CHAPTER – I

INTRODUCTION

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 Salaried Class People

In 2009, Over half the world's population now belongs to the middle class, as a result of rapid
growth in emerging countries. It characterized the middle class as having a reasonable amount
of discretionary income, so that they do not live from hand to mouth as the poor do, and
defined it as beginning at the point where people have roughly a third of their income left for
discretionary spending after paying for basic food and shelter. This allows people to buy
consumer goods, improve their health care, and provide for their children’s education. Most
of the emerging middle class consists of people who are middle-class by the standards of the
developing world but not the rich one, since their money incomes do not match developed
country levels, but the percentage of it which is discretionary does. India is also an emerging
country, so how long we call our Indian salaried class- as an investing class or saving class.

The Indian salaried class people are cash-rich, thanks to their ever-increasing salaries. They
do not park their hard-earned in money in traditional avenues. They look for higher returns
and tax sops; their risk appetite is more; they patronize the mutual funds.

THE ECONOMY is prospering, the job market is booming and salaries are touching a new
high. The new breed of Indian youth has its pockets full and is intelligent enough not to let its
money rust in bank accounts. Investment is on their mind and an option that has the potential
to multiply their savings and provide maxi-mum tax rebate is the one they crave.

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Investment choices for the salaried class

 Traditional saving options like post office schemes and fixed deposits are now passé.
“Options like post office schemes and fixed deposits are not very popular with the
youth as the rate of interest on them is lower as compared to other in-vestment options
available,” says Mr Vishal Sawhney, Manager, Citibank.
 Safety and security are no longer the major criteria that determine the choice of
investment. With money in hand and age on their side, the young investors are not
hesitant in taking risk, say experts. “Fixed deposits are not a very attractive investment
option for youngsters these days. Most of our clients who opt for fixed deposits are
senior citizens,” says Manoj Mishra, Financial Advisor, Sansad Marg Head Post
Office.
 Saving tax is one of the major reasons behind investment by the Indian family.
Traditional saving schemes do not provide any tax benefits and are, therefore, keeping
the youngsters away from them. “Why should I invest in fixed deposits and post office
schemes when they provide no tax rebates and the rate of return on them is fixed and
also lower than other investment options,” is what Reitesh, 30, a businessman has to
say.
 Mutual fund is the most favoured option of the salaried people today. “The stock
market is doing so well. I am a little apprehensive about investing directly in the stock
market but at the same time I want to avail of the benefits of the rapidly rising stock
market. So, mutual funds are the best option for me”, says Yash Chabra, 29,
Executive, TCS.
 The reason why mutual funds are such a big hit with salaried people is because of the
convenience factor. “Investing in mutual funds does not require an in-depth
knowledge of the market. Moreover, no personal monitoring is required. This makes a
very popular investment option even for youngsters,” points Amit Singh, Assistant
Manager, HDFC.
 With a hectic job schedule, not many have the time to study the market and personally
monitor their investments. “I would love to invest directly in the stock market but a
thorough knowledge of the market is needed for a judicious investment decision. My
job leaves no time for this and that’s why I chose mutual funds,” states Vikas Sahani,
28, Branch Manager, Standard Chartered.

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 Investment in mutual funds through the Systematic Investment Plan (SIP) is a
favoured investment option for the salaried class. This is especially true of the young
salaried class which has just started earning and does not have a fat bank balance as
yet. “In case of Systematic Investment Plans, instead of bulk payment, a small amount
is to be paid every month. This makes them very popular with the salaried class who
find it difficult to shell out a large amount at one go,” says Rishi Das, Manager,
HDFC.
 One thing that the working men do not prefer is locking in their money for a long time
in the same instrument. “It’s true that people these days don’t prefer options like fixed
deposits as they view them as something which tends to lock their money in and also
the returns are lower as compared to other options, says Devendra Singh, Officer,
Canara Bank.  It is because of these reasons that fixed deposits have lost their sheen
from the point of view of the youngsters. “I have age by my side and, therefore, can
afford to take risks. Fixed deposits can happen later in life,” says Neha, 26, an
employee with Reliance.
 Similarly, insurance is also an option which according to our youngsters locks in their
money. So insurance is something that youngsters go in for, a little later in life. “A
majority of our clients are those who are married and into families,” Shivani Singh,
Branch Manager, Bharati AXA, says.
 In insurance, it is the Unit Linked Insurance Plan (ULIP) that is very popular with the
salaried youth. “ULIP which provides market exposure along with the benefits of
insurance is extremely popular with young investors,” says Bhawana, Relationship
Manager, Bajaj Capital. 
 Stock market is another hot investment option for the youth. Still, there are many who
hesitate to risk their hard-earned money in the stock market. “I once lost around Rs 2
lakhs in the stock market and since then I stay away from it,” is what Sumit, 33, a
petrol pump owner, has to say.
 But not all are so sceptical about the stock market. The rising Sensex is attracting
many job holders to the market. “Youngsters as well as old age people, these days
have a very good understanding of the stock market and they are entering the market
in large numbers,” says an officer at Kotak Securities. But the risk in the stock market

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 is very high. “It is always recommended that only serious investors with an in-depth
knowledge of the market venture into it,” he adds.

