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MUTUAL FUND : A STUDY OF INVESTOR’S PERCEPTION AND

DISTRIBUTOR’S EVALUATION OF MAJOR AMCs


AND THEIR SCHEMES

A project submitted for partial fulfillment of MBF Program,


IIF, Delhi

Submitted By
Shweta Trivedi
CERTIFICATE

I hereby declare that this project report titled “Mutual Fund: A Study
of Investor’s Perception and Distributor’s Evaluations of major AMCs and
their Schemes” has been prepared by me during the year 2005 under the
valuable guidance and supervision of Mr. Shashank Bharadwaj, Manager,
Prudential ICICI, Lucknow and Mr. Prabhakar Yadav, Asst.Manager,
Prudential ICICI, Lucknow, as a partial fulfillment of the requirements for
the summer project.
I also declare that the project report is the result of my own sincere
efforts and the information used is strictly confined for academic purposes.
Further, I would like to add that one copy of the report would be given to the
organization (Prudential ICICI) and two copies of the same would be
submitted to the institute.

Signature: ________________
Name: Shweta Trivedi
Enroll.No: 4104181181
PREFACE

As a part of MBF Program at IIF, Delhi, a student has to


undergo summer training and pursue a project duly approved by the director
of the institute. I had the privilege of doing my summer training at Prudential
ICICI AMC, Lucknow.
During my training, I received active exposure of functioning
of an AMC and had privilege of undertaking a project on Mutual Fund. My
project was to conduct a questionnaire-based survey for the company. For
this purpose, I constructed two questionnaires: One for distributors- the
purpose of this questionnaire was to study distributors’ evaluation of major
AMCs and their Mutual fund schemes. Second questionnaire was
constructed to study the investor’s perceptions of AMCs and their schemes.
Major objective of this project was to construct the
questionnaires and on the basis of the information acquired by administering
the questionnaires on distributors and investors to provide feedback to the
company so that the company may re-evaluate its functioning, services and
schemes accordingly.
The project is divided into following parts:
1. Chapter one of this study contains concept of mutual
fund, industry
background, company background, review of literature, and statement
of the problem.
2. Chapter two deals with objective of the study and
research
methodology.
3. Chapter three deals with analysis of the data and
interpretation.
4. Chapter four deals with summary of major findings,
discussion of
results, suggestions and limitations of the study.

ACKNOWLEDGEMENT

This is my opportunity to acknowledge the contributions of


individuals who helped me in various capacities. The project was to be
completed in a short duration of eight weeks, therefore it required hard work
and support from many individuals.
My gratitude to Prof.J.D.Agarwal (Chairman, IIF, Delhi), and Prof.
Aman Agarwal (Director, IIF, Delhi) for giving me an opportunity to study
at their esteemed institution and providing us state of the art facilities.My
special thanks to my learned teachers, Prof. N.R.Chatterjee, Ms.Yamini
Agarwal, Mr.Pushpender Singh Raghav, Prof.Amitabh Gupta and others
at IIF who gave me insight into the basics of finance during my first year in
the institute.
I am grateful to Prudential ICICI and its management for giving me
an opportunity to pursue my summer training at their Lucknow branch.
My sincere thanks to my project supervisor, Mr. Shashank
Bharadwaj (Manager, Prudential ICICI, Lucknow) and Mr. Prabhakar
Yadav (Asst. Manager, Prudential ICICI, Lucknow) for patiently helping
and guiding me during the entire training period.
It is also my pleasure to acknowledge the cooperation of mutual fund
distributors and investors who provided valuable information relevant to the
project.
I want to express my love and appreciation to my parents and my
sister, sakshi, who inspired and motivated me at every stage of the project.
Finally, I am thankful to everybody who directly or indirectly contributed to
my summer training and my project.

SHWETA TRIVEDI

IIF, Delhi.

CONTENTS
CHAPTER- 1
INTRODUCTION
• Industry background
• Company Profile
• Review of literature & statement of the problem
CHAPTER- 2
RESEARCH METHODOLOGY
• Questionnaire Construction
• Sampling
• Data Collection
• Analytical Tools
• Operational Definitions
CHAPTER- 3
DATA & ANALYSIS
• Distributor’s Data Analysis
• Investor’s Data Analysis
CHAPTER- 4
Discussion
Suggestions
Limitations
QUESTIONNAIRES
APPENDIX
BIBLIOGRAPHY
CHAPTER- 1

INTRODUCTION

INDUSTRY BACKGROUND

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

Mutual Funds Industry in India:

The origin of mutual fund industry in India is with the introduction of


the concept of mutual fund by UTI in the year 1963. Though the growth was
slow, but it accelerated from the year 1987 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. Before, the
monopoly of the market had seen an ending phase, the Assets under
Management (AUM) was Rs. 67bn. The private sector entry to the fund
family raised the AUM to Rs. 470 bn in March 1993 and till April 2004, it
reached the height of 1,540 bn.
Putting the AUM of the Indian Mutual Funds Industry into
comparison, the total of it is less than the deposits of SBI alone, constitute
less than 11% of the total deposits held by the Indian banking industry.
The main reason of its poor growth is that the mutual fund industry
in India is new in the country. Large sections of Indian investors are yet to be
made aware of the concept. Hence, it is the prime responsibility of all mutual
fund companies, to market the product correctly abreast of selling.
The mutual fund industry can be broadly put into four phases
according to the development of the sector. Each phase is briefly described
as under.

First Phase - 1964-87


Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. It was set up by the Reserve Bank of India and functioned under
the Regulatory and administrative control of the Reserve Bank of India. In
1978, UTI was de-linked from the RBI and the Industrial Development Bank
of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988, UTI had Rs.6,700 crores of assets under management.

Second Phase - 1987-1993 (Entry of Public Sector Funds)


Entry of non-UTI mutual funds. SBI Mutual Fund was the first
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 in 1989 and GIC in 1990. The
end of 1993 marked Rs.47,004 as assets under management.

Third Phase - 1993-2003 (Entry of Private Sector Funds)


With the entry of private sector funds in 1993, a new era started
in the Indian mutual fund industry, giving the Indian investors a wider
choice of fund families. Also, 1993 was the year in which the first Mutual
Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by
a more comprehensive and revised Mutual Fund Regulations in 1996. The
industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with
many foreign mutual funds setting up funds in India and also the industry
has witnessed several mergers and acquisitions. As at the end of January
2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores.
The Unit Trust of India with Rs.44,541 crores of assets under management
was way ahead of other mutual funds.

Fourth Phase - since February 2003


This phase had bitter experience for UTI. It was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with AUM of Rs.29,835 crores (as on January 2003). The Specified
Undertaking of Unit Trust of India, functioning under an administrator and
under the rules framed by Government of India and does not come under the
purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI,
PNB, BOB and LIC. It is registered with SEBI and functions under the
Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which
had in March 2000 more than Rs.76,000 crores of AUM and with the setting
up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations,
and with recent mergers taking place among different private sector funds,
the mutual fund industry has entered its current phase of consolidation and
growth. As at the end of September, 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421 schemes.
GROWTH IN ASSETS UNDER MANAGEMENT

Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of
India effective from February 2003. The Assets under management of the Specified Undertaking of the
Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from
February 2003 onwards.

Mutual Funds – Organization


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

Organization of a Mutual Fund

A mutual fund is set up in the form of a trust, which has sponsor,


trustees, Asset Management Company (AMC) and custodian. The trust is
established by a sponsor or more than one sponsor who is like promoter of a
company. The sponsor is required to contribute at least 40% of the minimum
net worth (Rs. 10 crore) of the asset management company. The trustees of
the mutual fund hold its property for the benefit of the unit holders. The
board of trustees manages the MF and the sponsor executes the trust deeds in
favor of the trustees. It is the job of the MF trustees to see that schemes
floated and managed by the AMC appointed by the trustees are in
accordance with the trust deed and SEBI guidelines.
Asset Management Company (AMC) approved by SEBI manages
the funds by making investments in various types of securities.
Custodian, who is registered with SEBI, holds the securities of
various schemes of the fund in its custody. The trustees are vested with the
general power of superintendence and direction over AMC. They monitor
the performance and compliance of SEBI Regulations by the mutual fund.
SEBI Regulations require that at least two thirds of the directors of
trustee company or board of trustees must be independent i.e. they should
not be associated with the sponsors. Also, 50% of the directors of AMC must
be independent. All mutual funds are required to be registered with SEBI
before they launch any scheme.
Sponsor Company Establishes The Mutual Fund as a Trust.
(e.g. Prudential ICICI) Registers The Mutual Fund with SEBI.

Managed by a board
of trustees

Mutual Fund Hold Unit-holders funds in MF.Enter into an


(e.g. Pru ICICI Mutual Fund agreement with SEBI & ensure compliance

AMC Float MF funds. Manage the fund as per SEBI


(e.g. Pru ICICI AMC) Guidelines and AMC agreement

Custodian Provides custodial services.

Registrar Provides registrar and transfer services

Provides the network for distribution of the


Distributor schemes to the investor

Types of Mutual Funds Schemes in India

Wide variety of Mutual Fund Schemes exists to cater to the needs


such as financial position, risk tolerance and return expectations etc. The
table below gives an overview into the existing types of schemes in the
Industry.
By Structure
1. Open - Ended Schemes
An open-ended fund or scheme is one that is available for
subscription and repurchase on a continuous basis. These schemes do not
have a fixed maturity period. Investors can conveniently buy and sell units at
Net Asset Value (NAV) related prices which are declared on a daily basis.
The key feature of open-end schemes is liquidity.
These funds are sold at the NAV based prices, generally calculated on
every business day. These schemes have unlimited capitalization, open-
ended schemes do not have a fixed maturity - i.e. there is no cap on the
amount you can buy from the fund and the unit capital can keep growing.
These funds are not generally listed on any exchange.
Open-ended funds are bringing in a revival of the mutual fund
industry owing to increased liquidity, transparency and performance in the
new open-ended funds promoted by the private sector and foreign players.
Open-ended funds score over close-ended ones on several counts. Some of
these are listed below:
a) Any time exit option: The issuing company directly takes the
responsibility of providing an entry and an exit. This provides ready liquidity
to the investors and avoids reliance on transfer deeds, signature verifications
and bad deliveries.
b) Any time entry option: An open-ended fund allows one to enter the
fund at any time and even to invest at regular intervals (a systematic
investment plan).
c) Tax advantage

2. Close - Ended Schemes


A close-ended fund or scheme has a stipulated maturity period e.g. 5-
7 years. The fund is open for subscription only during a specified period at
the time of launch of the scheme. Investors can invest in the scheme at the
time of the initial public issue and thereafter they can buy or sell the units of
the scheme on the stock exchanges where the units are listed. In order to
provide an exit route to the investors, some close-ended funds give an option
of selling back the units to the mutual fund through periodic repurchase at
NAV related prices. SEBI Regulations stipulate that at least one of the two
exit routes is provided to the investor i.e. either repurchase facility or
through listing on stock exchanges. These mutual funds schemes disclose
NAV generally on weekly basis.
By Investment Objective

1. Growth Schemes
The aim of growth funds is to provide capital appreciation over the
medium to long- term. Such schemes normally invest a major part of their
corpus in equities. Such funds have comparatively high risks. These schemes
provide different options to the investors like dividend option, capital
appreciation, etc. and the investors may choose an option depending on their
preferences. The investors must indicate the option in the application form.
The mutual funds also allow the investors to change the options at a later
date. Growth schemes are good for investors having a long-term outlook
seeking appreciation over a period of time.
These funds may invest in a broad range of industries or concentrate
on one or more industry sectors. Growth funds are suitable for investors who
can afford to assume the risk of potential loss in value of their investment in
the hope of achieving substantial and rapid gains.
They are not suitable for investors who must conserve their principal
or who must maximize current income.

2. Income Schemes
The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such as
bonds, corporate debentures, Government securities and money market
instruments. Such funds are less risky compared to equity schemes. These
funds are not affected because of fluctuations in equity markets. However,
opportunities of capital appreciation are also limited in such funds. The
NAVs of such funds are affected because of change in interest rates in the
country. If the interest rates fall, NAVs of such funds are likely to increase in
the short run and vice versa. However, long term investors may not bother
about these fluctuations.
Some fixed-income funds seek to minimize risk by investing
exclusively in securities whose timely payment of interest and principal is
backed by the full faith and credit of the Indian Government. Fixed-income
funds are suitable for investors who want to maximize current income and
who can assume a degree of capital risk in order to do so.

3. Balanced Schemes
The aim of balanced funds is to provide both growth and regular
income as such schemes invest both in equities and fixed income securities
in the proportion indicated in their offer documents. These are appropriate
for investors looking for moderate growth. They generally invest 40-60% in
equity and debt instruments. These funds are also affected because of
fluctuations in share prices in the stock markets. However, NAVs of such
funds are likely to be less volatile compared to pure equity funds.

4. Money Market Schemes


For the cautious investor, these funds provide a very high stability of
principal while seeking a moderate to high current income. They invest in
highly liquid, virtually risk-free, short-term debt securities of agencies of the
Indian Government, banks and corporations and Treasury Bills. Because of
their short-term investments, money market mutual funds are able to keep a
virtually constant unit price; only the yield fluctuates.
Therefore, they are an attractive alternative to bank accounts. With
yields that are generally competitive with - and usually higher than -- yields
on bank savings account, they offer several advantages. Money can be
withdrawn any time without penalty. Although not insured, money market
funds invest only in highly liquid, short-term, top-rated money market
instruments.
Money market funds are suitable for investors who want high stability
of principal and current income with immediate liquidity.
Other Schemes

1. Tax Saving Schemes


These schemes offer tax rebates to the investors under specific
provisions of the Income Tax Act, 1961 as the Government offers tax
incentives for investment in specified avenues. e.g. Equity Linked Savings
Schemes (ELSS). Pension schemes launched by the mutual funds also offer
tax benefits. These schemes are growth oriented and invest pre-dominantly
in equities. Their growth opportunities and risks associated are like any
equity-oriented scheme.

2. Gilt funds
These funds invest exclusively in government securities.
Government securities have no default risk. NAVs of these schemes also
fluctuate due to change in interest rates and other economic factors as is the
case with income or debt oriented schemes.

