A PROJECT REPORT ON

EVALUATION OF MUTUAL FUND AS AN INVESTMENT TOOLS

AT MAHINDRA & MAHINDRA FINANCIAL SERVICES PVT.LTD.

University of Pune
IN PARTIAL FULFILLMENT OF MASTER OF BUSINESS ADMINISTRATION (2007-2009) BY

SUBMITTED TO

MAHESH HARIBHAU SALUNKE MBA II (FINANCE)

METS INSTITUTE OF MANAGEMENT ADGAON, NASHIK 422003 (AFFILIATED TO UNIVERSITY OF PUNE)

Sr. No.

INDEX
Topics

Page No.

1 2 3 4

Acknowledgement Declaration Table of Contents Annexure

I II 01 62 V

CONTENTS
Sr.No. 1 1.1 1.2 1.3 1.4 1.5 2 2.1 2.2 2.3 2.4 3 3.1 3.2 3.3 3.4 3.5 3.6 4 4.1 4.2 4.3 4.4 5 5.1 5.2 5.3 Topics Introduction Object of the Study Objectives of the Project Methodology of the Study Scope of the Study Limitations of the Study Profile of the Organization History of Organization About Company Business Done Organization Chart Related Theory Mutual Fund Fixed Deposit Postal Saving Real Estate Gold Insurance Policy Data Analysis, Interpretation Data Analysis (Questionnaire Analysis) Key Finding Recommendations Conclusion Annexure Questionnaire Reference Glossary Page No. 02 03 04 07 08 10 10 12 14 21 31 33 37 38 39 46 57 58 59 61 64 65

ACKNOWLEDGEMENT
Words puts on paper are mere ink, but when they have a purpose, there exist a thought behind theme. I too have a purpose to express my gratitude towards those individuals without whose guidance the project would not have been to its successful termination. I express my profound sense of gratitude and sincere thanks to the Mahindra & Mahindra Financial Services Pvt. Ltd. for allowed me to undergo the summer training. At the onset, I would like to thank my project guide Mr. Shailesh Nikumbh for their valuable guidance and kind co-operation during the project. I must especially record my thanks to our Program Incharge., for being the pillars of support and motivation thereby expanding my knowledge horizon. I must acknowledge the help and timely advice provided to me by my college project guide Dr Mrs. JOSHI Madam. Finally, yet important I would like to thank all those persons who helped me directly or indirectly for successfully carrying out this project.

Mashesh H. Salunke

DECLARATION
I Mahesh Haribhau Salunke a student of MBA (2007-09) studying at Met's Institute of Management declare that the project titled Evaluation of mutual fund As an investment tools at Mahindra & Mahindra Financial Services Pvt. Ltd. At Nashik was carried out by me in the partial fulfillment of MBA program under the University of Pune. This project was undertaken as a part of academic curriculum according to the university rules and norms and by no commercial interests or motives Date Place : Nashik. Signature (Mahesh Haribhau Salunke)

Chapter 1

Introduction
1.1 Object of the study. 1.2 Object of the study. 1.3 Methodology of the study. 1.4 Scope of the project. 1.5 Limitation of the project.

1.1 OBJECT OF THE PROJECT: For the partial fulfillment of the management course a student is supposed to undergo training in an organization for 50 days, while working with the organization, one has to undertake a small study in the field of work and subject allotted by firm. Based on this study one has to submit a report to the organization, university and collage. Summer project work exposes the real-time corporate environment to a student. And facilitates student to experience to current scenario. The project helps giving and insight in the field of marketing. To acquire knowledge and information of marketing aspects of the organization the topic by organization was Evaluation of Mutual Fund As an investment tools

1.2 OBJECTIVES OF THE STUDY:

To identify the preference of regarding investment pattern. To understand the awareness and attribute of mutual fund prefer by investor.

1.3 METHODOLOGY OF THE STUDY: -

Research Methodology
It has been important & essential to adopt certain predecided method to study any particular system. In order to collect the required information for the project the following methods were adopted:-

1.Primary data
The primary data has been collected through general discussion with the Relationship Managers of different AMCs, Investment Advisors of ICICI Bank. A structured questionnaire was prepared to find out investors perspective towards investment in mutual funds. A sample of 200 investors was taken for research purpose. The stratified random sample technique was applied to collect data through questionnaire. The investors had been divided into various strata according to their age, income, education and employment. The sample consist of..