 SALARIED CLASS PEOPLE OF RAIPUR

Approximately half of the population of Raipur is working class people. Every house have at
least one salaried man or woman. The salaried people are either in the Governmental service
or in any other corporate service. With the rise in the salary package the salaried class people
are able to save more and are expending for their own as well as for their family. But with rise
of inflation the expenditure has been shortened. The requirement are not been fulfilled. The
rising prices have affected the saving as well as the investment pattern of the salaried class.

INVESTMENT PATTERN

INCOME EXPEND

INVEST SAVE

The salaried people have the common attitude towards the usage of the income. They firstly
try to expend the money and then try to save them and finally look towards investing the
saved money. In this way they have shortage of money for the investment purpose.

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The ideal pattern is just opposite of it. The people should try to invest first and then look for
expenditure and finally saving.

INCOME INVEST EXPEND SAVE

Nowadays with the rise of standard of living and awareness about securing future through
investment many salaried class people undertake many schemes as investments to either
secure future or to raise the value of their wealth. Investing in PPF, Post Office deposit, FD,
and purchasing NSC are some of the traditional plans. The plans such as investment in Gold,
Mutual Fund, Real Estate, and Stock Market are something which the salaried people are not
well aware of. Though many individuals of Raipur have started investing in Mutual Fund,
many of them try to avoid investing in Mutual Funds as they find it a bit risky to place there
money. Lack of awareness among the salaried class people is also leading them to be away
from such a good and helpful investment plan.

The salaried class people of Raipur can use Mutual Fund as a way to save money plus growth
of the value of the money. After being aware of the working of the Mutual fund they will
definitely try to invest in it as it has many advantages and also it is beneficial than the
traditional plans of investment.

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 MUTUAL FUND

A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such
as shares, debentures and other securities. The income earned through these investments and
the capital appreciation realised 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 Fund Operation Flow Chart

A mutual fund is just the connecting bridge or a financial intermediary that allows a group of
investors to pool their money together with a predetermined investment objective. The mutual
fund will have a fund manager who is responsible for investing the gathered money into
specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units
or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of
the fund.Mutual funds are considered as one of the best available investments as compare to
others they are very cost efficient and also easy to invest in, thus by pooling money together
in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if
they tried to do it on their own. But the biggest advantage to mutual funds is diversification,
by minimizing risk & maximizing returns.

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 Mutual Fund Indusrty in India

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at
the initiative of the Government of India and Reserve Bank of India. The history of mutual
funds in India can be broadly divided into four distinct phases
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by
the Reserve Bank of India and functioned under the Regulatory and administrative control of
the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in
place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988
UTI had Rs.6,700 crores of assets under management.
 
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks
and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987
followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),
Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund
(Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund
in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47,004
crores.
 
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.

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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
 
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of
India with assets under management of Rs.29,835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and certain other schemes.
The Specified Undertaking of Unit Trust of India, functioning under an administrator and
under the rules framed by Government of India and does not come under the purview of the
Mutual Fund Regulations.
 
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the
erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under
management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector funds,
the mutual fund industry has entered its current phase of consolidation and growth.
 

The graph indicates the growth of assets over the years.

 
 

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Regulatory Authorities
To protect the interest of the investors, SEBI formulates policies and regulates the mutual
funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from

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time to time. MF either promoted by public or by private sector entities including one
promoted by foreign entities is governed by these Regulations. 
SEBI approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. Custodian, registered with SEBI, holds the
securities of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company or board
of trustees must be independent.
The Association of Mutual Funds in India (AMFI) reassures the investors in units of
mutual funds that the mutual funds function within the strict regulatory framework. Its
objective is to increase public awareness of the mutual fund industry.AMFI also is
engaged in upgrading professional standards and in promoting best industry practices in
diverse areas such as valuation, disclosure, transparency etc.

Diversification
Diversification is nothing but spreading out your money across available or different types
of investments. By choosing to diversify respective investment holdings reduces risk
tremendously up to certain extent. The most basic level of diversification is to buy
multiple stocks rather than just one stock. Mutual funds are set up to buy many stocks.
Beyond that, you can diversify even more by purchasing different kinds of stocks, then
adding bonds, then international, and so on. It could take you weeks to buy all these
investments, but if you purchased a few mutual funds you could be done in a few hours
because mutual funds automatically diversify in a predetermined category of investments
(i.e. - growth companies, emerging or mid size companies, low-grade corporate bonds,
etc).

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. thus mutual funds has Variety of
flavors, Being a collection of many stocks, an investors can go for picking a mutual fund
might be easy. There are over hundreds of mutual funds scheme to choose from. It is
easier to think of mutual funds in categories, mentioned below.