3. Index Funds
Index Funds replicate the portfolio of a particular index such as the
BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest
in the securities in the same weight age comprising of an index. NAVs of
such schemes would rise or fall in accordance with the rise or fall in the
index, though not exactly by the same percentage due to some factors known
as "tracking error" in technical terms. Necessary disclosures in this regard
are made in the offer document of the mutual fund scheme.
There are also exchange traded index funds launched by the mutual
funds which are traded on the stock exchanges.
4. Sector Specific Schemes

These are the funds/schemes which invest in the securities of only


those sectors or industries as specified in the offer documents. e.g.
Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG),
Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors/industries. While these funds may give
higher returns, they are more risky compared to diversified funds. Investors
need to keep a watch on the performance of those sectors/industries and must
exit at an appropriate time. They may also seek advice of an expert.

A summary is presented in the table below of the various funds and


their investment objectives.
Scheme type Time Risk Typical Investment Pattern
Horizon Profile

Objective Open Close Equity Debt Money Market


(%) (%) Inst./Others
(%)

Money Market Yes No Short-Term Low 0 0-20 80-100

Income Yes Yes Medium Low to 0 80-100 0-20


-Long Term Medium

Growth Yes Yes Long Term High 80-100 0-20 0-20

Balanced Yes Yes Long term Medium 0-60 0-40 0-20


to high

Tax Saving Yes Yes Long term High 80-100 80-100 0-20

Additional Features of Mutual Funds Schemes:

1. Load or No-Load Fund


A Load Fund is one that charges a percentage of NAV for entry or
exit. That is, each time one buys or sells units in the fund, a charge will be
payable. This charge is used by the mutual fund for marketing and
distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as
well as exit load charged is 1%, then the investors who buy would be
required to pay Rs.10.10 and those who offer their units for repurchase to the
mutual fund will get only Rs.9.90 per unit. The investors should take the
loads into consideration while making investment as these affect their
yields/returns. However, the investors should also consider the performance
track record and service standards of the mutual fund which are more
important. Efficient funds may give higher returns in spite of loads.
A no-load fund is one that does not charge for entry or exit. It means
the investors can enter the fund/scheme at NAV and no additional charges
are payable on purchase or sale of units.
Mutual funds cannot increase the load beyond the level mentioned in
the offer document. Any change in the load will be applicable only to
prospective investments and not to the original investments. In case of
imposition of fresh loads or increase in existing loads, the mutual funds are
required to amend their offer documents so that the new investors are aware
of loads at the time of investments.

2. Total Expenses that can be charged to the fund

Total expenses that can be charged to the fund (excluding entry and
exit loads):
Equity Debt

On the first Rs. 100 cr. 2.50 % 2.25 %


On the next Rs. 300 cr. 2.25 % 2.00 %
On the next Rs.300 cr. 2.00 % 1.75 %
On the balance assets 1.75 % 1.50 %
- Based on average weekly net assets

Choosing a Fund:
The first step to investing in Mutual Fund is to define the objective of
investing. Investors should clearly lay down the purpose for which they
desire to invest. There are several schemes tailor made to meet certain
personal financial goals (children's education, marriage, retirement etc.)
which can be availed of. Investors should define the tenure of investment
and the risk appetite they have. Thereafter, they can select a fund type that
best meets their need i.e. income schemes, liquid schemes, tax saving
schemes, equity schemes etc. Given the plethora of fund options available to,
investors can then choose the particular fund that they are comfortable with.
People can choose the fund on various criteria but primarily
these can be the following:
• The track record of performance of schemes over the last few
years managed by the fund
• Quality of management and administration
• Parentage of the Mutual Fund
• Quality and adequacy of disclosures
• Service levels
• The price at which Investor can enter/exit (i.e. entry load / exit
load) the scheme and its impact on overall return
• The market price of the units of the scheme (where available) to
see the discount/premium that the market assigns to the stated
NAV of the scheme
• Independent rating of the schemes, if available
A person could be investing in a mutual fund either at the initial stage
when the mutual fund approaches the market through an offer document
route or at a subsequent stage.
If one chooses to invest at the initial stage, the offer document would
detail the schemes being offered and the manner of investing. The manner is
usually similar to that of investing any public issue of any security
(equity/debt).
If a person is planning to purchase the units subsequently, then the
following choices exist:
A close ended scheme. If the desired units are of a close-ended
scheme, then the investor would be able to purchase them at the stock
exchange where the MF has listed them. This purchase would resemble the
purchase of an equity share wherein the investor would pay the quoted price
of the unit as well as a brokerage for the purchase transaction. In the case of
a close ended scheme, the sale also is affected through the stock exchange
mechanism and resembles the sale of equity share. The pricing for the
transaction, as was mentioned earlier, is driven by the price the units quote.
This is driven by the NAV (Net Asset Value) of the scheme. The price,
however, may be either at a discount or premium to the NAV.
Purchasing a unit in a open-ended scheme is different as there is no
exchange where these units are traded. Their price reflects the NAV of the
scheme. The mutual fund in an open-ended scheme sells these units to the
investor at the NAV (plus a sale / entry load).
Selling units in an open-ended scheme is similar to the way they are
purchased. It is the mutual fund that buys back the units and at a price based
on the NAV. The actual price is the NAV less the exit load. The exit load is
similar in concept to the entry load.

The discussion on investment objectives would not be complete


without a discussion on the risks that investing in a mutual fund entails.

Types of Risks:
All investments involve some form of risk. Even an insured bank
account is subject to the possibility that inflation will rise faster than the
earnings, leaving a person with less real purchasing power than when he/she
started .
Following are some common types of risk
• Market Risk:
At times the prices or yields of all the securities in a particular market
rise or fall due to broad outside influences. When this happens, the stock
prices of both an outstanding, highly profitable company and a fledgling
corporation may be affected. This change in price is due to "market risk".
• Inflation Risk:
Sometimes referred to as "loss of purchasing power." Whenever
inflation sprints forward faster than the earnings on investment, there is a
risk that a person will actually be able to buy less, not more. Inflation risk
also occurs when prices rise faster than returns.
• Credit Risk:
In short, how stable is the company or entity to which a person lends
his money when he invests? It refers to the degree of certainty that the
company will be able to pay the interest promised, or repay the principal
when the investment matures.
• Interest Rate Risk:
Changing interest rates affect both equities and bonds in many ways.
Investors are reminded that "predicting" which way rates will go is rarely
successful. A diversified portfolio can help in offsetting these changes.
• Exchange Rate Risk:
A number of companies generate revenues in foreign currencies and
may have investments or expenses also denominated in foreign currencies.
Changes in exchange rates may, therefore, have a positive or negative impact
on companies which in turn would have an effect on the investment of the
fund.
• Investment Risk:
The sectoral fund schemes, investments will be predominantly in
equities of select companies in the particular sectors. Accordingly, the NAV
of the schemes are linked to the equity performance of such companies and
may be more volatile than a more diversified portfolio of equities.
• Effect of loss of key professionals and inability to adapt:
An industries' key asset is often the personnel who run the business
i.e. intellectual properties of the key employees of the respective companies.
Given the ever-changing complexion of few industries and the high
obsolescence levels, availability of qualified, trained and motivated
personnel is very critical for the success of industries in few sectors. It is,
therefore, necessary to attract key personnel and also to retain them to meet
the changing environment and challenges, the sector offers.
Failure or inability to attract/retain such qualified key personnel may
impact the prospects of the companies in the particular sector in which the
fund invests.
• Changes in the Government Policy:
Changes in Government policy especially in regard to the tax benefits
may impact the business prospects of the companies leading to an impact on
the investments made by the fund.

Managing Risk:
Mutual funds offer incredible flexibility in managing investment risk.
Diversification and Automatic Investing (SIP) are two key techniques
investors can use to reduce their investment risk considerably and reach their
long-term financial goals.
• Diversification:
When an investor invests in one mutual fund, he instantly spreads his
risk over a number of different companies. He can also diversify over several
different kinds of securities by investing in different mutual funds, further
reducing his potential risk. Diversification is a basic risk management tool
that he will want to use throughout his lifetime as he rebalances his portfolio
to meet his changing needs and goals. Investors, who are willing to maintain
a mix of equity shares, bonds and money market securities, have a greater
chance of earning significantly higher returns over time than those who
invest in only the most conservative investments. Additionally, a diversified
approach to investing -- combining the growth potential of equities with the
higher income of bonds and the stability of money markets -- helps moderate
the risk and enhance the potential return.

Systematic Investment Plan (SIP):


The Unitholders of the Scheme can benefit by investing specific
Rupee amounts periodically, for a continuous period. Mutual fund SIP
allows the investors to invest a fixed amount of Rupees every month or
quarter for purchasing additional units of the Scheme at NAV based prices.
Here is an illustration using hypothetical figures indicating how the SIP can
work for investors:
Suppose an investor would like to invest Rs.1,000 under the Systematic
Investment Plan on a quarterly basis.

Amount Invested (Rs.) Purchase Price (Rs.) No. of Units


Purchased

Initial Investment 1000 10 100

1 1000 8.20 121.95

2 1000 7.40 135.14

3 1000 6.10 163.93

4 1000 5.40 185.19

5 1000 6.00 166.67

6 1000 8.20 121.95


7 1000 9.25 108.11

8 1000 10.00 100.00

9 1000 11.25 88.89

10 1000 13.40 74.63

11 1000 14.40 69.44

TOTAL 12,000 - 1,435.90

Average unit cost Rs 12,000/1,435.9 = Rs 8.36


Average unit price 109.6/12 = Rs 9.13
Unit price at beginning of next quarter Rs 14.90
Market value of investment 1435.9 * 14.90= Rs 21,395/-
The investor liquidates his units and gets back Rs 21,395/-
Using the SIP strategy the investor can reduce his average cost
per unit. The investor gets the advantage of getting more units when the
market is turned down.

RISKS

Managing Risk

Diversification

SIP
Types of Risk

Market

Inflation

Credit

Interest Rate

Employees

Exchange Rate
Investment

Govt. Policies

Advantages of Mutual Funds


The advantages of investing in a Mutual Fund are:

• Diversification: The best mutual funds design their


portfolios so individual investments will react differently to the same
economic conditions. For example, economic conditions like a rise in
interest rates may cause certain securities in a diversified portfolio to
decrease in value. Other securities in the portfolio will respond to the
same economic conditions by increasing in value. When a portfolio is
balanced in this way, the value of the overall portfolio should gradually
increase over time, even if some securities lose value. Mutual funds
invest in a broad range of securities. This limits investment risk by
reducing the effect of a possible decline in the value of any one security.
Mutual fund unit-
holders can benefit from diversification techniques usually available
only to investors wealthy enough to buy significant positions in a wide
variety of securities.
• Professional Management: Most mutual funds pay topflight
professionals to manage their investments. These managers decide what
securities the fund will buy and sell. Mutual funds hire full-time, high-
level investment professionals. Funds can afford to do so as they manage
large pools of money. The managers have real-time access to crucial
market information and are able to execute trades on the largest and most
cost-effective scale.
• Regulatory oversight: Mutual funds are subject to many government
regulations that protect investors from fraud.
• Liquidity: It's easy for investors to get their money out of a mutual fund.
Write a cheque, make a call, and you've got the cash. In open-ended
schemes, investor can get his money back promptly at net asset value
related prices from the mutual fund itself.
• Convenience: An investor can usually buy mutual fund shares by mail,
phone, or over the Internet.
• Low cost: Mutual fund expenses are often no more than 1.5 percent of
investment. Expenses for Index Funds are less than that, because index
funds are not actively managed. Instead, they automatically buy stock in
companies that are listed on a specific index. A mutual fund let's a person
participate in a diversified portfolio for as little as Rs.5,000/-, and
sometimes less. And with a no-load fund, one has to pay a little or no
sales charges to own them.
• Transparency: Investors get regular information on the
value of their investments in addition to disclosure on the specific
investments made by the mutual fund scheme.
• Flexibility: Investor owns just one security rather than many, yet enjoys
the benefits of a diversified portfolio and a wide range of services. Fund
managers decide what securities to trade, collect the interest payments
and see that dividends on portfolio securities are received and investor’s
rights exercised. It also uses the services of a high quality custodian and
registrar in order to make sure that customer’s convenience remains at
the top of their mind.
• Choice of schemes: There are a variety of ways in which Mutual Funds
are created, to cater to the varied risk and return requirements of
investor. Depending on the investment portfolio that is created, and the
segments of the various markets in which funds are invested, there is a
choice of funds to investors, such as Equity Funds, Debt Funds and
Hybrid Funds.
• Well regulated : Mutual funds are well regulated and governed by
multiple agencies :
oMinistry of Finance/Company law board/ROC.
oSEBI
oRBI
oTrustees
oAuditors
oBoard of Directors
• Personal Service: One call puts the investor in touch with a specialist
who can provide him/her with information he/she can use to make
his/her own investment choices. They will provide him/her personal
assistance in buying and selling his/her fund units, provide fund
information and answer questions about his/her account status.

Disadvantages of Mutual Funds:


Mutual funds have their drawbacks and may not be for everyone:

1. No Guarantees: No investment is risk free. If the entire stock market


declines in value, the value of mutual fund shares will go down as well, no
matter how balanced the portfolio. Investors encounter fewer risks when
they invest in mutual funds than when they buy and sell stocks on their own.
However, anyone who invests through a mutual fund runs the risk of losing
money.
2. No Tailor-made Portfolio: Mutual Fund portfolios are created and
marketed by AMCs, into which investors invest. Investors cannot create
tailor-made portfolios.
3. Taxes: During a typical year, most actively managed mutual funds sell
anywhere from 20 to 70 percent of the securities in their portfolios. If a fund
makes a profit on its sales, taxes are to be paid on the income received, even
if the money is re-invested.
4. Management risk: When a person invests in a mutual fund, he/she depends
on the fund's manager to make the right decisions regarding the fund's
portfolio. If the manager does not perform as well as hoped, investors might
not make as much money on their investment as they expected. Of course, if
they invest in Index Funds, they forego management risk, because these
funds do not employ managers.
5. No control over costs: Since investors do not directly monitor
the fund’s operations, they cannot control the costs effectively.
Regulators, therefore usually limit the expenses of mutual
funds.

Mutual Fund Companies in India:


The concept of mutual funds in India dates back to the year 1963. The
era between 1963 and 1987 marked the existence of only one mutual fund
company in India with Rs. 67bn assets under management (AUM), by the
end of its monopoly era, the Unit Trust of India (UTI). By the end of the 80s
decade, few other mutual fund companies in India took their position in
mutual fund market.
The new entries of mutual fund companies in India were SBI Mutual
Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian
Bank Mutual Fund, Bank of India Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund
industry. By the end of 1993, the total AUM of the industry was Rs. 470.04
bn. The private sector funds started penetrating the fund families. In the
same year the first Mutual Fund Regulations came into existence with re-
registering all mutual funds except UTI. The regulations were further given a
revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in
India which has now merged with Franklin Templeton. Just after ten years
with private sector players penetration, the total assets rose up to Rs. 1218.05
bn. Today there are 33 mutual fund companies in India.

