1.

INTRODUTION

1.

INTRODUCTION

The project is to find out prospect investors of Mutual Funds and also to provide key information about the investors perception and preferences of Mutual Fund industry. The study will help in getting information about their performance at distributors as well as at their own investment center or why people go for Mutual Fund for investments. Studies will also helps in finding out the problems related to distribution.

COMPANY PROFILE

Introduction: Success is a journey, not a destination. If we look for examples to prove this quote then we can find many but there is none like that of karvy. Back in the year 1981, five people created history by establishing karvy and company which is today known as karvy, the largest financial service provider of India. Success sutras of karvy: The success story of karvy is driven by 8 success sutras adopted by it namely trust, integrity, dedication, commitment, enterprise, hard work and team play, learning and innovation, empathy and humility. These are the values that bind success with karvy.

Vision of karvy: To achieve & sustain market leadership, Karvy shall aim for complete customer satisfaction, by combining its human and technological resources, to provide world class quality services. In the process Karvy shall strive to meet and exceed customer's satisfaction and set industry standards. Mission statement: Our mission is to be a leading and preferred service provider to our customers, and we aim to achieve this leadership position by building an innovative, enterprising , and technology driven organization which will set the highest standards of service and business ethics.

The Success Ladder:

Company overview: Karvy was established as karvy and company by five chartered accountants during the year 1979-80, and then its work was confined to audit and taxation only. Later on it diversified into financial and accounting services during the year 1981-82 with a capital of rs.150000. it achieved its first milestone after its first investment in technology. Karvy became a known name during the year 1985-86 when it forayed into capital market as registrar.

Evolution of KARVY: It is well said that success is a journey not a destination and we can see it being proved by karvy. Under this section we will see that how this karvy and company of 1980 became karvy of 2008. Karvy blossomed with the setting up of its first branch at Mumbai during the year 1987-88. The turning point came in the year 1989 when it decided to enter into one of the not only emerging rather potential field too i.e; stock broking. It added the feather of stock broking into its cap. At the same time it became the member of Hyderabad Stock Exchange through associate firm karvy securities ltd and ..it went on adding services one after another, it entered into retail stock broking in the year 1990. Karvy investor service centers were set up in the year 1992. Karvy which already enjoyed a wide network through its investor service centers, entered into financial product distribution services in the year 1993. Karvys strategy has always been being the first entrant in the market. Karvy again hit the limelight by becoming the first registrar in the country to be awarded ISO 9002 in the year 1997. Then it stepped into the other most happening sector i.e; IT enabled services by establishing its own BPO units and at a gap of just 1 year it took the path of e-Business through its website www.karvy.com . Then it entered into insurance services in the year 2001 with the launch of its retail arm karvy- the finapolis: your personal finance advisor. Then in the year 2002 it launched its PCG(Private Client Group) which looks after its High Networth Individuals .and maintain their portfolio and provides them with other financial services. In the year 2003, it commenced secondary debt and WDM trading. It was a decade which saw many Indian companies going global..so why the largest financial service provider of India should lag behind? Hence, karvy launched karvy global services limited after entering into a joint venture with Computershare, Australia in the year 2004.the year 2004 also saw
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karvy entering into commodities marketing through karvy comtrade. Year 2005 saw karvy establishing a separate branch for its insurance services under the head karvy insurance broking ltd and in the same year, after being impressed with the rapid growth of karvy stock broking limited, PCG group of Hong Kong acquired 25% stake at KSBL. In the year 2006, karvy entered into one of the hottest sector of present time i.e real estate through Karvy realty& services (India) ltd. hence , we can see now karvy being established as the lagest financial service provider of the country.

HISTORY OF KARVY AND COMPANY

1979-1980 1981-1982 1985-1986

Karvy and company Karvy Consultants Ltd. Foray into capital market as Registrars and Transfers Agents

1987-1988 1988-1989

First Branch in Mumbai Extension of financial services into stock broking

 1990 Entry into Retail Stock Broking 1992 Set up investor service centers 1993 Financial products distribution 1994 Entry into Mutual Fund service 1995 Corporate Finance and investment banking 1997 First Registrar in the country to be awarded ISO 9002 1999 IT enabled service 2000 E-Business www.Karvy.com 2001 Insurance and Launch of retail arm Karvy the Finapolis- Your Financial Advisor 2002 Launch of PCG 2003 Commencement of secondary Debt and WDM trading 2004 Joint Venture with Computer Share Ltd., Australia, Launch of Karvy global services and Karvy Comtrade Ltd. 2005 Karvy Insurance Broking Private Ltd 2006 Karvy Realty Services & Services(India) Ltd. 2007 Karvy Fortune, funding by ICICI Ventures Ltd., Barings Asia 2008 Karvy Private Wealth BPO

 2009 Karvy Data Management Services Ltd., Karvy Financial Services Ltd., Milestones to be achieved in future: By 2012 To set up its own Bank

In Future

To set up its own Asset Management Company

Now karvy group consists of 8 highly renowned entities which are as follow: 1. The first securities registry to receive ISO 9002 certification in India. Registered with SEBI as Category I Registrar, is Number 1 Registrar in the Country. The award of being Most Admired Registrar is one among many of the acknowledgements we received for our customer friendly and competent services. 2. karvy stock broking ltd. Consists of five units namely stock broking servics, depository participant, advisory services, distribution of financial products, advisory services and private client goups. 3. it is registered with SEBI as a category 1 merchant banker. Its clientele includesinclude leading corporates, State Governments, foreign institutional investors, public and private sector companies and banks, in Indian and global markets.

