SUMMER INTERNSHIP PROJECT REPORT ON INVESTORS AWARENESS & PREFERENCE REGARDING DIFFERENT TYPES OF MUTUAL FUNDS

Submitted in partial fulfillment of the requirement for the award of the Degree in

MASTER OF BUSINESS ADMINISTRATION To GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD

Under the Guidance of Prof. BHAVIK MEHTA Prepared by AMITKUMAR K. SADRANI, Enrollment No.:107420592055

PARUL INSTITUTE OF ENGINEERING & TECHNOLOGY

MBA Department, LIMDA. VADODARA.

CERTIFICATE

This is to certify that the project work entitled INVESTORS AWARENESS & PREFERENCE REGARDING DIFFERENT TYPES OF MUTUAL FUNDS was carried out by Mr. Amitkumar K.

Sadrani in partial fulfillment of the Award of the degree in Master of Business Administration to the GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD in the year2010 - 2012. It is certified that all correction/suggestion indicated for internal assessment have been incorporated in the Report deposited in the department library. The project report has been approved as it satisfies the academic requirements in respect of project work prescribed for the Master of Business Administration Degree.

Signature of Guide

Signature of Director

Prof. Bhavik Mehta Name of Guide

Dr. P.G.K.Murthy Name of Director

College

: Parul Institute of Engineering and Technology, MBA Department ( Ins. Code 742 )

DECLARATION
I, Amit Kamleshbhai Sadrani hereby declare that, This Report has been completed by me under guidance of Mr. Amar Shah (In charge of Branch) Training at JHAVERI SECURITIES LTD. I declare that study and Suggestion of this report is done by my own efforts and is not submitted, either in part or in whole, to any other University or Institute for Examination.

DATE: PLACE:

Student Name:Amit Sadrani Roll No: - 56

PREFACE
Theory of any subject is important but without its practical knowledge it becomes unless particularly for the Management Students. As a Management Students, we have studied many theories and concepts in the classroom, but only after taking up this project work we have experienced & understood these Management theories & practices in its fullest sense, which plays a very vital role in business field today. The knowledge of management is incomplete without knowing the practical application of the theories studied. This training provides golden opportunity for all students, especially when the management student does not have prefect

understanding of the working of a unit. This practical report in MBA program develops the feeling or awareness in the management students about the difficulties and challenges of the business world. Only theoretical knowledge does not import complete education is must be accompany with practical experience to add meaning to education . Hence, this report is designed with the objective to know the Mutual Funds concept and get poetical knowledge of this field.

ACKNOWLEDGEMENT

Any project work can never be done on an individual basis. It is collective effort of the people from different circles around the individual. Each of them has been very helpful at their level and has played a vital role in the direction of accomplishing this venture of mine I would also like to express my deep gratitude to my project guide Mr. Amar Shah for giving me this valuable guidance, deep insight into the Mutual Fund industry and help me in each & every phase of this project. I am also thankful to other Faculty members of Financial Department, the staff assistants who helped me directly or indirectly to prepare this project. I am also thankful to my family members and friends who helped me in the best way they could, to prepare this project.

MAIN INDEX
SR.NO PARTICULAR PAGE NO
10 11 12 14 16 19 19 22 27 33 35 36 39 40 44 45 48 49 50 54 55 59 61 63 64

1 2 2.1 2.2 2.3 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9

EXECUTIVE SUMMARY COMPANY PROFILE

Introduction Of The Company Approach for excellence Journey

RESEARCH PROJECT
Introduction Of Mutual Fund History & Background Of Mutual FUND Classification Of Mutual Fund Market Trends Banks VS Mutual Fund Regulatory Aspect Of Mutual Fund Risk & Reward Potential for Different Type Of Mutual fund Advantages Of Mutual Fund Drawback Of Investing In Mutual Fund

3.10 Defining Mutual Fund Risk 3.11 Safety Of Mutual Fund 3.12 Process Of Mutual Fund 3.13 Mutual Fund Organization 3.14 Nav 3.15 How To Invest In Mutual Fund 3.16 SEBIS Regulation In Mf 3.17 Literature Review 4 4.1

PROJECT ANALYSIS
Problem Description

4.2 4.3 5 6 7 8 9

Limitation Of Study
Evaluation Of Questionnaire

66 67 86 87 88 90 91

FINDING RECOMMENDATION CONCLUSION BIBLIOGRAPHY ANNEXURE

FIGURES
SR. NO PARTICULAR

PAGE NO

A B C D E F G H I J K L M N O P Q

Age Gender Occupation Saving Investment In Mutual Fund Sources Of Influences In Which Company Instrument Purpose for Investment In Mutual Fund Scheme Investment Period Factor Consider Return Investment Instrument Purpose For Investment Reason For Not Investing In Mutual Fund Investing Mutual Fund In Future

67 68 69 70 71 72 73 74 75 76 77 78 79 80 82 83 84

TABLES
SR. NO PARTICULAR

PAGE NO

A B C D E F G H I J K L M N O P Q

Age Gender Occupation Saving Investment In Mutual Fund Sources Of Influences In Which Company Instrument Purpose For Investment In Mutual Fund Scheme Investment Period Factor Consider Return Investment Instrument Purpose For Investment Reason For Not Investing In Mutual Fund Investing Mutual Fund In Future

67 68 69 70 71 72 73 74 75 76 77 78 79 80 82 83 84

EXECUTIVE SUMMARY
Mutual fund is being complicated day by day in India, but though it has come with many new changes, which provide more facilities to the investors. Here I have done research project on Mutual Fund Analysis.

The objective of the project is about detail study of Mutual Fund and customer perception & awareness about Mutual fund, Our target segment was randomly selected investors of Mutual fund. Our sample size is 100 and we have used questionnaires as a research instrument. We have tested hypothesis during our survey and analysis.

The subject of the project work given us, was unique experience for us to survey in a market. we have tried our best to represent this report.

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COMPANY PROFILE

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INTRODUCTION OF COMPANY
We are Gujarat's leading broking house with a strong and stable position in the financial markets having extensive experience in financial services, capital markets, mutual fund distribution and have varied skill-set to support the team to develop the business. Looking into Business Opportunity, The Company is developing in a Very Aggressive Way all over India, horizontally and vertically having Full infrastructure with all the Necessary Corporate facilities. JHAVERI group, initiated its operation in Gujarat in the year 1992 is now one of the fastest growing stock broking houses in the state. Over the years, JHAVERI securities has embarked its presence and played a major role in the development of financial markets in Gujarat and have emerged as a financial supermarket. We can proudly say that we have a membership in all the major stock exchanges & depositories in India such as NSE, BSE, MCX, NCDEX, and NSDL. CORE VALUES OUR PHILOSOPHY Providing Quality Customer Services is the cornerstone of the company's philosophy - Consistently meeting all customer requirements in every way. OUR GOALS To march ahead challenging the horizons of the service industry in providing benchmark Services.Create value for customers enabling them to be competitive and differentiate themselves on the marketplace.