Major Mutual Fund Companies in India:


• 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.

• 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 sponsorers, 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.

• Birla Sunlife 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:


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

• 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. 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 sponsorers 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 Limited. UTI Asset Management Company presently
manages a corpus of over Rs.20000 Crore. The sponsorers 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 Mutual Fund:


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.

• Morgan Stanley Mutual Fund:


Morgan Stanley is a worldwide financial services company and it’s
leading in the market in securities, investment management and credit
services. Morgan Stanley Investment Management (MISM) was
established in the year 1975. It provides customized asset management
services and products to governments, corporations, pension funds and
non-profit organizations. Its services are also extended to high net worth
individuals and retail investors. In India, it is known as Morgan Stanley
Investment Management Private Limited (MSIM India) and its AMC is
Morgan Stanley Mutual Fund (MSMF). This is the first close end
diversified equity scheme serving the needs of Indian retail investors
focusing on a long-term capital appreciation.

• Escorts Mutual Fund:


Escorts Mutual Fund was setup on April 15, 1996 with Escorts
Finance Limited as its sponsor. The Trustee Company is Escorts
Investment Trust Limited. Its AMC was incorporated on December 1, 1995
with the name Escorts Asset Management Limited.

• Alliance capital mutual Fund:


Alliance Capital Mutual Fund was setup on December 30, 1994
with Alliance Capital Management Corp. of Delaware (USA) as sponsorer.
The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance
Capital Asset Management India (Pvt) Ltd. with the corporate office in
Mumbai.

• Benchmark Mutual Fund:


Benchmark Mutual Fund was setup on June 12, 2001 with Niche
Financial Services Pvt. Ltd. as the sponsorer and Benchmark Trustee
Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16,
2000 and headquartered in Mumbai, Benchmark Asset Management
Company Pvt. Ltd. is the AMC.

• Canbank Mutual Fund:


Canbank Mutual Fund was setup on December 19, 1987 with
Canara Bank acting as the sponsor. Canbank Investment Management
Services Ltd. incorporated on March 2, 1993 is the AMC. The Corporate
Office of the AMC is in Mumbai.

• Chola Mutual Fund:


Chola Mutual Fund under the sponsorship of Cholamandalam
Investment & Finance Company Ltd. was setup on January 3, 1997.
Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is
Cholamandalam AMC Limited.

• LIC Mutual Fund:


Life Insurance Corporation of India set up LIC Mutual Fund on
19th June 1989. It contributed Rs. 2 Crores towards the corpus of the
Fund. LIC Mutual Fund was constituted as a Trust in accordance with the
provisions of the Indian Trust Act, 1882. . The Company started its
business on 29th April 1994. The Trustees of LIC Mutual Fund have
appointed Jeevan Bima Sahayog Asset Management Company Ltd as the
Investment Managers for LIC Mutual Fund.

• GIC Mutual Fund:


GIC Mutual Fund, sponsored by General Insurance Corporation
of India (GIC), a Government of India undertaking and the four Public
Sector General Insurance Companies, viz. National Insurance Co. Ltd
(NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance
Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is
constituted as a Trust in accordance with the provisions of the Indian
Trusts Act, 1882.

Association of Mutual Funds in India (AMFI):


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

The objectives of Association of Mutual Funds in India:

The Association of Mutual Funds of India works with 30 registered AMCs


of the country. It has certain defined objectives which juxtaposes the
guidelines of its Board of Directors. The objectives are as follows:
• This mutual fund association of India maintains high
professional and ethical standards in all areas of operation of the
industry.
• It also recommends and promotes the top class business
practices and code of conduct which is followed by members and related
people engaged in the activities of mutual fund and asset management.
The agencies who are by any means connected or involved in the field of
capital markets and financial services also involved in this code of
conduct of the association.
• AMFI interacts with SEBI and works according to SEBIs
guidelines in the mutual fund industry.
• Association of Mutual Fund of India represents the
Government of India, the Reserve Bank of India and other related bodies
on matters relating to the Mutual Fund Industry.
• It develops a team of well qualified and trained Agent
distributors. It implements a program of training and certification for all
intermediaries and other engaged in the mutual fund industry.
• AMFI undertakes all India awareness programs for investors
in order to promote proper understanding of the concept and working of
mutual funds.
• At last but not the least association of mutual fund of India
also disseminate information on Mutual Fund Industry and undertakes
studies and research either directly or in association with other bodies.

The sponsorers of Association of Mutual Funds in India:

Bank Sponsored:
• SBI Fund Management Ltd.
• BOB Asset Management Co. Ltd.
• Canbank Investment Management Services Ltd.
• UTI Asset Management Company Pvt. Ltd.
Institutions
• GIC Asset Management Co. Ltd.
• Jeevan Bima Sahayog Asset Management Co.
Ltd.
Private Sector
Indian:-
• BenchMark Asset Management Co. Pvt. Ltd.
• Cholamandalam Asset Management Co. Ltd.
• Credit Capital Asset Management Co. Ltd.
• Escorts Asset Management Ltd.
• JM Financial Mutual Fund
• Kotak Mahindra Asset Management Co. Ltd.
• Reliance Capital Asset Management Ltd.
• Sahara Asset Management Co. Pvt. Ltd
• Sundaram Asset Management Company Ltd.
• Tata Asset Management Private Ltd.
• Predominantly India Joint Ventures:-
• Birla Sun Life Asset Management Co. Ltd.
• DSP Merrill Lynch Fund Managers Limited
• HDFC Asset Management Company Ltd.
• Predominantly Foreign Joint Ventures:-
• ABN AMRO Asset Management (I) Ltd.
• Alliance Capital Asset Management (India) Pvt. Ltd.
• Deutsche Asset Management (India) Pvt. Ltd.
• Fidelity Fund Management Private Limited
• Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.
• HSBC Asset Management (India) Private Ltd.
• ING Investment Management (India) Pvt. Ltd.
• Morgan Stanley Investment Management Pvt. Ltd.
• Principal Asset Management Co. Pvt. Ltd.
• Prudential ICICI Asset Management Co. Ltd.
• Standard Chartered Asset Mgmt Co. Pvt. Ltd.

Association of Mutual Funds in India Publications:

AMFI publishes mainly two types of bulletin. One is on the monthly


basis and the other is quarterly. These publications are of great support
for the investors to get intimation of the know-how of their parked
money.

Asset Management Company and its obligations :


(1) The asset management company shall take all reasonable steps
and exercise due diligence to ensure that the investment of funds pertaining
to any scheme is not contrary to the provisions of these regulations and the
trust deed.
(2) The asset management company shall exercise due diligence and
care in all its investment decisions as would be exercised by other persons
engaged in the same business.
(3) The asset management company shall be responsible for the acts of
commissions or omissions by its employees or the persons whose services
have been procured by the asset management company.
(4) The asset management company shall submit to the trustees
quarterly reports of each year on its activities and the compliance with these
regulations.
(5) The trustees at the request of the asset management company may
terminate the assignment of the asset management company at any time:
Provided that such termination shall become effective only after the
trustees have accepted the termination of assignment and communicated
their decision in writing to the asset management company.
(6) Notwithstanding anything contained in any contract or agreement
or termination, the asset management company or its directors or other
officers shall not be absolved of liability to the mutual fund for their acts of
commission or omissions, while holding such position or office.
(7) An asset management company shall not through any broker
associated with the sponsor, purchase or sell securities, which is average of
5% or more of the aggregate purchases and sale of securities made by the
mutual fund in all its schemes.
(8) An asset management company shall not utilize the services of the
sponsor or any of its associates, employees or their relatives, for the purpose
of any securities transaction and distribution and sale of securities:
Provided that an asset management company may utilize such services
if disclosure to that effect is made to the unit holders and the brokerage or
commission paid is also disclosed in the half yearly annual accounts of the
mutual fund.
(9) The asset management company shall file with the trustees the
details of transactions in securities by the key personnel of the asset
management company in their own name or on behalf of the asset
management company and shall also report to the Board, as and when
required by the Board.
(10) In case the asset management company enters into any securities
transactions with any of its associates a report to that effect shall be sent to
the trustees.
(11) In case any company has invested more than 5 per cent of the net
asset value of a scheme, the investment made by that scheme or by any other
scheme of the same mutual fund in that company or its subsidiaries shall be
brought to the notice of the trustees by the asset management company and
be disclosed in the half yearly and annual accounts of the respective schemes
with justification for such investment
(12) The asset management company shall file with the trustees and
the Board –
(a) Detailed bio-data of all its directors along with their interest
in other companies within fifteen days of their appointment;
and
(b) any change in the interests of directors every six months.
(c) a quarterly report to the trustees giving details and adequate
justification about the purchase and sale of the securities of
the group companies of the sponsor or the asset management
company as the case may be, by the mutual fund during the
said quarter.
(13) Each director of the Asset Management Company shall file the
details of his transactions of dealing in securities with the trustees on a
quarterly basis.
(14) The asset management company shall not appoint any person as
key personnel who has been found guilty of any economic offence or
involved in violation of securities laws.
(15) The asset management company shall appoint registrars and share
transfer agents who are registered with the SEBI.
(16) The asset management company shall abide by the Code of
Conduct as specified in the Fifth Schedule.

Performance of Mutual Funds in India:


The concept of mutual fund took birth in India. The year was 1963.
Unit Trust of India invited investors or rather to those who believed in
savings, to park their money in UTI Mutual Fund.
For 30 years it goaled without a single second player. Though the
1988 year saw some new mutual fund companies, but UTI remained in a
monopoly position.
The performance of mutual funds in India in the initial phase was not
even closer to satisfactory level. People rarely understood, and of course
investing was out of question. But yes, some 24 million shareholders was
accustomed with guaranteed high returns by the beginning of liberalization
of the industry in 1992. This good record of UTI became marketing tool for
new entrants. The expectations of investors touched the sky in profitability
factor. However, people were miles away from the preparedness of risks
factor after the liberalization.
The Assets under Management of UTI was Rs. 67bn. by the end of
1987. Let us concentrate about the performance of mutual funds in India
through figures. From Rs. 67bn. the Assets under Management rose to Rs.
470 bn. in March 1993 and the figure had a three times higher performance
by April 2004. It rose as high as Rs. 1,540bn.
The net asset value (NAV) of mutual funds in India declined when
stock prices started falling in the year 1992. Those days, the market
regulations did not allow portfolio shifts into alternative investments. There
were rather no choices apart from holding the cash or to further continue
investing in shares. One more thing to be noted, since only closed-end funds
were floated in the market, the investors disinvested by selling at a loss in
the secondary market.
The performance of mutual funds in India suffered qualitatively. The
1992 stock market scandal, the losses by disinvestments and of course the
lack of transparent rules in the whereabouts rocked confidence among the
investors. Partly owing to a relatively weak stock market performance,
mutual funds have not yet recovered, with funds trading at an average
discount of 1020 percent of their net asset value.
The supervisory authority adopted a set of measures to create a
transparent and competitive environment in mutual funds. Some of them
were like relaxing investment restrictions into the market, introduction of
open-ended funds, and paving the gateway for mutual funds to launch
pension schemes.
The measure was taken to make mutual funds the key instrument for
long-term saving. The more the variety offered, the quantitative will be
investors.
At last to mention, as long as mutual fund companies are performing
with lower risks and higher profitability within a short span of time, more
and more people will be inclined to invest until and unless they are fully
educated with the do’s and don’ts of mutual funds.

Mutual Fund Industry Data:


(Refer to Appendix A)

Future of Mutual Funds in India:

By December 2004, Indian mutual fund industry reached Rs 1,50,537


crore. It is estimated that by 2010 March-end, the total assets of all
scheduled commercial banks should be Rs 40,90,000 crore.
The annual composite rate of growth is expected 13.4% during the rest
of the decade. In the last 5 years we have seen annual growth rate of 9%.
According to the current growth rate, by year 2010, mutual fund assets will
be double.
Aggregate deposits of Scheduled Com Banks in India (Rs.Crore)

Mar-
Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Sep-04 4-Dec
04
Deposits 605410 851593 989141 1131188 1280853 - 1567251 1622579

Change in % over last


15 14 13 12 - 18 3
yr
Source - RBI

Mutual Fund AUM’s Growth

Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sep-04 4-Dec

MF AUM's 68984 93717 83131 94017 75306 137626 151141 149300

Change in % over last yr 26 13 12 25 45 9 1


Source - AMFI

Some facts about the growth of mutual funds in India:


• 100% growth in the last 6 years.
• Numbers of foreign AMC’s are in the queue to enter the Indian
markets like Fidelity Investments, US based, with over
US$1trillion assets under management worldwide.
• Our saving rate is over 23%, highest in the world. Only
channelizing these savings in mutual funds sector is required.
• We have approximately 29 mutual funds, which are much less
than US having more than 800. There is a big scope for
expansion.
• 'B' and 'C' class cities are growing rapidly. Today most of the
mutual funds are concentrating on the 'A' class cities. Soon they
will find scope in the growing cities.
• Mutual fund can penetrate rural areas like the Indian insurance
industry with simple and limited products.
• SEBI allowing the MF's to launch commodity mutual funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.
• Introduction of Financial Planners who can provide need based
advice.
COMPANY PROFILE
Prudential ICICI Mutual Fund

Constitution of the Mutual Fund


ICICI Mutual Fund, which has been renamed as Prudential ICICI
Mutual Fund has been constituted as a Trust in accordance with the
provisions of the Indian Trusts Act, 1882. The Mutual Fund was registered
with SEBI on October 13, 1993. ICICI Mutual Fund was established by
ICICI, by execution of a Trust Deed dated August 25, 1993. Prudential plc,
through its wholly owned subsidiary, Prudential Corporation Holdings
Limited, contributed an amount of Rs.12.2 lacs to the corpus of the Fund.
SEBI approved the change in name of the Fund to Prudential ICICI Mutual
Fund. A deed of amendment to the Trust Deed dated August 25, 1993 was
executed and registered on May 14, 1998.
Prudential ICICI Asset Management Company, (49%:51%) is a joint
venture between Prudential Plc, UK's leading insurance company and ICICI
Bank Ltd, India's premier financial institution.
The joint venture was formed with the key objective of providing the
Indian investor mutual fund products to suit a variety of investment needs.
The AMC has already launched a range of products to suit different risk and
maturity profiles.
Prudential ICICI Asset Management Company Limited has a networth
of about Rs. 80.14 crore as of March 31, 2004. Both Prudential and ICICI
Bank Ltd have a strategic long-term commitment to the rapidly expanding
financial services sector in India.

