A PROJECT REPORT ON

EXCHANGE TRADED FUNDS IN INDIA WITH REFERENCE TO KOTAK AMC SUBMITTED

IN PARTIALFULFILLMENT OF

POST GRADUATE DIPLOMA IN MANAGEMENT

SUBMITTED BY
DARSHAN PATIL

UNITEDWORLD SCHOOL OF BUSINESS

(2011 2013)

PROF. HARDIK GHANDI FACULTY GUIDE

1

DIRCTOR ACCEDMICS

ACKNOWLEDGEMENT
A summer project is a golden opportunity for learning and self development. It is really a matter of great pleasure for me to present this creative and practical work. At this stage, project report is an important part of learning and it is presented by every student to get practical knowledge. I consider myself very lucky and honored to have so many wonderful people lead me through in completion of this project I take this opportunity to express my sincere thanks to all those who helped me in the preparation of this report. I would like to express my thanks to all those who assisted me in the preparation of the project. My grateful thanks to Mr. Karan Bhatia (sales manager) who in spite of being Extraordinarily busy with his duties, took time out to hear, guide and keep me on the correct path. I do not know where I would have been without him. A humble Thank you Sir. Prof. Hardik Gandhi whose patience I have probably tested to the limit. He was always so involved in the entire process, shared her knowledge, and encouraged me to think. Thank you, Dear Sir. I would like to thanks Mr. Jaydeep Sir, a placement manager Unitedworld School of Business, for his efforts and help provided to me to get such an excellent opportunity. Last but not the least there were so many who shared valuable information that helped in the successful completion of this project.

Darshan Patil

CERTIFICATE FROM FACULTY GUIDE

This is to certify that Mr. Darshan Patil of PGDM (Batch 11-13) in Unitedworld School Of Business Ahmedabad has carried out a Major Research Project titled Study of Exchange Traded Funds In India The work done by him is genuine and authentic.

The work carried out by the student was found satisfactory. I wish him all the success in career.

Prof. Hardik Gandhi

Signature

Declaration

I, Darshan Patil, Student of PGDM, Unitedworld School Of Business, hereby solemnly declare that the Summer Training Project Report titled Exchange Traded Funds In India is my own original work and has not been submitted to any other University or institute for the award of any degree or diploma.

PLACE: - AHMEDABAD

DATE: Name of Student: DARSHAN PATIL Roll NO.030301039

Chapter No.
1 2 3 4 5 6 7 8 9 10 11 12 13 14

SUBJECT Abstract
Company profile Concept of mutual fund Overview of AMC History of mutual fund industry in india Exchange traded funds List of ETFSs in india Overview of gold ETF Product of Gold ETFSs in india Research methodology Data collection methods/sources Sampling plan RESEARCH LIMITATION Data Analysis and Interpretation
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PAGE NO. 5 6-8 9-14 15-16 17-19 20-31 32-33 34-36 37-51 52 53 54 55-72

DETAILED FINDINGS 15 16 17 18 CONCLUSION Bibliography Annexure

73 74 75 76-79

List of Tables and Graphs

TYPES OF MUTUAL FUNDS ETFs Vs . Open Ended Funds Vs. Close Ended Funds CHART OF GOLD ETFS

14 31 32 35 36 55-72

A Comparison of ETFs and Mutual Funds: PRODUCT TURN OVER DATA ANALYSIS FIGURS

Abstract
Exchange traded funds (ETFs) have grown exponentially in assets under management since their introduction in 1993 and offer unique advantages to traditional indexing methods of mutual funds, futures, and directly owned portfolios.

By encapsulating the performance of broad-based market indexes like the S&P 500 in tradable baskets of securities, ETFs give individual investors a flexible and low-cost alternative to index mutual funds.

How do these popular new securities work? Should an individual investor choose an index mutual fund or an ETF? And how do taxes affect the decisions of purchasing and asset location? The purpose of this study is to quantify the comparative costs and benefits of buying long with ETFs and index mutual funds; specifically, the differential effects upon returns of expenses, dividend treatment, active management, capital gains distributions, and transaction costs.

The results will assist investors in choosing an optimal indexing strategy for their individual time horizons and budgets

Company profile

Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life.
From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate. The group has a net worth of Rs.7,911 crore and employs around 20,000 employees across its various businesses, servicing around 7 million customer accounts through a distribution network of 1,716 branches, franchisees and satellite offices across more than

470 cities and towns in India and offices in New York, California , San Francisco, London, Dubai, Mauritius and Singapore Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has over 10 Lac investors in various schemes. KMMF offers schemes catering to investors with varying risk - return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities

KOTAK MAHINDRA PRIMUS KOTAK MAHINDRA CAPITAL COMPANY KOTAK SECURITIES KOTAK MAHINDRA ASSET MANAGEME NT COMP. KOTAK MAHINDRA TRUSTEE COMP. KMOM LIFE INSURANCE KOTAK FOREX BROKERAGE KOTAK MAHINDRA INVESTMENT

Financing of non-ford passanger vehicles. Private equity, Project advisory. Stock broking, E-broking.

financing dealers. Fixed income, Primary dealership.

Distribution.

Mutual fund

Trustee company

Life insurance Interbank forex banking.

Investments.

MUTUAL FUND CONCEPT

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A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

The flow chart below describes broadly the working of a mutual fund:

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A Mutual Fund is a trust that pools the savings of a number of investors who share common financial goal; investments may be in shares, debt securities, money market securities or a combination of these. Those securities are professionally managed on behalf of the unit-holders, and each investor holds a pro-rata share of the portfolio i.e. entitled to any profits when the securities are sold, but subject to any losses in value as well. The income earned through these investments and the capital appreciations 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 securities at a relatively low cost.

Organization of a Mutual Fund

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Sponsor :
Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. The sponsor of a fund is akin to promoter of a company as he gets the fund registered with SEBI. The sponsor will form a Trust and appoint a Board of Trustees. The sponsor will also generally appoint as Asset Management Company as fund managers. The sponsor, either directly or acting through the Trustees, will also appoint a Custodian to hold the fund asset. All these appointments are made in accordance with SEBI Regulations. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund.