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MISSION To be the best broking house by offering world class financial services and cliental satisfaction. VISION Jhaveri shall be recognized as a market leader and to build a unique organization of those who think different, and redefine rules. Jhaveri believes in complete freedom in doing one's own work and focusing more on end results.

Institutional Investment Service

JHAVERI Securities Ltd with enormous knowledge in this diversified division of institutional Investment Service is functioning productively & efficiently to strengthen relation with our overwhelming institutional customers like SBI, IDBI, PNB, OBC BOB etc. We strive to provide the highest degree of expertise investment services which help to expand both in a firm & turbulent manner. Our experienced institutional investment advisors partner closely with you to understand your essential needs, risk management, investment goals and desired outcome in order to provide you with tailored strategies and recommendations.

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Approach for excellence:

We always share a long term relationship with our clients, which are based on mutual trust and immense faith. We have a diverse clientele and we always ensure that we are versatile to match their varying demands. No client or transaction is too small for us. We are committed to honor and executed all transactions for all types of clients, foe which we have experts at every stage. For bigger accounts we have Relationship Managers who are management graduates and who can understand clients' needs, expectations and aspirations, and ensure that all activities are fine turned to deliver appropriate services.

Strengths:
e- Trading Wealth creation seminars Digital contract Note Value Added Services Daily Investment Calls SMS/ Email updates

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 Derivative Strategy Weekly recommendations Research Reports Market news in Chat Widespread network Quality Human resources State-of-art-infrastructure

Services:
Portfolio Advisory Services Equity Broking Derivatives Trading Depository Services Mutual Funds Public sector Bonds & Government Securities IPOs & New Issues Commodities Trading

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Journey

2010
Awarded consecutively for 2nd time by CNBC TV 18 for "Best
Financial Advisor Award"

2009
April: September: October: 2009

Huge presence with more than 350 associates and expanding

network in Rajasthan in Maharashtra Awarded by CNBC TV 18 for Best Performing Individual Financial Advisor Award Jhaveri sponsored worlds longest canvas-Vadodara Marathon

December: -

IBT desk crossed highest number of 366 connected clients and 3015 Trades each day

2008
January: July: back Office. A new branch was opened in Mumbai. This was Jhaveri Securities 16th Branch. The Company developed internet-enabled software for use in the

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2007
June: An online trading facility was then launched for the investors convenience. Jhaveri was among the few first movers to offer an online trading platform.

November: - A new branch was opened in Mumbai. This was Jhaveri Securities
16th Branch.

2006
April: August: The company launched a new division for commodities broking Jhaveri published its first research report ever, based on various listed companies in the different stock exchanges.

2005
January: March: Jhaveri grew further and became a member of MCX/NCDX. This was Highlighting its growing trade in equities. It became a member of BSE (cash)

2003
February: Jhaveri became a member of Derivative (F & O), adding another feather in its hat.

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1995
June:Jhaveri Securities became a member of NSE (cash). Its high rate of escalation was evident.

1999
November:Jhaveri group conducted a first seminar for its investors where it communicated with them directly and extended a friendly hand towards the prospective investors.

1992
January:The need and dream of a bigger company was transformed into reality. Jhaveri Securities came into existence as the outcome of this transformation.

1989
April:A small business of mutual funds and Initial Public offer distribution was started. Soon, it started to grow and a need was felt to register a bigger company with properly organized structure.

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RESEARCH PROJECT
INTRODUCTION OF MUTUAL FUND
A mutual fund is a pool of money that is invested in various securities and professionally managed by an investment manager

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 invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the scheme are shared by its unit holders in proportion to the number of units owned by the (pro rata). 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 portfolio at a relatively low cost. Anybody with an inventible surplus of as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

A mutual fund is the ideal investment vehicle for today's complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc. A mutual fund is answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. In effect, the mutual fund

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vehicle exploits economies of scale in all three areas - research, investments and transaction processing. While the concept of individuals coming together to invest money collectively is not new, the mutual fund in its present form is a 20th century phenomenon. In fact, mutual fund gained popularity only after the Second World War. Globally, there are thousands of firms offering tens of thousands of mutual funds with different investment objectives. Today, mutual funds collectively manage almost as much as or more money as compared to banks. A draft offer document is to be prepared at the time of launching the fund. Typically, it pre specifies the investment objectives of the fund, the risk associated, the costs involved in the process and the broad rules for entry into and exit from the fund and other areas of operation. In India, as in most countries, these sponsors need approval from a regulator, SEBI (Securities exchange Board of India) in our case. SEBI looks at track records of the sponsor and its financial strength in granting approval to the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according to the investment objective. It also hires another entity to be the custodian of the assets of the fund and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund. In the Indian context, the sponsors promote the Asset Management Company also, in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life Asset Management Company Ltd., which has floated different mutual funds schemes and also acts as an asset manager for the funds collected under the schemes. A mutual fund is a collective investment fund formed with the objective of raising money from a large number of investors and investing it in accordance with a specified objective to provide returns that accrue pro rata to all the investors in proportion to their investment. The units held by an investor represent the stake of the investors in the fund. A professionally qualified and experienced team manages the investments and all other functions. With the large pool of money, a mutual fund is able to exploit

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economies of scale in the areas of research, investing, shuffling the investments and transaction processing - it is able to hire professionals in these functions at a very low cost per investor. As per SEBI regulations, mutual funds can offer guaranteed returns for a maximum period of one year. In case returns are guaranteed, the name of the guarantor and how the guarantee would be honored is required to be disclosed in the offer document.

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HISTORY & BACKGROUND

Mutual Fund in India (1964-2000)
The end of millennium marks 36 years of existence of mutual funds in this country. The ride through these 36 years is not been smooth. Investor opinion is still divided. While some are for mutual funds others are against it. UTI commenced its operations from July 1964. The impetus for establishing a formal institution came from the desire to increase the propensity of the middle and lower groups to save and to invest. UTI came into existence during a period marked by great political and economic uncertainty in India. With war on the borders and economic turmoil that depressed the financial market, entrepreneurs were hesitant to enter the capital market. The already existing companies found it difficult to raise fresh capital, as investors did not respond adequately to new issues. Earnest efforts were required to canalize savings of the community into productive uses in order to speed up the process of industrial growth. The then Finance Minister, T.T. Krishnamachari set up the idea of a unit trust that would be "open to any person or institution to purchase the units offered by the trust. However, this institution as we see it, is intended to cater to the needs of individual investors, and even among them as far as possible, to those whose means are small"

His ideas took the form of the Unit Trust of India, an intermediary that would help fulfill the twin objectives of mobilizing retail savings and investing those savings in the capital market and passing on the benefits so accrued to the small investors.