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Overview of existing schemes existed in mutual fund category: BY STRUCTURE
1. Open - Ended Schemes:
An open-end fund is one that is available for subscription all through the year. These do
not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
2. Close - Ended Schemes:
These schemes have a pre-specified maturity period. One can invest directly in the scheme
at the time of the initial issue. Depending on the structure of the scheme there are two exit
options available to an investor after the initial offer period closes. Investors can transact
(buy or sell) the units of the scheme on the stock exchanges where they are listed. The
market price at the stock exchanges could vary from the net asset value (NAV) of the
scheme on account of demand and supply situation, expectations of unitholder and other
market factors. Alternatively some close-ended schemes provide an additional option of
selling the units directly to the Mutual Fund through periodic repurchase at the schemes
NAV; however one cannot buy units and can only sell units during the liquidity window.
SEBI Regulations ensure that at least one of the two exit routes is provided to the investor.
3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-ended and close-
ended schemes. The units may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals at NAV related prices.

The risk return trade-off indicates that if investor is willing to take higher risk then

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correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns.  For example, if an investors opt
for bank FD, which provide moderate return with minimal risk. But as he moves ahead to
invest in capital protected funds and the profit-bonds that give out more return which is
slightly higher as compared to the bank deposits but the risk involved also increases in the
same proportion.

Thus investors choose mutual funds as their primary means of investing, as Mutual funds
provide professional management, diversification, convenience and liquidity. That doesn’t
mean mutual fund investments risk free. This is because the money that is pooled in are
not invested only in debts funds which are less riskier but are also invested in the stock
markets which involves a higher risk but can expect higher returns. Hedge fund involves a
very high risk since it is mostly traded in the derivatives market which is considered very
volatile.
Overview of existing schemes existed in mutual fund category: BY NATURE
1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure of
the fund may vary different for different schemes and the fund manager’s outlook on
different stocks. The Equity Funds are sub-classified depending upon their investment
objective, as follows:

 Diversified Equity Funds

 Mid-Cap Funds
 Sector Specific Funds
 Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on
the risk-return matrix.
2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers.
By investing in debt instruments, these funds ensure low risk and provide stable income to
the investors. Debt funds are further classified as:
 Gilt Funds: Invest their corpus in securities issued by Government, popularly
known as Government of India debt papers. These Funds carry zero Default risk

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 but are associated with Interest Rate risk. These schemes are safer as they invest in
papers backed by Government.

 Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.

 MIPs: Invests maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market.
These scheme ranks slightly high on the risk-return matrix when compared with
other debt schemes.

 Short Term Plans (STPs): Meant for investment horizon for three to six months.
These funds primarily invest in short term papers like Certificate of Deposits
(CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested
in corporate debentures.

 Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term
instruments like Treasury Bills, inter-bank call money market, CPs and CDs.
These funds are meant for short-term cash management of corporate houses and
are meant for an investment horizon of 1day to 3 months. These schemes rank low
on risk-return matrix and are considered to be the safest amongst all categories of
mutual funds.

3. Balanced funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in both
equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both the
worlds. Equity part provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter
viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds
objective and invest accordingly.
By investment objective:
 Growth Schemes: Growth Schemes are also known as equity schemes. The aim of

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 these schemes is to provide capital appreciation over medium to long term. These
schemes normally invest a major part of their fund in equities and are willing to
bear short-term decline in value for possible future appreciation.

 Income Schemes:Income Schemes are also known as debt schemes. The aim of
these schemes is to provide regular and steady income to investors. These schemes
generally invest in fixed income securities such as bonds and corporate debentures.
Capital appreciation in such schemes may be limited.

 Balanced Schemes: Balanced Schemes aim to provide both growth and income by

periodically distributing a part of the income and capital gains they earn. These
schemes invest in both shares and fixed income securities, in the proportion
indicated in their offer documents (normally 50:50).

 Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in
safer, short-term instruments, such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money.

Other schemes
 Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time
to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked
Savings Scheme (ELSS) are eligible for rebate.
 Index Schemes:

Index schemes attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks
that constitute the index. The percentage of each stock to the total holding will be identical
to the stocks index weightage. And hence, the returns from such schemes would be more
or less equivalent to those of the Index.
 Sector Specific Schemes:

Types of returns

There are three ways, where the total returns provided by mutual funds can be enjoyed by
investors:

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  Income is earned from dividends on stocks and interest on bonds. A fund pays out
nearly all income it receives over the year to fund owners in the form of a
distribution.

 If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.

 If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive a check for distributions
or to reinvest the earnings and get more shares.

Selecting The Right Mutual Fund

There are over 750 different mutual funds in India today and about 35 different companies
that run these funds. So, how will you choose which fund to invest in?Firstly, know your
own needs. Are you investing to fulfill a short-term or a long-term goal? Or, are you
investing just because you heard in your office cafeteria that you should invest in a certain
fund? Not all mutual funds serve the same purpose, so you should know why you are
investing. If you want capital appreciation for your son's education 20 years from now,
you should not invest in a bond fund. However, if you want to save and protect your
capital for funding your son's education in 2 years time, then you should consider a
conservative fund like a bond or money market fund, which will also give you some
income

Secondly, this brings us to time horizon. What period are you ready to invest in the
market for? Equity funds should be held for at least 3-5 years because equities are long-
term investment vehicles. Debt or money market funds, however, can be invested in for
shorter periods of time.