Trust :
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The Mutual Fund in India is constituted in the form of a public Trust created under the Indian Trustees Act, 1882. The fund sponsor acts as the settler of the trust, contributing to its initial capital, and appoints Trustees to hold the asset of the Trust for the benefit of the unit holders, who are the beneficiaries of the Trust. The fund then invites investors to contribute their money in the common pool, by subscribing to Units issued by various schemes established by the trust, units being the evidence of their beneficial interest in the fund. It should be understood that a mutual fund is just a pass-through vehicle. Under the Indian trusts Act, or the fund has no independent legal capacity itself, rather it is the Trustee or Trustees who have the legal capacity and therefore all acts in relation to the trust are taken on its behalf by the Trustees. The Trustees hold the unit holders money in a fiduciary capacity, i.e the money belongs to the unit holders and is entrusted to the fund for the purpose of investment. In legal parlance, the investor or the unit-holders are the beneficial owners of the investment held by the Trust, even as these investments are held in the name of the trustees on a day to - day basis. Being public Trusts, mutual fund can invite any number of investors as beneficial owners in their investment schemes.

Trustee:
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The trust the mutual fund may be a Board of Trustees a body of individuals, or a Trust company a corporate body. Most of the funds in India are managed by Board of Trustees. While the board of Trustees is governed by the provisions of the Indian Trusts Act, where the Trustee is a corporate body, it would also be required to comply with the provisions of the companies Act, 1956. The Board or the Trustee Company, as an independent body, act as protector of the unit holders interests. The Trustee doesnt directly manage the portfolio of securities. For this specialist function, they appoint an Asset Management Company. They ensure that the fund is managed by the AMC as per the defined objectives and in accordance with the Trust Deed and SEBI regulations. The trust is created through a document called the Trust Deed that is executed by the fund sponsor in favour of the Trustees. Trust Deed is required to be stamped as registered under the provisions of the Indian Registration Act and registered with SEBI. Clauses in the Trust Deed, inter alia, deal with the establishment of the Trust, the appointment of Trustees, their powers and duties, and the obligations of the Trustees towards the unit-holders and AMC. These clauses also specify activities that the fund/ AMC cannot undertake. The third schedule of the SEBI (MF) Regulations, 1996 specifies the contents of the Trust Deed. The Trustees being the primary guardians of the unit-holders funds and assets, a Trustee has to be a person of high repute and integrity. SEBI has laid down a set of conditions to be fulfilled by the individuals being proposed as trustees of mutual funds independent and non - independent. Besides specifying the disqualifications, SEBI has also set down the Right and obligations of the Trustees. Broadly, the Trustees must ensure that the investors interests are safeguarded and that the AMCs operations are along professional lines. They must also ensure that the management of the fund is in accordance with SEBI Regulations. To ensure the independence of the trustee company, SEBI mandates a minimum of two-third independent directors on the board of the trustee company.

TYPES OF MUTUAL FUND SCHEMES

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There are a wide variety of Mutual Fund schemes that cater to your needs, whatever your age, financial position, risk tolerance and return expectations. Whether as the foundation of your investment programme or as a supplement, Mutual Fund schemes can help you meet your financial goals.

TYPES OF MUTUAL FUND SCHEME

By structure

By Investment Objectives

Other Schemes

Open-ended Schemes Close Ended Schemes Interval Schemes

Debt Schemes

Equity Schemes

Tax saving fund

MM Mutual fund FMP

Sector specific fund Large cap fund Index Schemes

Mid cap Fund

Other Debt Schemes

Small cap fund

Any Other Equity Fund

Asset Management Company (AMC) :

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The role of an AMC is to act the investment manager of the Trust. The sponsors or the trustees, if so authorized by the Trust Deed, appoint the AMC. The AMC so appointed is required to be approved by SEBI. Once approved, the AMC functions under the supervision of its own Board of Directors, and also under the directions of the Trustees and SEBI. The Trustees are empowered to terminate the appointment of the AMC and appoint a new AMC with the prior approval of SEBI and unit-holders The AMC would, in the name of the Trust, float and then manage the different investment schemes as per SEBI Regulations and as per the Investment Management Agreement it signs with the Trustees. Mutual fund Regulations,1996 describes the issues relevant to appointment, eligibility criteria, and restrictions on business activities and obligations of the AMC. The AMC of a mutual fund must have a net worth of at least Rs. 10 Crores at all times. Directors of the AMC, both independent and non independent, should have adequate professional experience in financial services and should be individuals of high moral standing, a condition also applicable to other key personnel of the AMC. The AMC cannot act as a trustee of any other mutual fund. Besides its role as the fund manager, it may undertake specified activities such as advisory services and financial consulting, provided these activities are run independently of one another and the AMCs resources are properly segregated by activity. The AMC must always act in the interest of the unit-holders and report to the trustees with respect to its activities. To ensure the independence of the asset management company, SEBI mandates that a minimum of 50% of the directors of the board of the asset management company should be independent directors.

Registrar and Transfer Agent :

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The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form; redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor records.

Custodian :
Mutual funds are in the business of buying and selling of securities in large volumes. Handling these securities in terms of physical delivery and eventual safekeeping is therefore a specialized activity. The custodian is appointed by the Board of Trustees for safe keeping of physical securities or participating in any clearing systemthrough approved depository companies on behalf of mutual fund in case of dematerialized securities. A custodian must fulfill its responsibilities in accordance with its agreement with the mutual fund. The custodian should be an entity independent of the sponsers and is required to be registered with SEBI

History of the Indian Mutual Fund Industry :

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The origin of the mutual fund industry in India was with the formation of UTI in the year 1963, at the initiative of the reserve bank and Government of India. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. It has seen 218.5% increases in assets under their management from 2003 to 2007(May 31st), 38 fund houses managing Rs. 3, 87,896 crores (May 31st, 2008). The main reason of its slow growth initially, was because mutual fund industry was new in India. I experienced that lot of investors are aware of mutual fund and how does it work but still they are not aware of how does it function and how does the investments decision take place. DIFFERENT PHASES OF MUTUAL FUND INDUSTRY First Phase: 1964-87 (Growth of Unit Trust of India) Unit Trust of India (UTI) was established in 1963 by an act of Parliament. It was set up by the RBI and functioned under the Regulatory and administrative control of RBI. In 1978 UTI was De-linked from the RBI and IDBI took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was unit scheme in 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 PSU banks and LIC& GIC. SBI Mutual fund was the first non- UTI Mutual fund established in June 1987 followed by can bank mutual fund (Dec87), Punjab National Bank Fund (Aug 89), Indian Bank (Nov 89), Bank of India (Jun90), Bank of Baroda (Oct 92), LIC established its mutual fund in June 1989 while GIC had established its mutual fund in December 1990.at the end of 1993 the mutual fund industry had assets under management of Rs. 47,004 cores.

