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Development of Mutual Funds in India

The mutual fund industry in India started in 1963 with the formation of Unit
Trust of India, at the initiative of the Government of India and Reserve Bank
the. The history of mutual funds in India can be broadly divided into four
distinct phases
FirstPhase-1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It
was set up by the Reserve Bank of India and functioned under the Regulatory
and administrative control of the Reserve Bank of India. In 1978 UTI was delinked from the RBI and the Industrial Development Bank of India (IDBI) took
over the regulatory and administrative control in place of RBI. The first scheme
launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700
crores
of
assets
under
management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec
87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund
in
December
1990.
At the end of 1993, the mutual fund industry had assets under management of
Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund
families. Also, 1993 was the year in which the first Mutual Fund Regulations
came into being, under which all mutual funds, except UTI were to be
registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July
1993.
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The 1993 SEBI (Mutual Fund) Regulations were substituted by a more


comprehensive and revised Mutual Fund Regulations in 1996. The industry
now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were 33
mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India
with Rs.44,541 crores of assets under management was way ahead of other
mutual
funds.
Fourth Phase since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI
was bifurcated into two separate entities. One is the Specified Undertaking of
the Unit Trust of India with assets under management of Rs.29, 835 crores as at
the end of January 2003, representing broadly, the assets of US 64 scheme,
assured return and certain other schemes. The Specified Undertaking of Unit
Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund
Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March
2000 more than Rs.76,000 crores of assets under management and with the
setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different private
sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004, there were 29
funds, which manage assets of Rs.153108 crores under 421 schemes.
The graph indicates the growth of assets over the years.

[Growth in Assets Under Management]


[Source: www.amfiindia.com]

Mutual Funds Organisation


There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:

[Assets Under Management By Fund Type]


[Source: www.amfiindia.com]

[Assets

Under Management By AMC]


[Source: www.amfiindia.com]

REGULATORY BODIES
Financial System is basically responsible for the major up and downs in the
economy. So, there are some regulatory bodies on it which ensures
effectiveness in the management of fund of the investors and transparency in
the transactions.
Ministry of Finance

SEBI
Stock Brokers
R & T Agent
Mutual Fund

RBI

Dept. of IT

Commercial
Banks
NBF Co.

PAN
TAN
e-TDS

[Regulatory bodies]

MAJOR COMPETITORS
1. Bajaj Capital
It was established in 1964 at Delhi. In 1965 it innovates a new financial
instrument Companies Fixed Deposits and becomes the first company to raise
Fixed Deposits. The objective of company is to provide professional
guidance to investors on where, when and how to invest and to assist the
corporate sector in its resource raising activities. Bajaj Capital became the
first company to set up Investment Centers all over India for this
purpose. Today, Bajaj Capital has 90 offices in over 40 important Indian
Cities and has a team of around 500 employees nationwide.
Services provided
Merchant banking
Buying and Selling of Money Market Investments
Distribution of financial products
Investment Advisory Service
Company fixed deposits
Bonds
Mutual funds
Life insurance
General insurance
Pension schemes
Post office schemes
Tax saving schemes
Insurance linked investment schemes
Initial public offerings
Housing loans
NRI schemes
Car insurance
Financial Planning
Investment planning
Retirement planning
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Insurance planning
Children's future planning
Tax planning
Short-term cash flow planning

2.MCS Ltd.
It is established in 1985 in Delhi. It is one of the largest Data Processing House
employing more than 600 people.
MCS Ltd. has 8 branches all over India.
Volumes Handled
Share registry activities for over 100 corporate servicing over 10 million
investors.
Mutual fund operations for 25 funds, servicing over 4.5 million investors.
Billing & settlement plan for Indian operations of IATA Geneva for 1.2
million tickets per annum covering (26 airlines & over 1200 agents).
Services Offered:
Registrars and Transfer Agents
Registrars to IPOs /Right Issues
Registrars to Open Offers
Registrars to Mutual Funds
Data Processing for Airlines
Print Shop Services
MCS is a major player in these activities in the Country with a market share of
about 25%. MCS today provides these services to over 140 Corporate and
Mutual Funds for a total investor base of 15 million.