Thirdly, how comfortable are you with the promoter of the fund? Many new companies
are starting fund houses. Many of them will not be as successful as the ones that already

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have a successful track record that they have built over the past 5-10 years. So,invest in
mutual funds that have been launched by companies that have a track record and are not
new into the Indian market.

Finally, many investors look at past performance and assume that the fund will continue
to return the same in the future. This is not always true and can often be wrong. Any fund
can do well over a short-term because luck and other factors can come into play. So, do
not choose a fund to invest in just because it has done well in the recent past. You should
be interested in the long term performance of the fund. Invest in funds that have done well
across market cycles and investment cycles.

Investing in Mutual Funds

1. Where can you purchase mutual funds - banks, brokerage houses, third party
distributors
2. Fill out form - you will need your PAN number for that
3. Get receipt/acknowledgment as proof that you have invested in the fund
4. Fund House will send you regular statements on your status and NAV of your
units
5. You can choose to invest through a SIP scheme - Systematic Investment Plan.
Allows you to invest small amounts of money at regular intervals. Helps you avoid
market timing and you can enter the market with a small amount of capital rather
than a lump sum. You can also set up an electronic transfer directly from your
bank through the ECS transfer facility, so you don't have to write a cheque every
month
6. How can you educate yourself about MF's - read personal finance magazines like
Outlook Money or Money Today or the personal finance sections of business
newspapers; may newspapers like Hindu or Business Standard also carry weekly
reports on the mutual funds.

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Pros & cons of investing in mutual funds:

For investments in mutual fund, one must keep in mind about the Pros and cons of
investments in mutual fund.

Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they are professional
managed, by well qualified professional. Investors purchase funds because they do not
have the time or the expertise to manage their own portfolio. A mutual fund is considered
to be relatively less expensive way to make and monitor their investments.

2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks

or bonds, the investors risk is spread out and minimized up to certain extent. The idea
behind diversification is to invest in a large number of assets so that a loss in any
particular investment is minimized by gains in others.

3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time,
thus help to reducing transaction costs, and help to bring down the average cost of the unit
for their investors.

4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate
their holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other

available instruments in the market, and the minimum investment is small. Most AMC
also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just
Rs.50 per month basis.

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Disadvantages of Investing Mutual Funds:
1. Professional Management- Some funds doesn’t perform in neither the market, as their
management is not dynamic enough to explore the available opportunity in the market,
thus many investors debate over whether or not the so-called professionals are any better
than mutual fund or investor him self, for picking up stocks.

2. Costs – The biggest source of AMC income, is generally from the entry & exit load
which they charge from an investors, at the time of purchase. The mutual fund industries
are thus charging extra cost under layers of jargon.

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

4. Taxes - when making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a capital-gain
tax is triggered, which affects how profitable the individual is from the sale. It might have
been more advantageous for the individual to defer the capital gains liability.

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 SEBI

In 1988 the Securities and Exchange Board of India (SEBI) was established by the
Government of India through an executive resolution, and was subsequently upgraded as a
fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities
and Exchange Board of India Act (SEBI Act) on 30th January 1992. In place of Government
Control, a statutory and autonomous regulatory board with defined responsibilities, to cover
both development & regulation of the market, and independent powers have been set up.
Paradoxically this is a positive outcome of the Securities Scam of 1990-91. 

The basic objectives of the Board were identified as:

 to protect the interests of investors in securities;

 to promote the development of Securities Market;
 to regulate the securities market and
 for matters connected therewith or incidental thereto.

Since its inception SEBI has been working targetting the securities and is attending to the
fulfillment of its objectives with commendable zeal and dexterity. The improvements in the
securities markets like capitalization requirements, margining, establishment of clearing
corporations etc. reduced the risk of credit and also reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed registration norms,
the eligibility criteria, the code of obligations and the code of conduct for different
intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars,
portfolio managers, credit rating agencies, underwriters and others. It has framed bye-laws,
risk identification and risk management systems for Clearing houses of stock exchanges,
surveillance system etc. which has made dealing in securities both safe and transparent to the
end investor.

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Another significant event is the approval of trading in stock indices (like S&P CNX Nifty &
Sensex) in 2000. A market Index is a convenient and effective product because of the
following reasons:

 It acts as a barometer for market behavior;

 It is used to benchmark portfolio performance;
 It is used in derivative instruments like index futures and index options;
 It can be used for passive fund management as in case of Index Funds.

Two broad approaches of SEBI is to integrate the securities market at the national level, and
also to diversify the trading products, so that there is an increase in number of traders
including banks, financial institutions, insurance companies, mutual funds, primary dealers
etc. to transact through the Exchanges. In this context the introduction of derivatives trading
through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real landmark.

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 Bank

A bank is a financial intermediary that accepts deposits and channels those deposits

into lending activities, either directly or through capital markets. A bank connects customers
with capital deficits to customers with capital surpluses.