Third Phase: 1993-1996 (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
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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 to be 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 houses went on increasing, with many foreign mutual funds setting up in India and also the industry had witnessed several mergers and acquisitions.

Fourth Phase: 1996-1999 (Growth and SEBI Regulation) From here onwards mutual fund industry in India saw tighter regulations and higher growth. Competition arises because of deregulation and liberalization of the Indian economy. Measures were taken both by SEBI to protect the investor, and the government to enhance the investors returns through tax benefits. NOTE: In 1996 SEBI introduced comprehensive set of regulation for all mutual fund companies operating in India. During this phase both SEBI and AMFI launched various investor awareness campaigns aimed at educating the investors about the investment through mutual fund.

Fifth Phase: 1999-2004 (Emergence of uniform industry) In1999, dividends from mutual funds were tax exempt in the hands of the investors. In Feb 2003, UTI act was repealed. UTI no longer has special legal status as a trust established by an act of parliament. Instead it has to adopt the same structure as any fund in India-a trust and an AMC. Phase Sixth: 2004 onwards (Consolidation and growth) As at the end of May 2007, there were 38 fund houses. Now it is the time to strengthen what is the best channel to invest your funds. The stage is set for growth through consolidation and new entry both in international and private sectors.

Major Mutual Fund Companies in India:

Axis Asset Management Company AIG Global Investment Group Mutual Fund

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 Birla Sun Life Mutual Fund Bank of Baroda Mutual fund DBS Chola Mutual Fund Fraanklin Templeton India Mutual Fund HDFC Mutual fund ICICI Prudential Mutual fund ING Mutual fund JM Financial Mutual fund JP Morgan Mutual fund Kotak Mahindra Mutual fund LIC Mutual fund Reliance Mutual fund Sahara Mutual fund State Bank of India Mutual fund Sundaram BNP Paribas Mutual fund Tata Mutual fund Unit Trust of India Mutual fund

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Exchange Traded Funds

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Exchange Traded Funds are essentially open ended funds that are listed and traded on exchanges like stocks. They enable investors to gain broad exposure to indices or defined underlying assets with relative ease, on a real time basis, and at a lower cost than many other forms of investing. It invests in the constituents of the index in the same proportion as the index and come with the feel of the index. They are largely passive in their investment strategy and their returns are more or less in line with the returns in the index. ETFs have got a lot of benefits including low cost structure, tax efficient, transparent portfolios etc. The very first ETF was issued in 1993 in US by State Street Global Advisors with the launch of the S&P 500 depositary receipts, also know as SPDRs ("spiders"). The very first ETF, in India, was launched by Benchmark Mutual Fund in the year 2002 named Nifty BeES which was based on the S&P CNX Nifty Index

Structure of ETF

Major Players
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Recent Developments in ETFs

Benchmark Mutual Fund, the pioneer in setting up ETFs in India recently filed an Offer Document with Securities and Exchange Board of India (SEBI) for the launch of six open ended exchange traded funds. All of the planned launches are sector-specific. The launch of so many ETFs points to the asset management companys (AMCs) confidence in the growing maturity of Indian investors. They are obviously of the view that investors now appreciate the advantages of investing via an index-based fund, and that passive investing might finally be coming of age in the country.

ETFs-An understanding for Financial Planners

ETFs provide an opportunity to investors with small corpus and limited knowledge to enter the market more efficiently. Historically, all the indices gave positive returns over a period of time and these returns have been higher than Fixed Income Instruments. While Gold ETFs provide a good opportunity for taking exposures in Gold, Financial Planners must spread the knowledge and benefits of Gold ETFs in terms of lower costs, tax benefits and others. Moreover, Financial Planners must stick on with the comprehensive and life-cycle financial planning services for retail clients through ETFs.

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Why ETFs?
If investors are looking to diversify their investments, preferable for investors to look for a product which provide a decent return, at least comparable to its benchmark with bounty of other benefits such as tax efficiency, low expense ratios. ETFs are pools of stocks, bonds or in a few instances other types of investments such as Gold that you can trade like stocks. ETFs tend to have very low annual expenses much lower than the actively managed funds. Moreover, ETFs are high tax efficient i.e. they tend to minimize distributions, which help in making the post-tax returns more efficient. ETFs are listed on stock exchanges and can be bought and sold like any other company share.

Indian Journey

ETFs are not very old in India. It started its journey in 2001 after Benchmark AMC forayed into this unique proposition. Since then, the ETFs grew by leap and bound. The domestic ETF assets grew from R 7 crore in 2001 to R 3,203 crore as on May 31, 2010. However, the main course of action in ETFs got intensified in the recent bull period. Indian equities component of Global Emerging Markets ETFs account for US $ 5.5 billion of AUM while the domestic equity ETFs now account for US $ 0.5 billion. Overall, over the past year, around 20 per cent of the net inflows into the Indian market have come from ETFs, thereby, ETFs a very significant component of Indian fund flows. Table 1 describes the holdings of major India focused ETFs listed outside India

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Global Journey :
ETFs have travelled a long distance since its inception in 1993 in USA. It took 7 years (from 1993 2000) to get it widely accepted among investors. Once it drew attention from investors, it grew leap and bound; the global ETF assets has reached an all time high of US $1.03 trillion as on March 2010 from an estimated US $463 million in 1993, clocking a CAGR of 56 per cent. On US Exchanges, 11 out of top 25 volume leaders/stocks are ETFs. Some of the top volume leader ETFs is SPDRs, iShares MSCI Brazil Index, Ultra Short Russel 2000 ProShares, etc. These ETFs account for 78 per cent of total volume out of top 25 traded stocks on US Stock Exchanges. It should be noted that the share of ETFs in the total volumes was less than 25 per cent 10 years back.