4. karvy insurance broking ltd is also a part of karvy stock broking ltd. At Karvy Insurance Broking Limited both life and non-life insurance products are provided to retail individuals, high net-worth clients and corporates. 5. The company provides investment, advisory and brokerage services in Indian Commodities Markets. And most importantly, it offer a wide reach through our branch network of over 225 branches located across 180 cities. 6. Karvy Global is a leading business and knowledge process outsourcing Services Company offering creative business solutions to clients globally. It operates in banking and financial services, inurance, healthcare and pharmaceuticals, media , telecom and technology. It has its sales and business development office in New York, USA and the offshore global delivery center in Hyderabad, India 7. Karvy Realty (India) Limited is engaged in the business of real estate and property services offering:

Buying/ selling/ renting investments of properties Identifying valuable opportunities in the real estate sector Facilitating financial support for real estate and investments in properties Real estate portfolio advisory services

Organization structure of karvy: Talking about the organization structure of karvy, we have the board of directors as the supreme governing body , the chairman being Mr. C parthasarthy, mr. m

yugandhar as the managing director, mr m s ramakrishna andmr. Prasad v. potluri as directors. Karvy computershare private limited facilitates mutual fund services, share registry and issue registry whereas merchant banking is looked after by karvy investor services ltd. Karvy stock broking ltd heads its another branch too ie. Karvy insurance broking ltd. The services offered by KSBL are: stock broking, depository, research, distribution, personal client group and institutional desk. And finally be presented as:

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Spectrum of services offered by karvy: Karvy being the top registrar and transfer agent, functions as registrar in most of the issues in the country. Talking about the mutual fund services offered by karvy, we can get the products of 33 AMCs over here. it deals in both closed ended funds as well as open ended too. Now one must be thinking why to get the mutual funds from karvy instead of getting it directly from AMCs???we have great reasons for it. Karvy believes in being updated always. So it is always ready to use latest technologies so that its clients always be in touch with the latest happenings along with karvy. It offers e-business through internet through its website: www.karvy.com . Other than it,
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it also provides its various services through SMSes. Karvys services are not limited to its investors only rather its offerings are for its corporate clients and distributors too. it is very well aware of the fact that in this era of neck to neck competition, we cant ignore any of the aspects of our business.so theres a offering for everybody everyones welcome at karvy.

Why should investors choose for karvy? Excellence is next to nothing.and here at karvy everybody tries their best to offer excellent services to its clientele through its offerings maintaining the karvy culture which includes: 1. Controlled and low cost service culture: karvy is there to serve its client at the minimum possible cost. it controls cost by its various cost- cutting techniques and minimization of avoidable costs.

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2. Large volume processing capability: being the largest financial service provider in the country, it has the unique distinction of operating its activities on a large scale which benefits all the parties cordially. 3. Adherence to strict time schedule: karvy knows that time is money and tries it best to finish the task within the stipulated time schedule. 4. Expertise in coordinating multi-location responses: karvy has got a wide network and hence one can find its branches at most of the places in India. Thus it enjoys its presence everywhere and coordinates among itself in solving the queries and in responding to any situation. 5.Expertise in managing independent entities such as banks, post-office etc.: the work culture of karvy and the ethics followed inside karvy makes its workforce compatible with everybody, so the karvy people establishes good coordination with independent entities too.

How karvy achieved it? The core competency of karvy lies in the following points due to which it enjoys a competitive edge over its competitors. The following culture adopted by karvy makes it all time favorite among its clientele: 1. Professionally managed by qualified and trained manpower. 2. Uniquely structured in-house software and hardware department 3. Query handling within 48 hrs.
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4. Strong secretarial, accounting and audit systems. 5. Unique work culture of working 7 days a week in 3 shifts. 6. Unmatched network spreading all over India.

How Achievements sounds synonymous to karvy: The landmarks achieved by karvy very well define its success story. In the previous pages, we learnt how a company started by five chartered accountants, named as karvy and company turned into todays karvy group, the largest financial intermediary of India. But success didnt came to karvy at a flow, the hard work and dedication of its workforce made it what it is todaygradually it achieved the following landmarks and now it has became what we call the karvy group, now it is: 1.largest independent distributor for financial products.

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2.amongst the top 5 stock broker. 3.among the top 3 depository participants. 4.largest network of branches & business associates. 5.ISO 9002 certified operations by DNV. 6.Amongst top 10 investment bankers.

Clientele of karvy: Karvys culture has helped karvy in achieving such a distinct position in the market where it can boast of its huge client base. Be it a retail investor investing Rs. 500 in a SIP in Reliance mutual fund or be it the largest corporate house of the country: Reliance industries- everybody is heading towards karvy for their wealth maximization, lets have a look at the clientele of karvy : According to the datas published in year 2007, karvy stock broking ltd. Operates through more than 12000 terminals, more than 290000 accounts are maintained and

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commands over 3.14% market share of NSE. The distribution services has access to more than Rs. 40 billion Assets Under Management. Karvy being a depository participant with both NSDL and CDSL, manages more than 700000 accounts from more than 380 locations. Talking about the registry services, it manages over 750 public/ right issues.at the same time, it is managing over 16 million portfolios as registrar. If we took a look at some of the top corporate houses availing the services of karvy then we have: Reliance, IOC, IDBI,LIC, Hindustan Unilever, Principal Mutual Fund, Duetsche Mutual Fund, Yogokawa, Marico Industries, Patni Computers, Morgan Stanley, Glenmark, CRISIL, 3M, Kotak Mahindra Bank, Bharti Televenture, Infosys Technologies, Wipro, Infotech, IPCL,TATA consultancy services, UTI mutual fund etc. Thus in total karvy serves over 16 million investors and 300 corporate.

Hierarchical Structure in diagram:

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The above diagram shows the hierarchy of Karvy stock broking ltd. It can be easily depicted from the diagram that the regional head (presently Mr. Alok Chaturvedi) is the supreme in the eastern region, under whom the various zonal heads operate and under these zonal heads, the branch heads operate. Between each level o the hierarchy, there exists a coordinator, who acts as the facilitator between the different heads.

Structure according to the Products offered by Karvy:

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REGIONAL HEADS

PRODUCT HEADS HEA Realt y Debt divisi on

Mutu al funds

Insur ance broki ng

com modi ties

Stock broki ng

Depo sitory partic ipant

Merc hant & inv.b ankin g

PMS

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MUTUAL FUNDS

Introduction of Mutual fund

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While everyone dreams of a luxurious life, very few fulfill them. A luxurious life is generally linked with wealth. So, the question most people would like to know is: How do I create wealth? Or how can I get rich? It's really not that difficult to create wealth. It's just a matter of systematic planning and disciplined approach. Once you have small amounts saved up, then you can start looking into ways to use that money to create more money. Money can multiply through investments in the stock market, real estate, commodities, etc. One avenue which invests in all is mutual funds. Therefore, one of the crucial ways, people can build their core capital is by investing in a mutual fund. Once you have small amounts saved up, then you can start looking into ways to use that money to create more money. Money can multiply through investments in the stock market, real estate, commodities, etc. One avenue which invests in all is mutual funds. Therefore, one of the crucial ways, people can build their core capital is by investing in a mutual fund.