3. N.J.India Investments Pvt. Ltd.


NJ India Invest (formerly known as NJ Capital stocks) was started in 1994 to
cater to the growing financial services sector. NJ India Invest evolved out as a
client focused need based investment advisory firm. NJ regards mutual fund as
one of the best investment avenue available to satisfy any kind of investment
need.

4. ICICI Securities Ltd.

ICICI Securities Limited (i-SEC) is a wholly owned investment-banking


subsidiary of ICICI Limited. ICICI is the only non-Japanese Asian financial
institution to be listed on the New York Stock Exchange (NYSE). ICICI
Securities was formed on 22nd Feb. 1993, when ICICI's Merchant Banking
Division was spun off into a new company; ICICI Securities today is India's
leading Investment Bank and one of the most significant players in the Indian
capital markets.
ICICI Brokerage Services Limited (IBSL) set up in March 1995, IBSL is a
100% subsidiary of i-SEC. It commenced its securities brokerage activities in
February 1996 and is registered with the National Stock Exchange of India
Limited and The Stock Exchange, Mumbai.
ICICI has started a website ICICIdirect.com which is the most comprehensive
website, which allows you to invest in Shares, Mutual funds, Derivatives
(Futures and Options) and other financial products.
ICICI has a large network of branches all over India.
Services offered:
Merchant Banking
Demat Service
Stock Broking

5. HDFC
HDFC is the leading financial company in India. IT has large network of
branches all over India. HDFC Securities which is fully subsidiary of HDFC
provides demat service.
HDFC and its subsidiary provides following services.
Demat Service
Life Insurance
Banking Service
Housing Finance
Vehicle Finance
Education Loan
Personal Loan
Mutual Fund
8

6. Kotak Securities Ltd.


Kotak Securities needs no introduction as one of the largest stock broking
houses in the country and a leading distributor of primary market offerings.
Kotak Securities limited is a joint venture between Kotak Mahindra Bank and
Goldman Sachs, the international investment banking and brokerage firm.
Kotak Securities is a corporate member of both the BSE and the NSE. It is also
a depository participant with the National Securities Depository Limited
(NSDL) for trading and settlement of dematerialized shares.
Services offered:
Stock Broking
Financial Product Distribution
Demat Services
Investment Advisory Services

7. Motilal Oswal Securities Ltd.


Motilal Oswal Securities Ltd (MOSt) is one of the leading equity research and
broking houses of India. MOSt has a 20-member research team, which is
engaged round the clock in analyzing the Indian economy and corporate sectors
to identify equity investment ideas. Asia Money Broker's Poll 2002 has rated
MOSt as one of the best Indian broking house, for research, for the second time
since 2000.
Motilal Oswal is member of NSDL and CDSIL for DP. It has wide network of
branches. It has 158 branches all over India.
Services Offered:
Demat Services
Stock Broking
Investment Advisory Service

PRODUCT DETAILS
Mutual funds serve as a link between the saving people and the capital market
in that they mobilize saving from investors and bring them to borrowers in the
capital markets. In short, it is a common pool of money into which investors
place their contribution that is to be invested in accordance with a stated
objective.
A mutual fund uses the money collected from the investors to buy those assets,
which are specially permitted by its stated investment objective. When an
investor subscribes to a mutual fund, he/she buys a part of asset or the pool of
funds that are outstanding at that time.
A mutual fund is constituted as an investment company and an investor buys
into the fund, means he buys the share of the fund and is known as a unit holder.
Since each unit holder is a part of owner of a mutual fund, it is necessary to
establish the value of his part. Since the unit held by an investor evidences the
ownership of the funds assets, the value of the total asset of the fund when
divided by the total number of units issued by the mutual fund gives us the
value of one unit. This is called as Net Asset Value (NAV).