Guiding principles of the company:


Pru ICICI conducts its business with :
• Honesty and trustworthiness in all interactions.
• A pioneering spirit and excellence in action.
• Collaboration and teamwork.
• An understanding of customer needs and the desire to satisfy
them.
• The highest service standards.
• A consistently above average performance.

Sponsors
Prudential plc (formerly known as Prudential Corporation plc)

Founded in 1848, Prudential plc is the largest life insurance


company in the United Kingdom (Source: Standard & Poor’s UK Life
Financial Strength Digest 1998) and one of the leading life insurance
companies in the world. Prudential is a global player in the medium to long-
term savings market and has a presence in over 10 countries. Prudential is no
stranger to Asia. It has over 70 years of experience in the region and has
operations in Singapore, Hong Kong, Malaysia, Indonesia, Thailand,
Taiwan, Vietnam and Philippines. Recently, it has received permission to
start life insurance operations in China.
Prudential manages the savings of over 10 million investors
worldwide and its products cater to the diverse risk profiles and needs of a
cross section of investors. Prudential has significant experience in product
development, distribution through varied and multiple channels, and
investment management of a diverse portfolio of assets including equity,
fixed income, real estate and other investments. Its equity holdings in the UK
account for 4% (as of April 1998) of the market capitalization of the London
Stock Exchange. Prudential as of November 30, 1999 had over US$ 250
billion (Rs.10,90,500 crores) of assets under management.

ICICI Limited (formerly, The Industrial Credit and Investment


Corporation of India Limited) (ICICI)
ICICI is a diversified term lending institution founded on January 5,
1955 through the initiative of the Government of India, World Bank and
representatives of Indian industry. The principal business of ICICI is to
provide industry with medium to long term project finance, leasing and other
financial services. Since inception, ICICI has financed all major sectors of
the economy, covering 6811 companies and 16,632 projects. As of
December 31, 1999 it has disbursed a total of over Rs.106,504.32 crores
since inception. Over the years, ICICI has developed an expertise in
appraising and monitoring projects across the cross section of industry.
ICICI has a consistent track record of profitable operations.

The Trustee Company


Prudential ICICI Trust Limited
Prudential ICICI Trust Limited (The Trustee), a company incorporated
under the Companies Act, 1956 is the Trustee to the Fund vide Trust Deed
dated August 25, 1993 as amended from time to time. Prudential plc,
through its wholly owned subsidiary, Prudential Corporation Holdings
Limited, U.K. holds 55% of the shares of the Trustee and ICICI holds the
balance 45%.

Directors of the trustee company:

• Mr. Vishnu Bhagwandas Haribhakti


• Mr. Eruch B Desai
• Mr.D.J.Balaji Rao
• Mr.Nagesh D.Pinge
• Mr. Sham P Subhedar
• Mr.M.S.Parthasarathy

Management of the AMC


Prudential ICICI Asset Management Company Limited (AMC)
(formerly known as ICICI Asset Management Company Limited), has been
appointed as the Asset Management Company of Prudential ICICI Mutual
Fund vide Investment Management Agreement dated September 3, 1993.
The aggregate assets under management by the AMC are over Rs.15,298.28
crores as on March 31, 2005.

Management team:

1. Mr. Pankaj Razdan


Managing Director

2. Mr. Nilesh Shah


Chief Investment Officer

3. Mr. Vasant Sanzgiri


Sr. Vice-President & Head Human Resources

4. Mr.Kalyan Prasad
Vice-President, Information Technology

5. Mr. Ranganath Athreya


Sr. Vice-President-Legal, Compliance and C.S.
Board of Directors:
The Prudential ICICI AMC Board comprises reputed people from the
finance industry both from India and abroad.
• Mr. Mark Norbom
• Mr.Ajay Srinivasan
• Ms. Shikha Sharma
• Mr. N.S.Kannan
• Mr. K.S. Mehta
• Mr. Dadi Engineer
• Mr. B.R.Gupta
• Mr. Pradip P. Shah
• Dr.(Mrs.) Swati A. Piramal
• Mr.Pankaj Razdan

Auditors
N. M. Raiji & Co., Chartered Accountants, Mumbai have been
appointed as Auditors of the Scheme by the Trustee.

Registrar
Computer Age Management Services (P) Limited (CAMS), Rayala
Towers, 1st Floor, No. 781 - 785, Anna Salai, Chennai 600 002 are the
Registrar for the Scheme. The Registrar is registered with SEBI. As
Registrars to the Scheme, CAMS handles communications with investors,
performs data entry services and dispatches Account Statements. The AMC
and the Trustee have satisfied themselves that the Registrar can provide the
services required and has adequate facilities and the system capabilities.
Custodian
HDFC Bank is the custodian for the Scheme. The Custodian has been
registered with SEBI The Custodian is responsible for safe custody of the
securities and carrying out activities related to corporate actions. The
Custodian is also entitled to remuneration for its services in accordance with
the terms of the Custodian Agreement.

Funds offered by the company

• Equity Funds: The funds offered under this category are:


1. Prudential ICICI Growth Plan
2. Prudential ICICI FMCG Fund
3. Prudential ICICI Technology Fund
4. Prudential ICICI Tax Plan
5. Prudential ICICI Index Fund
6. Prudential ICICI Power
7. Prudential ICICI Dynamic Plan
8. Prudential ICICI Discovery Plan
9. Prudential ICICI Emerging S.T.A.R. Fund.

• Debt Funds: The funds offered under this category are


1. Prudential ICICI Income Plan
2. Prudential ICICI Gilt-Treasury Fund
3. Prudential ICICI Gilt-Investment Fund
4. Prudential ICICI Liquid plan
5. Prudential ICICI Fixed Maturity Plan
6. Prudential ICICI Short Term Plan
7. Prudential ICICI Long Term Plan
8. Prudential ICICI Sweep Plan
9. Prudential ICICI Income Multiplier Fund
10. Prudential ICICI Monthly Income Plan
11. Prudential ICICI Flexible Income Plan
12. Prudential ICICI Gilt Fund PF Option
13. Prudential ICICI Long Term Floating Rate Plan
14. Prudential ICICI Floating Rate Plan.

• Balanced Funds: The funds offered under this category are


1. Prudential ICICI Balanced Fund
2. Prudential ICICI Child Care Plan.

• SPIcE Fund: (Sensex Prudential ICICI Exchange Traded Fund)


Prudential ICICI Mutual Fund, country's largest private sector
mutual fund, has launched its first Exchange Traded Fund (ETF) on
the country's benchmark Index- SENSEX christened SPIcE
(SENSEX Prudential ICICI Exchange Traded Fund). SPIcE is a
passive investment tool tracking the SENSEX.
An ETF is a hybrid product having features of both an open-
ended mutual fund and an exchange listed security. The price of one
SPIcE unit will be equal to approximately 1/100th of SENSEX value.
For example, if the current SENSEX is at 3300, one SPIcE unit will
trade at around Rs. 33. The scheme is to be managed by Prudential
ICICI AMC Ltd. and listed on both The Stock Exchange, Mumbai
(BSE) and The Delhi Stock Exchange (DSE).
One unique feature of SPIcE is that it can be bought and sold
like any other equity share on Stock Exchange through a stockbroker.
The minimum lot size is one unit of SPIcE. Effectively, a retail
investor can buy one SPIcE unit for around Rs. 33 (in the above
example assuming SENSEX is at 3300) and hold it in his Demat
account just like any other security.
SPIcE is the country's first Exchange Traded Fund on
SENSEX. Globally, there are 279 ETFs listed and traded across the
world with assets under management of US$ 120 billion. In US, the
major ETFs include SPDRs (linked to S&P 500 Index), QQQs
(linked to Nasdaq-100 Index) and Diamonds (linked to DJIA). More
than 60% of trading volume on American Stock Exchange (AMEX)
is in ETFs.

Specifications of Prudential ICICI Mutual Fund

Prudential ICICI Asset Management Company Limited, the


Investment Manager to the Prudential ICICI Mutual Fund, manages assets
over Rs.15,298.28 crores as of March,2005.
It is the second largest asset management company in the private
sector in the country. Being open-ended Schemes, Units may be purchased
or redeemed on every Business Day at NAV based prices. The Fund , under
normal circumstances, endeavors to dispatch redemption cheques within 3
Business Days for Growth Plan, Income Plan, FMCG Fund, Technology
Fund and Balanced Fund, 2 Business Days for Gilt Fund and 1 Business Day
for Liquid Plan.
Under the Flexible Lifetime Investment Program, investors may
choose to alter the allocation of their investment among the schemes in order
to meet their changing circumstances during their lifetime.
The investors under the Schemes can choose between a Growth
Option and a Dividend Option. Dividend Reinvestment facility is also
available.
The following Tax benefits are available under the prevailing tax
laws and subject to change thereto:
As per the provisions of Section 10(33) of the Income-tax Act, 1961,
dividend distributions by the Fund will be tax exempt in the hands of
Unitholders.
For equity oriented scheme, as per the provisions of Section 115 R of
Income-tax Act, 1961, the Fund will not pay, for a period of three years
commencing from the Assessment Year 2000-2001, tax on the dividends
distributed by it.
For debt oriented schemes the Fund will pay a dividend tax as per the
provisions of Income-tax Act, 1961. Tax benefits are available for
investments made under Sections 54 EA and 54 EB of the Income-tax Act,
1961.
There will be no tax deduction at source (TDS) on redemptions
(irrespective of the amount redeemed) for Unitholders resident in India.
Investments in the Scheme will be exempt from Wealth Tax. For gift of
units, Gift Tax will not be payable either by the donor or the donee. Investors
who redeem units held for more than 12 months will get benefit of long term
capital gains tax and resident investors will get the benefit of indexation.

Who can Invest?


The following persons are eligible and may apply for subscription to
the Units of the Scheme (subject, wherever relevant, to purchase of units of
Mutual Funds being permitted under respective constitutions and relevant
statutory regulations):
• Resident adult individuals either singly or jointly (not exceeding three)
• Minor through parent/lawful guardian
• Companies, Bodies Corporate, Public Sector Undertakings,
association of persons or bodies of individuals and societies registered
under the Societies Registration Act, 1860 (so long as the purchase of
units is permitted under the respective constitutions)
• Religious and Charitable Trusts under the provisions of 11(5)(xii) of
Income-tax Act, 1961 read with Rule 17C of Income-Tax Rules, 1962
• Partnership Firms
• Karta of Hindu Undivided Family (HUF)
• Banks & Financial Institutions
• Non-resident Indians/Persons of Indian origin residing abroad (NRIs)
on full repatriation basis or on non-repatriation basis (Except in the
Tax Plan)
• Overseas Corporate Bodies, firms and societies which are held
directly or indirectly but ultimately to the extent of at least 60% by
NRIs and trusts in which at least 60% of the beneficial interest is
similarly held irrevocably by such persons (OCBs), on full repatriation
basis.
• Foreign Institutional Investors (FIIs) registered with SEBI on full
repatriation basis (Except in the Tax Plan)
• Army, Air Force, Navy and other para-military funds
• Scientific and Industrial Research Organizations
• Mutual fund schemes
Investments made in Tax Plan by Resident Adult Individuals and Kartas of
Hindu Undivided Families only will qualify for Tax Benefits under Section
88.

How to apply ?
Application Forms are available with Customer Service Centers, at the
corporate office of the AMC and the office of the Registrar. Applications
complete in all respects, may be submitted at the Customer Service Centers
or may be sent by mail to the Registrar, Computer Age Management
Services Pvt. Ltd., Rayala Towers, 1st Floor, No. 781 - 785, Anna Salai,
Chennai 600002. The Trustee shall have absolute discretion to accept/reject
any application for purchase of Units, if in the opinion of the Trustee,
increasing the size of Scheme’s Unit capital is not in the general interest of
the Unitholders, or the Trustee for any other reason believes it would be in
the best interest of the Schemes or its Unitholders to accept/reject such an
application.

Redemption of Units
The Units can be redeemed (i.e., sold back to the Fund), at the Applicable
NAV. A Unitholder may request redemption of a specified amount or a
specified number of Units, (subject to the minimum redemption amount).
Unitholders may also request for redemption of their entire holding and close
the account. The 54EA and 54EB Investment Plans will have to be locked-in
for a period of 3 years and 7 years, respectively and the Units so allotted
cannot be redeemed during the specified lock-in period.

Applicable NAV
Applicable NAV is the Net Asset Value per Unit at the close of the Business
Day on which the application is accepted. An application will be considered
accepted on that day, subject to it being complete in all respects and received
prior to the cutoff time on that Business Day.

Net Asset Value


NAV of Units under the Scheme shall be calculated as shown below :
NAV = Market Value of Scheme’s investments – Liabilities
No. of Fund’s Units Outstanding

The NAV of the Scheme is calculated at the close of every Business Day.
The valuation of the Scheme’s assets and calculation of the Scheme’s NAV
are subject to audit on an annual basis and such regulations as may be
prescribed by SEBI from time to time.

Unit Holders Services and Rights

• Investor Friendly Services:


In order to provide efficient service the Fund endeavors to continuously
establish and upgrade systems to handle transactions efficiently and resolve
any investor grievances promptly.