UTI commenced its operations from July 1964 "with a view to encouraging savings and investment and participation in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal of securities." Different provisions of the UTI Act laid down the structure of management, scope of business, powers and functions of the

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Trust as well as accounting, disclosures and regulatory requirements for the Trust. One thing is certain - the fund industry is here to stay. The industry was oneentity show till 1986 when the UTI monopoly was broken when SBI and Can bank mutual fund entered the arena. This was followed by the entry of others like BOI, LIC, GIC, etc. sponsored by public sector banks. Starting with an asset base of Rs 0.25bn in 1964 the industry has grown at a compounded average growth rate of 26.34% to its current size of Rs 1130bn. The period 1986-1993 can be termed as the period of public sector mutual funds (PMFs). From one player in 1985 the number increased to 8 in 1993. The party did not last long. When the private sector made its debate in 199394, the stock market was booming. The opening up of the asset management business to private sector in 1993 saw international players like Morgan Stanley, Jardine Fleming, JP Morgan, George Soros and Capital International along with the period of 1994-96 was one of the worst in the history of Indian Mutual Funds.

1999-2000 year of the funds:Mutual funds have been around for a long period of time to be precise for 36 yrs but the year 1999 saw3 immense future potential and developments in this sector. This year signaled the year of resurgence of mutual funds and the regaining of investor confidence in these MF's. This time around all the participants are involved in the revival of the funds the AMC's, the unit holders, the other related parties. However the sole factor that gave lift to the revival of the funds was the Union Budget. The budget brought about a large number of changes in one stroke. An insight of the Union Budget on mutual funds taxation benefits is provided later. It provided center stage to the mutual funds, made them more attractive and provides acceptability among the investors. The Union Budget exempted mutual fund dividend given out by equity-oriented schemes from tax, both at the hands of the investor as well as the mutual fund. No longer were the mutual funds interested in selling the concept of mutual fund. No longer were the mutual funds interested in selling the concept of mutual

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funds they wanted to talk business, which would mean to increase asset base, and to get asset base, and investor base they had to be fully armed with a whole lot of schemes for every investor. So new schemes for new IPO's were inevitable. The quest to attract investors extended beyond just new schemes. The funds started to regulate themselves and were all out on winning the trust and confidence of the investors under the aegis of the Association of Mutual Funds of India (AMFI)

One can say that the industry is moving from infancy to adolescence, the industry is maturing and the investors and funds are frankly and openly discussing difficulties opportunities and compulsions. The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 non-UTI players entered the industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector entry to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004, it reached the height of Rs1,540 bn.

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Four Phases Of Mutual Fund In India

The mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.

First Phase - 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 de-linked 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 mu-tual fund was the first non - UTI mutual fund established in June 1987 followed by Can bank 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 47004 crores.

Third Phase - 1993-2003 (Entryof 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

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with Franklin Templeton) was the first private sector mutual fund registered in July 1993. 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.

Fourth Phase - since February 2003-:

In February 2003, following the repeal of the Unit Trust of India act 1963 UTI was divided into two separate entities. One is the specified undertaking of the UTI 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 & certain other schemes. The specified undertaking of UTI, functioning under an administrator & the rules framed by Govt. of India & does not come under the purview of Mutual fund regulations.

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CLASSIFICATION OF INDIAN MUTUAL FUND INDUSTRY

The private sector players, after an indifferent start in the early years, have made a strong impression especially in the larger cities, with a high quality of fund management, sales and customer service. This sector has dented UTI's dominance resulting in a falling market share towards the end of the last millennium.

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TYPES OF MUTUAL FUNDS

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

1. By Structure:
Open-ended Funds
These funds do not have a fixed date of redemption. Generally they are open for subscription and redemption throughout the year. Their prices are linked to the daily net asset value (NAV). From the investors' perspective, they are much more liquid than closed-ended funds. Investors are permitted to join or withdraw from the fund after an initial lock-in period

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 Closed-ended Funds
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.

Interval Funds
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.

2. By Investment Objective: Income Funds

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and government securities. Income Funds are ideal for capital stability and regular income.

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 Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities 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. These are ideal for investors looking for a combination of income and moderate growth.

Growth Funds
Funds that invest in equity shares are called equity funds. They carry the principal objective of capital appreciation of the investment over the medium to long-term. The returns in such funds are volatile since they are directly linked to the stock markets. They are best suited for investors who are seeking capital appreciation. There are different types of equity funds such as Diversified funds, Sector specific funds and Index based funds.

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 Money Market Funds:

The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer shortterm 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. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

Load Funds:
A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history.

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 No-Load Funds:
A no-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to work.

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Other Schemes: Tax saving Schemes

Investors (individuals and Hindu Undivided Families (HUFs)) are being encouraged to invest in equity markets through Equity Linked Savings Scheme (ELSS) by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed / switched out until completion of 3 years from the date of allotment of the respective Units. The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations, 1996 and the notifications issued by the Ministry of Finance (Department of Economic Affairs), Government of India regarding ELSS. These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA by investing in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

Special Schemes: Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG and Pharmaceuticals etc.

Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the BSE Sense or the NSE 50

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 Sectoral Schemes
Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.

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MARKET TRENDS

A lone UTI with just one scheme in 1964 now competes with as many as 400 odd products and 34 players in the market. In spite of the stiff competition and losing market share, UTI still remains a formidable force to reckon with. Last six years have been the most turbulent as well as exiting ones for the industry. New players have come in, while others have decided to close shop by either selling off or merging with others. Product innovation is now pass with the game shifting to performance delivery in fund management as well as service. Those directly associated with the fund management industry like distributors, registrars and transfer agents, and even the regulators have become more mature and responsible. The industry is also having a profound impact on financial markets. While UTI has always been a dominant player on the bourses as well as the debt markets, the new generations of private funds which have gained substantial mass are now seen flexing their muscles. Fund managers, by their selection criteria for stocks have forced corporate governance on the industry. By rewarding honest and transparent management with higher valuations, a system of risk-reward has been created where the corporate sector is more transparent then before. Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and technology sector. Funds performances are improving. Funds collection, which averaged at less than Rs.100bn per annum over five-year period spanning 1993-98 doubled to Rs.210bn in 1998-99. In the current year mobilization till now have exceeded Rs.300bn. Total collection for the current financial year ending March 2000 is expected to reach Rs.450bn.