10

STRUCTURE OF INDIAN MUTUAL FUNDS


Mutual fund industry is highly regulated by the government keeping in view of
the protection of investors interest as well as to maintain operational
transparency.
In India SEBI Regulations Act, 1996, guides the formation and operation of
Mutual Funds. A Mutual Fund comprises of 4 separate entities.
1.
2.
3.
4.
5.

Sponsor
Board of Trusties
Asset Management Company
Custodian and Depositories
Distributors

1.

Sponsor:

Sponsor is defined under SEBI regulation as any person who, acting alone or
in combination with another body corporate, establishes a mutual fund. The
sponsor gets the fund registered with SEBI. The sponsors form a trust and
appoint a Board of Trustees.
The sponsor must contribute at least 40% of the net worth of the AMC.
The sponsor must posses a sound financial track record over 5 years prior
to registration.

2. Board of Trustees:
Mutual funds are managed by Board of Trustees. Trust is created by a document
called the Trust Deed that is executed by fund sponsor in favour of trustees.
The trustees appoint the AMC and custodian with the prior approval of
SEBI.
They also approve all the schemes floated by the AMC.
They have right to dismiss the AMC, with the approval of SEBI.
Half of the trustees should be independent persons. Neither the AMC, nor
its employees can act as trustee.

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A trustee can not be appointed as a trustee of two or more mutual funds


until and unless he is an independent person or has permission from the
Mutual Fund where he is trustee.
Trustees can be removed only by prior approval of SEBI.
3. Asset Management Company:
The role of an AMC is to act as the investment manager of the Trust under the
Board supervision and direction of the Trustees.
The AMC is required to be approved and registered with SEBI.
The AMC of a Mutual Fund must have a net worth of at least Rs. 10
crore at all time.
The AMC can not act as a trustee of any other Mutual Fund.
They will float schemes only after obtaining the prior approval of the
Trustees and SEBI.
The director of AMC should be a person of reputed of high standing and
at least have five years experience in relevant field.
AMC can be terminated with 75% unit holders or majority of trustees.

4. Custodian and Depositories:


As per SEBI Regulations Mutual Funds shall have a custodian who is not any
way associated with the AMC. It carry outs the activity of safe keeping the
securities or participating, in any clearing system. The custodian should be
independent from sponsors and AMC and should have a sound track record and
adequate relevant experience.
As Indian capital markets are moving away from having physical certificates to
ownership of these securities in dematerialized form with Depository. Mutual
Funds dematerialized securities are hold by depository participant.

5. Distributors:
For a fund to sell units across a wide retail base of individual investors, an
established network of distribution agents is essential. AMCs usually appoint
Distributors or Brokers, who sell units on behalf of the fund. A broker usually
acts on behalf of several mutual funds simultaneously and may have several
sub-brokers under him for the purpose of distribution of units.

12

MUTUAL FUND A GLOBALLY PROVEN


INVESTMENT
Worldwide, the mutual fund has a long and successful history. The popularity of
mutual fund has increased manifold. In developed financial market, like US
mutual funds have almost overtaken bank deposits and total assets of over US $
3 trillion.
In India, Mutual Fund industry started with the setting up of UTI in 1964.
Public sector banks and financial institution began to establish Mutual Funds in
1987. The private sector and foreign institutions were allowed to set up Mutual
Fund in 1993.
WHAT IS MUTUAL FUND?
A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debentures and other securities. The
income earned through these investments and the capital appreciation realized
is 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.

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Critical View About Mutual Fund


Advantages:
1. Portfolio Diversification:

Each investor in a fund is a part owner of all the funds assets, thus enabling
investor to hold a diversified investment portfolio even with a small amount of
investment, which would otherwise require big capital.
2. Professional Management:
Mutual Funds provide the services of experienced and skilled professionals,
backed by a dedicated investment research team that analyze the performance
and prospect of companies and selects suitable investments to achieve the
objectives of the scheme.
3. Diversification:
Mutual Fund invests in a number of companies across a broad cross-section of
industries and sectors. This diversification reduces the risk because all stock can
not go through a downtrend at the same time and in the same proportion. You
achieve this diversification through a mutual fund with powerless money that
you can do on your own.
4. Reduction of Transaction Cost:
The investors bear all the cost of investing such as brokerage or custody of
securities. When going through the fund investor has the benefit of economies
of scale; the funds pay lesser cost because of larger volumes, a benefit passed
on to its investors.
5. Liquidity:
By investing in Mutual Funds the investors can cash their investment by selling
their units to the fund if open-ended, or selling them in the stock market if the
fund is close ended.
6. Convenience & Flexibility:
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Mutual Funds Companies offer investor to transfer their holding from one
scheme to other.
7. Tax Benefits:
The investors are totally exempt from paying any tax on the income they
receive from the Mutual Funds.
Investment up to 10000 in ELSS qualifies for tax rebate of 20%.
8. Regulatory oversight:
Mutual funds are subject to many government regulations that protect
investors from fraud.
9. Convenience:
You can usually buy mutual fund shares by mail, phone, or over the Internet.

Limitations:
1.

No Control over Costs:

An investor in a mutual fund has no control over the overall cost of investing.
He/she has to pay investment management fees as long as he/she remains with
the fund. Fees are payable even while the value of the investment may be
declining.
2.

No Tailor made Portfolios:

Investors who invest on their own can build their own portfolios of shares and
bonds and other securities. Investing through fund means he/she delegates this
decision to the fund managers.
3.

Managing a Portfolio of Funds:

Availability of a large number of funds can actually mean too much choice for
the investor. He/she may again need advice on how to select a fund to achieve
his/her objectives, quite similar to the situation when he/she has to select
individual shares or bonds to invest in.

15

4.

Entry and Exit Cost:

When large bodies like a fund invest in shares, the concentrated buying or
selling often result in adverse price movements i.e. at the time of buying, fund
has to pay high and vise-versa. But now SEBI has confirmed that no AMC can
charge entry load on new mutual fund.

5.

No Guarantees:

No investment is risk free. If the entire stock market declines in value, the value
of mutual fund shares will go down as well, no matter how balanced the
portfolio. Investors encounter fewer risks when they invest in mutual funds than
when they buy and sell stocks on their own. However, anyone who invests
through a mutual fund runs the risk of losing money.

16

MUTUAL FUND CYCLE

[Mutual Fund Cycle]


[Source: amfiindia.com]

From above cycle, it can be observed clearly that how the money from the
investors flow and they get returns out of it. With a very small amount of fund,
investors pool their money with fund managers.
After studying the market, the fund manager invests money of the investors in
various securities like shares, bonds, debentures, government securities etc. to
achieve goal of the investors.
With ups and downs in the market returns are generated and they are passed on
to the investors in form of dividend or capital gain or lost. The above cycle is
very clear and also very effective.
The fund manager while investing on behalf of investors takes into
consideration various factors like time, risk; amount etc. so that he/she can
make proper investment decision.

17

Types of Mutual Fund

Types of Mutual Fund

By Objective

Equity Fund

Debt Fund

Balanced Fund

Money Market

Gilt Fund

By Duration

Open Ended

Close Ended

Interval

By Load

Load Fund

No Load Fund

Other Fund

Tax Saving

Index Fund

Sector Fund

Comm. Fund

Offshore

[Fig.10: Types of Mutual Funds]

18

1.

By objective:

Investment goals vary from person to person. While somebody wants security,
others might give more weightage to returns alone. Somebody else might want
to plan for his childs education while somebody might be saving for the
proverbial rainy day or even life after retirement. With objectives defying any
range, it is obvious that the products required will vary as well. So, Mutual
funds can be classified based on the objectives of the investor.
(a). Equity Fund:
Equity funds invest a major portion of their corpus in equity shares issued by
companies. NAV of equity funds are fluctuated by fluctuation in price of shares
that it holds. So there is a high risk as well as high return in equity fund.
Potential to earn in such funds is higher when they are invested for long term.
The leading example of such funds are
Prudential ICICI Growth Plan,
Tata Pure Equity Fund,
Reliance Vision,
Franklin India Prima Fund etc.
(b).