• Problem Resolution
The Fund is constantly in touch with Customer Service Centre and Registrar
for complaints and enquiries received from investors with an endeavor to
resolve them promptly.
REVIEW OF
LITERATURE
In order to accelerate economic development, it is
necessary to not only increase the rate of savings but also to hold them in
appropriate form. If savings are held in the form of currency or used mainly
to buy non-productive physical assets such as gold and non-agricultural land
etc., either they would remain idle or they would be used unproductively or
be wasted. The financialization of savings i.e. savings in the form of
financial assets other than currency is therefore one of the requirements for
faster economic growth. Although financialization of savings has taken place
in urban India to a large extent but it has yet to happen in rural India.
The household sector has been the only surplus sector in India but
they have played a minor role, while private corporate and public sectors
have generally played a dominant role in the accumulation of national
surplus.
In a country like India where individual savers are widely dispersed in
rural areas, which lack quicker means of communication, equities have
remained unimportant, while there is an increasing trend of indirect
ownership of direct securities. While the number of shareholders has
increased about four times from 1980 to 2000, numbers of Mutual Fund
holders have increased by more than fifty times.
Mutual Fund industry in India has achieved a remarkable expansion
during last two decades. However, there are certain weaknesses from which
Mutual Fund industry suffers. There are many areas to which serious
attention ought to be devoted with a view of improving the functioning of
Indian financial system in general and Mutual Fund industry in particular.
More and more people are trying to make quick money through
middleman’s margin, commissions, consultancy fee and so on. Of late, an
indiscriminate growth of financial services industry has taken place in India.
But the investors feel cheated in respect of the risk, return and liquidity of
their investments. For instance:
• The liquidity of financial assets for small investors is low.
• The risk of investments is high due to dishonest practices, scams and
frauds committed and unethical investment culture in India.
• There has been a mushroom growth of Mutual Funds and their
schemes. The ordinary investor is likely to get bewildered or lost in
too many products. It also acts as a drag on the administrative
resources of the Mutual Fund industry.
The activities of the Mutual Funds have significantly diversified
the portfolio of financial asset. However too many schemes, too much
competition, unaccountability, unsound documentation and so on
characterize many of them.
On the whole, there is a tremendous scope for improving the
operational, functional and allocational efficiency of the Mutual Fund
industry in India.
Investors needs, expectations and perceptions have changed in
recent times. Only those Mutual Funds that deliver what investors want in
terms of quality, returns, service and costs will prosper in today’s highly
competitive environment. This continues to be an age of total quality
management (TQM), management dedicated to ensuring that an organization
and all of its members are committed to high quality, continuous
improvements and customer satisfaction. Quality in this sense means that
investor’s needs, expectations and perceptions are met. This requires
continuous improvement of products and services. Anything and everything
done and policy decisions taken should be continuously evaluated and
reformulated on the basis regular feedback from managers, distributors,
agents and investors.
Consistent with this approach is creation of investor
driven Mutual Fund organizations that are dedicated to quality and service.
This notion can be expressed in the form of an upside-down pyramid view of
organization which focuses attention on quality service to investors by
placing them at the top of the organization. Managing from this point of
view requires that team leaders and middle managers try to fulfill the needs
and expectations of distributors and investors by evaluating the working and
quality of Mutual Funds and its schemes on the basis of continuous feedback
received from them.

Consumer Perception Theory (CPT):

Consumer Perception Theory (CPT) proposes that cultural filtration


and perceptual reality are two important factors in consumer behavior. The
theory asserts that people perceive day to day life differently from one
another. Each person is unique and has had a unique set of life events that
shape the way they experience the reality. An easy way of understanding
cultural filtration is by comparing the cultural filter to a pair of sunglasses.
When we wear tinted glasses we view the world as being the color of the
lens, the same applies with our cultural filters. We gather our experiences on
a wide variety of topics (politics, education, experience, vocabulary, travel,
geographic location, cultural knowledge, tradition, family, heritage, race,
ethnicity, sexuality, habits, etc) and form our own unique cultural filter. It is
through this unique filter that we experience everything.
The process of CPT starts with the consumer: an individual toward
whom the message is directed. The consumer first experiences a need or
want, then actively experiences the product category which may fulfill his
needs. After this exposure, the consumer forms an opinion about the product.
This perception becomes the reality of that product to the consumer. It is
possible that this could change with exposure to competitive messages from
a wide variety of sources (other media, friends, advice columns etc). If the
perceived reality does fit the need, the consumer is likely to proceed to the
purchase stage. At the purchase stage, the consumer may decide to purchase
or not to purchase the product.

Behavioral Finance theory

There is some evidence that stocks may have short-term


momentum. Stocks that perform poorly tend to continue performing poorly
over the next 3 to12 months, and stocks that perform well tend to continue
performing well in the short term future. On the other hand, there is some
evidence that stocks have long term reversals. In particular, stocks that have
the lowest returns in a five year period tend to outperform the market the
next five years. The opposite is true for stocks that outperform the market
during the five year period. They tend to have lower than average returns
during the next five year period.
There is a large body of evidence in the field of psychology
indicating that people don’t behave rationally in many areas of their lives, so
some argue that we should not expect people to behave rationally with their
investments. For example, most people experience “loss aversion” or a
strong desire to avoid realizing losses. This leads investors to sell winners
much more frequently than losers, even though this is suboptimal for tax
purposes. Many psychological studies also show that people are over-
confident with respect to their own abilities relative to the abilities of others.
People also tend to have “biased self-attribution”, a way of saying that we
believe our failures are due to bad luck but that our successes are due to our
skills. Some researchers have hypothesized that the combination of over-
confidence and biased self-attribution leads to overly volatile stock markets.
In other words, returns reflect the irrational, but predictable human behavior.
In response to such observations, a number of researchers are blending
psychology with finance, creating a new field called ‘behavioral finance’.

Risk Tolerance:

At the cornerstone of investing is the basic principle that the greater


the risk you take, the greater the potential reward. It is important to note that
the value of all financial investments fluctuates.
Typically, risk is defined as short-term price variability. But on a long-
term basis, risk is the possibility that accumulated real capital will be
insufficient to meet financial goals. And if a person wants to reach his
financial goals, he must start with an honest appraisal of his own personal
comfort zone with regard to risk. Individual tolerance for risk varies,
creating a distinct "investment personality" for each investor. Some investors
can accept short-term volatility with ease, others with near panic. So whether
one considers his/her investment temperament to be conservative, moderate
or aggressive, he/she needs to focus on how comfortable or uncomfortable
he/she will be as the value of his/her investment moves up or down.
Recognizing the type of investor an individual is will go a long way
towards helping to build a meaningful portfolio of investments that one can
live with.
Statement of the problem and objectives of the study

It is evident from the above review that needs, perceptions and


expectations and risk-tolerance of people play an important role in their
investment behavior. The feedback about what and how they perceive and
evaluate different AMCs and their products will definitely help Mutual Fund
industry in improving their products and services.
Therefore, the present investigator proposes to undertake a study of
investors’ risk-tolerance as well as to assess investors and distributors
perceptions of major AMCs and their schemes.
The major objectives of the survey study are:
1. To assess investor’s perceptions and distributor’s evaluations by
administering the questionnaires on investors and distributors.
2. To study the investor’s Risk-tolerance profile.
3. To provide feedback to the AMC for re-evaluation of their strategies
and services accordingly.
CHAPTER-2

RESEARCH
METHODOLOGY
The Mutual Fund industry provides various Mutual Fund Schemes to
its investors through different AMCs. The Investors come from different
segments of the society. Naturally, their need and preferences are different
from one another. Hence, the AMC is always keen to identify investors’
needs, preferences, expectations and their risk-tolerance etc. and accordingly
design schemes to suit such needs in the best possible way. Currently due to
severe competition and similar Mutual fund products in the market, it has led
to the number of choices of the product for the investor. Hence, the company
should identify its target segment for their product diffusion followed by
laggards and capture the market.
A survey study was planned to collect information regarding
investor’s risk-tolerance, as well to study investor’s and distributor’s
perception of major AMCs and their schemes.
A Survey technique has following advantages:
• It is an efficient way of collecting information from a large
number of respondents.
• Surveys are flexible, in the sense, that a wide range of
information can be collected.
• Surveys are free from several types of errors.
• They are relatively easy to administer.

Data Collection Tools:


1. Questionnaire for Investors: Constructed by the investigator.
2. Questionnaire for distributors : Constructed by the investigator.
3. Risk-Tolerance Questionnaire for Investors : Taken from the
official website of Prudential ICICI Mutual Fund.
Questionnaire Construction:
Multiple-choice, rank-order questionnaires were constructed.
In Multiple-choice items, the item itself contains the standard by
means of which the best response is to be selected.
In rank-order items, the problem of the participant is to indicate his
preferences in appropriate order or sequence.
Good questionnaire construction is critical for the success of a survey.
Inappropriate questions, incorrect ordering of questions or bad questionnaire
format can make the survey valueless. Therefore, while constructing the
questionnaire, the following precautions were taken:
• An attempt was made to adjust the difficulty level of the items
to the subject for whom it was intended.
• Complex and ambiguous questions were avoided.
• Wording was kept simple.
• The items were limited to a fixed set of responses.
• In order to increase the response rates, the questionnaires were
limited to a single page.
Instead of researcher-administered questionnaire, self-administered
questionnaires were constructed because they have following advantages:
• They do not require skilled interviewers.
• They can be administered in large numbers all at one place and
time.
• They lack interviewer bias.
• They create less pressure on respondents.
Before deciding and writing the items of the questionnaire, the
investigator had a long discussion with the project supervisor. Initially 20
items were written for each questionnaire, but after re-evaluation of the
items, less meaningful items were dropped and 10 items were retained in
final questionnaires.
Sampling:

A simple random sample of investors and distributors was chosen for


the study.
Population: Distributors and Investors of Mutual Fund Industry.

Sampling Frame : (1) Distributors of Prudential ICICI, Lucknow


(2) Investors investing through distributors of
Prudential ICICI

Sample Size:

Distributors: 15

Investors: 100

To study the effect of gender, nature of employment and age of


individuals on their risk-tolerance of investments, a 2×2×2 Factorial design
was used.
For this purpose, 40 investors were chosen out of original 100 to meet
the specific criteria of following 2×2×2 factorial design:

2×2×2 FACTORIAL DESIGN

b1 b2

c1 c2 c1 c2

a1 a1b1c1 a1b1c2 a1b2c1 a1b2c2

a2 a2b1c1 a2b1c2 a2b2c1 a2b2c2


The investigator decided to have 5 subjects in each of the 8
combination cells. The first factor (Factor A) is the variable of sex and equal
number of males (a1) and females (a2) were included. The second factor
(Factor B) is the variable of age and two types of subjects were taken, i.e.
below 40 years (b1) and above 40 years (b2). The third factor (Factor C) is
the variable of nature of employment and two types of subjects were taken,
i.e. salaried (c1) and self-employed (c2).
Then 5 subjects were assigned to each of the 8 combination cell. The
dependent variable was risk-tolerance.

Data Collection:

Distributors Data:
For Distributor’s data, the investigator obtained the list of distributors
of Prudential ICICI, Lucknow. Fifteen distributors were randomly selected
from the list.
The investigator approached the distributors, gave them the
questionnaire and requested them to self-administer it. Self-administered
questionnaires were collected from the distributors on next working day.
The distributors included in the survey were:
1. Karvy Consultants, Hazratganj, Lucknow.
2. Sharma Capital, Saran chambers, Park Road, Lucknow.
3. Integrated Investments, Saran Chambers-I, Park Road,
Lucknow.
4. Sahara Capital Services, Park Road, Lucknow.
5. Karvy Consultants, Ashok Marg, Lucknow.
6. S.S.Consultants, Saran Chambers, Park Road, Lucknow.
7. Anand Rathi, Lalbagh, Lucknow.
8. Harshit Financials, Hazratganj, Lucknow.
9. Birla Sunlife Distributors, Shalimar square, Lucknow.
10.Lion Financials, Vidhan Sabha marg, Lucknow.
11.R.R.Finance, Sriram Tower, Lucknow.
12.Stock Holding Corporation India Ltd., Sriram Tower, Lucknow.
13.Securities Investments, Rohit Bhavan, Sapru Marg, Lucknow
14.Six Sense Investments, Vidhan Sabha Marg, Lucknow.
15.Bajaj Capital, Habibullah Estate, Lucknow.

Investors Data:

Mutual Fund investors are not localized at one place at a time.


Therefore, for investors’ data, investigator approached them at distributor’s
office as and when they happened to come there for investment queries and
consultation.
Some of the investors were contacted at their home address or
workplace and investigator requested them to self-administer the
questionnaire.
Some of the investors were either unwilling to participate or cooperate
or were difficult to contact. This problem was addressed by follow-ups and
making repeated attempts to contact the unresponsive participants.
Altogether, one hundred investors were contacted and questionnaire data was
collected.

Analytical Tools:

The following statistical and analytical tools were used for analysis of
the data:
• Analysis of Variance (ANOVA)
• Rank-order Scores
• Percentage
• Charts and Graphical representation of the data
Operational Definitions:

Distributor:
Distributors are institutions that appoint agents and other mechanisms
to mobilize funds from investors.

Diversification:
Investment in more than one risky asset with primary objective of risk
reduction.

Selling Agent:
Selling agent is an individual who brings in investor’s funds for a
commission.

Expected Return:
The ex-ante return expected by investors over some future holding
period.

Efficient Portfolio:
A portfolio which has the largest expected return for a given level of
risk or smallest risk for a given level of returns.

Interest Rate Risk:


The risk arising from a change in the price of a security resulting from
a change in the market interest rates.

Liquidity:
The extent to which or the ease with which an asset may quickly be
converted into cash with the least administrative and other costs.
Portfolio:
A set or group or combination of securities held by an investor.

Risk:
Variability of return or gain measured generally by standard
deviation or beta coefficients.

Transfer Agent:
Individual or institution appointed by a company to look after the
transfer of newly issued securities.

Volatility:
Fluctuations in a security’s or portfolio’s return or price.

Financial Engineering:
Developing new financial products by innovatively combining or
breaking existing financial products.