Operation Aspects - Buying and Selling ETF

ETFs can either be purchased on the Exchange or directly with the Fund. The Fund creates / redeems units only in predefined lot sizes in exchange for a predefined underlying portfolio basket. Once the underlying portfolio basket is deposited with the Fund together with a cash component, the investor is allotted the units. This is in-kind creation / redemption of units, unique to ETFs. Alternatively, investors can follow the "Cash Subscription" route in which they can pay cash directly to the Fund for purchasing the underlying portfolio. For a retail investor to buy a unit of ETF from the secondary market, it is similar to buying or selling a particular stock from the stock market. They can directly buy / sell from exchange, through their designate Broker, the ETF units gets credit / debited from their Depository account.

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Tradability:
ETFs provide investors a convenient way to gain market exposure viz. an index that trades like a stock. In comparison to a stock, an investment in an ETF index product provides a diversified exposure to the market. Depending on the index, investors may obtain exposure to countries / markets or sectors.

Transparency:
ETFs typically track an index and this passive index management eliminates any bias resulting from a managers style. The aim is to achieve greater control and therefore better long term results. As an ETF tracks an index at its NAV, there are no surprises of under or over performance. The tracking error is usually very small, although the measured tracking error can be greater for ETFs whose underlying stocks have different closing hours however, at creation or redemption this measured tracking error would disappear. In addition, the investor will know the identity and weighing of each of the stocks in the creation/redemption unit.

Cash Equitisation:
Investors with idle cash in their portfolios may want to invest in a product tied to a market benchmark like an index as a temporary investment before deciding which stocks to buy or waiting for the right price.

Cash Flow Management:

Investment managers who see regular inflows and outflows may use ETFs because of their liquidity and their ability to represent the market.

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Diversifying Exposure:
If an investor is not sure about which particular stock to buy but likes the overall sector, investing in shares tied to anindex or basket of stocks provides diversified exposure and reduces stock specific risk.

Filling Gaps:
ETFs tied to a sector or industry may be used to gain exposure to new and important sectors. Such strategies may also be used to reduce overweight or increase an underweight sector.

Dividends:
Except for ETFs based on a total return index, which reinvests dividends, dividends are paid out to the investor.

Small denomination:
ETFs are generally priced as a percentage of the value of their underlying index. The denomination is such that the investor can easily follow the tracking accuracy to the index. For instance, if the Nifty is at 2023, the related ETF should ideally trade at around 202.30 with a bid/offer on either side of this value. However, the trading value of ETF is also affected by the expectations of the buyer or seller.

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Risks
All investments involve risk. Like other investments, index ETFs carry a certain level of risk for investors as follows:

Market Pricing:
Given that the market share price is determined by the forces of supply and demand, not the underlying net asset value, investors may purchase shares at November 2005 The Chartered Accountant 701 a premium or discount to their net asset value.

Tracking Error:
In some cases ETFs pay out dividends received from the underlying stocks on a quarterly basis. However, the underlying stocks pay dividends throughout the quarter. Therefore, these funds may hold cash for various time periods throughout the quarter, even though the underlying benchmark index is not composed of cash. In addition, due to transactions via market prices rather than at net asset value, the performance based on an index ETF may not completely replicate the performance of the underlying index.

Market Risk:
Market prices for securities and index ETFs fluctuate daily based on a variety of factors such as economic conditions and global events, investor sentiment and security-specific factors. The degree of volatility in general in the markets has increased over the last several years. The prospect of a market decline and its impact on security and fund prices should be considered as general market risk.

Credit Risk:
Credit risk refers to an issuers ability to make payments of principal and interest when due. An interruption in the timely payment of principal and interest (such as on a corporate bond) may adversely affect a funds net asset value and ability to pay dividends.

Interest Rate Risk:

Prices of bonds tend to fall as interest rates rise, and as interest rates fall (bonds with longer maturities tend to fluctuate more in price in response to such changes). For index ETFs that hold bonds in their portfolios, this risk can be significant, although most funds hedge this risk through various market instruments.

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Advantage and Disadvantage of Investing in ETF :

Can easily be bought / sold like any other stock on the exchange through terminals across the country. Can be bought / sold anytime during market hours at a price close to the actual NAV of the Scheme. No separate form filling. Just a phone call to your broker or a click on the net Ability to put limit orders Minimum investment is one unit. Enjoy flexibility of a stock and diversification of index fund Expense Ratio is lower. Hence low cost invest, even lower than the index funds

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Disadvantages :

Underlying volatility ETFs passively track other financial instruments, which can be liquid or volatile. Usually market indexes are less volatile than specific sectors or industries. Similarly international ETFs which track indexes of countries / regions with strong fundamentals are less volatile. ETF liquidity Although the liquidity of ETFs match liquidity of tracking index, their own trading volume is also a factor worth noticing. With coming of new types of ETFs to the market, now there are quite a few not-so-liquid ETFs having large differences between ask and bid prices. Capital gains distribution most ETF firms invest capital gains to the market, which is often the right thing to do. ETFs which distribute capital gains to ETF holders are making the shareholders qualify for capital gains tax. Dollar cost averaging DCA is a simple but effective way of building a big portfolio. But the costs involved in ETF trading makes DCA less-effective (unless trading through a discount broker). SIP investing - SIP in ETF is not convenient as you have to place a fresh order every month Also SIP may prove expensive as compared to a no-load, low-expense index funds as you have to pay brokerage every time you buy & sell Because ETFs are conveniently tradable, people tend to trade more in ETFs as compared to conventional funds. This unnecessarily pushes up the costs . Dividend reinvestment - You cant automatically re-invest your dividends. Secondly, you may have to pay brokerage to reinvest dividends in ETF, whereas dividend reinvestment in MFs is automatic and with no entry-load

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ETFs Vs . Open Ended Funds Vs. Close Ended Funds

Parameter Open Ended Fund Closed Ended Fund Exchange Traded Fund

Fund Size

Flexible

Fixed

Flexible

NAV

Daily

Daily

Real Time

Liquidity Provider Fund itself

Stock Market

Stock Market / Fund itself

Sale Price

At NAV plus load, if any

Significant Premium / Discount to NAV

Very close to actual NAV of Scheme

Availability

Fund itself

Through Exchange where listed

Through Exchange where listed / Fund itself.