Debt Fund:

Debt funds invest in debt instruments debt instruments issued by governments,


private companies, banks and financial institutions. By investing in debt, these
funds target low risk and stable income investors. These funds are low risk low
return funds.
The leading examples are:
Birla Income Plus,
Principal Income Fund,
HDFC Income Fund,
UTI Bond Fund etc.
(c).

Balanced Fund:

A balanced fund is one that has a portfolio comprising debt instruments as well
as preference and equity shares. The idea is to reduce volatility of funds, while
19

providing some upside for capital appreciation. They are best suitable for the
people looking for a combination for capital appreciation and regular income
and best time spend for such investment is more than 3 years.
The leading examples are
Prudential ICICI Balanced Fund,
Birla Balance Fund,
Franklin India Balance Fund,
Sundaram Balance Fund etc.
(d).

Money Market Fund:

Money market funds invest in securities of a short-term nature, which generally


means securities of less than one-year maturity such as Treasury Bills issued by
governments, Certificates of deposit issued by banks and Commercial paper
issued by companies.
The major strength of money market funds are the liquidity and safety of
principal that the investors can normally expect from short term investments.
The leading examples are
Prudential ICICI Liquid Plan,
Templeton India Liquid Fund,
Grindlays Cash Fund etc.
(e).

Gilt Fund:

These funds are sort of government funds wherein the investments are made in
debt instrument of government, which carry no risk of non payment of interest
as the RBI manages the payment of interest and principal on the investments.
These funds are best suited for regular income and long term investment
objectives.
The leading examples are
Prudential ICICI Gilt Fund,
Tata Gilt Securities Fund,
Templton India Government Securities Fund etc.

20

2. By Duration:
(a). Open-ended Fund:
An open ended fund is one that is available for subscription and repurchase on a
continuous basis. These schemes do not have a fixed maturity period. Investors
can conveniently buy and sell units at NAV related prices which are declared
daily basis. The key feature of this fund is liquidity.
(b). Close-ended Fund:
A close ended fund has a stipulated maturity period e.g. 5-7 years. The fund is
open for subscription only during a specified period at the time of launch of the
scheme. Investors can invest in the scheme at the time of initial public issue and
thereafter they can buy or sell units on stock exchange where the units are listed
at NAV. These mutual fund schemes disclose NAV generally on weekly basis.
(c).

Interval Fund:

Interval funds combine the features of open-ended and close-ended schemes.


They are open for sale or redemption during pre determined intervals at NAV
related prices.
Risk Return Grid
Risk
Tolerance/Return
Expected

Focus

Suitable Products

Benefits offered by
MFs

Low

Debt

Bank/ Company FD, Debt


based Funds

Liquidity, Better PostTax returns

Medium

Partially
Debt,
Partially
Equity

Balanced Funds, Some


Liquidity, Better PostDiversified Equity Funds
Tax returns, Better
and some debt Funds, Mix Management,
of shares and Fixed Deposits Diversification

Equity

Capital Market, Equity


Funds (Diversified as well
as Sector)

High

Diversification,
Expertise in stock
picking, Liquidity, Tax
free dividends

21

[Table11: Risk Return Grid of various MF]

22

3. By Load:
(a).

Load Fund:

Marketing of new mutual fund scheme involves initial expenses. These initial
expenses may be recovered from the investors by entry or exit load.
But now SEBI has confirmed that AMC can not charge entry load on new
mutual fund.
(i). Entry Load or Front-end Load:
If initial expenses recovered from investors at the time of investors entry into
the fund, by deducting a specific amount from his initial contribution it is called
Entry Load. But now it has been banned by SEBI.
(ii). Exit Load or Back-end Load:
If initial expenses recovered at the time of the investors exit from the scheme,
by deducting a specified amount from the redemption proceeds payable to the
investor it is called exit load.
(iii). Deferred Load:
The load amount charged to the scheme over a period of time is called a
deferred load.
(b).