Secondary data
The secondary data is used to supplement the information on mutual funds, its origin and evolution. The secondary data was collected from printed materials such as books, magazines, newspapers and internet i.e various websites. Substantial information is available on AMFI website regarding Mutual fund

industry in India, which was used to understand the present trends in the industry.

1.4 SCOPE OF THE PROJECT:The study will help Mahindra finance services ltd. To understand the investment pattern preferred by investors and there by guiding them regarding there investment pattern.

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1.5 LIMITATION OF THE STUDY: Data analysis is based on the responses given by the respondents.
Survey is restricted only for the area of Nasik city.

Gangapur road Cidco

Panchwati etc.

All the above mentioned statements are the limitations of project.

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Chapter 2

Profile of the Organization.

2.1 History of the Organization. 2.2 About Company 2.3 Business 2.4 Organization Chart.

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2.1 MAHINDRA AND MAHINDRA

The birth of MAHINRA AND MAHINDRA began when K.C.Mahindra visited the United State of America (USA) as a chairman of India Supply Mission. The Mahindra Brothers joined hands with distinguished gentleman called Gulam Mohammad. And on October 2nd 1945, Mahindra and Mohammad was setup as a franchise for assembling keeps from Willy USA.Two years later, India became and independent nation and Mahindra and Mohammad changed its name to MAHINDRA AND MAHINDRA Since then, Mahindra and Mahindra has grown steadily in size and nature.

2.2

MAHINDRA

AND

MAHINDRA

FINANCIAL

SERVICES PVT. LTD.:Mahindra Finance was established in 1991, as a subsidiary a time when the buyer had to largely arrange for his own fund. The major financiers were bank and moneylenders and the challenge was to achieve growth amidst competitions. The company started as a wholesale fund provider and moved in to retail funding. Now it got listed and has become sister concern Mahindra and Mahindra.

ITS PROGRESS:
Today it is one of the largest banking finance companies in India with an asset base of about Rs.5000 Cr. It has around 5, 00,000 customer
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and over 350 branches spread across the country, largely covering rural and semi-urban location.

BUSINESS FOCUS:
We dont have a mission statement. This what makes us want to get up and come to work in morning -Anand G. Mahindr Mahindra and Mahindra have always focused on rural area because it knew that rural area has potential and it is very big segment to be served and opportunities are unlimited. Core value are Good Corporate Citizenship, Professionalisms, Customer First, Quality Focus, Dignity of the Individual.

RANKING AND RATING: Mahindra and Mahindra were ranked second in prestigious most Trusted Car Company in India in a study conducted by TNS. Mahindra was ranked 22nd in business Indias and annual survey of the country top Companies Super 100. Mahindra was ranked 31st in business todays annual survey of Indias most valuable Companies.

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 NDTV Profit Business Leadership Award 2007, Awarded Mr. Anand Mahindra Most Inspiring Leader of the year.

2.3

BUSINESS:1. Two-wheeler loan. 2. Car loan. 3. Utility Vehicle loan. 4. Tractor loan. 5. Refinance. 6. Buys used commodity. 7. Commercial vehicle loan. 8. Investment advisory. 9. National Distributor of Mutual Fund.

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Vision & Mission:Vision:Our vision is to be the leading Rural Finance Company and continue to retain the leadership position for Mahindra Products.

Mission:We will be recognized as the premier provider of financial services on the basis of our contribution to sale of Mahindra range of vehicles, tractors, services and help M & M protect its sale through availability of finance

We will specialized in financing products based on applications and build on the competence developed in its focus area. We will target all segments of vehicle financing and deploy the skills acquired through an in-depth understanding of the chosen product market.

We will provide products and services tailored to the needs of M&M, our most favored customer, and always meet their needs. In case of demand-supply mismatch of funds, we will do everything to find a solution.

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 We will help M&M develop better products by providing firsthand information received from the target market

Chapter 3

Related theory.
3.1 Mutual Fund. 3.2 Fixed Deposit. 3.3 Postal saving. 3.4 Real Estate. 3.5 Gold 3.6 Insurance Policy.

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3.1 Concept of 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 investment and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of security at a relatively low cost. The flow chart below describes broadly the working of a a relatively low cost. The mutual fund

Mutual Fund Operation Flow Chart

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History of the Indian mutual fund

History of the Indian Mutual Fund Industry 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 of India the. The history of mutual funds in India can be broadly divided into four distinct phases 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 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.