Investor:
The term investor more generally refers to anyone who
engages in activity such as evaluating, acquiring, using or disposing of goods
and services.
The traditional viewpoint has been to define investor strictly in
terms of economic goods and services. This position holds that consumers
are potential purchasers of the product and services offered for sale. It is a
broad term, involving all the resources and economic activities necessary to
direct the flow of goods and services from producers to consumers.
CHAPTER-3

DATA ANALYSIS

DATA ANALYSIS
Factorial Analysis of Investor’s Risk-Tolerance

2×2×2 FACTORIAL DESIGN

b1 b2

c1 c2 c1 c2

a1 a1b1c1 a1b1c2 a1b2c1 a1b2c2

a2 a2b1c1 a2b1c2 a2b2c1 a2b2c2

Observations obtained on 2×2×2 Factorial design with N=5


Below 40 Years Above 40 Years
b1 b2
S.No. Salaried Self-employed Salaried Self-employed
c1 c2 c1 c2

1. 30 34 16 20

2. 34 42 20 20
Male
3. 36 44 28 26
a1
4. 38 38 14 16

5. 40 44 12 26

Σ 178 202 90 108 578

6. 36 40 12 16
7. 30 32 16 27
Femal
e 8. 28 36 12 20
a2 9. 20 22 40 22
10. 20 24 14 27

Σ 134 154 94 122 504

Grand Total
1082

ABC Summary Table


b1 b2

c1 c2 c1 c2 Σ

a1 178 202 90 108 578

a2 134 154 94 122 504

Σ 312 356 184 230 1082

AB Summary Table

b1 b2 Σ

a1 380 198 578

a2 288 216 504

Σ 668 414 1082

BC Summary Table

c1 c2 Σ
b1 312 356 668

b2 184 230 414

Σ 496 586 1082

AC Summary Table

c1 c2 Σ

a1 268 310 578

a2 228 276 504

Σ 496 586 1082

COMPUTATION:

• Correction (C) = 1082 2 / 40 = 29268.1


• Total SS (SST) = ( 322 + 342 +………….+ 272 ) – C
= 103288 – 29268.1
= 74019.9

• SS ( between ) = ( 1782 + 2022 +…………+ 1222 ) – C


= 31528.8

• SS (within) = SST - SS (between)


= 74019.9 - 31528.8
= 42491.1

• SSA = ( 6682 + 4142) /20 - C


= 1612.9

• SSB = (4962 + 5862 ) / 20 - C


= 202.5

• SSC = (5782 + 5042 ) / 20 – C


= 136.9

• SSAB = {( 3122 +3562 + 1842 + 2302 ) / 10} – (C + SSA + SSB )


= 31083.6 – 29268.1 – 1612.9 – 202.5
= 0.1

• SSAC = {( 3802 +1982 + 2892 + 2162 ) / 10} – (C + SSA + SSc )


= 360.2
• SSBC = {( 2682 +3102 + 2282 + 2762 ) / 10} – (C + SSB + SSc )
= 0.9

• SSABC = 31528.8 – 3213.5


= 28315.3

Summary of ANOVA for 2×2×2 Factorial Data

Source of Variance SS df MS F
A (Sex) 1612.9 1 1612.9 1.21
B (Nature of Employ.) 202.5 1 202.5 0.16
C (Age) 136.9 1 136.9 0.10
AB 0.1 1 0.1 0.00
AC 360.2 1 360.2 0.271
BC 0.9 1 0.9 0.00
ABC 28315.3 1 28315.3 21.3
Error (within) 42491.1 32 1327.85

Total 74019.9 39
F . 99 ( 1,32) = 7.50 F . 95 (1,32) = 4.15

F for factor A = MS ( factor) / MS ( Error)


= 1612.9 / 1327.85
= 1.21

F for factor B = 202.5 / 1327.85


= 0.16

F for factor C = 136.9 / 1327.85


= 0.103
F for factor AB interaction = 0.1 / 1327.85
= 0

F for factor AC interaction = 360.2 / 1327.85


= 0.271

F for factor BC interaction = 28315.3 / 1327.85


= 21.3
Observed F values of the main effect of factor A (sex) , B ( nature of
employment) and factor C (age) are far less than critical value of 7.50 at
α = .01 and .05 . Similarly, F values of first order interaction effect of
AB, AC and BC too are far less than critical value. But F value of second
order interaction effect of ABC ( 21.3 ) far exceeds the critical value of
7.50 at α = .01

DATA & ANALYSIS OF INVESTOR’S


PERCEPTION
TABLE – 1

TABLE SHOWING PERCENTAGE OF INVESTOR’S


INVESTMENT IN MUTUAL FUND

Percentage of
Investors(%)
savings
Less than 10 % 10
10-25 % 18
More than 25 % 72

Most of the investors (72%) invest their more than 25% savings
in the mutual funds.

DIAGRAM- 1

PERCENTAGE OF INVESTOR’S INVESTMENT IN


MUTUAL FUND
more than
10-25 % 25%
18% 72%

less than10%
10%

less than10% 10-25 % more than 25%

TABLE – 2

TABLE SHOWING INVESTOR’S AWARENESS OF


MINIMUM AMOUNT WHICH CAN BE INVESTED IN
MUTUAL FUND
Investor’s
Investors(%)
Awareness
Aware 85
Not Aware 15

Most of the investors are aware of the fact that one can invest as
little as Rs.500 either once or on recurring monthly basis. Very few of
them ,who were investing in the mutual fund for the first time were not
aware of the above fact.

DIAGRAM- 2

INVESTOR’S AWARENESS OF MINIMUM


AMOUNT THAT CAN BE INVESTED
IN MUTUAL FUND
85%

90%

80%

70%

60%

50%

40%
15%
30%

20%

10%

0%
Percentage

Aware Not Aware

TABLE – 3

TABLE SHOWING INVESTOR’S AWARENESS OF


REDEMPTION PERIOD OF MUTUAL FUND SCHEMES
Investor’s
Investors(%)
Awareness
Aware 95
Not Aware 5

Most of the investors (95 %) are aware of the fact that Mutual
Funds can be redeemed very easily within a couple of days after the request.
Very few of them, who were investing in the mutual fund for the first time
were not aware of the above fact.

DIAGRAM- 3

INVESTOR’S AWARENESS OF REDEMPTION


PERIOD OF MUTUAL FUND SCHEMES
100%

90% 95%

80%

70%

60%

50%

40%

30%

20%

10% 5%

0%
Percentage

Aware Not Aware

TABLE – 4

TABLE SHOWING INVESTOR’S AWARENESS OF THE


FACT THAT MF’s OFFER LESSER RISK AS COMPARED
TO OTHER DIRECT INVESTMENT OPTIONS
Investor’s
Investors(%)
Awareness
Aware 55
Not Aware 15
Can’t Say 30

It is clear from the above table that about half of the investors are
aware that mutual Funds offer lesser degree of risk as compared to other
direct investment options. Rest of the investors are either not aware or are
doubtful.

DIAGRAM- 4

INVESTOR’S AWARENESS OF THE FACT THAT MF’s


OFFER LESSER RISK AS COMPARED TO OTHER
DIRECT INVESTMENT OPTIONS
60
55

50

40

30
30

20
15

10

0
Percentage

Aware Not Aware Can't Say

TABLE – 5

TABLE SHOWING INVESTOR’S PERCEPTION OF


BENEFITS OF MUTUAL FUND INVESTMENTS
Benefits Total Scores
Professional
180
Management
Diversification 340
Liquidity 340
Market Related
450
Returns
Tax Benefits 190

Above table clearly shows that investors have given maximum scores
to market related returns for being the best benefit of mutual fund
investments. ‘Diversification’ and ‘liquidity’ have scored second largest
scores.

DIAGRAM- 5

INVESTOR’S PERCEPTION OF
BENEFITS OF MUTUAL FUND INVESTMENTS
200
180
180
160
136 136
140
120
100
72 76
80
60
40
20

0
Total scores

Professional Management
Diversification
Liquidity
Market Related returns
Tax Benefits

TABLE – 6

TABLE SHOWING INVESTOR’S PERCEPTION OF BEST


BENEFIT OF MUTUAL FUND INVESTMENTS
Benefits Investors(%)
Professional
5
Management
Diversification 18
Liquidity 27
Market Related
37
Returns
Tax Benefits 13

It is clear from the above table that according to majority of


investors (37%), market related return is the best benefit of mutual fund
investment. Twenty-seven percent investors have chosen Liquidity as the
best benefit, which is followed by diversification. Tax benefits and
professional management were least preferred by the investors.

DIAGRAM- 6

INVESTOR’S PERCEPTION OF BEST BENEFIT OF MUTUAL


FUND INVESTMENTS
5%

13%

37%

18%

27%

Professional Management
Diversification
Liquidity
Market related returns
tax benefits

TABLE – 7

TABLE SHOWING FACTORS INFLUENCING


INVESTOR’S CHOICE OF MUTUAL FUND SCHEMES
Factors Investors(%)
Returns Offered 60
Risk Profile 25
Asset Allocation
15
Pattern

Above table shows that 60% of the investors choose any Mutual
Fund scheme on the basis of returns offered by the scheme. Therefore,
majority of distributors prefer schemes which offer higher returns.

DIAGRAM- 7

FACTORS INFLUENCING INVESTOR’S CHOICE


OF MUTUAL FUND SCHEMES
Returns
Offered
60%

Risk Profile
25%
Asset
Allocation
Pattern
15%

Returns Offered Risk Profile


Asset Allocation Pattern

TABLE – 8

TABLE SHOWING INVESTOR’S PREFERENCE OF


SCHEMES
Schemes Total Scores
Equity fund 310
Debt Fund 130
Balanced Fund 300
Monthly Income
260
Plan

Above Table clearly indicates that Equity fund and Balanced fund
have scored maximum scores, 310 and 300 respectively. Therefore, we can
say that investors prefer Equity fund and Balanced fund to Debt fund and
Monthly Income plan. Monthly Income Plan has scored 260 scores, while
Debt Fund has scored only 130 scores, which means that it is the least
preferred fund of all.

DIAGRAM- 8

INVESTOR’S PREFERENCE OF MUTUAL FUND SCHEMES


140
124
120
120
104
100

80

60 52

40

20

0
Total scores

Equity fund Debt Fund

Balanced Fund Monthly Income Plan

TABLE – 9

TABLE SHOWING INVESTOR’S PERCEPTION OF BEST


MUTUAL FUND SCHEME

Schemes Investors(%)
Equity fund 50
Debt Fund 10
Balanced Fund 20
Monthly Income
20
Plan

It is clear from the above table that majority of investors, i.e. 50


percent of them perceive Equity fund as the best fund. Balanced Fund and
Monthly Income Plan follow the Equity Fund. While, Debt Fund is the least
preferred one.

DIAGRAM- 9

INVESTOR’S PERCEPTION OF BEST MUTUAL


FUND SCHEME
Debt Fund
Equity Fund 10%
50%

Balanced
Fund
20%

Monthly
Income Plan
20%

Equity Fund Debt Fund


Balanced Fund Monthly Income Plan

TABLE – 10

TABLE SHOWING INVESTOR’S PREFERENCE OF AMCs


ON THE BASIS OF RETURNS
AMCs Total Scores
HDFC 240
Birla 160
Pru ICICI 295
Templeton 305

As far as Investor’s preference of AMCs in terms of returns is


concerned, it has been found that Templeton Mutual Fund and Prudential
ICICI Mutual Fund have scored maximum , with HDFC Mutual Fund and
Birla Sunlife Mutual Fund sharing the third and fourth place respectively.

DIAGRAM- 10

INVESTOR’S PREFERENCE OF AMCs ON


THE BASIS OF RETURNS
350
305
295
300

240
250

200
160
150

100

50

0
Total scores

HDFC Birla Pru ICICI Templeton

TABLE – 11

TABLE SHOWING INVESTOR’S PERCEPTION OF BEST


AMC ON THE BASIS OF RETURNS
AMCs Investors(%)
HDFC 20
Birla 10
Pru ICICI 32
Templeton 38

Maximum numbers of investors have marked Templeton Mutual Fund


as the best Mutual Fund in terms of returns. About 38%of investors have
marked it as their first choice.
Prudential ICICI Mutual Fund is preferred by 32% of investors. So
there is only a small difference between Templeton and Prudential ICICI.
About 20% investors have rated HDFC Mutual Fund as the best in terms of
returns, but only 10% of investors have rated Birla Sunlife Mutual Fund as
the best .

DIAGRAM- 11

INVESTOR’S PERCEPTION OF BEST AMC ON THE


BASIS OF RETURNS
Pru ICICI
32%
Birla Sunlife
10%

HDFC
20%
Templeton
38%

HDFC Birla Sunlife Pru ICICI Templeton

TABLE – 12

TABLE SHOWING INVESTOR’S PREFERENCE OF AMCs


ON THE BASIS OF SERVICE
AMCs Total Scores
HDFC 290
Birla 140
Pru ICICI 310
Templeton 260

Investors have judged Prudential ICICI Mutual Fund as one of


the best AMC in terms of service. It has scored 310. HDFC Mutual Fund has
scored second largest scores i.e. 290. It is followed by Templeton Mutual
Fund, which has scored 260 scores. Birla Sunlife Mutual Fund has again
scored least scores, i.e. 140.

DIAGRAM- 12

INVESTOR’S PREFERENCE OF AMCs ON THE BASIS OF


SERVICE
350
310
300 290
260
250

200

150 140

100

50

0
Total scores

HDFC Birla Pru ICICI Templeton

TABLE – 13

TABLE SHOWING INVESTOR’S PERCEPTION OF BEST


AMC ON THE BASIS OF SERVICE
AMCs Investors(%)
HDFC 30
Birla 4
Pru ICICI 40
Templeton 26

According to investor’s perception, Prudential ICICI Mutual Fund is


the best Mutual Fund in terms of service. HDFC Mutual Fund and
Templeton Mutual Fund both are second and third.

DIAGRAM- 13

INVESTOR’S PERCEPTION OF BEST AMC ON THE


BASIS OF SERVICE
Birla Sunlife Pru ICICI
4% 40%

HDFC
30%

Templeton
26%

HDFC Birla Sunlife Pru ICICI Templeton

DATA & ANALYSIS OF DISTRIBUTOR’S


PERCEPTION

TABLE – 14

TABLE SHOWING SCORES GIVEN BY DISTRIBUTORS


TO DIFFERENT AMCs ON THE BASIS OF RETURNS
Total Scores

HDFC Mutual Fund 40


Prudential ICICI Mutual
40
Fund
Birla Sunlife Mutual
22
Fund
Templeton Mutual Fund 48

It is evident from the above table that Templeton Mutual Fund has scored
highest in terms of returns, which is followed by Prudential ICICI Mutual
Fund and HDFC Mutual Fund. While Birla Sunlife Mutual Fund has scored
lowest.