What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than public sector mutual funds. Indeed private MFs saw a net inflow of Rs.7819.34 crore during the first

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nine months of the year as against a net inflow of Rs.604.40 crore in the case of public sector funds.

Mutual funds are now also competing with commercial banks in the race for retail investors savings and corporate float money. The power shift towards mutual funds has become obvious. The coming few years will show that the traditional saving avenues are losing out in the current scenario. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way. The collection in the first half of the financial year 1999-2000 matches the whole of 1998-99.

India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund assets are not even 10% of the bank deposits, but this trend is beginning to change. Recent figures indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits rose by only 17%. (Source: Think tank, The Financial Express September, 99) This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not close down completely. Their role as intermediaries cannot be ignored. It is just that Mutual Funds are going to change the way banks do business in the future.

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BANKS V/S MUTUAL FUNDS

BANKS Returns Administrative exp. Risk Investment options Network Liquidity Quality of assets Interest calculation Guarantee Low High Low Less High penetration At a cost Not transparent Minimum balance between 10th. & 30th. Of every month Maximum Rs.1 lakh on deposits

MUTUAL FUNDS Better Low Moderate More Low but improving Better Transparent Everyday

None

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REGULATORY ASPECTS OF MUTUAL FUND

SCHEMES OF MUTUAL FUND:
The asset management company shall launch no scheme unless the trustees approve such scheme and a copy of the offer document has been filed with the Board. Every mutual fund shall along with the offer document of each scheme pay filing fees. The offer document shall contain disclosures which are adequate in order to enable the investors to make informed investment decision including the disclosure on maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor. No one shall issue any form of application for units of a mutual fund unless the form is accompanied by the memorandum containing such information as may be specified by the Board. Every close ended scheme shall be listed in a recognized stock exchange within six months from the closure of the subscription The asset management company may at its option repurchase or reissue the repurchased units of a close ended scheme. A close-ended scheme shall be fully redeemed at the end of the maturity period. "Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution". The mutual fund and asset management company shall be liable to refund the application money to the applicants,(i) If the mutual fund fails to receive the minimum subscription amount referred to in clause (a) of sub-regulation (1); (ii) If the moneys received from the applicants for units are in excess of subscription as referred to in clause (b) of sub-regulation (1). The asset management company shall issue to the applicant whose application has been accepted, unit certificates or a statement of accounts specifying the number of units allotted to the applicant as soon as possible but not later than six weeks from the date of closure of the initial subscription list and or from the date of receipt of the request from the unit holders in any open ended scheme.

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Classification on the basis of Objective of the funds:

Gilt Funds The funds are invested only in Central/State Government securities No principal risk on the product Best suited for the medium-long term investors who are averse to risk

Liquid (Cash) Fund-:

These funds invest in very short-term instruments Ideal for corporate, institutional investors and business houses Period of investment may be as low as one day Used as a stop gap arrangement before investing/utilizing the money for other purposes.

Debt (Income) Funds-:

These funds invest in debt instruments (bonds, debentures, GOI securities, etc) The returns are steadier and can be benchmarked against comparable Debt instruments in the markets Best suited for the medium-long term investors who are averse to risks

Balanced Funds-:
A combination of the above two types where in some part of the money is invested in debt and some in equity market. Generally seen as a step through from debt funds towards the equity funds for the investors who were not willing to invest in the equity funds up till now. Best suited for medium-long term investors who are willing to take moderate risk.

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Equity (Growth) Funds-:

These funds invest in stocks of various companies. The returns here are volatile as they are directly linked to the stock Markets. Best suited for long term investors who are not averse to taking risk. Over a long period of time these funds give the maximum returns.

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Risk And Reward Potential For Different Type Of Mutual Fund

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ADVANTAGES OF MUTUAL FUND

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

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

Diversification-:
Mutual Funds invest in a number of companies across 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.

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

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

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

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

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.

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

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

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

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

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DRAWBACKS OF INVESTING IN MUTUAL FUNDS

Potential loss-:
Unlike a bank deposit, the investment in a mutual fund could fall in value, as the fund is nothing bur a portfolio of different securities. Apart from a few assured returns schemes, the fund does not guarantee any minimum percentage of return.

The Diversification Penalty-:

While diversification reduces the risk of loss from holding a single security, it also limits the larger gains if a single security increases dramatically in value. Also, diversification does not protect the unit holders totally from an overall decline in the market.

Costs:
Mutual funds don't exist solely to make your life easier--all funds are in it for a profit. The mutual fund industry is masterful at burying costs under layers of jargon. These costs are so complicated that in this tutorial we have devoted an entire section to the subject.

Dilution:
It's possible to have too much diversification. Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good in-vestment for all the new money.

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DEFINING MUTUAL FUND RISK

Different Mutual fund categories as previously defined have inherently different risk characteristics and should not be compared side by side. A bond fund with below average risk. For example should not be compared t a stock fund with below average risk. Even though both funds have low risk for their respective categories, stock funds overall have a higher risk/return potential than bond funds. Of all the asset classes, cash investments (i.e. money markets) offer the greatest price stability but have yielded the lowest long-term return. Bond typically experience mote short term price swings, and in turn have generated higher long term returns. However, stocks historically have been subject to the greatest short term price fluctuations and have provided the highest long term returns. Investors looking for a fund which incorporates ass asset classes may consider a balanced or hybrid mutual fund width different asset classes. At the discretion of the manager(s), securities are bought, sold and shifted between funds with different asset classes according to market conditions. Mutual funds face risks based on the investments they hold. For example, a bonk fund faces interest rate risk and income risk. Bond values are inversely related to interest rates. If interest rates go up, bonk values will go down and vice versa. Bond income is also affected by the change in interest rates. Bond yields are directly related to interest rates falling as interest rates fall and finding as interest rise. Income risk is greater for a short term bond fund than for long term bond fund. Similarly, a sector stock fund (which invests in a single industry, such as telecommunications) is at risk that its price will decline due to developments in its industry. A stock fund that invests across many industries is more sheltered from this risk.

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Following is a glossary of some risks to consider when investing in Mutual Funds: Call Risk-:
The possibility that falling interest rates will cause a bond issuer to redeem - or call - its high-yielding bond before the bonds maturity date.

Country Risk-:
The possibility that political events (a war, national elections), financial problems (rising inflation, government default), or natural disasters (an earthquake, a poor harvest) will waken a countrys economy and cause investments in that country to decline.

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

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

Income Risk-:
The possibility that a fixed - income funds dividends will decline as a result of falling overall interest rates.

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

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

Interest Rate Risk-:

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

Manager Risk-:
The possibility that an actively managed Mutual Funds investment adviser will fail to execute the funds investment strategy effectively resulting in the failure of stated objectives.