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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.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, here 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 UTI 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, 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. The graph indicates he growth of assets over the years.

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GROWTH IN ASSETS UNDER MANAGEMENT:-

Mutual Funds Organization:

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

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Organization of a Mutual Fund

TYPES OF THE MUTUAL FUND: BY STRUCTURE: Open End Mutual Funds:

All mutual funds by default and by definition are open-end funds. Here an investor can buy the shares at any point of time and exit from it at any time of his choice. Both buying and selling will be at the current NAV subject to load factors where ever applicable. Though this is a very broad category, one can easily say this is the most popular of the lot looking at the ease with which one can liquidate his holding (exit from position by selling or redemption to the trust/fund). Affordability is another key factor that decides the popularity of openend funds.

Closed End Mutual Funds: Selling off of a specified and limited number of shares by the mutual funds at an initial public offering is known as closed end mutual fund.

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However one important difference between open-end fund and closed end mutual fund is that the price of the latter is decided by demand and supply of the stock in the market and not by NAVs unlike in the former case. The pooled funds are utilized as per the mandate of the fund and Securities and Exchange Commission's regulations. They are traded more like the general stocks. Some of the reasons to invest in this category

Prices are determined by market demands and thus closed end funds trade at lower

The offer price more often than not which is a perfect time for buying.

Like in the open end funds there are wide options for you to choose from. Like stock funds, balanced funds that give full asset allocation benefit and thirdly the bond funds.

Interval fund:
Interval fund 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.

BY INVESTMENT OBJECTIVES:Growth Schemes:The aim of growth fund is to provide capital appreciation over the medium to long-term. Such schemes normally invest a majority of there corpus in equities it has been proven that returns from stocks, have out performed most other kind of investments held over the long
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term. Growth schemes are ideal for investors having a long-term out look seeking growth over a time.

Income Schemes:If you are looking for regular and steady return go for income schemes. These schemes generally invest in fixed income securities such as bond and corporate debentures. Their returns may not be as attractive as growth schemes but they are steady and less risky as compared to equity schemes. Balanced Schemes: Balanced schemes give you the best of growth and income schemes. A balanced fund invests both in equities and fixed income securities. Their return is generally less volatile as compared to pure equity fund.

Liquid Schemes:Liquid schemes are also known as money market schemes. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and government securities. It is good idea to invest your surplus funds for short periods in liquid schemes.

Gilt Schemes:These funds invest exclusively in government securities, which have zero credit. The NAVs of these schemes are determined by changes in
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interest rates and other economic factors as are the case with income or debt oriented schemes.

Tax Saving Schemes:Generally funds invested in tax-exempted securities are called tax saving fund schemes. In such fund among invested up to Rs. 1, 00,000 is exempted from tax and since income Received is from of divided so it is also exempted from income tax.

SPECIAL SCHEMES:Index funds:Index fund replicate the portfolio of a particular index such as BSE sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weightage comprising of an index.

Sector specific funds:Sector specific funds take advantages of the boom or expected upturn in a particular industry or sector by investing in them. So if software or pharmaceuticals is expected to do well. You have fund that invest in the stocks of only these sector. The returns in these funds are dependent of the respective sector or industry. While these funds may give optimized return, they are riskier as compared to diversified equity funds that invest across different sector.

Advantages of Mutual Funds:

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The advantages of investing in a Mutual Fund are: Diversification: The best mutual funds design their portfolios so individual investment will react differently to the same economic conditions. For example, economic condition like a rise in interest rate may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will economic conditions by increasing in value. Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell. Regulatory oversight: Mutual funds are subject to many government regulations that protects investors from fraud. Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash. Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet. Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Fund are less than that, because index funds are not actively manage. Instead, they automatically buy stock in companies that are listed on a specific index. respond to the same

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 Transparency Flexibility Choice of schemes Tax benefits Well regulated

Disadvantage of mutual fund: Investors have no control over costs . Products are standardized and cannot be fine tuned. Excess of choice.

The five most common Mistakes mutual fund investors make

Failing to stay invested for a longer period. Worrying about portfolio turnover or dividends it pays. Being affected by new the market when youre supposed to be investing for the long term. Selling out during bad market. Being impatient and losing confidence too soon.