No Load Fund:

Funds that dont charge entry, exit, or deferred load or any other charges for
sales expenses are called no load funds.
Now, generally all Mutual Fund companies charge 2 to 2.5% entry load
on equity fund.
Generally there is no exit load on equity and sectoral funds to maintain
liquidity of that funds.
Generally there is no entry load on gilt scheme and income fund.
There is 0.25 to 1% exit load on gilt and income fund if investors exit
from fund before specified time which is generally 3 to 6 months.

23

4. Other types of fund:


(a) Tax Saving Funds:
These schemes offer tax rebates to the investors under specific provisions of the
Income Tax Act, 1961 as the Government offers tax incentives for investment in
specified avenues. E.g. Equity Linked Saving Scheme (ELSS). Pension
schemes also offer tax benefits.
The leading examples are
Prudential ICICI Tax Plan,
Templeton India Pension Plan,
Franklin India Taxshield etc.
(b) Index Funds:
Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the
securities in the same weightage comprising of an index. NAV of such funds are
changed accordance with the change in the index.
The leading examples are
Birla Index Fund,
HDFC Index Fund,
Prudential ICICI Index Fund,
UTI Index Fund etc.
(C) Sector Funds:
These are the funds which invest in the securities of only those sectors or
industries as specified in the offer documents. E.g. Pharmaceuticals, Software,
Petroleum etc. These types of funds are more risky compared to diversified
funds.
The leading examples are
Birla IT Fund,
Pru. ICICI FMCG Fund,
24

Franklin India Pharma Fund etc.


(d) Commodity Funds:
Commodity funds invest into the different commodities directly or through
shares of commodity companies. E.g. Commodity fund invest in gold or shares
of gold mines. Commodity funds have not yet developed in India.
(e) Off Shore Funds:
These funds invest in equities in one or more foreign countries there by
achieving diversification across the countrys borders. However they also have
additional risks such as the foreign exchange rate risk and their performance
depends on the economic conditions of the countries they invest in.

25

INDUSTRY DETAILS
Following are list of Mutual Fund companies in India.
Sr. No.

Mutual Fund Name

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Alliance Mutual Fund


Benchmark Mutual Fund
Birla Mutual Fund
Bank of Baroda Mutual Fund
Can Bank Mutual Fund
Chola Mutual Fund
Deutsche Mutual Fund
DSP Merrill Lynch Mutual Fund
Escorts Mutual Fund
Franklin Templeton Investments
GIC Mutual Fund
HDFC Mutual Fund
HSBC Mutual Fund
IL & FS Mutual Fund
ING Vysya Mutual Fund
JM Mutual Fund
Kotak Mutual Fund
LIC Mutual Fund
Morgan Stanley Mutual Fund
Punjab National Bank Mutual Fund
Prudential ICICI Mutual Fund
Principal Mutual Fund
Reliance Mutual Fund
Sahara Mutual Fund
State Bank of India Mutual Fund
Standard Chartered Mutual Fund
Sundaram Mutual Fund
SUN F&C Mutual Fund
Tata TD Mutual Fund
Taurus Mutual Fund
Unit Trust of India
UTI Mutual Fund

No. of
Schemes
36
5
74
17
25
45
40
40
15
130
5
79
32
43
55
55
56
35
1
4
124
68
74
12
59
100
52
1
100
9
42
66

26

RESEARCH OBJECTIVES

Any activity done without an objective in a mind cannot turn fruitful. An


objective provides a specific direction to an activity. Objectives may range from
very general to very specific, but they should be clear enough to point out with
reasonable accuracy what researcher wants to achieve through the study and
how it will be helpful to the decision maker in solving the problem.
The objective of any research is basically divided into two categories.
Primary Objective:
To find out market potential of various companies.
Secondary Objectives:
Following are secondary objectives.
To assess an awareness of mutual funds .
To find out how many people are interested in dealing of mutual fund.

27

RESEARCH METHODOLOGY

1.

Research Design:

A research design is a pattern or an outline of a research projects working. It is


a statement of only the essential elements of a study, those that provide the
basic guidelines for the details of the project. It comprises a series of prior
decision that taken together provide master plans for executing a research
projects.
A research design serves as a bridge between what has been established i.e., the
research objectives and what is to be done, in conduct of the study to relish
those objectives. If there were no research design, the research would have only
foggy notions as about what is to be done.
I have used Exploratory Type. The research is of both qualitative as well as
quantitative type.
2.