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

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SAFETY OF MUTUAL FUNDS

Any Mutual Fund is as safe or unsafe as the assets that it invests in. There are two basic categories of Mutual Funds with others being variations or mixtures of these. Firstly, there are those that invest purely in equity shares (called equity funds or growth funds) and secondly, there are those that invest purely in bonds, debentures and other interest bearing instruments called income or debt funds. The NAV of growth funds fluctuates in line with the fluctuation of the shares held by them. They can also witness face substantial erosion in value, which could be permanent in some cases. On the other hand, prices of debt instruments fluctuate to a much lesser degree and an income fund is extremely unlikely to face erosion in value especially of the permanent kind.

Most Mutual Funds have qualified and experienced personnel, who understand the risks of investing. But, nobody is immune from making mistakes. However, funds diversify the investment portfolio substantially so that default in any single investment (in the case of an income fund) will not affect the overall performance of a fund in a significant manner. In the event of default of a part of the portfolio, an income fund is extremely unlikely to face erosion in face value.

Generally, Mutual Funds are not guaranteed by anybody. However, in the Indian context, some of the Mutual Funds have floated guaranteed or assured return schemes which guarantee a certain annual return or guarantee a buyback at a specified price after some time. Examples of these include funds floated by the UTI, Can bank Mutual Fund, SBI Mutual l fund, LIC Mutual Fund etc. Many of these funds have not earned returns that they promised and the asset management companies of the respective Mutual Funds or their sponsors have made good their promises. The biggest case pertains to the US64, which never guaranteed any returns but is being bailed out by the government due to the millions of individuals who have invested in it.

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PROCESS OF MUTUAL FUND

The above graph shows how Mutual Fund works and how investor earns money by investing in the Mutual Fund. Investors put their saving as an investment in mutual fund.

The fund manager, who is a person who takes the decisions where the money should be invested in securities according to the schemes objective. Securities include Equities, Debentures, Govt. securities, Bonds and Commercial Paper etc. These securities generate returns to the fund manager. The fund manager passes beck return to the investor.

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MUTUAL FUNDS ORGANIZATION

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

How important is an AMC (Asset Management Company) behind a mutual fund?

AMC controls the operations and functioning of a mutual fund. It is very critical to the performance of a mutual fund as it decides on the style of functioning, people who are going to manage the funds, the commitment to service quality and overall supervision.

The financial strength and the commitment of the AMC sponsors to the business are very key issues. This is because most AMCs lose money in the first few years of operations. In most cases, these losses are much more than the capital requirements stipulated by SEBI. Hence, a sponsor which is financially weak or which cannot capital to the business either because of its inability or unwillingness will result in an unhealthy operation. There will be

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a tendency to cut corners and unwillingness to spend money to expand operations. This is the last place where high quality persons would want to remain and work. The AMC then remains stunted and the sponsors lose interest. The worst affected are the investors. This is exactly what has happened with some AMCs promoted by Indian business houses. This is also a problem that has afflicted some of the AMCs floated by nationalized banks. In these organizations, the traditional thinking is prevalent which can be summarized as "money is power". Since mutual fund business did not have access to too much money, a posting in the AMC became punishment postings for some personnel who were not doing well in the parent organization or who lost out in the organizational politics. The management of the banks `also did not allow these AMCs to become independent viable businesses. The CEOs of the AMCs did not have any clue of the mutual fund business and neither were they interested in it the entire effort was spent in getting a posting back in the parent. The fund managers had no experience in the activity making a mockery of "professional management". The sad results are there to see. Some of the parents had to provide funds to bridge the gap in "assured return schemes". It looks extremely likely that some of these AMCs will no longer exist in a few years.

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Organization of a Mutual Fund

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NET ASSETS VALUE (NAV)

The performance of a particular scheme of mutual fund is denoted by Net Assets Value (NAV).Mutual fund invest the money collected from the investors in securities markets. In simple word, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market vale of securities of a scheme divided buy the total no of units of the scheme o any particular date. For example if the market value if securities of a mutual fund scheme is Rs. 200 lakhs and mutual fund has issue 10 lakhs units of Rs.10 each to the investors, then the NAV per unit of the fund is Rs. 20 . NAV is required to be disclosed by the mutual funds on a regular basis daily of weekly- depending on the type of scheme. The net assets value (NAV) is the actual value of one unit of a given scheme n any given business day. The NAV reflect the liquidation value of the funds investments on that particular day after accounting for all expenses. It is calculated by deducting all liabilities except unit capital of the fund from the realizable value of all assets and dividing it by number of units outstanding. So NAV is equals to-

Market / fair value of schemes (+) Receivables (+) Accrued income (+) Other assets (-) Accrued expenses (-) Payables

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HOW TO INVEST IN MUTUAL FUND

These are steps given below to invest in Mutual Funds. Step one - Identify investors Investment needs-:
Investors financial goals will vary, based on investors age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess investors needs. You can begin by defining investors investment objectives and needs which could be regular income, buying a home or finance a wedding or educate investors children or a combination of all these needs, the quantum of risk you are willing to take and investors cash flow requirements.

Step Two - Choose the right Mutual Fund-:

The important thing is to choose the right mutual fund scheme, which suits investors requirements. 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 the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category. Other fact ors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the 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 investors investment needs. You may consider investing in a combination of schemes to achieve investors specific goals.

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Step Four - Invest regularly-:

The best approach 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 investors average cost per unit. This is called rupee cost averaging and do investors all over the world follow a disciplined investment strategy. You can also avail the systematic investment plan facility offered by many open-end funds.

Step Five- 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 investors money multiplies at a compounded rate of return.

Step Six - The final step-:

All you need to do then visit to www.njindia.com for online application forms of various mutual fund schemes and start investing. You may 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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Association of Mutual Funds in India (AMFI)

With the increase in mutual fund players in India, a need for mutual fund association in India was generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August; 1995.AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under the supervision and guidelines of its Board of Directors. Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders.

The role of Association of Mutual Funds in India-:

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The objectives are as follows: 1. This mutual fund association of India maintains a high professional and ethical standard in all areas of operation of the industry. 2. It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association. 3. AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.

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4. Association of Mutual Fund of India does represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. 5. It develops a team of well qualified and trained Agent distributors. It implements a programmed of training and certification for all intermediaries and other engaged in the mutual fund industry. 6. AMFI undertakes all India awareness programmed for investors in order to promote proper understanding of the concept and working of mutual funds. 7. At last but not the least association of mutual fund of India also disseminate informations on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.