Portfolio Disclosure

Monthly

Monthly

Daily/Real-time

Uses

Equitising cash

Equitising Cash, Hedging, Arbitrage

Intra-Day Trading

Not possible

Expensive

Possible at low cost

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List of ETFs in India Gold ETFs:

Scheme Name Goldman Sachs Gold Exchange Traded Scheme Symbol GOLDBEES Managed By Goldman Sachs Mutual Fund UTI Mutual Fund Kotak Mutal Fund Reliance Mutual Fund Quantum Mutual Fund SBI Mutual Fund Religare Mutual Fund Launched On March 2007 April 2007 July 2007 November 2007 February 2008 May 2009 March 2010 UTI GOLD Exchange Traded GOLDSHARE Fund Kotak Gold Exchange Traded KOTAKGOLD Fund Reliance Gold Exchange Traded Fund RELGOLD

Quantum Gold Fund (an ETF) QGOLDHALF SBI Gold Exchange Traded Scheme Religare Gold Exchange Traded Fund SBIGETS RELIGAREGO

HDFC Gold Exchange Traded HDFCMFGETF Fund ICICI Prudential Gold Exchange Traded Fund Axis Gold ETF Birla Sun Life Gold ETF IPGETF AXISGOLD BSLGOLDETF

HDFC Mutual Fund July 2010 ICICI Prudential Mutual Fund Axis Mutual Fund Birla Sun Life Mutual Fund August 2010 November 2010 May 2011

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Equity ETFs:
Benchmark Mutual Fund: Banking Index Benchmark Exchange Traded Scheme - Bankbees . Hang Seng Benchmark Exchange Traded Scheme Hangsangbees. Infrastructure Benchmark Exchange Traded Scheme -Infrabees. Nifty Benchmark Exchange Traded Scheme- Niftybees. Nifty Junior Benchmark Exchange Traded Scheme Juniorbees. Psu Bank Benchmark Exchange Traded Scheme - Psubnkbees. Shariah Index- Shariabees. ICICI Prudential Mutual Fund - Sensex Fund -Spice. Kotak Mahindra Mutual Fund: Kotak Nifty ETF - Kotaknifty. Kotak PSU Bank ETF - Kotakpsubk. Kotak Sensex ETF. Motilal Oswal Mutual Fund: Quantum Mutual Fund Quantum Index Fund -Qnifty. Reliance Mutual Fund - Reliance Banking Exchange Traded Fund Relbank

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Gold exchange traded fund or what is commonly known as Gold ETF is an alternative method to invest in gold without having to physically buy the metal. You can simply chose to buy gold in small units via specially created gold funds just like you buy units in a mutual fund. The value of the purchased units are directly linked to the performance/price of gold in the bullion market. All you need to do to buy and invest in a gold ETF is a demat and broking account. Gold ETFs makes it easier for individuals willing to own and invest in gold by making the entire process safe, secure and hassle free. The only major difference here is you are not buying physical gold but buying gold in units in a digital format

How Does Gold ETFs Work?

The workings of Gold ETFs can simply be explained as a fund that is traded on major stock exchanges world over. The fund house or institution (s) that offers the ETF would buy large quantities of gold and store it. In return the fund house would issue shares or gold units in digital format to investors willing to invest in gold ETFs with the understanding that based on the metals performance investors can expect an increase in the value of the purchased units. For instance if there is an upside of 5% to 10% in gold prices in the bullion market, investors can expect a similar increase in the value of the purchased units

36

A Comparison of ETFs and Mutual Funds:

ETFs Index Mutual Funds Active Mutual Funds Most ETFs are passively Index mutual funds are passively Most mutual funds are managed; they seek to track a managed; they seek to track a actively managed, market index, before fees and benchmark index, before fees and seeking to outperform expenses, and do not attempt to expenses, and do not attempt to market indexes. outperform during rising markets outperform during rising markets or to take defensive positions in or to take defensive positions in declining markets. Performance declining markets. Performance may diverge from the ETF's may diverge from the fund's underlying index. underlying index. Trading Trade on exchanges intraday at Accessed directly through the market price, which may be fund company or through a select greater or less than its NAV broker. Pricing generally occurs once a day. Accessed directly through the fund company or through a select broker. Pricing generally occurs once a day. Redeemed through fund company at end-of-day NAV, less applicable fees. Expense ratios (typically higher than index-linked products); may charge sales loads or redemption fees Shareholder transactions may generate tax consequences for all shareholders; obliged to distribute gains to shareholders Generally quarterly holdings disclosure

Redemption process

Shares not individually redeemed through the fund

Redeemed through fund company at end-of-day NAV, less applicable fees.

Fees

Expense ratio plus transaction costs

Expense ratio (typically lower than active mutual funds); may charge sales loads or redemption fees

Tax implications

Transactions generate tax consequences for the transacting shareholder only; obliged to distribute gains to all shareholders

Shareholder transactions may generate tax consequences for all shareholders; obliged to distribute gains to shareholders

Transparency Generally daily holdings disclosure

Generally quarterly holdings disclosure

37

GOLD ETF TURNOVER IN INDIA

38

Products of GOLD ETFs Companys in India

About Kotak Gold ETF (KGETF)

It is an open-ended gold Exchange Traded Fund, which invests in physical gold and ofendeavors to track the domestic spot price of gold as closely as possible. Units of the scheme listed on stock exchanges and can be easily traded in demat form. Each unit of the scheme is approximately equal to 1 gram of gold. Units of the schemes are backed by physical gold held by the Custodian (Scotia Macotta). All physical gold held with Scotia Macotta conforms to the London Bullion Market Associations (LBMA) rules for Good Delivery.

39

Kotak Gold ETF (KGETF)*Performance (%) as on 10th july, 2012

Scheme Facts
Investment Manager Trustee Benchmark Registrar Expense ratio Exit load Tracking Error AUM Gold holding Allotment Date Purity : : : : : : : : : : Kotak Mahindra AMC Ltd. Kotak Mahindra Trustee Co. Ltd Domestic price of gold Computer Age Management Services 1% Nil 0.0666* `1104.94Crs 2003 Kgs 27 July, 2007 995 fineness

40

RETURNS IN BULLISH MARKET

Absolute Returns: 5.2%* NAV as on April 10, 2012: Rs 2711.426 NAV as on July 10, 2012: Rs 2852.350
Kotak Gold ETF - Performance Snapshot as on Jul 10, 2012
Period 1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years Annualised Returns (%) ** ** ** ** 32.0 25.9 25.4 26.4 Absolute Returns (%) 0.7 0.8 3.9 7.2 32.0 58.5 97.2 222.4 Performance Rank # (within fund classes) 3 4 6 4 1 4 2 3

** Annualised returns displayed only for 1 year and above

41

Scheme Facts
Investment Manager Trustee Benchmark Registrar Services Expense ratio Exit load Tracking Error AUM Gold holding Allotment Dat Purity : AXIS AMC Ltd.