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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 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 of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.

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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.

Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

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GROWTH IN ASSETS UNDER MANAGEMENT

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Working of Mutual Fund The flow chart below describes broadly the working of a mutual fund

Savings Trust Units Unit holders

AMC Investments Returns

Registrar

SEBI

Trust Custodian AMC

The structure of Mutual Funds in India is governed by SEBI (Mutual Fund) Regulations, 1996. It is mandatory to have a three tier structure of Sponsor Trustee Asset Management Company. The trust is established by a Sponsor or more than one sponsor who is like a promoter of a company. He appoints the Trustees who are responsible to the investors of the fund. The Trustees of the mutual fund hold its property for the benefit of the unit holders.

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Asset Management Company (AMC) approved by SEBI is the business face of the mutual fund as it manages all the affairs of the fund by making investments in various types of securities.

Custodian, who is registered with SEBI, holds the securities of various schemes of the funds in its custody.

BENEFITS OF MUTUAL FUND INVESTMENT

Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the

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

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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. 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. Categories of Mutual Funds:

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Mutual funds can be classified as follow:

Based on their structure: Open-ended funds: Investors can buy and sell the units from the fund, at any point of time. Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity. Based on their investment objective: Equity funds: These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as: i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition

and individual stock weightages.

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ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks. iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields. iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc. v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks. Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes: i) Debt-oriented funds -Investment below 65% in equities. ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt. Debt fund: They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs.

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i) Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market. ii)Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills. iii)Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate. iv)Arbitrage fund- They generate income through arbitrage opportunities due to mispricing between cash market and derivatives market. v)Gilt funds LT- They invest 100% of their portfolio in long-term government securities.

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Investment strategies: 1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.

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INVESTMENT THROUGH SIP Introduction Which ever way you choose to invest your money to create wealth, one thing is for sure, the sooner you start the better off you will be. Once your investment returns start compounding year after year, you will really start to see the effect it has on your wealth creation activities. Uncertainty is the basic nature of stock markets. Time and again, the markets have proved investors wrong by showing their unpredictable nature. This impact is most crushing on retail investors. Is it possible to ride on the stock market volatility, without getting hurt? Yes, it is! For this two simple principles need to be followed religiously. 1: Stay invested for long term. 2: Adopt a systematic and regular approach towards investment. SIP is one approach which lets the investors follow the two basic principles of investing at one go.

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Benefits of SIP Monthly contribution: Investing at one go proves to be a burden on the pockets of investors. On the other hand, monthly investments in small amounts is more feasible for them. SIP provides this benefit to retail investors, wherein they can invest a part of their monthly savings regularly. The initial investment amount may be as low as Rs.500. Systematic approach: SIP helps in investing consistently in a disciplined manner and further it helps in compounding returns as well. Rupee-cost averaging: Any market witnesses ups and downs over a period. The best investment approach to be followed in such cases is a SIP. Here, irrespective of the NAV movement an investor acquires more units compared to a one time investor. Successively, this means higher gains. The following table illustrates the same.

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Amount NAV invested in SIP (Rs.) (Rs.) 10 8 10 12 10 5000 5000 5000 5000 5000 25000 500.00 625.00 500.00 416.67 500.00 2541.67 in SIP Units allotted

Amount invested lump sum 25000 25000

Units in lump

allotted

in sum

investment 2500 2500

Timing the market approach: Consider three cases. Sehwag invests Rs.5,000 at the index level on the first day of every month. Dhoni, being lucky, invests the same amount at the lowest value of the index every month; and Kaif, unfortunately invests the same amount but at the highest level of the index during that month. Investment made BSE Sensex returns Sehwag (indifferent) Dhoni (most lucky) 20.02% 20.87% Kaif (unlucky) 19.09%

Note: An investment of Rs.5,000 is made monthly for a period of 10 years (June'2001 to June'2011). Returns are XIRR of investments. The returns in the above three cases differ by a very small margin, showing that while investing for long term, it doesn't really matter whether you are investing at market peaks or market lows.

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Hence time in the market is more important than timing the market. Investing through SIP frees you from timing the market because over a long horizon, SIP investment evens out the market ups and downs.

RISK & RETURN CHART

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BANKS V/S MUTUAL FUNDS:

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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 indicates that money is going to mutual fund in a big way. CATEGORY Returns Administrative exp. Risk Investment options Network Liquidity Quality of assets Interest calculation BANKS Low High Low Less High penetration At a cost Not transparent MUTUAL FUNDS High Low Moderate More Low but improving Better Transparent

Minimum balance between Everyday 10th & 30th of every month

Guarantee

Maximum Rs.1 lakh on None deposits

RISKS ASSOCIATED WITH MUTUAL FUNDS

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The most important relationship to understand is the risk-return trade-off. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Hence it is upto you, the investor to decide how much risk you are willing to take. In order to do this you must first be aware of the different types of risks involved with your investment decision.

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CONSTITUENTS OF A MUTUAL FUND

1. Sponsor:

Sponsor is a person who sets up a Mutual Fund Sponsor settles the Trust and executes Trust Deed Sponsor contributes to the initial capital of the Trust Sponsor appoints the Board of Trustees Sponsor appoints Asset Management Company Sponsor contributes minimum 40% of net worth of AMC Trustees: Trustees appointed by the Sponsor with SEBI approval At least two third Trustees must be Independent The Trustees have a FIDUCIARY responsibility towards unit holders

2.

Trustees not liable for acts done in good faith and if they have exercised adequate due diligence

Trustees oversee the functioning of AMC Trustees approve each MF scheme floated by AMC

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The investments in MFs are held by the Trustees Asset Management Company: Constituted as a Company under the Indian Companies Act Minimum Net worth of Rs. 10 crores for AMC with minimum 40% share of Sponsors

3.

At least 50% of Directors of AMC to be independent AMC can do only the following businesses Asset Management Services Portfolio Management Services Portfolio Advisory Services

AMC can be terminated/changed with the consent of Majority of Trustees or At least 75%majority of Unit holders

4.

Custodian: Appointed by Board of Trustees Keep account of Securities Collects benefits under Securities Sponsor & Custodian cannot be the same entity

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 5. 6. 7.