The definition of a bank varies from country to country. See the relevant country page
(below) for more information.

Under English common law, a banker is defined

as a person who carries on the business of
banking, which is specified as:

conducting current accounts for his customers

paying cheques drawn on him, and

collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act that codifies the
law in relation to negotiable instruments, including cheques, and this Act contains a statutory
definition of the term banker: banker includes a body of persons, whether incorporated or not,
who carry on the business of banking' (Section 2, Interpretation). Although this definition
seems circular, it is actually functional, because it ensures that the legal basis for bank
transactions such as cheques does not depend on how the bank is organised or regulated.

The business of banking is in many English common law countries not defined by statute but
by common law, the definition above. In other English common law jurisdictions there are
statutory definitions of the business of banking or banking business. When looking at these
definitions it is important to keep in mind that they are defining the business of banking for
the purposes of the legislation, and not necessarily in general. In particular, most of the
definitions are from legislation that has the purposes of entry regulating and supervising banks

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rather than regulating the actual business of banking. However, in many cases the statutory
definition closely mirrors the common law one. Examples of statutory definitions:

"banking business" means the business of receiving money on current or deposit account,
paying and collecting cheques drawn by or paid in by customers, the making of advances to
customers, and includes such other business as the Authority may prescribe for the purposes
of this Act; (Banking Act (Singapore), Section 2, Interpretation).

"banking business" means the business of either or both of the following:

receiving from the general public money on current, deposit, savings or other similar account
repayable on demand or within less than [3 months] ... or with a period of call or notice of less
than that period;

paying or collecting cheques drawn by or paid in by customers

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct
debit and internet banking, the cheque has lost its primacy in most banking systems as a
payment instrument. This has led legal theorists to suggest that the cheque based definition
should be broadened to include financial institutions that conduct current accounts for
customers and enable customers to pay and be paid by third parties, even if they do not pay
and collect cheques.

Standard activities

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Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to
customers' current accounts. Banks also enable customer payments via other payment
methods such as telegraphic transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by
making advances to customers on current accounts, by making installment loans, and by
investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered indispensable by
most businesses, individuals and governments. Non-banks that provide payment services such
as remittance companies are not normally considered an adequate substitute for having a bank
account.

Banks borrow most funds from households and non-financial businesses, and lend most funds
to households and non-financial businesses, but non-bank lenders provide a significant and in
many cases adequate substitute for bank loans, and money market funds, cash management
trusts and other non-bank financial institutions in many cases provide an adequate substitute
to banks for lending savings to.

Wider commercial role

 The commercial role of banks is not limited to banking, and includes:

 issue of banknotes (promissory notes issued by a banker and payable to bearer on
demand)
 processing of payments by way of telegraphic transfer, EFTPOS, internet banking or
other means
 issuing bank drafts and bank cheques
 accepting money on term deposit
 lending money by way of overdraft, installment loan or otherwise
 providing documentary and standby letters of credit (trade finance),
guarantees, performance bonds, securities underwriting commitments and other forms
of off-balance sheet exposures

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  safekeeping of documents and other items in safe deposit boxes
 currency exchange
 acting as a 'financial supermarket' for the sale, distribution or brokerage, with or
without advice, of insurance, unit trusts and similar financial products

Channels

Banks offer many different channels to access their banking and other services:

 A branch is a retail location

 ATM is a machine that dispenses cash and sometimes takes deposits without the need
for a human bank teller. Some ATMs provide additional services.
 Mail: most banks accept check deposits via mail and use mail to communicate to their
customers, eg by sending out statements
 Telephone banking is a service which allows its customers to perform transactions
over the telephone without speaking to a human
 Call center
 Online banking is a term used for performing transactions, payments etc. over the
Internet
 Mobile banking is a method of using one's mobile phone to conduct banking
transactions
 Video banking is a term used for performing banking transactions or professional
banking consultations via a remote video and audio connection. Video banking can be
performed via purpose built banking transaction machines (similar to an Automated
teller machine), or via a videoconference enabled bank branch.

]Economic functions

The economic functions of banks include:

 issue of money, in the form of banknotes and current accounts subject to cheque or

payment at the customer's order. These claims on banks can act as money because they
are negotiable and/or repayable on demand, and hence valued at par. They are

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 effectively transferable by mere delivery, in the case of banknotes, or by drawing a
cheque that the payee may bank or cash.
 netting and settlement of payments – banks act as both collection and paying agents
for customers, participating in interbank clearing and settlement systems to collect,
present, be presented with, and pay payment instruments. This enables banks to
economise on reserves held for settlement of payments, since inward and outward
payments offset each other. It also enables the offsetting of payment flows between
geographical areas, reducing the cost of settlement between them.
 credit intermediation – banks borrow and lend back-to-back on their own account as
middle men.
 credit quality improvement – banks lend money to ordinary commercial and personal
borrowers (ordinary credit quality), but are high quality borrowers. The improvement
comes from diversification of the bank's assets and capital which provides a buffer to
absorb losses without defaulting on its obligations. However, banknotes and deposits
are generally unsecured; if the bank gets into difficulty and pledges assets as security,
to raise the funding it needs to continue to operate, this puts the note holders and
depositors in an economically subordinated position.
 maturity transformation – banks borrow more on demand debt and short term debt, but
provide more long term loans. In other words, they borrow short and lend long. With a
stronger credit quality than most other borrowers, banks can do this by aggregating
issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g.
withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in
marketable securities that can be readily converted to cash if needed, and raising
replacement funding as needed from various sources (e.g. wholesale cash markets and
securities markets).