: AXIS Trustee Co. Ltd : Domestic price of gold : Computer Age Management : : : : : : : 1% Nil 0.0626* `1109.94Crs 2009 Kgs 22 July, 2008 995 fineness

42

Axis Gold ETF Performance (%) as on 10th july, 2012 Absolute Returns: 5.1%* NAV as on April 10, 2012: Rs2764.704 NAV as on July 10, 2012: Rs 2905.704
Axis Gold ETF - Performance Snapshot as on Jul 10, 2012
Period 1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years Annualised Returns (%) ** ** ** ** 31.4 N.A 0.0 0.0 Absolute Returns (%) 0.7 0.7 3.8 7.1 31.4 0.0 0.0 0.0 Performance Rank # (within fund classes) 11 13 11 11 9 N.A N.A N.A

** Annualised returns displayed only for 1 year and above

43

Scheme Facts
Investment Manager Trustee : : HDFC AMC Ltd. HDFC Trustee Co. Ltd

Benchmark gold Registrar Services Expense ratio Exit load Purity

: Domestic price of Physical

: Computer Age Management

: : :
44

1%
Switch out of Units.

995 finen

HDFC Gold Exchange Traded Fund Performance (%) as on 10th July, 2012 Absolute Returns: 5.2%* NAV as on April 10, 2012: Rs2766.966 NAV as on July 10, 2012: Rs 2910.402
HDFC Gold Exchange Traded Fund Period 1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years Annualised Returns (%) ** ** ** ** 31.7 N.A 0.0 0.0

Performance Snapshot as on Jul 10, 2012

Absolute Returns (%) 0.7 0.8 3.9 7.2 31.7 0.0 0.0 0.0 Performance Rank # (within fund classes) 3 4 9 4 8 N.A N.A N.A

** Annualised returns displayed only for 1 year and above

45

IDBI Gold Exchange Traded Fund Performance (%) as on 10th july, 2012 Absolute Returns: 5.2%* NAV as on April 10, 2012: Rs2830.994 NAV as on July 10, 2012: Rs 2976.949
IDBI Gold Exchange Traded Fund - Performance Snapshot as on Jul 10, 2012
Period 1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years Annualised Returns (%) ** ** ** ** 0.0 N.A 0.0 0.0 Absolute Returns (%) 0.7 0.7 3.9 7.2 0.0 0.0 0.0 0.0 Performance Rank # (within fund classes) 9 10 10 10 N.A N.A N.A N.A

** Annualised returns displayed only for 1 year and above

46

Reliance Gold ETF Performance (%) as on 10th july, 2012 Absolute Returns: 5.3%* NAV as on April 10, 2012: Rs2637.923 NAV as on July 10, 2012: Rs 2777.909
Reliance Gold ETF - Performance Snapshot as on Jul 10, 2012
Period 1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years Annualised Returns (%) ** ** ** ** 32.0 26.0 25.4 0.0 Absolute Returns (%) 0.7 0.8 4.0 7.3 32.0 58.7 97.4 0.0 Performance Rank # (within fund classes) 3 3 2 4 1 2 2 N.A

47

SBI Gold Exchange Traded Fund Performance (%) as on 10th july, 2012
Absolute Returns: 5.2%* NAV as on April 10, 2012: Rs2765.523 NAV as on July 10, 2012: Rs 2910.027

SBI Gold Exchange Traded Fund - Performance Snapshot as on Jul 10, 2012
Period 1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years Annualised Returns (%) ** ** ** ** 32.0 26.1 25.2 0.0 Absolute Returns (%) 0.7 0.8 3.9 7.3 32.0 59.0 96.4 0.0 Performance Rank # (within fund classes) 3 4 3 3 1 1 6 N.A

48

** Annualised returns displayed only for 1 year and abov

Birla Sun Life Gold ETF (G) Performance (%) as on 10th july, 2012 Absolute Returns: 5.5%* NAV as on April 10, 2012: Rs2821.713 NAV as on July 10, 2012: Rs 2977.474
Birla Sun Life Gold ETF (G) - Performance Snapshot as on Jul 10, 2012
Period 1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years Annualised Returns (%) ** ** ** ** 31.8 N.A 0.0 0.0 Absolute Returns (%) 0.8 1.0 4.1 7.4 31.8 0.0 0.0 0.0 Performance Rank # (within fund classes) 1 1 1 1 7 N.A N.A N.A

49

** Annualised returns displayed only for 1 year and above

KOTAK PSU BANK ETF :

Absolute Returns: -22.5%*
NAV as on April 10, 2011: Rs 464.654 | NAV as on July 10, 2012: Rs 360.189

Kotak PSU Bank ETF - Performance Snapshot as on Jul 10, 2012

Period Annualised Returns (%) ** ** ** ** -13.9 -4.0 14.1 0.0 Absolute Returns (%) 0.2 5.1 0.0 19.2 -13.9 -7.8 48.6 0.0 Performance Rank # (within fund classes) 12 12 11 9 11 10 9 N.A

1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years

** Annualised returns displayed only for 1 year and above

50

Absolute Returns: 5.2%*

NAV as on April 10, 2012: Rs 2713.06000 | NAV as on July 10, 2012: Rs 2854.16100
* Returns have been calculated after adjusting the NAVs for "dividends and bonus", if any.

UTI Gold Exchange Traded Fund - Performance Snapshot as on Jul 19, 2012
Period Annualised Returns (%) ** ** ** ** 26.3 25.6 23.6 25.7 Absolute Returns (%) -0.4 -3.4 2.2 7.1 26.3 57.7 89.0 214.3 Performance Rank # (within fund classes) 7 6 6 4 4 2 2 2

1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years

** Annualised returns displayed only for 1 year and above

51

Absolute Returns: 0.0%*

NAV as on July 10, 2012: Rs 10.12300 | NAV as on July 10, 2012: Rs 10.12300

Religare Gold Fund (G) - Performance Snapshot as on Jul 19, 2012

Period Annualised Returns (%) ** ** ** ** 0.0 N.A 0.0 0.0 Absolute Returns (%) -0.1 -3.5 1.3 5.7 0.0 0.0 0.0 0.0 Performance Rank # (within fund classes) 7 9 7 6 N.A N.A N.A N.A

1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years

** Annualised returns displayed only for 1 year and above

52

Absolute Returns: -2.0%*

NAV as on July 10, 2011: Rs 1151.24000 | NAV as on July 10, 2012: Rs 1128.30500
* Returns have been calculated after adjusting the NAVs for "dividends and bonus", if any.