Registered with SEBI Registrar & Transfer Agent: Issues, redeems, transfers units of MF schemes Keeps Unit Holders A/cs upto date Registered with SEBI

Distributors Banker

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DEBT FUNDS SALIENT FEATURES Debt funds are funds which invest money in debt instruments such as short and long term bonds, government securities, t-bills, corporate paper, commercial paper, call money etc. The fees in debt funds are lower, on average, than equity funds because the overall management costs are lower. The main investing objectives of a debt fund is usually preservation of capital and generation of income. Performance against a benchmark is considered to be a secondary consideration. Investments in the equity markets are considered to be fraught with uncertainties and volatility. These factors may have an impact on constant flow of returns. Which is why debt schemes, which are considered to be safer and less volatile have attracted investors. Debt markets in India are wholesale in nature and hence retail investors generally find it difficult to directly participate in the debt markets. Not many understand the relationship between interest rates and bond prices or difference between Coupon and Yield. Therefore venturing into debt market investments is not common among investors. Investors can however participate in the debt markets through debt mutual funds. One must understand the salient features of a debt paper to understand the debt market. Debt paper is issued by Government, corporates and financial institutions to meet funding requirements. A debt paper is essentially a contract which says that the borrower is taking some money on loan and after sometime the lender will get the money back as well as some interest on the money lent.

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Concept Clarifier Face Value, Coupon, Maturity Any debt paper will have Face Value, Coupon and Maturity as its standard characteristics. Face Value represents the amount of money taken as loan. Thus when an investor invests Rs. 100 in a paper, at the time of issuing the paper, then the face value of that paper is said to be Rs. 100. For our understanding point of view, Face Value is that amount which is printed on the debt paper. The borrower issues this paper; i.e. takes a loan from the investor as per this Face Value. So, if the Face Value is Rs. 100, the borrower will take a loan of Rs. 100 from the investor and give the paper to the investor. Next question is what the investor will earn from this investment. This can be found by looking at the Coupon of the paper. The Coupon represents the interest that the borrower will pay on the Face Value. Thus, if the Coupon is 8% for the above discussed paper, it means that the borrower will pay Rs. 8 every year to the investor as interest income. It must be understood that the Face Value and the Coupon of a debt paper never change. There are some papers where the Coupon changes periodically, but again, for the moment we will ignore such paper. Since the investor will earn a fixed income (8% on Rs. 100 or Rs. 8 per year in our example), such instruments are also known as Fixed Income securities. Finally the question arises, for how long the borrower has taken a loan. This can be understood by looking at the Maturity. So if the paper in our example says that the maturity of the paper is 10 years, it means that for 10 years the investor will receive Rs. 8 as interest income and after 10 years, he will get his Principal of Rs. 100 back. Thus now we can say, about the paper in our example that the borrower has taken a

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Rs. 100 loan, for a period of 10 years, and he has promised to pay 8% interest annually. This is the most basic form of debt paper. There can be modifications made to he issue price, coupon rate, frequency of coupon payment, etc., but all these modifications are out of these basic features. Prima facie this arrangement looks risk free. However two important questions need to be asked here: 1. What if interest rates rise during the tenure of the loan? 2. What if the borrower fails to pay the interest and/ or fails to repay the principal? In case interest rates rise, then the investors money will continue to grow at the earlier fixed rate of interest; i.e. the investor loses on the higher rate of interest, which his money could have earned. In case the borrower fails to pay the interest it would result in an income loss for the investor and if the borrower fails to repay the principal, it would mean an absolute loss for theinvestor. A prospective debt fund investor must study both these riskscarefully before entering debt funds.

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RISKS ASSOCIATED WITH MUTUAL FUNDS

MARKET RISK Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (SIP) that works on the concept of Rupee Cost Averaging (RCA) might help mitigate this risk.

CREDIT RISK The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cashflows determines the Credit Risk faced by you. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. An AAA rating is considered the safest whereas a D rating is considered poor credit quality. A well-diversified portfolio might help mitigate this risk.

INFLATION RISK

Things you hear people talk about: Rs. 100 today is worth more than Rs. 100 tomorrow. Remember the time when a bus ride costed 50 paisa? Mehangai Ka Jamana Hai.

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The root cause , Inflation. Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A well-diversified portfolio with some investment in equities might help mitigate this risk.

INTEREST RATE RISK

In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified portfolio might help mitigate this risk.

POLITICAL RISK

Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa.

47

LIQUIDITY RISK

Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities. You have been reading about diversification above, but what is it? Diversification The nuclear weapon in your arsenal for your fight against Risk.

ACCOUNTING AND VALUATION

Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the per unit. We also abide by the same convention.

48

Calculation of Net Asset Value

The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of the units outstanding. The detailed methodology for the calculation of the net asset value is given below:

NAV =

Market value of investments + Current assets and other assets + Accrued income - Current liabilities and other liabilities - Accrued expenses

BETA RATIO

A high beta is good or bad depending on the state of the market. If the market sentiments are bullish, i.e., the market is seeing a rise in general, then a high beta stock is better and if the market sentiment is bearish then low beta is preferred. A beta of 1 indicates that the security's price will move with the market. A beta less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security's price will be more volatile than the market.

49

R_SQUARED

A statistical

measure

that

represents

the

percentage

of

fund's

or

security's movements that are explained by movements in a benchmark index. Rsquared values range from 0 to 100. An R-squared of 100 means that all movements of a security are completely explained by movements in index

SHARP RATIO

High returns are generally associated with a high degree of volatility. The Sharpe ratio represents this trade off between risk and returns. At the same time it also factors in the desire to generate returns, which are higher than those from risk free returns.The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance is. .

50

MAJOR PLAYERS IN MUTUAL FUNDS INDUSTRY

ABN AMRO Mutual Fund ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.

Birla Sun Life Mutual Fund Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 Crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

51

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund HDFC Mutual Fund was setup on June 30, 2000 with two sponsor namely Housing Development Finance Corporation Limited and Standard Life Investments Limited.

HSBC Mutual Fund HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. The Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment

52

Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

Prudential ICICI Mutual Fund The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993.

Sahara Mutual Fund Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM.

53

Now it has an investor base of over 8 Lakhs spread over 18 schemes.