DIAGRAM- 14

SCORES GIVEN BY DISTRIBUTORS TO


DIFFERENT AMCs ON THE BASIS OF RETURNS
60

50 48

40 40
40

30

22
20

10

0
HDFC MF Pru ICICI Birla Templeton
MF Sunlife MF MF
TABLE – 15

TABLE SHOWING DISTRIBUTOR’S EVALUATION OF


BEST AMC IN TERMS OF RETURNS

Distributors(%)
Birla Sunlife Mutual
Fund
27
Prudential ICICI
Mutual Fund
30
HDFC Mutual Fund 7
Templeton Mutual
Fund
36

It is obvious from the above table that according to distributor’s


evaluation, Templeton Mutual Fund has emerged as the Best AMC, followed
by Prudential ICICI. Birla Sunlife Mutual Fund is preferred by only 27% on
Distributors, while only 7 % investors have marked HDFC Mutual Fund as
the best AMC in terms of returns
DIAGRAM- 15

DISTRIBUTOR’S EVALUATION OF BEST AMC IN


TERMS OF RETURNS

ICICI
30%

BIRLA
27%

HDFC TEMPLETON
7% 36%

HDFC BIRLA ICICI TEMPLETON


TABLE – 16

TABLE SHOWING FACTORS INFLUENCING


DISTRIBUTOR’S CHOICE OF MUTUAL FUND SCHEMES

Factors Distributors(%)
Returns Offered 73.33
Risk Profile 13.33
Asset Allocation
13.33
Pattern

Above table shows that 73.33% of the distributors choose any


Mutual Fund scheme on the basis of returns offered by the scheme, while
very few(13.33%) choose on the basis of the risk profile and the asset
allocation pattern of the scheme. Therefore, majority of distributors prefer
schemes which offer higher returns.
DIAGRAM- 16

FACTORS INFLUENCING DISTRIBUTOR’S CHOICE


OF MUTUAL FUND SCHEMES

Returns
Offered
74%

Risk Profile
Asset 13%
Allocation
Pattern
13%

Returns Offered Risk Profile


Asset Allocation Pattern
TABLE – 17

TABLE SHOWING SCORES GIVEN BY DISTRIBUTORS


TO DIFFERENT TYPES OF MUTUAL FUND SCHEMES

Mutual Fund Schemes Total Scores

Equity Fund 55

Debt Fund 24

Balanced Fund 43

Monthly Income Plan 28

It is clear from the above table that distributors prefer


Equity Funds and Balanced Funds over Debt funds and Monthly Income
Plans.
DIAGRAM- 17(a)

SCORES GIVEN BY DISTRIBUTORS TO DIFFERENT


TYPES OF MUTUAL FUND SCHEMES

60
55

50
43
40

30 28
24

20

10

Equity Debt Fund Balanced Monthly


Fund Fund Income
Plan
DIAGRAM- 17(b)

DISTRIBUTOR’S CHOICE OF BEST TYPE OF


MUTUAL FUND SCHEMES

Equity Fund
80%

Debt Fund
Monthly Balanced 0%
Income Plan Fund
7% 13%

Equity Fund Debt Fund


Balanced Fund Monthly Income Plan
TABLE – 18

TABLE SHOWING SCORES GIVEN BY DISTRIBUTORS


TO DIFFERENT AMCs FOR SERVICE

AMCs Total Scores

HDFC Mutual Fund 40


Birla Sunlife Mutual
24
Fund
Prudential ICICI Mutual
46
Fund

Templeton Mutual Fund 40

The above table clearly shows that Distributors have given


maximum scores to Prudential ICICI Mutual Fund (46) for service. HDFC
Mutual Fund and Templeton Mutual Fund, both have scored equally, i.e. 40
scores each, while Birla Sunlife Mutual Fund have scored the least, i.e. 24
scores. This clearly indicates that distributors of Prudential ICICI are
satisfied with their service as compared to other competitors of the company.
DIAGRAM- 18(a)

SCORES GIVEN BY DISTRIBUTORS


TO DIFFERENT AMCs FOR SERVICE

50
46
45
40 40
40

35

30

25
24

20

15

10

HDFC MF Birla MF Pru ICICI Templeton


MF MF
DIAGRAM- 18(b)

DISTRIBUTORS CHOICE OF BEST AMC


IN TERMS OF SERVICE

Pru ICICI MF
46%

HDFC MF
27%
Birla Sunlife
MF
Templeton
7%
MF
20%

HDFC MF Pru ICICI MF


Birla Sunlife MF Templeton MF

Above diagram shows that according to the distributors,


Prudential ICICI is the best AMC as compared to Birla Sunlife, Templeton
and HDFC. Majority of Distributors have rated Prudential ICICI as No. 1
AMC in terms of service.
TABLE – 19

TABLE SHOWING DISTRIBUTOR’S CHOICE OF MOST


RISKY AND VOLATILE MUTUAL FUND SCHEME

MF Schemes Distributors(%)
Tata Equity PE
27
Fund
HDFC Capital
40
Builder Fund
Pru ICICI
13
Discovery Plan
Templeton India
20
Growth Fund

Looking at the above table, it can be clearly analyzed that among the
given four mid-cap equity funds, HDFC Capital Builder Fund has been the
most risky and volatile fund. 40% of the distributors have marked it as the
most risky and volatile fund. It is followed by Tata Equity PE fund. 27%
distributors evaluated it as the most risky and volatile fund. Then follows
Templeton India Growth Fund. Only 13% of distributors have marked
Prudential ICICI Discovery Plan as the most risky and volatile Fund.
DIAGRAM- 19

DISTRIBUTOR’S CHOICE OF MOST RISKY


AND VOLATILE MUTUAL FUND SCHEME

Pru ICICI
Discovery
Plan
13%
HDFC Capital
Builder Fund
40%
Tata Equity
PE Fund
27%

Templeton
India Growth
Fund
HDFC CapitalBuilder20%
Fund
Pru ICICI Discovery Plan
Tata Equity PE Fund
Templeton India Growth Fund
TABLE – 20

TABLE SHOWING DISTRIBUTOR’S CHOICE OF FUND


OFFERING BEST INVESTMENT PORTFOLIO

MF Schemes Distributors(%)
Tata Equity PE
7
Fund
HDFC Capital
13
Builder Fund
Pru ICICI
60
Discovery Plan
Templeton India
20
Growth Fund

It is clear from the above table that according to distributor’s


evaluation Prudential ICICI Discovery Plan offers the best investment
portfolio designed to cater to every need of the investor. Second is
Templeton India Growth Fund, Which is followed by HDFC Capital Builder
and Tata Equity PE Fund.

DIAGRAM- 20
DISTRIBUTOR’S CHOICE OF FUND
OFFERING BEST INVESTMENT PORTFOLIO

Pru ICICI
Discovery
Plan
60%

HDFC Capital Tata Equity


Builder Fund PE Fund
Templeton
13% 7%
India Growth
Fund
HDFC CapitalBuilder20%
Fund
Pru ICICI Discovery Plan
Tata Equity PE Fund
Templeton India Growth Fund

TABLE – 21
TABLE SHOWING DISTRIBUTOR’S CHOICE OF FUND,
WHICH HAD PERFORMED BEST OVER PAST ONE
YEAR

MF Schemes Distributors(%)
Tata Equity PE
13
Fund
HDFC Capital
27
Builder Fund
Pru ICICI
47
Discovery Plan
Templeton India
13
Growth Fund

Above table shows that according to distributors Prudential ICICI


Discovery Plan had performed best over past one year. 47% of distributors
have marked it as the best performing fund. 27 % of distributors have opted
for HDFC Capital Builder Fund. Moreover, 13-13% distributors each have
opted for Tata Equity PE fund and Templeton India Growth Fund.

DIAGRAM- 21
DISTRIBUTOR’S CHOICE OF FUND WHICH HAD
PERFORMED BEST OVER PAST ONE YEAR

Pru ICICI
Discovery
Plan
47%

HDFC Capital
Builder Fund
27%
Tata Equity
Templeton PE Fund
India Growth 13%
Fund
HDFC Capital13%
BuilderFund
Pru ICICI Discovery Plan
Tata Equity PE Fund
Templeton India Growth Fund

TABLE – 22
TABLE SHOWING DISTRIBUTOR’S RELATIONSHIP
WITH PRUDENTIAL ICICI AMC

Relationship Distributors(%)
Very Good 40
Good 47
Satisfactory 13
Not Satisfactory 0

According to the above table, distributor’s relationship with


Prudential ICICI has been good, as 47 % of them have marked the second
option (Good) as their option. 40% have marked their relationship with the
company as Very good and rest has marked it as satisfactory.

DIAGRAM- 22
DISTRIBUTOR’S RELATIONSHIP WITH
PRUDENTIAL ICICI AMC

Very Good Good


40% 47%

Not Satisfactory
satisfactory 13%
0%

Very Good Good Satisfactory Not satisfactory


CHAPTER-4
DISCUSSION, SUGGESTIONS
&
LIMITATIONS

DISCUSSION

The objective of the present survey was to study the investor’s risk-
tolerance as well as to assess distributor’s and investor’s perceptions of
major AMCs and their Mutual Fund schemes.
For this purpose, two questionnaires were constructed by the
investigator, while one questionnaire which was required to study investor’s
risk-tolerance was taken up from the official website of Prudential ICICI
Mutual Fund . Risk-Tolerance questionnaire was administered on a sample
of 40 investors who were specifically chosen from the original sample of 100
investors. Other two questionnaires were administered on a sample 15
distributors and 100 investors. Obtained observations were tabulated and
analyzed using various analytical tools and statistical techniques, such as
ANOVA. The main findings of the survey are:
• There is some indication of gender differences in risk-tolerance
of investors . Average score for males is 33 and for females,
about 21. Thus males seem to show more risk- taking behavior
than females. But, as it is clear from ANOVA analysis, the
difference is not significant.. Similarly, there is no significant
difference between salaried and self-employed investors.
Difference in risk-tolerance scores of younger and older people
too are not significant. Thus, main factors, i.e. age, sex and
nature of employment are not important risk-tolerance variables
when compared independently.
First order interaction too does not seem to contribute to any variance
in risk-tolerance of the investors. But, most interesting finding is that second
order interaction is very highly significant at .01 level.
Implication of the findings is that age, sex and nature of employment
do not play any important role in determining the risk tolerance of the
individual. But, when age, sex and nature of employment are taken together,
the differences are very significant.
Thus, it seems that age-old stereotypes of gender differences, age and
nature of employment are no more relevant in present day. The differences
between male & female, young & old are disappearing. Its not that investors
do not differ in risk-tolerance. They do differ, but there are investors who
have higher risk tolerance and others who have lower risk tolerance, whether
they are being male or female, young or old, and salaried or self-employed.
• Most of the investors are well aware that they can invest as little
as Rs.500 on a monthly recurring basis in mutual fund and the
amount invested can be easily redeemed within 3-4 days after
making the request. But about 50% of the investors are not
aware of the fact that Mutual funds offer lesser degree of risk as
compared to other direct investment options.
• The study has also revealed that nowadays invest more than
25% of their savings into Mutual Funds. The reason could be
that people are instinctively on a saving mode and are holding
on to cash. Therefore today Mutual Fund as a saving avenue has
grown very well. Mutual funds also offer several benefits over
other investment options. Mutual Funds are the safest
investment for small investors because they can invest as little
as Rs. 500 on a monthly recurring basis and yet hold a highly
diversified portfolio. Mutual funds also have higher liquidity
than other investment options and they offer some tax benefits
too.
• Majority of distributors and investors have rated Franklin
Templeton Mutual Fund and Prudential ICICI Mutual Fund as
the best AMC in terms of returns.
It is easy to figure out why it is so Most of their schemes have
outperformed their category averages in 2002, some schemes surpassed that
benchmark in 2003, and beat it in 2004. Additionally, some of their schemes
were in the top 5 across various categories. It would be relevant to note here
that presently, Prudential ICICI Mutual Fund is the second largest Mutual
fund in the country in terms of Assets under management.
• Mutual Fund schemes differ in returns offered, risk profiles and asset
allocation patterns. Present study reveals that distributor’s and investor’s
choice of a particular Mutual fund scheme is largely based on the expected
returns of the scheme. An individual or business spends money today with
the expectation of earning even more money in the future. Investors and
distributors judge the financial performance of any investment on the basis
of the returns offered by the investment. Investor undertakes no investment
unless the expected rate of return is high enough to compensate the
perceived risk of the investment. Therefore, Indian fund managers are today
faced with a pressure to provide higher returns and reduced profit margins.
For these reasons, both distributors and investors have marked
“Returns offered” as the most important factor influencing their choice of a
particular Mutual Fund scheme. Investors have even marked it as the best
benefit of Mutual Fund investments.
• When distributors had to make a choice between different kinds of
schemes- Equity, Debt, balanced and monthly Income Plan- most of them
voted in favor of Equity funds, while investors showed equal liking for
Equity as well as Balanced Funds.
Why equity Funds: Equity Funds provide maximum growth of
capital, with secondary emphasis on dividend or interest income. Equity
funds have long-term growth potential but provide less current income. Since
majority of distributors as well as investors have marked Equity funds as
their first choice, it can be analyzed that investors nowadays are more risk
tolerant and are less interested in maximizing their current income or
conserving principal. They are more interested in long-term growth of their
capital.
• Prudential ICICI AMC has been rated as the best AMC in terms of
service by the distributors and investors. This means that both distributors as
well as investors are satisfied with the services of Prudential ICICI Mutual
Fund.
• HDFC Capital Builder fund has emerged as the most risky and volatile
scheme according to the distributors. While, Prudential ICICI Discovery
fund appears to be least risky and volatile scheme among the four funds
compared.
• According to majority of distributors, Prudential ICICI Discovery
fund has the best investment portfolio and had been the beat performer for
the last one year. It would be relevant to note here that Prudential ICICI
Discovery fund invests in stocks that have high potential but are currently
lying low at a discount to their inherent value.
• Mutual fund distributors at Lucknow share a good professional
relationship with Prudential ICICI AMC. They are satisfied with its services.
• Most interesting finding of the survey was that though professionally
qualified, Mutual fund distributors lack the understanding of technical ratios
of mutual funds like fama, Jenson etc., which provide a better understanding
of the riskiness of a scheme. None of the distributors’ knew about these
ratios and hence were willing to receive support and updation in this regard.

SUGGESTIONS
• Awareness level of people about mutual fund schemes should be
increased by continuous advertisements through media and hoardings.

• Unique characteristics of the product like Prudential ICICI Blended


Plan should be highlighted to attract the potential investors.

• Some promotional activity may be carried out in Government offices,


Schools, Colleges etc.

• About 70 % of Mutual Fund money comes in from urban sector. Some


measures should be taken to attract idle rural savings. There is need to
establish the Brand in smaller towns.

• There is low level of financial literacy in India in terms of


understanding financial products. Investors usually equate mutual
Funds with equities. But, Mutual fund are nit just about equities.
There is a need to launch a nationwide literacy and awareness drive.
People need to be educated about Mutual fund products and their
benefits- the understanding of Net asset value, the fact that returns are
not assured, Mutual fund is not a fixed income and capital guarantee.
Unless the company is comfortable about the fact that there are people
who understand the product, only then could their product be sold
there.
• Before launching a new product intensive training of agents and
distributors should be carried out.

• In Indian mutual fund industry, the investors already have more


choices of products than they really need. Instead of product
innovation, the emphasis should be on investment research, better
service and clear communication.
LIMITATIONS

Although due care was taken during the study but still some unavoidable
limitations were present while carrying out the study.
1. The entire project was to be completed within a short period of two
months.
2. Because of the time constraints, the investigator was forced to keep
the sample small.
3. Some of the respondents were not comfortable with English language
of the questionnaire. Therefore, the investigator had to assist them in
understanding the items. Although due care was taken but it may have
led to some interviewer bias.
4. Size of the original sample of investors was 100, but looking at the
Industry size it is felt that this sample size is very small, thus acting as
a limitation to the study.