Unit of Analysis:

Middle class, Upper Middle class and HNIs people.


Characteristics of interest:
Peoples knowledge about Mutual Fund
Peoples knowledge about Karvy
Peoples interest in getting knowledge of Mutual Fund
Peoples willingness to deal in Mutual Fund with Karvy
3.

Sources of Data:
a. Primary Source:

The primary data is collected using sampling method and by survey using
questionnaire.
b. Secondary Source:
28

Secondary data includes information regarding present market scenario,


Information regarding Mutual Funds and competitors are collected by Internet,
Magazines and News papers and books.
4.

Sample Planning:

Sample Size: 50 units


Sample Extent: Delhi
Sampling Design:
A Sample Design is a definite plan for obtaining a sample from a given
population. It refers to the technique or method the researcher would adopt in
selecting items for the sample.
I have used both Convenience Sampling Method.
5.

Data Collection Method:

I have used Survey Method to collect data. I have collected data using
questionnaire.
Questionnaire Plan
I have used Structured Questionnaire for gathering the required data through
contacting respondent personally.
Type of Information:
I have collected Fact, Awareness, Attitude, Future action plan and reason using
questionnaire.
Type of Questions:
Close-ended questions of Dichotomous and Multiple Choice type are
asked in the questionnaire for data collection.

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6.

Data Analysis & Interpretation:

Data Analysis is based on the data collected by way of Questionnaires. From


the collected data findings are extracted. The data is tabulated and frequency
distribution chart is prepared.

30

RESEARCH ANALYSIS AND INTERPRETATION

1. Percentage of investors

Inference : Graph shows that 30% of people are investing in mutual fund.
That mean it is a good opportunity for the company as they can grap the
rest unaware people to being them investor in mutual fund by making
them aware about mutual fund.
2. Reason for Investment

Inference : Graph shows that 50% (above among all) people


are interested in investing in mutual fund. That mean company
can increase investors for investing in mutual fund by giving
them equity based mutual fund.
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3. Frequency of Investment

Inference: Graph shows that 40% people are investing in mutual fund
once a month. So company suggests people about SIP and company
suggest rest of the people about the benefits of SIP.
4. Awareness about scheme offered for Mutual Fund

Inference: Graph shows that 66% of people have few knowledge about
mutual fund and 10 % of people do not know about mutual fund. That
means company can make fully aware about mutual fund to people and
tell them benefit associated with mutual fund so that they will invest in
Mutual fund.

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5. Awareness of tax advantage by Mutual Fund

Inference: Graph shows that 38 % of people dont know about tax


benefit associated with mutual fund and 34 % of people are not sure
about tax benefit through mutual fund. This is the good opportunity
for company to increase investors of mutual fund by making aware
them tax benefit associated with mutual fund in such schemes like ELSS.
6. External advisor for Investors

Inference: Graph shows that 38 % of people invest in mutual fund


on the suggestion of their friends. So they are potential investors for
the company. Company can take care of these investors by suggest
them to invest on professional advisory.

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7. Types of Mutual Funds in which they invest

Inference: Graph shows that most of the people (58 %)


invest in equity based mutual funds. They are risk taker.
Company can take care of these investors by suggesting
them balanced and debts funds.
8. Why they are not investing in mutual funds.

Inference: Graph shows that 48% of people are not investing in


Mutual fund because of bitter past experience. 14% have not knowledge
about mutual funds. 22 % do not believe on this service.
6 % are not able to select the best scheme for them.Company assumes
that these investors have lack of advisory. So company should suggest
them for investing on basis of professional advisor.

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9. People those interested to know more about mutual fund.

Inference: Graph shows that 86 % of people are interested to know


more about mutual funds. This is the great opportunity for the
company to increase the investors by making them aware about
mutual funds and telling them benefits associated with mutual funds.