Future of Mutual Funds in India:-

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By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40,90,000 Cr. The annual composite rate of growth is expected 13.4% during the rest of the decade. In the last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010, mutual fund assets will be double.

Some facts for the growth of mutual funds in India

100% growth in the last 6 years. Number of foreign AMC's are in the que to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide.

Our saving rate is over 23%, highest in the world. Only canalizing these savings in Mutual Funds sector is required.

We have approximately 29 mutual funds which is much less than US having more expansion. than 800. There is a big scope for

'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities.

Mutual fund can penetrate rural

like the Indian insurance

industry with simple and limited products.

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SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance.

3.2 FIXED DEPOSIT:This is among our earliest higher interest bearing savings scheme where in deposits can be made between 7 days to 120 months. Loans against such deposits are also provided. Interest can be withdrawn monthly / quarterly. Product Highlights: Deposits are accepted for fixed period. Account can be opened for a minimum period of 7 days to 120 months. Deposits for a period 7 to 14 days only accepted for value of Rs. 1 lakh and above. Nomination facility is available. Simple interest is eligible, depending upon the period of deposit. Premature closing is allowed, subject to penalty if any. Loans can be obtained against the deposit amount. Interest can be withdrawn in option monthly / quarterly. Standing instruction is accepted for transferring the interest.

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Features:You can deposit any amount of money in our Fixed Deposit for as long as you wish between 15 days to 10 years.

Benefits
*0 A wide range of tenures, ranging from 15 days to 10 years, to suit your investment plan. *1 Partial withdrawal is permitted in units of Rs 1,000. The balance amount earns the original rate of interest.
*2 Safe custody of your fixed deposit receipts.

*3 Auto renewal is provided. *4 Loan facility is available up to 90% of principal and accrued interest. *5 Choice of two investment plans: Traditional or Reinvestment.

Traditional
Interest payable monthly and quarterly as per your

Reinvestment
Interest is compounded quarterly and reinvested with principal amount.

convenience. Maturity period ranges from 15 Maturity period ranges from 6 months to 10 years. days to 10 years.

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3.3 POSTAL SAVING:Post office saving account is similar to a savings account in a bank. It is a safe instrument to park those funds, which you might need to liquidate fully or partially at very short notice. Post office savings accounts are especially suited for those living in rural and semi-rural areas where the reach of banks is very limited. The account can be opened at any post office with a minimum balance of Rs. 20. Maximum of Rs. one lakh for single account holder and Rs. two lakhs for joint account holders can be deposited. There is no lock-in or maturity period. The amount can be withdrawn anytime subject to keeping a minimum balance of Rs. 50 in simple account and Rs. 500 for cheque facility accounts. Rate of interest is decided by the Central Government from time to time. Interest is calculated on monthly balances and credited annually. Income tax relief is available on the amount of interest under the provisions of section 80L of Income Tax Act. Department of Post has the largest postal network in the world. It has reached in all the corners of the country up to small villages, hilly regions and tribal areas. This widespread network helps them to cover and contact all people in the country. Apart from carrying out Postal services (like delivering letters / parcels / registers, booking of value payable letters and parcels, booking of money orders, certificate of posting, sale of stamps and postal stationary, etc.), it also offers Nonpostal services (like money transfer services, banking service, life insurance schemes, pension payment, payment of telephone bills, electricity bills, etc.) as an agency function.
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With its extensive network, Post Offices serve the nation by providing various agency services like banking services for the Directorate of Small Savings. The Post Office Savings Bank is now the largest savings institution in the country with a network of about 145,000 Post Offices since Independence. This channel is a major instrument for mobilizing savings for meeting development expenditure of the nation. It has grown tremendously in all directions. It is going hand in hand with the Directorate of Small Savings for marketing and executing various Small Savings Schemes in the nation. The Post Office is currently handling following Small Savings Schemes: 1. Savings Bank Account 2. Recurring Deposit Account 3. Time Deposit 4. Public Provident Fund (PPF) Account 5. Monthly Income Scheme 6. National Savings Certificates (NSC) 7. Kisan Vikas Patra (KVP)