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 Banking Services in India

Bank Account

Opening bank account is the most common and first service of the banking sector. There are
different types of bank account in Indian banking sector. The bank accounts are as follows:

Bank Savings Account - Bank Savings Account can be opened for eligible person / persons

and certain organisations / agencies (as advised by Reserve Bank of India (RBI) from time to
time)

Bank Current Account - Bank Current Account can be opened by individuals / partnership
firms / Private and Public Limited Companies / HUFs / Specified Associates / Societies /
Trusts, etc.

Bank Term Deposits Account - Bank Term Deposits Account can be opened by individuals /

partnership firms / Private and Public Limited Companies / HUFs/ Specified Associates /
Societies / Trusts, etc.

Bank Account Online - With the advancement of technology, the major banks in the public
and private sector has faciliated their customer to open bank account online. Bank account
online is registered through a PC with an internet connection. The advent of bank account
online has saved both the cost of operation for banks as well as the time taken in opening an
account.

General procedure to open an account

The Bank will provide you with details of various types of accounts that you may open with
the Bank.

You can have your choice on what type of account would best suit you, based on your needs
and requirements

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The Bank will, prior to opening an account, require documentation and information as
prescribed by the "Know Your Customer" (KYC) guidelines issued by RBI and or such other
norms or procedures adopted by the Bank prior to opening the account.

The due diligence process that the Bank would follow, will involve providing documentation
verifying your identity, verifying your address, and information onyour occupation or
business and source of funds. As part of the due diligence process the Bank may also require
an introduction from a person acceptable to the Bank if they so deem necessary and will need
your recent photographs.

The Bank is required by law to obtain Permanent Account Number (PAN) or General Index
Register (GIR) Number or, where you do not possess such registration, declaration in Form
No. 60 or 61 as specified under the Income Tax Rules.

In the event that the account opening process is likely to take longer than normal, the Bank
will inform you of the revised timeline.

You can also call your branch or the executive for any queries that you may have and the
branch / executive will revert on the query at the earliest.

The Bank will provide you with the account opening forms and other relevant material to
enable you open the account. Bank personnel will advise you on the complete details of
information that would be required by the Bank for the verification process.

The Bank reserves the right, at its sole discretion, to open any account and at such terms as
the Bank may prescribe from time to time

Plastic Money

Credit cards in India is gaining ground. A number of banks in India are encouraging people to
use credit card. The concept of credit card was used in 1950 with the launch of charge cards in
USA by Diners Club and American Express. Credit card however became more popular with
use of magnetic strip in 1970.Credit card in India became popular with the introduction of
foreign banks in the country. Credit cards are financial instruments, which can be used more

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than once to borrow money or buy products and services on credit. Basically banks, retail
stores and other businesses issue these. 

Loans

Banks in India with the way of development have become easy to apply in loan market. The
following loans are given by almost all the banks in the country:

Personal Loan

Car Loan or Auto Loan

Loan against Shares

Home Loan

Education Loan or Student Loan

In Personal Loan, one can get a sanctioned loan amount between Rs 25,000 to 10,00,000
depending upon the profile of person applying for the loan. SBI, ICICI, HDFC, HSBC are
some of the leading banks which deals inPersonal Loan.

Almost all the banks have jumped into the market of car loan which is also sometimes termed
as auto loan. It is one of the fast moving financial product of banks. Car loan / auto loan are
sanctioned to the extent of 85% upon the ex-showroom price of the car with some simple
paper works and a small amount of processing fee. 

Loan against shares is very easy to get because liquid guarantee is involved in it. 

Home loan is the latest craze in the banking sector with the development of the infrastructure.
Now people are moving to township outside the city. More number of townships are coming
up to meet the demand of 'house for all'. The RBI has also liberalised the interest rates of
home loan inorder to match the repayment capability of even middle class people. Almost all
banks are dealing in home loan. Again SBI, ICICI, HDFC, HSBC are leading. 

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The educational loan, rather to be termed as student loan, is a good banking product for the
mass. Students with certain academic brilliance, studying at recognised colleges/universities
in India and abroad are generally given education loan / student loan so as to meet the
expenses on tuition fee/ maintenance cost/books and other equipment.