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SEBI REGULATIONS REGARDING MUTUAL FUND

The SEBI regulations for the establishment and issue of schemes by mutual funds are as follows: Mutual fund shall be established in the form of trusts under the Indian Trust Act and managed by separately formed asset Management Company. Money market mutual fund would be regulated by the RBI and other mutual funds would be regulated by SEBI. Fifty per cent members of the board of AMC must be independent directors and must have no connection with sponsoring organization. The directors should have at least 10 years experience in the field of portfolio management, financial administration, etc. The AMC should have a minimum net worth of Rs. 10 crores. The SEBI has the authority to withdraw the authorization of AMC if they fail to work for the interest of investors. This stipulation is not applicable to banks sponsoring mutual funds. An AMC cannot act as the AMC for another mutual fund. AMCs are also allowed to do other fund based businesses such as providing investment management services to offshore funds, other mutual funds, venture capital funds, and insurance companies.

The minimum amount to be raised with each closed-end scheme should be Rs. 20 crores and for the open-ended scheme Rs. 50 crores.

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 Each scheme of the mutual fund is registered with SEBI before it is floated in the market. Closed-end schemes should not be kept open for subscription for more than 45 days. For open-ended schemes, the first 45 days should be considered for determining the target figure. If the minimum amount or 60% of the target amount is not raised, the entire subscription has to be returned to the investors. For each scheme, there should be a separate and responsible fund manager. The SEBI guidelines (1999) restrict MFs to invest not more than 10% of NAV of a scheme in shares or share related instruments of a single company. SEBI increased the maximum investment limit for MFs in listed companies from 5 to 10% of NAV in respect of the open-ended funds. The initial issue expenses should not exceed 6% of the funds raised under each scheme. All mutual funds must distribute a minimum of 90% of their profits in any given year. Every mutual fund is required to send the audited annual statements of accounts and six months un audited accounts of net assets for each of its schemes to the SEBI. The SEBI shall lay down a common advertising code for all mutual funds to comply with. The SEBI after due investigation may impose penalty on mutual funds for violating the guidelines.

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LITERATURE REVIEW

A number of recent studies have examined the issue of performance persistence in mutual funds. Grinblatt and Titman (1992) analyze performance of 279 funds over the period of 1975 to 1984 using a benchmark technique and find evidence that performance differences between funds persists over time. Hendricks, Patel, and Zeckhauser (1993) study 165 no-load growth-oriented funds over the period 1974 to 1988 and obtain similar results. In a study of 728 mutual fund returns over the period 1976 to 1988, Goetzman and Ibbotson (1994) find that two-year performance is predictive of performance over the successive two years. Volkman and Wohar (1995) extend this analysis to examine factors that impact performance persistence. Their data consists of 322 funds over the period 1980 to 1989, and shows performance persistence is negatively related to size and negatively related to levels of management fees. Studies of performance persistence in mutual funds are not without contrary evidence. Carhart (1997) shows that expenses and common factors in stock returns such as beta, market capitalization, one-year return momentum, and whether the portfolio is value or growth oriented "almost completely" explain short term persistence in risk-adjusted returns. He concludes that his evidence does not "support the existence of skilled or informed mutual fund portfolio managers" (Carhart, 1997, p. 57). In the Kahn and Rudd 1995 study of 300 equity funds and 195 bond funds between 1983 and 1993, only the bond funds show evidence of persistence. In an article in this issue, Detzel and Weigand (1998) use a regression residual technique to control for the effects of investment style, size and expense ratios. They find, after controlling for these variables, no evidence of performance persistence. Two other studies have used performance ranks. Dunn and Theisen (1983) rank the annual performance of 201 institutional portfolios for the period 1973 through 1982 without controlling for fund risk. They found no evidence that funds performed within the same quartile over the ten-year period. They also found that ranks of individual managers based on 5-year compound returns revealed no consistency. Bauman and Miller (1995)

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studied the persistence of pension and investment fund performance by type of investment organization and investment style. They employed a quartile ranking technique because they noted that "investors pay particular attention to consultants' and financial periodicals' investment performance rankings of mutual funds and pension funds" (Bauman & Miller, 1995, p. 79). They found that portfolios managed by investment advisors showed more consistent performance (measured by quartile rankings) over market cycles and that funds managed by banks and insurance companies showed the least consistency. They suggest that this result may be caused by a higher turnover in the decision-making structure in these less consistent funds. This study controls for the effects of turnover of key decision makers by restricting the sample to those funds with the same manager for the entire period of study.

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PROBLEM DESCRIPTION:-

To study the awareness about mutual funds among Independent Financial Advisors compare other mutual fund company to reliance mutual fund Since last 5 years mutual fund industry is grooving fast. In last two month there are 14 new fund offers introduced. To understand the investor and to convince them to invest in Mutual fund, more adviser of Mutual fund are needed. To be Adviser of Mutual Fund is easier for the person who is already dealing with other category of investment e.g. Small savings, Insurance. Because they have good cliental base, they might get successes in mutual fund selling. So we can say that there is a good chance for every financial adviser to be the Broker of Mutual fund. To make them broker fist we have to make them aware with the mutual fund and search their opinion against the mutual fund. This is analytical research. The awareness is to be found out after knowing the behavioral study of independent financial advisors they have different options available in the market for investment.

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RESEARCH PROPOSAL

Main Objective:
Mutual Fund awareness and intention among Individual

Sub Objectives:
To study the investment pattern among Individuals. To study peoples risk taking abilities. To study whether people seek advice from mutual fund consultant before investing in mutual fund. To known whether the person thinking mutual fund as an investment option. To study the peoples awareness regarding mutual fund. Whether people are aware of how to invest in mutual fund i.e. filling of application form and documents is to be attached. Where most of the savings are invested i.e. equity market, fix deposit, mutual fund, precious metal insurance etc.

Research Methodology:
Research Design Research Approach Research Instrument Information Need Area of the survey Sample Size Sampling unit Interview method : : : : : : : : Descriptive Survey Questionnaire Primary Data Vadodara 100 Respondents individual Personal interview

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LIMITATIONS OF STUDY
This research reflects on Individual investors in few areas of Vadodara city. Therefore findings and suggestions given on the basis of this research cannot be considered for the entire mutual fund industry of India. Sample size is 100 which is very small that is not enough to study the awareness of Individual investors. As sampling technique is convenient sampling so it may result in personal bias. The study might also consist of the respondents bias answer. Time is main constraint of the research as we have been given training period of 10 days is short for such studies.

Major sources of data are secondary which might limit the study.

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EVALUATION OF QUESTIONNAIRE

AGE
Particular 20 30 31 40 41 -50 51 60 Percentage 32 32 24 12

Evaluation: From our research we can say that age group of 20-30 & 31- 40, they are likely to take more risk as a result they are investing more funds in mutual fund. 31% of investors are from the age grope of 20 - 30 & 31-40. Respondents who are above 40 are like to invest in insurance and Bank Deposits.