MUTUAL FUND PERFORMANCE QUESTIONNAIRE – I


PARTICIPANT’S PERSONAL PROFILE:

Name: ______________________
Organization & address: _________________
Tel. No. / Mobile: ______________________

INSTRUCTIONS:

We are interested in appraisal of your perception of different mutual


funds and mutual fund schemes. Choose your own response for each
item.

1) You choose any mutual fund scheme on the basis of…


a) Returns offered.
b) Risk profile.
c) Asset allocation pattern.
d) Any other reason___________

2) Rate the following mutual fund schemes on a scale of 1 to 5,as per


your preference for 18-24 month period (1 for best and 5 for
least preferred):
a) Equity fund
b) Debt fund
c) Balanced fund
d) Monthly Income Plan
e) Others___________

3) Rate the following AMCs in terms of returns, on a scale of 1 to 5


(1 for best and 5 for least preferred):
a) HDFC Mutual Fund
b) Birla Sunlife Mutual Fund
c) Prudential ICICI Mutual Fund
d) Templeton Mutual Fund
e) Others_______________

4) Rate the following AMCs in terms of service, on a scale of 1 to 5.


(1 for best and 5 for least preferred):
a) HDFC Mutual Fund
b) Birla Sunlife Mutual Fund
c) Prudential ICICI Mutual Fund
d) Templeton Mutual Fund
e) Others_______________

5) Which fund presents a higher degree of risk & volatility


(According to your perception)?
a) Tata Equity PE Fund
b) HDFC Capital Builder Fund
c) Prudential ICICI Discovery Plan
d) Templeton India Growth Fund

6) Which of the following fund offers a better investment portfolio


designed to cater to every need of the investor?
a) Tata Equity PE Fund
b) HDFC Capital Builder Fund
c) Prudential ICICI Discovery Plan
d) Templeton India Growth Fund

7) Which fund had performed better over past 1 year?


a) Tata Equity PE Fund
b) HDFC Capital Builder Fund
c) Prudential ICICI Discovery Plan
d) Templeton India Growth Fund

8) How has been your relationship with Prudential ICICI AMC?


a) Very Good
b) Good
c) Satisfactory
d) Not Satisfactory

9) Do you understand the technical ratios of mutual funds, like Fama, Jenson
etc. ?

a) If ‘Yes’, then which ratio do you use for deciding the Mutual Fund
scheme?
……..........................................................
b) If ‘No’, then do you need any support for your value
addition and updation?
i) Yes ii) No

THANKS FOR YOUR COOPERATION

MUTUAL FUND PERFORMANCE QUESTIONNAIRE - II


PARTICIPANT’S PERSONAL PROFILE:

Name: ______________________
Organization & address: _________________
Tel. No. / Mobile: ______________________
Age: _________________
Sex: _________________
Nature of Employment: _________________

INSTRUCTIONS:

We are interested in appraisal of your perception of different mutual


funds and mutual fund schemes. Choose your own response for each
item.

1) What do you do with your savings?


a) Deposit it with banks.
b) Invest in equity.
c) Invest in mutual fund.
d) Others ____________

2) What percentage of your savings goes into mutual funds?


a) Less than 10%.
b) 10-25%
c) More than 25%

3) Do you know that you can invest as little as Rs. 500 either once
or on recurring monthly basis?
a)Yes b) No

5) Investments in Mutual Funds can be redeemed very easily and the


amount can be received in about 3-4 days after the request. Do you
agree?
a) Yes b) No

5) Mutual Funds offer lesser degree of risk as compared to other


direct investment options.Do you agree?
a) Yes b) No c) Can’t say

6) Rate the following benefits of Mutual Fund investments on a scale


of 1 to 5.
a) Professional Management
b) Diversification
c) Tax benefits
d) Market related returns
e) Liquidity

7) You choose any mutual fund scheme on the basis of…


a) Returns offered.
b) Risk profile
c) Asset allocation pattern.
d) Any other reason______________

7) Rate the following mutual fund schemes on a scale of 1 to 5,as per


Your preference for 18-24 month period (1 for best and 5 for
least preferred):
a) Equity fund
b) Debt fund
c) Balanced fund
d) Monthly Income Plan

9) Rate the following AMCs in terms of returns, on a scale of 1 to 5


(1 for best and 5 for least preferred):
a) HDFC Mutual Fund
b) Birla Sunlife Mutual Fund
c) Templeton Mutual Fund
d) Prudential ICICI Mutual Fund
e) Others____________

10) Rate the following AMCs in terms of service, on a scale of 1 to 5


(1 for best and 5 for least preferred):
a) HDFC Mutual Fund
b) Birla Sunlife Mutual Fund
c) Templeton Mutual Fund
d) Prudential ICICI Mutual Fund
e) Others___________

11)Your suggestions
__________________________________________________

THANKS FOR YOUR COOPERATION

RISK-TOLERANCE QUESTIONNAIRE
PART-A

1. If the performance of an investment you had recently made is below


your expectations, how would you feel ?
a) Very Upset
b) Somewhat upset, but hope that it will improve in the future.
c) Uneasy, but willing to take it in my stride.
d) Not upset because I know that all investments carry risk.

2. What do you normally associate the word ‘Risk’ with?


a) Danger
b) Uncertainty
c) Opportunity
d) Thrill

3. If you had to choose between being a salaried employee and running


your own business, which one would you prefer ?
a) Being a salaried employee.
b) Doing a salaried job, and maybe run a part time business.
c) Running a partnership business.
d) Running my own business.

4. When you invest your money, what thought comes to your mind
first?
a) I should not loose my money.
b) This should not turn out to be a bad investment.
c) I know this a good decision.
d) I know this is a good investment.

5. After you have made an investment, how do you usually feel ?


a) Very worried.
b) Somewhat worried.
c) Somewhat satisfied.
d) Very satisfied.

6. If you have the choice between a fixed salary or a partly variable


one, depending on your preference and the profits of your company,
which one would you prefer?
a) I would prefer a fixed salary even if it is small.
b) I would prefer most of my salary to be fixed, with only a small
variable part.
c) I would prefer half of my salary to be fixed and other half to be
variable.
d) I would prefer most of my earnings to be performance linked.

7. If you had to make an investment decision without consulting or


discussing it with anybody, how would you feel?
a) Very unsure.
b) Not Very confident.
c) Somewhat confident.
d) Very confident.
8. Consider this scenario. You had invested in a company but its
performance was so bad post your investment that you soled off
your investment at a loss. Then you hear that the same company has
began to do well. Would you invest in the company again?
a) Definitely not.
b) May be but I am not very sure.
c) Perhaps I will
d) Definitely yes.

9. Experts tell you that investments are subject to risk and you have to
be prepared for losses as well as gains. What is the level of loss in
your investments that you are willing to accept?
a) I would hate to see any kind of loss in my investments.
b) I will be willing to take upto a 20 % loss.
c) I can perhaps bear a loss of upto 40%.
d) I am willing to take any kind of loss.

10.If you looked at the portfolio of the investments that you have
already made, how would you characterize them?
a) Only assured return investments.
b) Limited investments in risky products.
c) Divided between risky and safe products.
d) Mostly risky investments.

11.If your investment advisor told you that you could enjoy better
returns if you were willing to take the risk. To what extent would
you be willing to expose your investments to risk to earn higher
returns?
a) None at all.
b) About 20%.
c) About 40%.
d) More than 50%.

12.Interest rates can go up or down. If you had to take a loan and had a
choice between a fixed rate and a variable one, which one would
you prefer?
a) I will always choose a fixed rate.
b) I will always choose a combination of 70% fixed and 30 %
variable.
c) I will always choose a combination of 30% fixed and 70 %
variable.
d) I will always choose 100% variable.

PART-B
DEMOGRAPHIC PROFILE

Sex: Male Female

Age: Less than 40 More than 40

Nature of Employment: Salaried Self-Employed

APPENDIX- A
MUTUAL FUND DATA FOR THE MONTH - MAY 2005
Total Assets
Redemptions All
Category Sales-All Schemes Under
Schemes
Management
Cumulative Cumulative
From Total For For
From new April 2005 April 2005 As on
Existing the the
schemes # to May to May May 31, 2005
schemes Month Month
2005 2005
No. Amount Amount
A) Bank
Sponsored
1 Joint
Ventures :
- - 2552 2552 5063 2416 4592 7182
Predominantly
Indian(1)
2 Others
1 693 5364 6057 11075 5128 9910 24464
(3)
Total A (1+2) 1 693 7916 8609 16138 7544 14502 31646
B) Institutions
- - 1095 1095 2430 1456 2443 2993
(2)
C) Private
Sector
1 Indian
4 874 13981 14855 31540 14329 29192 33437
(10)
2 Joint
Ventures :
2 23 13308 13331 27082 12200 23433 33506
Predominantly
Indian(3)
3 Joint
Ventures :
8 3467 27922 31389 64002 27654 54251 66396
Predominantly
Foreign (11)
Total C
14 4364 55211 59575 122624 54183 106876 133339
(1+2+3)
Grand Total
15 5057 64222 69279 141192 63183 123821 167978
(A+B+C)
*62,461 *134,621 *56,937 * 115,274 * 154,018

Table 1:- SALES DURING THE MONTH - MAY 2005 - TYPE AND CATEGORY
WISE
Table 1.1 *NEW SCHEMES LAUNCHED
(Rs. in Crore)
(ALLOTMENT COMPLETED)
Open End Close End Total
No. Of No. Of No. Of
Amount Amount Amount
Schemes Schemes Schemes
Income - - 8 921 8 921
Growth 7 4136 - - 7 4136
Balanced - - - - - -
Liquid/Money
- - - - - -
Market
Gilt - - - - - -
ELSS - - - - - -
Total 7 4136 8 921 15 5057

Table:- 1.2 EXISTING SCHEMES


Open End Close End Total
No Of No Of No Of
Amount Amount Amount
Schemes Schemes Schemes
Income 130 12026 25 ^- 155 12026
Growth 150 1872 2 - 152 1872
Balanced 34 164 1 - 35 164
Liquid /
Money 39 49981 - - 39 49981
Market
Gilt 30 122 - - 30 122
ELSS 21 57 13 - 34 57
Total 404 64222 41 - 445 64222

Notes:The change in number of existing schemes is because of the maturity and


reclassification of some of the existing schemes.

^ Amount mobilised by new plans launched under existing scheme

Table:- 1.3 TOTAL OF ALL SCHEMES


Open End Close End Total
No. Of No. Of No. Of
Amount Amount Amount
Schemes Schemes Schemes
Income 130 12026 33 921 163 12947
Growth 157 6008 2 - 159 6008
Balanced 34 164 1 - 35 164
Liquid/Money
39 49981 - - 39 49981
Market
Gilt 30 122 - - 30 122
ELSS 21 57 13 - 34 57
Total 411 68358 49 921 460 69279

*New Schemes:
Open End Growth: Chola Global Advantage Fund, Fidelity Equity Fund, HSBC Midcap Equity Fund,
ING Vysya Midcap Equity Fund, Prudential ICICI Blended Plan A, Prudential ICICI Blended Plan B
and UTI Dividend Yield Fund,

Close End Income: Birla Fixed Term Debt Fund Series 1 - 18 Months, Birla Fixed Term Debt Fund
Series 1 - 36 Months,
Franklin Templeton Fixed Tenure Fund Series - 60 Month Plan, Grindlays Fixed Maturity Plan 8th
Plan, Grindlays Fixed Maturity Plan 12th Plan,
Reliance Fixed Maturity Fund Monthly Plan 2 - Series 2, Reliance Fixed Maturity Fund Annual Plan 1
- Series 2 and Reliance Fixed Maturity Fund Annual Plan 2 - Series 2

Table 2:- REDEMPTIONS / REPURCHASES DURING THE MONTH MAY 31, 2005
Category & Typewise
Net Inflow/
Open End Close End Total
(Outflow)
Income 10717 787 11504 1443
Growth 2971 1 2972 3036
Balanced 169 - 169 (5)
Liquid / Money
48193 - 48193 1788
Market
Gilt 323 - 323 (201)
ELSS 10 12 22 35
Total 62383 800 63183 6096

Table 3:- ASSETS UNDER MANAGEMENT AS ON MAY 31, 2005


Category & Typewise
Open End Close End Total % to Total
Income 42292 7959 50251 30
Growth 41487 1749 43236 26
Balanced 4392 687 5079 3
Liquid/Money
63331 - 63331 38
Market
Gilt 4227 - 4227 3
ELSS 836 1018 1854 1
Total 156565 11413 167978 100

Table 4:- DATA ON FUND OF FUNDS - MAY 2005


AUM as on
No of Schemes Sales Redemptions
May 31, 2005
Fund of Funds 12 22 68 876
Asset Under Management
Sr. No. Name of the Asset Management Company
(Rs. in Crore)
A BANK SPONSORED
(i) Joint Ventures - Predominantly Indian
1 SBI Funds Management Ltd. 7182
Total A (i) 7182
OTHERS
1 BOB Asset Management Co. Ltd. 125
2 Canbank Investment Management Services Ltd. 1895
3 UTI Asset Management Company Pvt. Ltd. 22444
Total A (ii) 24464
Total A (i + ii) 31646
B INSTITUTIONS
1 GIC Asset Management Co. Ltd. 122
2 Jeevan Bima Sahayog Asset Management Co. Ltd. 2871
Total B 2993
C PRIVATE SECTOR
(i) INDIAN
1 Benchmark Asset Management Co. Pvt. Ltd. 496
2 Cholamandalam Asset Management Co. Ltd. 911
3 Credit Capital Asset Management Co. Ltd. 176
4 Escorts Asset Management Ltd. 123
5 J.M.Financial Asset Management Pvt. Ltd. 3975
6 Kotak Mahindra Asset Management Co. Ltd. 7297
7 Reliance Capital Asset Management Ltd. 10128
8 Sahara Asset Management Co. Pvt. Ltd. 291
9 Sundaram Asset Management Company Ltd. 1876
10 Tata Asset Management Private Ltd. 8164
Total C (i) 33437
(ii) JOINT VENTURES - PREDOMINANTLY
INDIAN
1 Birla Sun Life Asset Management Co. Ltd. 10722
2 DSP Merrill Lynch Fund Managers Ltd. 7074
3 HDFC Asset Management Co. Ltd. 15710
Total C (ii) 33506
(iii) JOINT VENTURES - PREDOMINANTLY
FOREIGN
1 ABN AMRO Asset Management Co.Ltd. 1572
Alliance Capital Asset Management (India) Pvt.
2 1342
Ltd.
3 Deutsche Asset Management (India) Pvt. Ltd. 2318
4 Fidelity Fund Management Private Ltd. 1495
Franklin Templeton Asset Management (India)
5 17079
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