Tata Mutual Fund Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited is one of the fastest in the country with more than Rs. 7,703 Crores (as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having more than 1,99,818 investors in its various schemes. KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities.

Unit Trust of India Mutual Fund UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Private

54

Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crore. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds. Reliance Mutual Fund Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.

Standard Chartered Mutual Fund Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20,1999. Franklin Templeton India Mutual Fund

55

The group, Franklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer.

WHAT ARE THE INVESTORS RIGHTS & OBLIGATIONS? Some of the Rights and Obligations of investors are :-

1. Investors

are mutual, beneficial and proportional owners of the schemes

assets. The investments are held by the trust in fiduciary capacity (The fiduciary duty is a legal relationship of confidence or trust between two or more parties)

2. In case of dividend declaration, investors have a right to receive the dividend

within 30 days of declaration.

3. On redemption request by investors, the AMC must dispatch the redemption

proceeds within 10 working days of the request. In case the AMC fails to do so, it has to pay an interest @ 15%. This rate may change from time to time subject to regulations.

4. In case the investor fails to claim the redemption proceeds immediately, then
the applicable NAV depends upon when the investor claims the redemption proceeds.

56

5. Investors

can obtain relevant information from the trustees and inspect

documents like trust deed, investment management agreement, annual reports, offer documents, etc. They must receive audited annual reports within 6 months from the financial year end.

6. Investors can wind up a scheme or even terminate the AMC if unit holders
representing 75% of schemes assets pass a resolution to that respect.

7. Investors

have a right to be informed about changes in the fundamental

attributes of a scheme. Fundamental attributes include type of scheme, investment objectives and policies and terms of issue.

8. Lastly,

investors can approach the investor relations officer for grievance

redressal. In case the investor does not get appropriate solution, he can approach the investor grievance cell of SEBI. The investor can also sue the trustees. The offer document is a legal document and it is the investors obligation to read the OD carefully before investing. The OD contains all the material information that the investor would require to make an informed decision. It contains the risk factors, dividend policy, investment objective, expenses expected to be incurred by the proposed scheme, fund managers experience, historical performance of other schemes of the fund and a lot of other vital information.

SEBI GUIDELINES

57

1. The issued a set of regulation and code of conduct of 20 January 1913 for the smooth conduct and regulation of mutual fund . The silent feature of these guidelines are as follows: 2. Mutual fund cannot deal in option trading, short selling or carrying forward transactions in securities. 3. Mutual fund should be formed as trusts and managed by AMC.
4. Restriction to ensure those investments under all schemes do not Exceed 15%

of the funds in the shares and debentures of single company. 5. SEBI will grant registration to only those Mutual Funds, which can prove an efficient and orderly conduct of business. 6. The Mutual funf should have a custodian, not associated in any way with the AMC and registered with the board. 7. The minimum amount to be raised with each closed ended scheme should be Rs.20 and for the open ended scheme Rs.60 crore. 8. The mutual fund is obliged to maintain books of account.
9. The Mutual fund should ensure adequate disclosures to the investors.

58

FUNDS TOP PERFORMANCE OF FUND OPEN ENDED FUND Rank Scheme Name Date NAV (Rs.) Last 12 Months % 1 UTI Gold Exchange Traded Fund Aug 10 , 2012 2 Kotak Gold ETF Aug 10 , 2012 1327.0541 39.8494 1326.4833 39.9758

Gold BeES

Aug 10 , 2012

1323.4007

39.8438

DBS Chola Monthly Income Plan Growth

Aug 10 , 2012

16.6348

22.6215

Franklin India International Fund

Aug 10 , 2012

11.3054

19.3033

59

Canara Robeco Income Scheme Growth

Aug 10 , 2012 Aug 10 , 2012

16.0835

17.0448

Canara Robeco Gilt PGS- Growth

22.3167

15.7109

Birla Sun Life MIP - Savings 5 - Growth

Aug 10 , 2012

14.0479

14.9877

Sahara Gilt Fund - Growth

Aug 10 , 2012

14.7186

14.8861

10

ICICI Prudential Gilt Fund Investment Plan - PF Option - Growth

Aug 10 , 2012

13.9301

12.9479

11

JM Fixed Maturity Fund - Series VII - 13 Months - Growth

Aug 10 , 2012

10.9394

9.1093

2.
Rank

CLOSED ENDED FUND Scheme Name Date NAV (Rs.) Last 12 Months %

JM Fixed Maturity Fund - Series VII - 13 Months - Institutional - Growth

Aug 10 , 2012 Aug 10 , 2012 Aug 10 ,

10.9885

9.5857

ING Fixed Maturity Fund - Series 32 Institutional - Growth

11.0023

9.5377

UTI Fixed Maturity Plan - Aug 07 -

10.9946

9.5221

60

Yearly Series - Institutional - Growth

2012

Templeton Fixed Horizon Fund - Series II Aug 10 , - Plan B - Inst - Growth 2012 Aug 10 , 2012

11.2235

9.347

HSBC Fixed Term Series 24 - Growth

11.6623

9.2795

Templeton Fixed Horizon Fund - Series 1 - 13 Months - Inst - Growth

Aug 10 , 2012 Aug 10 , 2012

11.5613

9.2496

Sundaram BNP Paribas FTP - Series XII - (18 Months) - Growth

11.4072

9.2212

Templeton Fixed Horizon Fund - Series II Aug 10 , - Plan A - Inst - Growth 2012 Aug 10 , 2012

11.3274

9.2155

Templeton Fixed Horizon Fund - Series 1 - 15 Months - IP - Growth

11.5956

9.1643

61

BALANCED FUNDS Rank Scheme Name Date NAV (Rs.) Last 12 Months % 1 HDFC Balanced Fund - Growth Aug 10 , 2012 2 DSP Merrill Lynch Balanced Fund Growth 3 LIC Balanced - Plan C (Growth) Aug 10 , 2012 Aug 10 , 2012 4 Reliance Regular Savings Fund Balanced - Growth 5 Kotak Balance - Growth Aug 10 , 2012 Aug 10 , 2012 6 ING Balanced Fund - Growth Aug 10 , 2012 7 HDFC Prudence Fund - Growth Aug 10 , 2012 8 PRINCIPAL Balanced Fund - Growth Aug 10 , 2012 9 Sundaram BNP Paribas Balanced Fund Growth Aug 10 , 2012 33.9693 -13.4719 22.53 -13.2124 117.598 -12.124 18.82 -12.0662 19.553 -11.1607 12.6063 -9.1343 46.5673 -9.1081 43.4 -8.3107 32.913 -3.7222