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Real Estate Investment is now treated as a major case of capital budgeting by using state-of-the-art investment analysis which incorporates the future stream of income it may generate and the associated risk adjustments. It has been the highlight of the investment literature since the 1970s when investment theorists extended techniques such as probability, time value of money and utility into its analysis. Real estate is basically defined as immovable property such as land and everything permanently attached to it like buildings. Real property as opposed to personal or movable property is characterized by the right to transfer the title to the land whereas title to personal property can be retained. The investment in real estate essentially depends on the risks associated with it, that is to say, even if the venture succeeds when the future stream of income will accrue to the investor and the alternative investment opportunities. Real estate investment can be attractive if viewed as a business opportunity; it can generate rental income, using it as collateral to secure a loan for a business venture, to offset otherwise taxable income through cash savings on tax-deductible interest rate losses, or simply from the profits garnered from its resale. Notable, in this context is the gains reaped by real estate speculators who trade in real estate futures (by buying and selling purchase options). Common examples of real estate investment are individuals owning multiple pieces of real estates one of which is his primary residence and others are occupied by tenants from where the rental income accrues. Real estate investment is also associated with appreciation in the value of property thereby having the potential for capital gains. Tax implications differ for real estate investment and residential real estates. Real estate investment is long term in nature and investment professionals routinely maintain that ones investment portfolio should have at least 5%-20% invested in real estate. A Real Estate Investment Trust (REIT) is a corporation or body investing in real estate that has the property to reduce or eliminate corporate income taxes. In return, REITs are required to distribute 90% of their income among the investors. These incomes are often taxable. REITs provide a similar function as does Mutual Funds provide for stocks in33 share market. The key statistics to the study about the REITs are the NAV (Net Asset Value) and AFFO (Adjusted

3.4 REAL ESTATE:Why invest in Indian real estate:Flying high on the wings of booming real estate, property in India has become a dream for every potential investor looking forward to dig profits. All are eyeing Indian property market for a wide variety of reasons: *0 Its ever growing economy which is on a continuous rise with 8.1 percent increase witnessed in the last financial year. The boom in economy increases purchasing power of its people and creates demand for real estate sector. *1 India is going to produce an estimated 2 million new graduates from various Indian universities during this year, creating demand for 100 million square feet of office and industrial space. *2 Presence of a large number of Fortune 500 and other reputed companies will attract more companies to initiate their operational bases in India thus creating more demand for corporate space. *3 Real estate investments in India yield huge dividends. 70 percent of foreign investors in India are making profits and another 12 percent are breaking even.
*4 Apart from IT, ITES and Business Process Outsourcing (BPO)

India has shown its expertise in sectors like auto-components, chemicals, apparels, pharmaceuticals and jewelers where it can match the best in the world. These positive attributes of India is

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definitely going to attract more foreign investors in the near future. The relaxed FDI rules implemented by India last year has invited more foreign investors and real estate in India is seemingly the most lucrative ground at present. The revised investor friendly policies allowed foreigners to own property, and dropped the minimum size for housing estates built with foreign capital to 25 acres (10 hectares) from 100 acres (40 hectares). With this sudden change in investment policies, the overseas firms can now put up commercial buildings as long as the projects surpass 50,000 square meters (538,200 square feet) of floor space. Indian real estate sector is on boom and this is the right time to invest in property in India to reap the highest.

3.5 GOLD:Today, like all investments and commodities, the price of gold is ultimately driven by supply and demand, including hoarding and disposal. Unlike most other commodities, the hoarding and disposal plays a much bigger role in affecting the price, because most of the gold ever mined still exists and is potentially able to come on to the market for the right price. Given the huge quantity of hoarded gold, compared to the annual production, the price of gold is mainly affected by changes in sentiment, rather than changes in annual production. According to the World Gold Council, annual mine production of gold over the last few years has been close to 2,500 tones. About

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3,000 tones goes into jewelry or industrial/dental production, and around 500 tones goes to retail investors and exchange traded gold funds. This translates to an annual demand for gold to be 1000 tones in excess over mine production which has come from central bank sales and other disposal.

Types of gold investor:Investors may buy gold for a variety of reasons: among them include a desire to diversify their assets; to hide wealth from tax authorities; for reasons of political belief (e.g. libertarian); or out of fear of an economic depression or other serious crisis (e.g. gold bug). Investment in gold can be done directly through bullion ownership, or indirectly through certificates, accounts, spread betting, derivatives or shares.