Money Transfer

Beside lending and depositing money, banks also carry money from one corner of the globe to
another. This act of banks is known as transfer of money. This activity is termed as remittance
business. Banks generally issue Demand Drafts, Banker's Cheques, Money Orders or other
such instruments for transferring the money.
It has been only a couple of years that banks have jumped into the money transfer businessess
in India. The international money transfer market grew 9.3% from 2003 to 2004 i.e. from
US$213 bn. to US$233 bn. in 2004. Economists say that the market of money transfer will
further grow at a cumulative 10.1% average growth rate through 2008.
Visa has recently introduced the 'Visa Money Transfer' option for its savings and current
account holder of any bank with a visa debit card. This facility helps its customer to
transfer funds from his bank account to any visa card, either debit or credit within India.A
Visa Money Transfer is of similar kind, in many respects, to the third-party fund transfer
option given by some banks to its account holders through e-cheque, but this is restricted to
only visa cardholders.

For NRI’s

Almost all the Indian Banks provide services to the NRIs. There are different types of
accounts for them. They are:

Non-Resident (Ordinary) Account - NRO A/c

Non-Resident (External) Rupee Account - NRE A/c

Non-Resident (Foreign Currency) Account - FCNR A/c

An Indian resident who is earning forign exchange can also maintain Foreign Currency
account in the country with an authorised dealer bank but only to the maximum limit of 50%

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of such foreign exchange earnings under the Exchange Earners Foreign Currency Account
(EEFC) Scheme.

NRO A/c.: The funds, credited to this account, cannot be repatriated outside India in foreign
exchange, without prior permission of the Reserve Bank of India. Interest, earned is eligible
for repatriation outside India, net of Indian taxes. The remittance of interest (net of taxes) will
be permitted by the authorised dealer who maintains the account, if the account holder makes
an application to the authorised dealer, in the prescribed form. No RBI permission is required
for remittance of interest.
NRE A/c.: The funds, standing to the credit of this account, as well as interest earned thereon,
are remittable outside India in free foreign exchange, without permission of the RBI. The
interest income is not subject to Indian Income-tax. Credits to the accounts should be in the
form of remittance in foreign exchange from outside India, as well as other funds, which are
eligible to be remitted outside India, in free foreign exchange. Funds, emanating from local
sources, are not eligible to be credited to these accounts, unless these funds are otherwise
remittable outside India, in terms of the existing Exchange Control Regulations.

FCNR A/c.: These accounts can be opened in four foreign currencies:

Pounds Sterling;

US Dollars;

Japanese Yen;

Euro.

For the purpose of opening an account, remittance in foreign exchange, in the same currency,
should be received in India. The accounts can be opened only as fixed deposits, with a
minimum maturity of one year and, a maximum maturity of three years. The principal, as well
as interest, earned on these accounts, is remittable outside India, in the same currency or, in
other convertible currency, as desired by the account holder. The interest, earned on these
deposits, is exempt from Indian Income-tax.

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 RESERVE BANK OF INDIA

The central bank of the country is the Reserve Bank of India (RBI). It was established in April
1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton
Young Commission. The share capital was divided into shares of Rs. 100 each fully paid
which was entirely owned by private shareholders in the begining. The Govt. held share of
nominal value of Rs.2,20,000. Reserve Bank of India was nationalised in the year 1949. The
general superintendence and direction of the Bank is entrusted to Central Board of Directors
of 20 members, the Governor and four Deputy Governors, one Government official from the
Ministry of Finance, ten nominated Directors by the Government to give representation to
important elements in the economic life of the country, and four nominated Directors by the
Central Government to represent the four local Boards with the headquarters at Mumbai,
Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central
Government appointed for a term of four years to represent territorial and economic interests
and the interests of cooperative and indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of
1934) provides the statutory basis for the functioning of bank. The Bank was constituted for
the need of following:

 To regulate the issue of banknotes

 To maintain reserves with a view to securing monetary stability and
 To operate the credit and currency system of the country to its advantage.

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Functions of the RBI

Issue of Notes

The Reserve Bank has the monopoly of note issue in the country. It has the sole right to issue
currency notes of various denominations except one rupee note.

Banker to the Government

It performs all the banking functions of the state and the central Government and it also
tenders useful advice to the Government on matters related to economic and monetary policy.
It also manages public debt for the Government.

Bankers Bank

The Reserve Bank performs same functions for the other banks as the other banks ordinarily
perform for their customers. It is not only a banker to the commercial banks, but it is the
lender of the last resort.

Controller of Credit

The Reserve Bank undertakes the responsibility of controlling credit created by the
commercial banks. It makes extensive use of quantitative and qualitative techniques to control
and regulate credit effectively in the country.

Custodial of Foreign Reserve

For the purpose of keeping the foreign exchange rates stable the Reserve Bank buys and sells
the foreign currencies and also protects the country’s foreign exchange funds.

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 CHAPTER-II

COMPANY PROFILE

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 ING VYSYA BANK LTD.

ING Vysya Bank Limited, is an Indian retail bank, formed after the global financial
institution ING acquired a 44% stake in Vysya Bank Ltd in October 2002, and took over
management of the bank.