Reliance Banking ETF - Performance Snapshot as on Jul 19, 2012

Period Annualised Returns (%) ** ** ** ** -3.4 4.3 13.2 0.0 Absolute Returns (%) 0.3 8.3 3.1 13.0 -3.4 8.8 44.9 0.0 Performance Rank # (within fund classes) 3 4 5 2 2 1 6 N.A

1 week 1 month 3 months 6 months 1 year 2 years 3 years 5 years

53

This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem. It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones.

Data sources: Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites.

Duration of Study: The study was carried out for a period of two months, from 2nd May to 1st July 2012.

54

Sampling:
Sampling procedure: The sample was selected of them who are the customers/visitors of Kotak Bank, and IDBI Bank Setelite and Shaibag Branch, irrespective of them being investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool.

Sample size: The sample size of my project is limited to 200 people only. Out of which only 120 people had invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund.

Sample design: Data has been presented with the help of bar graph, pie charts, line graphs etc.

55

Research Limitations
1. Due to constraints of time & financial resources, the scope of study is limited to few customers of Ahemedabad city only. 2. Smaller sample may not always give better results. Sample may not be true representative of the whole population. 3. The possibility of biased responses is ruled out. 4. Lack of availability of full information. 5. Sometimes customers are not willing to give response. 6. Lack of communication

7. The sample was restricted to specified region only. 8. The sample collected may not represent the entire population and the result may not be a true representation of total universe.

56

ANALYSIS & INTERPRETATION OF THE DATA

1. A) Age distribution of the Investors

Age Group No. of Investors

<= 30 12

31-35 18

36-40 30

41-45 24

46-50 20

>50 16

Investors invested in Mutual Fund

35 30 25 20 15 10 5 12 18 30

24

20

16

0
<=30 31-35 36-40 41-45 46-50 >50 Age group of the Investors

Interpretation: According to this chart out of 120 Mutual Fund investors of Jaipur the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 4145yrs i.e. 20% and the least investors are in the age group of below 30 yrs.

57

B). Educational Qualification of investors: Educational Qualification Graduate/ Post Graduate Under Graduate Others Total Number of Investors 88 25 7 120

6% 23% 71%

Graduate/Post Graduate

Under Graduate

Others

Interpretation: Out of 120 Mutual Fund investors 71% of the investors are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under HSC).

58

C). Occupation of the investors:

Occupation . Govt. Service Pvt. Service Business Agriculture Others

No. of Investors 30 45 35 4 6

50 45 40 35 30 25 20 15 10 5 0

No. of Investors

45 35 30 4 Govt. Service Pvt. Service Business Agriculture 6 Others

Occupation of the customers

Interpretation:

In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.
59

D). Monthly Family Income of the Investors: Income Group <=10,000 10,001-15,000 15,001-20,000 20,001-30,000 >30,000 No. of Investors 5 12 28 43 32

50 45 40 35 30 25 20 15 10 5 0

No. of Investors

43 28 12 32

5
<=10 10-15 15-20 20-30 >30

Income Group of the Investorsn (Rs. in Th.)

Interpretation:

In the Income Group of the investors, out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000

60

E). Percentage (%) of Annual Savings:

0 9.17 15.83 Less then 10% 10-20% 35 21-30% 40 31-40%

Less than 0% 19

10-20% 48

21-30% 42

31-40% 11

Interpretation

Everybody saves some proportion of the income looking at the present and future needs. The pie chart shows that major proportion that is 40 % investors have annual savings ranging from 10 20% whereas 35% investors annual saving ranges from 21-30%.

61

F). Risk-Taking Ability Of Investors:

High-Risk

Reluctant

Low risk

Careful 0 10 20 30 40 50

Careful 33

Low risk 49

Reluctant to risk 24

High risk 14

Interpretation

There are very few investors who believe in avoiding risk while investing in different avenues. The major proportion is those of low risk taker here the investors invest their wealth mainly in mutual funds, fixed deposits etc.

62

(2) Investors invested in different kind of investments: Kind of Investments Saving A/C Fixed deposits Insurance Mutual Fund Post office (NSC) Shares/Debentures Gold/Silver Real Estate 65 No. of Respondents 195 148 152 120 75 50 30

65
Kinds of Investment

30

50
75 120 152 148 195 0 100 200 300

No.of Respondents

Interpretation:

From the above graph it can be inferred that out of 200 people, 97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate.

63

3. Preference of factors while investing:

Factors (a) Liquidity (b) Low Risk (c) High Return (d) Trust

No. of Respondents

40

60

64

36

18%

20%

32%

30%

Liquidity

Low Risk

High Return

Trust

Interpretation:

Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust

64

4. Awareness about Mutual Fund and its Operations:

Response No. of Respondents

Yes 135

No 65

33%

67%

Yes

No

Interpretation:
From the above chart it is inferred that 67% People are aware of Mutual Fund and its operations and 33% are not aware of Mutual Fund and its operations.

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5. Source of information for customers about Mutual Fund:

Source of information Advertisement Peer Group Bank Financial Advisors No. of Respondents 18 25 30 62

80 No. of Respondents 60 40 62

20
18 0 Advertisement

25 Peer Group

30 Bank Financial Advisors

Source of Information

Interpretation: From the above chart it can be inferred that the Financial Advisor is the most important source of information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund Through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement.

66

6. Investors invested in Mutual Fund:

Response YES NO Total No. of Respondents 120 80 200

No 40%

Yes 60%

Interpretation: Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested in Mutual Fund.

67

7. Reason for not invested in Mutual Fund:

Reason Not Aware Higher Risk Not any Specific Reason No. of Respondents 65 5 10

13%

6% 81%

Not Aware

Higher Risk

Not Any

Interpretation: Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any specific reason.