35

LIMITATIONS

Due to limitation of time and cost constrains a sample size of only 50


respondents are chosen.
Data Analysis and interpretation done may not be that strong due to small
sample and Convenience Sampling Method.
The sample extent for research is only INDIA.
Some of the respondents may be biased in giving responses.
My inexperience in research area might have affected results.

36

GLOSSARY
Corporate advisory services
Merchant bankers offer customised solutions to solve the financial problems of
their clients. Merchant bankers study the working capital practices that exist
within the company and suggest alternative policies. They also advise the
company on rehabilitation and turnaround strategies, which would help
companies to recover from their current position. They also provide advice on
appropriate risk management strategies.
Loan syndication
Arrangement of loans for clients, by analysing their cash flow pattern, so that
the terms of borrowing meet the clients cash requirements and offer assistance
in loan documentation procedures.
Portfolio
Total number of all holdings held by a company is called portfolio. The
portfolio mix is aimed at spreading the risk over different sectors. It consists of
all assets of company.
NAV
Net Asset Value is the current market worth of the mutual fund shares. It is
calculated daily by taking the funds total asset securities, cash and any accrued
earning deducting liabilities, and dividing the reminder by the number of shares
outstanding.
Depository
The principal function of a depository is to dematerialize securities and enable
their transactions in book-entry form. A depository established under the
Depositories Act can provide any service connected with recording of allotment
of securities or transfer of ownership of securities in the record of a depository.

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Capital gain
The profit made from selling shares, mutual funds etc.
IPO
Abbreviation for Initial Public Offering. Generally associated with admission to
listing of the share capital on the stock exchange.

38

Questionnaire
1.
[]
[]
[]
[]
[]

Which are the investment tools you invest in?


Bank Fixed Deposit
RBI Bonds
Mutual Funds
Equities
others (Please specify)

Re2. You primarily invest for (Rank according to your preference)


[ ] Returns
[ ] Liquidity
[ ] Savings
[ ] Tax Benefits
4. Rank the investments options according to you preference of
Investment.
[ ] Bank Fixed Deposit
[ ] RBI Bonds
[ ] Mutual Funds
[ ] Equities
[ ] Any other (Please specify)
5.
[]
[]
[]

What is the frequency of you investments?


Once a Month
Once in 6 Months
Once a Year

6. Do you invest in Mutual Funds?


[ ] Yes
[ ] No
7. If the answer to question 9 is "Yes"
a.)Are you aware of the various schemes offered by Mutual Funds?
[ ] Yes
[ ] No
[ ] Few
b.)Do you know that you can get Tax Advantages by investing in Mutual
Funds?
[ ] Yes
[ ] No
[] Not Sure
39

c.)On whose external advice do you invest?


[ ] Bank
[ ] Distributor
[ ] Agents
[ ] Direct investments
[ ] C.A.
d.)Which types of Mutual Fund do you invest in?
[ ] Debt
[ ] Equities
[ ] Balanced
8.If the answer to question 9 is "No"
You do not invest in Mutual Fund because of (you may give multiple
answers)
[]
[]
[]
[]
[]

Bitter past experience


Lack of Knowledge
Lack of confidence in service being provided
Difficulty in selection of schemes
In-efficient investment advisors

9. If Mutual Fund offer you Steady Returns, Tax Benefits, Liquidity,


Diversification of Portfolio, Lesser Risk would consider it as an investment
option in the future for you?
[ ] Yes
[ ] No
[ ] May be
10. Would you be interested to know more about Mutual Funds?
[ ] Yes
[ ] No
Name

: ...

Age

:.

Occupation:
Mobile No. :...

40

BIBLIOGRAPHY
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

www.mutualfundsindia.com
www.amfiindia.com
www.themanagementor.com
www.dewb-vc.com
www.karvy.com
www.indiacorporateadvisor.com
www.nsdl.co.in
www.incometaxdelhi.nic.in
www.incometaxindia.gov.in
D.C.Anjaria & Dhaivat Anjaria, AMFI Workbook, Ed. 2 (Association of

Mutual Funds in India)

41