3.6 INSURANCE POLICY:Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. Insurer, in economics, is the company that sells the insurance. Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. An operational definition of insurance is that it is:
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*0 The benefit provided by a particular kind of indemnity contract, called an insurance policy; *1 That is issued by one of several kinds of legal entities (stock company, mutual company, reciprocal, or Lloyd's syndicate, for example), any of which may be called an insurer; *2 In which the insurer promises to pay on behalf of or to indemnify another party, called a policyholder or insured; *3 That protects the insured against loss caused by those perils subject to the indemnity in exchange for consideration known as an insurance premium. In recent years this kind of operational definition proved inadequate as a result of contracts that had the form but not the substance of insurance. The essence of insurance is the transfer of risk from the insured to one or more insurers. How much risk a contract actually transfers proved to be at the heart of the controversy. Commercially insurable risks typically share seven common characteristics:A Large Number of Homogeneous Exposure Units The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004.The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called law of large numbers, which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected
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results. There are exceptions to this criterion. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent. Large commercial property policies may insure exceptional properties for which there are no homogeneous exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable. Definite Loss: The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements. Accidental Loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.
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Large Loss: The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer. Affordable Premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards (See FAS 113 for example), the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. Calculable Loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective

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evaluation of the amount of the loss recoverable as a result of the claim. Limited Risk of Catastrophically Large Losses: The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurers appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurers capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

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41

Chapter 4
4.1 Data Analysis & Interpretation. 4.2 Key Findings. 4.3 Recommendations 4.4 Conclusion

4.1 DATA ANALYSIS:42

The basic purpose of the study conducted was to find the emerging trends of investment. There are many sources available to make investment & individual prefer them according to his needs. Data was collected based on the above aim in mind, regarding the purpose of the investment and the various parameters on the basis of which these investments are evaluated etc. According to survey unaware and investor prefer to invest infixed deposit and postal saving because they think it is government firm. And aware people spend in many other AMC also based on their performance. Basically they go for company which have been giving good returns or based on fund manager.

A) Which is your income Source?

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Income Source Business Service Agri field Total

No. of People 54 132 14 200

Percentage 27 % 66 % 7% 100%

Interpretation:-From above graph 66% investors belongs to

the service class, 27% investors belongs to the business class and 7% investors belongs to the agri fiel

B) Annual Income:-

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Annually Income Below 1 lac 1 to 2.5 lac 2.5 to 4.0 lac Above 4 lac Total

No. of People 110 48 24 18 200

Percentage 55 % 24 % 12 % 9% 100%

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Interpretation:-From above graph 55% investors annual

income is below 1 lac, 24% investors annual income is between 1 to 2.5 lac, 12% investors annual income is 2.5 to 4 lac and 9% investors annual income is above 4 lac. C) Which option will you prefer for investment?

Types of Investment Fixed Deposit Postal saving Mutual Fund Other Total

No. of People 58 52 42 48 200

Percentage 29 % 26 % 21 % 24 % 100%

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Other: - other includes Real estate, Gold and insurance policy

etc.

Interpretation:-From above graph it can be observed that 29%

investors find fixed deposit as most option, 26% investors invest in postal saving, 24% investors prefer other option that is Real estate, Gold and insurance policy etc. and 21% investors invest in mutual fund.

Why? Reason for preferring specific option are47

1)

People prefer bank deposit as an investment option because it gives fixed interest on investment and not risk in this investment option.

2)

Investor prefers postal saving because they think it is government firm and fixed interest rate. Investors invest in Real estate, Gold and Insurance policy etc. because they think its tangible asset. Investors prefer mutual fund as an investment option because some people are interested in share market but it is more risky so this people are invest in mutual fund.

3)

4)

D) Do you know about mutual fund as an investment option? Option

Yes No Total

No. of People
176 24 200

Percentage
88 % 12 % 100%

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Interpretation:- From the above graph 88% invesrors are

aware of mutual fund as an investment option and 12% investors are not aware of mutual fund as an investment option.

E) If you invest in mutual fund so which type of scheme will you prefer?

Types of scheme
Equity link service scheme [ELSS] Growth scheme Total

No. of People
66 134 200

Percentage
33 % 67 % 100%

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Interpretation:- From the above graph 67% investors prefer

Growth scheme and 33% investors prefer Equity link service scheme(ELSS).

F) Which type of fund will you prefer? Types of fund

Equity fund Debt fund Balanced fund Total

No. of People
60 24 116 200

Percentage
30 % 12 % 58 % 100%

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Interpretation:- From the above graph 58% investors prefer

Balanced fund type of investment, 30% investors prefer Equity fund and 12% investors prefer Debt fund type of mutual fund.