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GENDER
Particular Male Female Percentage 87 13

Evaluation: In our survey we have taken 87 male & 13 female respondents for our study of mutual fund.

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OCCUPATION
Particular Business Service Govt. Employee Other Percentage 25 41 21 13

Evaluation: People doing Jobs are having more knowledge about investing options. 41% of our investor belongs to service. They are having more salary compare to other occupation, so they would like to invest in most of the investing options.

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Question-1 Approximately, how much % of your income you are saving every year?

Particular Below 5% 5 to 10% 10 to 15% 15 to 20% 20% or More

Percentage 18 31 16 21 14

Evaluation: From above information it shows clearly that 31% of people are saving 5-10% of their income for investment purpose.

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Question- 2.

Are you investing in mutual fund?

Particular Yes No

Percentage 74 26

Evaluation: From the above information it clearly shows that74% of people are interested in investing their money in mutual fund other 26% of people are investing their money in other investment instrument.
(Now, we have taken the study of 76 respondents who like to invest their money in mutual funds.)

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Section-1
Question-3 which kind of sources are influences to Invest in mutual fund?

Particular News paper Relative Television Broker Friend Internet

Percentage 14.9 10.8 6.8 45.9 10.8 10.8

Evaluation: It clearly shows that people are investing in the mutual funds by brokers advice. 45% of people are investing in mutual fund by brokers advice.

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Question-4 In which type of companies do you prefer to invest?

Particular Private Public

Percentage 68.9 31.1

Evaluation: As above information shows that there are least public Ltd. Co. in mutual fund so that there are less investment in public sector. 69% of investments are done in private sector & 31% of investments are done in public sector.

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Question-5 In which companies do you prefer to invest?

Particular UTI MF ICICI Prudential MF IDBI Principal MF SBI MF TATA MF BIRLA Sun Life MF RELIENCE MF

Percentage 20.3 10.8 5.4 16.2 10.8 10.8 25.7

Evaluation: It clearly shows people are investing in different mutual fund. From above information it shows 26% of people are investing in Reliance mutual fund & 20% of people are investing in UTI mutual fund. It shows clearly an equal investment in all kind of mutual fund.

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Question- 6 What is your purpose for investment in MF?

Particular Return Tax benefit Liquidity Security

Percentage 31.1 31.1 18.9 18.9

Evaluation: The purpose or the criteria for the investment is different from investor to investor. The main purpose of investment in MF is to get maximum return and tax benefit. They can get regular income or return from their investment. The people who are doing service in Govt. or NGO, they invest for the tax benefit. The people who want to satisfy their emergency needs, they invest in some liquid investment.

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Question-7 In Mutual Fund, which types of schemes do you prefer?

Particular Equity Scheme Debt or Income Scheme Gilt Fund Tax Saving Scheme Other

Percentage 37.8 10.8 13.5 24.3 13.5

Evaluation: The investment is different from investor to investor. Now a days investment market, investor most prefer equity scheme and tax saving scheme. From last couple of years, the stock market is booming and investors gets hefty returns and to save more tax on income, they are adopting equity schemes and tax saving schemes. Gilt fund and debt scheme are less preferable among investors.

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Question-8 Since how many years are you investing in Mutual Fund? Particular Only This Year Last 2 Years Last 3 Years Last 3 To 5 Years More than 5 Years Percentage 16.2 27.0 10.8 25.7 20.3

Evaluation: From the above information it is clear that Investment in Mutual Fund increased from last two years. 27% people started investment in mutual fund from last 2 years.

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Question-9 What factor you consider while investing in MF?

Particular AMC Name Brokers or Advisors advice Equity Market Performance Past Performance Scheme Objective

Percentage 23.0 27.0 13.5 16.2 20.3

Evaluation: Investors invest their precious saving in MF. And MF is subjected to market risk so investor see all kinds of possible factors such as AMC name, Brokers advice, past performance of AMC, Equity mkt. performance and scheme objective for study before investment in MF.

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Question-10 Which option for return would you like to prefer?

Particular Capital Appreciation Bonus Dividend Reinvest Dividend Payout

Percentage 51.4 20.3 17.6 10.8

Evaluation: Most of investors are interested in capital appreciation on their amount invested in securities. So their main central point is capital appreciation and 2nd comes dividend payout and then dividend reinvest and bonus.

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(Now, we take the study of 26 respondents which are not interested in investing their money in mutual fund.)
Section-2
Question -11 In which of the following instrument do you invest Money? investment

Particular Gold & properties Bank deposit Life insurance Post office ULIP fund Government securities national saving schemes RBI Relief Bond

Percentage 15.4 19.2 11.5 15.4 3.8 11.5 19.2 3.8

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Evaluation: Investors move where they get higher return on their investments so even if more investment available such as Bank Deposits, National Saving Schemes, Post office schemes. The most preferable investment instruments are Bank Deposit, Life Insurance and Gold and properties.

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Question-12 What is your purpose for investment?

Particular Return Tax benefit liquidity security

Percentage 46.2 3.8 23.1 26.9

Evaluation: The purpose or the criteria for the investment is different from investor to investor. From the above information we can say that main purpose for investment is return - 46.2%. 2nd purpose is security - 26.9 %.

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Question-13 Which are the reasons for not investing in mutual fund?

Particular Due to recession Due to high volatility in stock market Due to unawareness related to mutual fund Due to not capacity to saving

Percentage 11.5 19.2 53.8 15.4

Evaluation: -

From the above information it shows clearly that the reason for not investing in mutual fund is due to unawareness related to mutual fund. Here 53.8% of people are not investing in mutual fund due to unawareness related to mutual fund.

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Question- 14 Will you invest in mutual fund in future?

Particular Yes No

Percentage 57.7 42.3

Evaluation: When we asked the above Question 58% of people would be invest their money in mutual fund in future. Reaming 42% of people are not interested in investing in mutual fund in future.

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IF No then What are the most reasons not to invest in mf future? Particular Due to recession Due to unawareness related to mutual fund Due to not capacity to saving Percentage 36.4 45.5 18.2

Evaluation: The people who are not going to invest in mutual fund in future gave main 2 reasons for not investing in mutual fund 46% of people said, due to unawareness related to mutual fund. 36% of people said, due to recession they are not going to invest in mutual funds.