62

3.
Rank

INCOME FUNDS Scheme Name Date NAV (Rs.) Last 12 Months % 19.3033 17.0448

1 2

Franklin India International Fund Canara Robeco Income Scheme Growth ING Income Fund - Regular Plan Growth Birla Sun Life Dynamic Bond Fund Retail - Growth Sahara Income Fund - Growth Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012

11.3054 16.0835

21.1515

11.3735

13.2962

11.2282

15.1007

11.0957

ABN AMRO Flexi Debt Fund - Growth

13.2109

10.1883

UTI Fixed Income Interval Fund Quarterly Plan I - Regular - Growth UTI Fixed Income Interval Fund Monthly Plan I - Regular - Growth Sundaram BNP Paribas Interval Fund QS - Plan A - Ret - Growth ABN AMRO Interval Fund - Quarterly Plan I - Growth-Ren

11.2345

9.7996

11.1508

9.7715

11.0047

9.6748

10

10.9838

9.6611

4.

EQUITY FUNDS

63

Rank

Scheme Name

Date

NAV (Rs.)

Last 12 Months % 8.9334

UTI Spread Fund - Growth

Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012

12.0781

Lotus India Arbitrage Fund - Growth

11.2159

8.2037

JM Arbitrage Advantage Fund - Growth

11.9319

7.8736

ICICI Prudential Blended Plan - Option A Aug 10 , - Growth 2012 SBI Arbitrage Opportunities Fund Growth Kotak Equity Arbitrage Fund - Growth Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012

12.9532

7.7676

11.708

7.505

12.5349

7.462

IDFC Arbitrage Fund - Plan B (Institutional) - Growth IDFC Arbitrage Fund - Plan A (Regular) - Growth UTI Growth Sector Fund - Pharma and Healthcare - Growth JM Healthcare Sector Fund - Growth

11.5461

7.2553

11.4448

6.7203

23.01

5.198

10

17.8441

3.935

64

5.
Rank

MIP FUNDS Scheme Name Date NAV (Rs.) Last 12 Months % 22.6215

DBS Chola Monthly Income Plan Growth Birla Sun Life MIP - Savings 5 - Growth

Aug 10 , 2012 Aug 10 , 2012 Aug 10 , 2012

16.6348

14.0479

14.9877

HDFC Multiple Yield Fund - Growth

13.684

6.1359

PRINCIPAL Monthly Income Plan Plus Growth

Aug 10 , 2012

14.8266

5.7882

PRINCIPAL Monthly Income Plan Growth

Aug 10 , 2012

17.2219

5.3499

LIC MF Floating Rate Fund - Monthly Income Plan - Plan A - Growth

Aug 10 , 2012

14.683

4.6272

HDFC Multiple Yield Fund - Plan 2005 Growth

Aug 10 , 2012

12.3364

4.5578

Tata Monthly Income Fund - Growth

Aug 10 , 2012 Aug 10 , 2012

15.7854

3.8644

DSP Merrill Lynch Savings Plus Moderate Fund - Growth

16.6155

3.511

65

10

DSP Merrill Lynch Savings Plus Conservative Fund - Growth

Aug 10 , 2012

12.924

3.87

7. ELSS FUNDS

Rank

Scheme Name

Date

NAV (Rs.)

Last 12 Months % -8.5016

Taurus Libra Taxshield - Growth

Aug 10 , 2012

22

Sundaram BNP Paribas Taxsaver - (Open Aug Ended Fund) - Growth 10 , 2012

29.5705

-13.5435

66

Sahara Taxgain - Growth

Aug 10 , 2012

21.6801

-14.7626

Tata Tax Advantage Fund -1

Aug 10 , 2012 Aug 10 , 2012

10.4582

-16.5566

Lotus India Tax Plan - Growth

10.22

-16.6658

Franklin India Index Tax Fund

Aug 10 , 2012

31.7527

-17.4686

ICICI Prudential Taxplan - Growth

Aug 10 , 2012

81.96

-17.7494

Franklin India Taxshield - Growth

Aug 10 , 2012

129.4726

-18.1532

Fidelity Tax Advantage Fund - Growth

Aug 10 , 2012

12.889

-18.1876

10

Franklin India Taxshield 99

Aug 10 , 2012

62.9399

-19.1525

67

2.

68

OBJECTIVE OF THE STUDY

OBJECTIVES OF THE STUDY Objectives: To study the Mutual funds industry in detail To study the Investment procedure in Mutual fund. To study in brief various Mutual funds promoted by karvy To study the investors Preference regarding Investment in Mutual Funds
To know the type of risk in the investments

To gain effective knowledge of market

69

 To know the solutions that gives you investment flexibility and protection To know what should be the right investment period for investors

3. LITERATURE REVIEW

70

LITERATURE REVIEW:The Indian mutual funds industry is witnessing a rapid growth as a result of infrastructuraldevelopment, increase in personal financial assets, and rise in foreign participation. With thegrowing risk appetite, rising income, and increasing awareness, mutual funds in India arebecoming a preferred investment option compared to other investment vehicles like FixedDeposits (FDs) and postal savings that are considered safe but give comparatively low returns, according to Indian Mutual Fund Industry

71

This report provides a detailed analysis along with current and future outlook of the Indianmutual fund industry and explores the market development and potential. The forecasts andestimations given in this report are not based on a complex economic model, but are intendedas a rough guide to the direction in which the industry is likely to move.

According to Niamey (2008) - The mutual funds are the biggest financial assets for many investors and are important in todays investing world. The investors can achieve their investment goals with the help of well-established mechanics of mutual funds portfolio.

According to Wu, Chang and Wu (2008) -The valuation of the mutual funds should relate to the qualitative and subjective aspects of the market. The quantitative figures always do not give the right information. The investor should have more information from the market pulse and the ratings. According to Kacperczyk, Sialmand Zheng (2007) The mutual fund managers must have a distinct investment styles. The managers with more diversified funds portfolios have the rhythm of the total market sentiment. The mutual funds must have large value and large blend in the world stock with the foreign large blend also.