G) If you invest in mutual fund so which type of plan will you prefer?

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Types of fund
Systematic investment plan Systematic withdrawal plan Systematic transfer plan One time investment Total

No. of People
88 28 18 66 200 44% 14% 09% 33%

Percentage

100%

Interpretation:- From the above graph 44% investors prefer

Systematic investment plan, 33% investors prefer One time investment plan, 14% Systematic withdrawal plan, 9% investors prefer Systematic transfer plan of mutual fund investment.

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H) Do you think that mutual funds ensure better returns?

Option
Yes No Cant say Total

No. of People
130 12 58 200

Percentage
65% 6% 29% 100%

Interpretation:- From the above graph it can be seen that 65%

investors agrees that mutual fund gives better returns, 29%investors said that cant say and 6% investors said that no.

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I) Investment option preferred by according to income source?

Types of investment
Fixed deposit Postal saving Mutual fund Other

No. of business people

8 4 24 18

No. of salaried people

52 35 25 20

No. of agri field people

5 6 0 3

(Other: - Other includes Real estate, Gold and insurance policy etc.)

Interpretation:- From the above graph salaried people are more intrested in any type of investment but business people mostly prefer mutual fund as an investment option.
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4.2 FINDINGS
1) Most of the people know about mutual fund as an investment option.
2) Majority of the peoples income source is service and annual

income is below one lack. 3) Investors mostly prefer bank deposit as option for investment than any other option.
4) Investors prefer the balanced fund type of investment,

growth option and systematic investment plan or one time investment plan of mutual fund as an investment option. 5) Preference of business peoples is mutual fund, salaried peoples interested in fixed deposit and agri field peoples prefer the postal saving as an investment option. 6) Performance of systematic withdrawal plan and systematic investment plan is comparatively low than other plan.
7) Agri. field people have low interest in investing in mutual

fund.

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4.3 RECOMMENDATIONS
1) Mahindra finance should create more awareness about various mutual fund schemes and plans.
2) Mahindra finance should promote by systematic withdrawal

plan and systematic transfer plan has people know very low about it.
3) Mahindra finance should create more awareness in agri. field

people.

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4.4 CONCLUSIONS
1) Maximum investors are aware of the mutual fund as an

investment option but not about various schemes.

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ANNEXURE

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QUESTIONNAIRE Name : Address: Contact No: Occupation: Date of birth: Age:

Que: Which is your income source? ( ) Service ( ) Agri Field Annual Income: ( ) below 1 Lac ( ) 2.5 Lac to 4 Lac ( )1 Lac to2.5 Lac ( ) Above 4 Lac ( ) Business ( ) Other

Ph. No:Mobile no:

91-

Que: Which option will you prefer for investment? ( ) Postal Saving ( ) Mutual fund ( ) Bank Deposit ( ) other

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Why?

Que: Do you know about mutual fund as an investment option? ( ) Yes ( ) No

Que: If you invest in mutual fund so which type of scheme will you prefer? ( ( ) Equity link service scheme (ELSS) ) Growth scheme

Que: Which type of fund will you prefer? ( ) Equity fund ( ) Balanced fund Que: If you invest in mutual fund so which type of plan will you prefer? ( ) Systematic Investment Plan {SIP} ( ) Systematic Withdrawal plan {SWP} ( ) Systematic Transfer plan {STP} ( ) One time Investment (Lumsum) ( ) Debt fund

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Que: Do you think that mutual funds ensure better returns? ( ) Yes ( ) Cant say ( ) No

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REFERENCES

Journal and Magazines:

Mahindra Fin smart Magazines.

News Papers:
Economic Times. Business Standard. Times of India

Web Site:
www.mahindrafinance.com www.mahindraandmahindra.com www.amfiindia.com www.moneycontrol.com

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GLOSSARY
AMA:- AMERICAN MARKETING ASSOCIATION NAV:- NET ASSET VALUE REIT:- REAL ESTATE INVESTMENT TRUST ELSS:- EQUITY LINK SERVICE SCHEME SIP:- SYSTEMATIC INVESTMENT PLAN SWP:- SYSTEMATIC WITHDRAWAL PLAN STP:- SYSTEMATIC TRANSFER PLAN

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