC GSEC – PF INSI B (G)
- 91. This is a graph that showcases the minimum risk associated with the GILT funds. The value of NAV of the fund is not affected by the share market fluctuations. The NAV value is also steadily increasing and has surpassed the value on 1-1-2008. If we look at the sensex it has more or less recovered but does not have any significant effect on the return of the fund. Hence GILT funds are largely safe to invest in comparison to equity funds.
- 92. NAV on 1-1-2008 – Rs.11.982
- 93. NAV on 30-6-2010 – Rs.15.149
- 94. HDFC PRUDENCE FUND (G)
- 95. This graph is a comparison between sensex and the Net asset value of Mutual Fund. We see here that the NAVs of the mutual fund and the sensex have both been affected by the recession and they have both recovered after the initial meltdown. However in the case of fund the NAV has exceeded the value on 1-1-2008 but sensex is yet to reach that level. But the value at both the extremes has a very minimal difference and there is every possibility that the sensex will surpass its value on 1-1-2008.
- 97. To find out the effect of recession on Indian Mutual Fund Industry
- 100. Njfundz.com
- 104. Wrong numbers
- 106. Insurance
- 108. See to it that he earns a good profit.
- 109. Build trust through this.
- 110. Educate clients on equity market.
- 112. SIP calculator
- 114. Comparison of Mutual Fund and ULIPs
- 116. Ries and Trout, Marketing Warfare, New York, TMH, 2003
- 117. Malhotra Naresh, Marketing Research, India, Pearson Education,2009
- 119. The Analyst, July 2010