According to Massa and Pager (2008) The mutual funds with high level of risk have higher returns. The managers can induce the diversified portfolio to give the balanced of returns to the company.

72

According to Haslem, Baker and Smith (2008) -The superior performance on & average occurs among large funds with low expense ratios, low trading activity and no or low front-end loads.

4. SCOPE OF STUDY

73

Scope of the Study:

In current scenario, the bank rates have been cut down rapidly due to severe competition, so people are not going for contemporary deposits because that

74

cannot provide them the better returns or the desired interest rates. So, they can look for some other investment options like Mutual Funds, which can provide them higher returns in medium to long term and can easily meet their financial goals. To look out for new prospective customers who are willing to invest in Mutual Funds.

75

5. RESEARCH METHODOLOGY

RESEARCH METHODOLOGY I decided to do the project in two parts. The first part of the project is comprised of the study of Mutual Funds as a whole and the second part deals with the investors perception regarding their investment preferences about investment in Mutual Funds. The first part of the project i.e. descriptive study is comprising an overall study of Mutual funds as what it is ,why to invest and where to invest,risk factor associated with it ie,an overview of whole Mutual fund industry . The second part of the project

76

that is related to investors perception about investment in Mutual funds available in market. Indian Stock market has undergone tremendous changes over the years. Investment in Mutual Funds has become a major alternative among Investors. The project has been carried out to understand investors perception about Mutual Funds in the context of their trading preference and explore investors risk perception . The first part of the project relating the study of Mutual funds is collected through

secondary data obtained from internet & books whereas the second part relating the Investors perception about investment in Mutual Funds is covered using primary data.

Sampling Plans:After collecting entire data and deciding on the research approach and instruments, now I had to decide on the sampling plan which was one of the important task, because from the bunch of people I had to select only those people ,whom I can target from now onward .There are three way of sorting the data. Sampling Unit: - who is to be surveyed? And now my task was to define the target population, which will be sampled from the number of people.

77

Sample Size: - large sample give more reliable result than small sample, so for this reason I had taken around 100 people to whom I should focus upon.

Contact Methods:Once the client had been decided now my task was how to contact them ,and for me there only two ways of contacting them . 1. Personal Interview: - this method was the most appropriate way of survey, because by personal interview I came to know their experience and investment pattern in mutual fund.. 2. Telephone: - This method is also used by me for once, because when the client had no time for me, and there was no other option for me.this method is also time saving.

6.

78

DATA ANAYLSIS & INTERPRETATION

79

DATA ANALYSIS AND INTERPRETATION

INVESTMENT IN MUTUAL FUNDS

9% yes 28% 63% no earlier,now stopped

Interpretation:-

The major part of the sample taken has invested in the Mutual

Funds. The demand for the mutual funds have increased in the past few years with many Foreign players entering in the Indian market, Fidelity, Franklin Templeton, DSP Meryll Lynch to name few. Still there are few who are not investing in MF.

80

HOLDERS OF D-MAT ACCOUNT

Holders of D-mat Account

44% 56%

Other Account holder

D-Mat Account holder

Interpretation:- The major D-MAT holders are traders in securities, due to that number of D-MAT account holders are less compare to other account holder. This

all defines that D-MAT account having trading work but simple account having simple work as money saving .

81

PREFERENCE IN MUTUAL FUNDS

P reference in Mutual Funds

E quity E LS S B alanced S IP 2% Incom e O thers M oney M arket

17%

19%

15% 9% 2 0%

18 %

Interpretation:- There are different types of mutual funds available in the market according to the needs of the investors. There are Equity funds, SIP, Income Funds, Balanced Funds, etc. The highest sought after fund is the Income fund which offers a regular income through investments in the Govt. Bonds. The risk is also low in this. It was followed by the Equity Fund which offers higher returns but it is riskier also. Some people would like to have Equity Linked Saving Schemes (ELSS). This

82

NUMBER OF TRADERS CONTACTED FOR SOLUTION

Traders contacted for a solution

16%

28%

Not contacted
contacted Not know that

56%

Interpretation:- Most of traders presence in the market is because of two reasons flexibility and protection ,but due to some cost most of traders not presences that.

83

Factors Influencing the Investment Decision of Investors

Factors Influencing Investment

40% 30% 20% 10% 0% 10% 6% Self 30% 32% 20% 30%

2% Other 2% 20%

Broke News Magzi Frien 10% 6%

Series1 32%

Interpretation:- There are many factors which influence the investment decision of the investors. It may be the current news (political, technological, financial, etc.), Magazines, friends, etc. in the study it proved that many people trust the brokers most for the investment decisions. These are the ones who have less experience. The SelfEvaluation is the next major factor. The experienced person trust himself thereafter he/she invests. Magazines and current News also matters. Any bad news can make a person change his/her decision.

84

RISK TAKING

Moderate

High

Low 0% 20% 40% 60%

Interpretation:- The higher the Risk, the more the Profits. The people need to take the risk to enjoy the benefits. Some investors were willing to take lower risk and this was the reason they gave for investing in the MF. Most of the people would like moderate level of risk in there investment

85

Average Investment Period of Investors

Average Investment Period

50% 23% 10% 0%

42% 25% S1 Less Than 3-9 Months 9 months - More Than 3 months 2 Year 2 Year Investment Period Less Than 3-9 Months 9 months - More Than

Series1

23%

10%

42%

25%

Interpretation:- The investment period is very important to increase the profits. The timing must be right enough to benefit from fluctuations. The smart investor decides it in advance for how much time he would be keeping his money in the market and when he should leave squaring-up. Many people consider the investment for 9 months 2 years as a right option. Still some want to be invested for over 2 years. The least responded to the 3-9 months period.

86

EXPERIENCE IN THE MARKET

Experience

26% 53% 21%

Less Than a Year 1-4 Years More Than 4 Years

Interpretation:- The experience in the market was the factor which influenced the investments. There are very few who have experience of less than a year.

87

Investors willingness to take Loss

Loss Willing To Take

60% 50% 40% Percentage 30% 20% 10% 0% Less than 5% 5-10% Category More Than 10% 12% 35% 53%

Interpretation:- The willingness to bear the loss was not high. Most of the investors were not willing to bear a loss of more than 5%. Very few agreed to be able to bear a loss of more than 10%. The desire for having profits is higher but nobody was ready to take loss.