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FINDING
Looking at the project, we can further say that now a day the trend towards Mutual funds has increased among investors. People are shifting more towards Mutual fund investment. Investors move where they get higher return on their investments so even if more investment available such as RBI Bond, National Saving Schemes, equity scheme and Post office schemes. The most preferable investment instruments are Mutual Funds, Bank Deposit, Life Insurance and Gold and properties. The investment is different from investor to investor. Now a days investment market providing the investors most preferable equity schemes and tax saving Scheme. From last 3 to 5 years stock market has given quite eye catching return to investors so in this last 3 years more number of investors has made their first footstep in stock market Most of investors are interested in appreciation on their amount invested in securities. So their main focal point is capital appreciation and 2nd comes dividend payout and then dividend reinvest and bonus. The most preferable AMC for investment, according to this study is Reliance MF, UTI MF and SBI MF stand as 1st, 2nd and 3rd slots. In a survey, it shows that 81 % of individual have witnessed that their investment in MF increased compare to the other investment options. So in the end we can say that the investors in the recent years i.e. during 2-3 years have moved to the Mutual funds very quickly because of all above factors. And our purpose of this project has proved to be positive and ethical.

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RECOMMANDATION
Mutual funds should develop their own modern market research. It will be helpful for better and efficient portfolio management. To provide greater liquidity to the investors, mutual funds should develop a wide infrastructure of self sufficient branches. The difference between the stock market and Mutual Funds should be made clear to the investors by educating them through training programs and seminars. Training must be provided insisting on moderate risk return products like Mutual Funds compared to high risk-return products like direct equities. Professionals and business class, which is considered to be the most knowledgeable class of the region prefers Mutual Funds less compared to the service class. Steps should be taken to improve this scenario by proper marketing. Investors should be given satisfactory explanation in respect to their reason for not investing in Mutual Fund thereby convincing them to invest more in Mutual Funds. Those people who hesitate for investing in Mutual Funds, since they lack proper market knowledge should be made aware regarding the current market trends and scenario. The benefits such as Tax benefits, and various other benefits of different schemes should be made known to all investors having different risk appetite.

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CONCLUSION
It has taken years for the countrys mutual fund industry to come of age, from the time the first private sector mutual fund made its debut in India. But the year 2006 certainly saw the beginning of that process, with several evolutionary changes in the industry. The year saw a sharp growth in the assets managed by Mutual Funds, a rising proportion of retail money in those assets and growing acceptance of equity funds as an investment option for the long term by common investors. From this research we can conclude that percentage of saving are more park to the MF industries by individuals. In last two to three years, no. of individuals have turned to stock market via MF and specially those of individuals of whom they were not too much aware of stock market. Significant efforts still need to be put in to enable the large body of investors who are completely unaware of MF products to enhance their understanding. There also needs to a focus on ensuring that last mile financial advice quality remains of the highest order so that investors do not burn their fingers by investing in products with wrong risk return profile. MF penetration in the US market increased significantly from single digit levels to hours 30% during the 1990s. This happened primarily owing to a demographic change, spread of financial advisory channels especially banks, sustained uptrend in equity markets and with more and more products becoming available from mutual funds. If one compares with the Indian market, one is possibly witnessing an uptrend in equity markets, changing demographics, more wide spread financial advice and growing basket of products offer to meets various investors requirements from mutual funds. It does seem that the Indian mutual fund industry is slowly but surely shifting gears and is moving to a higher growth profile. Investor will need to be careful in understanding their own risk return appetite and make efforts in obtaining right financial advice so that they can optimize their long term financial saving objectives.

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BIBILIOGRAPHY
WEB SITES
www.thebharat.com. www.mutualfundindia.com www.ici.org www.amfiindia.com www.finmanagementsource.com

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ANNEXURE
Note: - collected information should be confidential.

Questionnaire
Dear Respondent, I am the students of Parul Institute Of Engineering & Technology (M.B.A. PROGGRAME), Vadodara. As a part of our study curriculum, We are undertaking a project on Customers awareness & perception about mutual fund. We will be thankful to you if you spare your a little special time to answer our few questions. Thanking you in advance PERSONAL INFORMATION

Name: ________________________________________ Age: Gender: [ ] 20-30 [ ] MALE [ ] 31-40 [ ] FEMALE [ ] Other [ ] 41-50 [ ] 51-60

Occupation: [ ] Businessman [ ] Service [ ] Govt.employee

1. Approximately, how much % of your income you are saving every year? ( ) Below 5% ( ) 15 to 20% ( ) 5 to 10% ( ) 20% or more ( ) 10 to 15%

2. Are you investing in mutual fund? ( ) Yes ( ) No {If yes then section 1, No then section 2}

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Section:-1 3. Which kind of sources are influences to invest in mutual fund? ( ) News paper ( ) Broker ( ) Relative ( ) Friends ( ) Television ( ) Internet 4 In which type of companies do you prefer to invest? ( ) Private ( ) Public 5. . In which companies do you prefer to invest? ( ) UTI MF ( ) SBI MF ( ) Tata MF ( ) ICICI Prudential MF ( ) Birla Sun Life ( ) IDBI Principal MF ( ) Reliance MF

6. In which sector do you prefer to invest in mutual fund? ( ) Infrastructure ( ) Reality ( ) Power ( ) Capital ( ) Insurance 7. What is your purpose for investment in MF? ( ) Return ( ) Liquidity ( ) Tax benefit ( ) Security 8. In Mutual Fund, which types of schemes do you prefer? ( ) Equity Scheme ( ) Tax Saving Scheme ( ) Debt or Income Scheme ( ) Other ( ) Gilt Fund 9. Since how many years are you investing in Mutual Fund? ( ) Only this year ( ) Last 3 to5 years ( ) Last 2 years ( ) More than 5 years ( ) Last 3 years 10. What factor you consider while investing in MF? ( ) AMC name ( ) Past performance ( ) Brokers or Advisors advise ( ) Scheme Objective ( ) Equity market performance

11. Which option for return would you like to prefer? ( ) Capital Appreciation ( ) Dividend reinvests ( ) Bonus ( ) Dividend payout

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Section:-2
12. In which of the following investment instrument do you invest Money? ( ) Gold & properties ( ) ULIP fund ( ) Bank Deposit ( ) Government securities ( ) Life Insurance ( ) National Saving Schemes ( ) Post office ( ) RBI Relief Bond 13. What is your purpose for investment? ( ) Return ( ) Liquidity ( ) Tax benefit ( ) Security 14. Which are the reasons for not investing in mutual fund? ( ) Due to Recession ( ) Due to high volatility in stock Market ( ) Due to unawareness related to mutual fund ( ) Due to not capacity to saving 15. Will you invest in mutual fund in future? ( ) Yes ( ) No IF No then What are the most reason not to invest mf future? ( ) Due to Recession ( ) Due to unawareness related to mutual fund ( ) Due to not capacity to saving

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THANKS

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