68

8. Investors invested in different Assets Management Co. (AMC):

Name of AMC AxisMF UTI HDFC Reliance ICICI Prudential Kotak Others No. of Investors 55 75 30 75 56 45 70

Others HDFC Name of AMC Kotak AxisMF ICICI Reliance 30

70

45
55 56 75 75 0 20 40 No. of Investors 60 80

UTI

Interpretation:

Most of the Investors preferred UTI and Reliance Mutual Fund. Out of 120 Investors 62.5% have invested in each of them, only 46% have invested in AxisMF, 47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC.
69

9. Preference of Investors for future investment in Mutual Fund

Name of AMC AxisMF UTI HDFC Reliance ICICI Prudential Kotak Others No. of Investors 76 45 35 82 80 60 75

Others Kotak Name of AMC ICICI Prudential Reliance HDFC UTI AxisMF 0 20 35 45 60

75

80 82

76 40 60 80 100

No. of Investors

Interpretation: Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63% in AxisMF, 62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual Fund.
70

10. Channel Preferred by the Investors for Mutual Fund Investment

Channel No. of Respondents Financial Advisor 72 Bank 18 AMC 30

25% 15%

60%

Financial Advisor

Bank

AMC

Interpretation: Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through AMC and 15% through Bank.

71

11. Mode of Investment Preferred by the Investors

Mode of Investment No. of Respondents One time Investment 78 Systematic Investment Plan (SIP) 42

35% 65%

One time Investment

SIP

Interpretation:

Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through Systematic Investment Plan.

72

12. Preferred Portfolios by the Investors

Portfolio Equity Debt Balanced No. of Investors 56 20 44

37% 17%

46%

Equity

Debt

Balance

Interpretation: From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17% preferred Debt portfolio

73

13. Option for getting Return Preferred by the Investors

Option Dividend Payout Dividend Reinvestment No. of Respondents 25 10 85 Growth

21% 8% 71%

Dividend Payout

Dividend Reinvestment

Growth

Interpretation: From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout and 8% preferred Dividend Reinvestment Option.

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ETFs have given better opportunity for the small investors in terms of diversified portfolio with a small amount of money. Benchmark AMC issued more number of ETFs than other AMCs. ETFs investment has given better performance over Index Funds and other traditional Mutual Funds. Expense ratios of ETFs are very less compared with the Index Funds. Therefore, investing in ETFs is less costly. More than 1 per cent of the expenses can be saved in ETFs compared to Index Funds. Problem of tracking error can be reduced by the ETFs and tracking error of the ETFs is very less than Index Funds. Here, though the underlying asset is same, tracking error is less in ETFs, thus, automatically ETFs give better returns than Index Funds. ETFs are better than Index Funds in terms of Risk and Volatility. According to Sharpe ratio, ETFs give better performance for extra risk taken by the Investors. All the ETFs and Index Funds have the R-squared values as 1.00. It means that, they have exact correlation with the underlying Index and are moving in the same direction as that of the market returns.

75

Conclusion
In the last fifteen years, since 1993, the popularity of ETFs has increased manifold. This has attracted a lot of attention from both the investors as well as the market participants, resulting in the introduction of a variety of ETFs and continuous innovations in the ETF industry. As the variety of financial indices is increasing, there has been a corresponding increase in the spectrum of ETF varieties available in the market. ETFs have technical advantages over Mutual Funds and have shown an ability to capture investors' money. They are low cost, having less tracking error and more liquid. They are a good investment suitable to individual investors and professionals. However, now, the Indian economic conditions are gradually stabilizing and equity markets are performing well because of political stability and positive signs about economy. Investors always look for better returns and it is the equity markets which can give better returns and therefore, there is a huge potentiality for the introduction of more equity ETF products in India. However, the ETFs can become a best investment alternative, provided, awareness is created among the investors.

76

BIBLIOGRAPHY:

BOOKS: MUTUAL FUND HAND BOOK SEBI HAND BOOK NSE HAND BOOK MARKETING RESERCH BOOK WEB SITE : WWW.GOOGLE.COM WWW.MONEYCONTROL.COM WWW.AMFI.COM WWW.KOTAKMUTUALFUND.COM WWW.NSE.COM WWW.MUTUALFUNDSINDIA.COM WWW.AMFINDIA.COM

77

QUESTIONNAIRE
1. Personal details: (a). Name: (c). Age:Graduation/pg (b). City: (d). Qualification:Under graduate Others contact no:-

(e). Occupation. Pl tick () Govt. Ser Pvt. Ser Business Agriculture Others

(F). What is your monthly family income approximately? Pl tick (). Up rs.10,000 to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 15000 20,000 30,000 30,001

and above

(G). What much do you think you will be able to save on an annual basis as a % of your total annual income? Less than 10% 10-20% 20-30% More than 30%

78

(H). How would you honestly describe yourself as a risk-taker? Careful Low risk taking capability

Extremely reluctant to risk

High risk taking capability

2. What kind of investments you have made so far? Pl tick (). All applicable. A. Saving account B. Fixed deposits C. Insurance G. Gold/ silver D. Mutual fund H. Real estate

E. Post office-nsc, etc F. Shares/debentures

3. While investing your money, which factor will you prefer? (a) liquidity (b) low risk (c) high return (d) trust

4. Are you aware about mutual funds and their operations? Pl tick (). a) yes b) no

79

5. If yes, how did you know about mutual fund? A. Advertisement B. Peer group C. Banks D. Financial advisors

6. Have you ever invested in mutual fund? Pl tick (). a) yes b) no

7. If not invested in mutual fund then why? (a) not aware of mf (b) higher risk (c) not any specific reason 8. If yes, in which mutual fund you have invested? Pl. Tick (). All applicable. A. AxisMF B. UTI C. HDFC D. Reliance E. KOTAK F. Other specify

9. When you plan to invest your money in asset management co. Which AMC will you prefer? Assets management co. A. Axis mf B. UTI C. Reliance D. HDFC E. KOTAK F. ICICI

80

10. Which channel will you prefer while investing in mutual fund? (a) financial advisor (b) bank (c) AMC

11. When you invest in mutual funds which mode of investment will you prefer? Pl. Tick () A. One time investment B. Systematic investment plan (sip)

12. When you want to invest which type of funds would you choose? A. Having only debt B. Having debt & equity C. Only equity portfolio. portfolio portfolio.

13. How would you like to receive the returns every year? Pl. Tick (). A. Dividend payout B. Dividend re- C. Growth in nav

investment

81