88

7. SWOT ANALYSIS

89

SWOT ANALYSIS

a)

Strength:

Good co-operation, Strong communication b) Weakness:

High employee turnover c) Opportunities:

Growth rate of Mutual funds d) Threats:

Increasing number of competitors

90

.8

FINDINGS

91

FINDINGS The study done was a tool to analyze the present setup and to know the investors perception regarding investment in Mutual Funds . The study proved fruitful and many facts came to the light. The following were the findings of the study: People with less experience were inclined towards investment in the Mutual Funds. It attracted as a safer avenue as compared to share market. 63% People are already mutual fund investers or are interested to invest in future.28% are not interested in it and 9% earlier invested but now stopped.

People were asked about the reason of not investing in mutual funds then most of the people held their ignorance responsible for that. they lacked knowledge and information about the a mutual funds. some of them not want to take risk some people investing in other option.

Mutual Funds are more of an investment option than the speculative avenue. People tend to gain through long investments rather than through short term.

Income funds and ELSS are among the few top funds . People are not willing to take much risk and bear loss. Brokers advice matters to as much as 32% of the people. Major part of people preferred self-evaluation as best.

92

The investors give more preference to regular income funds besides the considerations of 1) Diversified Equity 2) Tax Saving Schemes. Thus if the government encourages the investment in mutual funds in the current budget, then more people will be investing in the MFs for tax saving. However people are also not compliant to risk aversion. They are willing to invest in risky equity funds..

. Investors desire

open-ended schemes than close-ended schemes. This

means that they want flexibility in the inflow and outflow of their funds.

The investment horizon, which is most liked by the investors, is 2-3 yrs. 5. The source of information the investors most rely is on advertisement. However they also require the detailed information, which they take from Financial Advisors. On other sources the investors are quite apprehensive.

Investors portfolio consists mainly of Fixed Deposits and Post Office schemes. However portfolio of regular investors do contain significant proportion of Mutual Funds.

Most of the people look at the returns that are given by a Funds56%

are

in this

favour and only 23% people are there who consider Fund name and current NAV of the fund before investing into a Mutual Fund Experience was the main factor that made a person invest in mutual funds

93

Limitations There were certain limitations faced during the study. Some people were not willing to disclose the investment profile Costly process The area of sample was decided after taking into consideration the major factors Availability of limited investors Approachability Time availability with investor for interaction

94

9. CONCLUSION & RECOMMENDATION

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Recommendations The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing. Mutual funds offer a lot of benefit which no other single option could offer. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. The advisors may try to highlight some of the value added benefits of MFs such as tax benefit, rupee cost averaging, and systematic transfer plan, rebalancing etc. these benefits are not offered by other options singlehandedly. So these are enough to drive the investors towards mutual funds. Investors could also try to increase the spectrum of services offered..

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CONCLUSION The study done was a tool to analyze the present setup and to know the investors perception regarding investment in Mutual Funds. The study proved fruitful and many facts came to the light. The following were the findings of the study: People with less experience were inclined towards investment in the Mutual Funds. It attracted as a safer avenue as compared to share market. 63% People are already mutual fund investors or are interested to invest in future.28% are not interested in it and 9% earlier invested but now stopped. People were asked about the reason of not investing in mutual funds then most of the people held their ignorance responsible for that. They lacked knowledge and information about the mutual funds. Some of them not want to take risk. Some people investing in other option. Mutual Funds are more of an investment option than the speculative avenue. People tend to gain through long investments rather than through short term. Income funds and ELSS are among the few top funds. People are not willing to take much risk and bear loss. Brokers advice matters to as much as 32% of the people. Major part of people preferred self-evaluation as best. Most of the people looks at the returns that are given by a Funds56% are in

this favor and only 23% people are there who consider Fund name and current NAV of the fund before investing into a Mutual Fund Experience was the main factor that made a person invest in mutual funds

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BIBLOGRAPHY

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BIBLIOGRAPHY 1. Websites visited

1. www.the-finapolis.com/finapolis/mf/index.asp 2. www.karvy.com 3. www.mutualfundsindia.com/rankfund_rpt.asp 4. www.indiainfoline.com 5. www.amfiindia.com/showhtml.asp?page=mfconcept 6. www.sebi.gov.in

2. Books referred

1. Bhalla V.K. ,International Financial Management ,6th Edition ,Anmol

Publications Pvt Ltd. ,New Delhi

2. Apte P.G. ,International Financial Management ,Tata Mc Graw-Hill

Publishing Company Ltd ,4th edition ,New Delhi

3. Pandian, P (2009), Security Analysis And Portfolio Management, Vikas

Publishing House Pvt. Ltd., New Delhi

4. Ranganatham M. and Madhumani R. ,(2005), Investment Analysis and

Portfolio Management, Pearson Education ( Singapure) Pte. Ltd., New Delhi

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ANNEXURE QUESTIONNAIRE INVESTMENT AWARENESS MARKET SURVEY FORM 1. Which type of instruments are you currently invested in? a. Mutual Funds, Equities b. Debt Funds c. Currency and Commodities d. Others: Please specify 2. Do you currently have a D-Mat Account? a. Yes b. No 3. According to you, in which of these cases can you maximize earning potential in market investments? a. Timing your investment in the stock market b. Systematic Investments c. d. Regular yearly Investments Investing based on professional financial advice

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4.

Have you currently protected your investment from the unfortunate events

in life? a. Yes b. No

5.

If you had Rs.100, In which of these asset classes would you invest? a. b. c. d. e. Equity Debt Commodities Derivatives Any other: Please specify

6.

Would you like to be contacted for a solution that gives you investment

flexibility and protection? a. b. c. Yes No Not now, maybe later

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7.

Which type of risk you want to take in your investment? a. b. c. High midrate Low

8.

Which one is right investment period for the investors? a. b. c. Less than 3 month 3 to 9 month 9 month to 2 year

9.

How much experience a investor should have in market to gain effective

knowledge of market? a. b. c. Less than 1 year 1 to 4 years more than 4 years

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10. 50%?

How much percent investers having willingness to face loss more than

a. b. c.

Less than 5 % more than 5 % around 10 %

Respondent Details

Name: Date of Birth:. Contact Number: E-Mail Address:

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