History

The Vysya Bank was established in 1930, in Bangalore (now Bengaluru) with the aim of
offering banking services to those who were currently not privileged enough to do so. In 1948
The Vysya Bank became a scheduled bank.On 7 October 2002 ING Group took over the
Management of the Bank.ING Vysya Bank currently has about 470 branches spread all over
India.

Headquarters- Bangaluru

Current CEO

Mr. Shailendra Bhandari (IIM-A Alumni)

Growth of the ING VYSYA BANK

Vysya Bank Ltd was one of the first private sector banks in the country and was set up in the
year 1930. The main objective of setting up the bank was to provide financial support to the
various sectors of the economy. In the year 1948, the Vysya Bank was listed among the
Scheduled Banks. 

In order to increase its profit and add to its operations, the Vysya Bank Ltd merged with
ING. Currently, it is one of the well known banks in the country and has around 677 branches
across various parts of the country. The headquarters of the bank is located in the city of
Bangalore. Among the total number of branches, there are 407 regular branches, 28 satellite

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offices, 39 extension counters. The number of ATMs is around 203 which are expected to
increase within the next few years. The deposit of the bank amounts to around Rs. 204980.00
millions while the net worth is around Rs 14260.00 millions. The profits of the bank amount
to around Rs. 1569.00 millions.

Products and services of the ING VYSYA BANK

Being a well known name in the domain of financial and banking services in the country, the
ING Vysya Bank Ltd has come up with a number of financial solutions and services in a
number of areas. Some of the well known segments in which the bank offers customized and
specialized services are:

 Accounts and deposits

 Short and long term loans
 Private banking
 NRI services

Personal Banking: The personal banking department of ING Vysya Bank Ltd offers high
quality services and solutions to cater to the financial needs and preferences. The high end
solutions make them a one stop organization to fulfill the needs and requirements of the
customers. Some of the well known services offered in the segment of personal banking are:

 Mutual Funds
 Tax Savings Bonds
 Savings Account
 NRI Services
 Credit & Debit Card
 Internet Banking
 Phone Banking
 Mobile Banking
 Self Banking

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 Term deposits
 Demat accounting
 Wealth management
 Debit and credit card accounting
 Payment services

Wealth Management services: The wealth management services of the ING Vysya Bank Ltd
offers the best services in order to take care of the needs and preferences of the consumers in
various wealth management sectors. The secure services offered by the bank also minimize
the risk processes and also offer the best of returns. 

In addition to these, ING Vysya Bank Ltd also offers business banking facilities and services
of high standards. The services are meant to take care of the business needs and also provide
high degree of financial stability to the various corporate organizations and business sectors.
Some of the well known services that are offered include:

 Long and term loans in the agro based sector

 SME- Power Business account and loans
 Financial market analysis
 Market trading
 Asset liability management services
 Financial market sales
 Cash management services
 Corporate and investment banking services
 Off shore borrowing services
 Trade and community finance services

In addition to these, ING Vysya Bank Ltd also carries out research and development to add
more stability to the Indian economic scenario. The customers are also given useful guidance
about investing their assets and funds.

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 RELIANCE MUTUAL FUND

INTRODUCTION
The Reliance group – one of India’s largest business houses with revenues of Rs. 990 billion
($22.6 billion) that is equal to 3.5 percent of the country’s gross domestic product was split
into two.The group – which claims to contribute nearly 10 per cent of the country’s indirect
tax revenues and over six percent of India’s exports – was divided between Mukesh Ambani
and his younger brother Anil on June 18, 2005.
The group’s activities span exploration, production, refining and marketing of oil and
natural gas, petrochemicals, textiles, financial services, insurance, power and telecom. The
family also has interests in advertising agency and life sciences.
Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average Assets
Under Management (AAUM) of Rs. 90,938 Crores (AAUM for Mar 08 ) and an investor
base of over 66.87Lakhs.Reliance Mutual Fund, a part of the Reliance – Anil Dhirubhai
Ambani Group, is one of the fastest growing mutual funds in the country.
RMF offers investors a well-rounded portfolio of products to meet varying investor
requirements and has presence in 115 cities across the country. Reliance Mutual
Fund constantly endeavors to launch innovative products and customer service initiatives to
increase value to investors.
“Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management
Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up
capital of RCAM, the balance paid up capital being held by minority shareholders.”
Reliance Capital Ltd. is one of India’s leading and fastest growing private sector financial
services companies, and ranks among the top 3 private sector financial services and banking
companies, in terms of net worth.

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Reliance Capital Ltd. has interests in asset management, life and general insurance, private
equity and proprietary investments, stock broking and other financial
services. Reliance Mutual fund has largest AUM in India. Reliance capital asset
Management is no. 1 AMC in India. Management of Reliance mutual fund wants to expand
its feet in Chhattisgarh, before taking any step they want to understand market & investor
and distributor behavior of SMEs, so they may plan accordingly to capture Chhattisgarh
Market. In this research we have to analyze why, how, where, when & how much an
investor invest & according to it, we have to make profile of investors. In this report I have
endeavored to understand the factors affecting Investment behavior of an investor in
Chhattisgarh. This behavioral study consists of how any investor invests in CG. What factor
they consider, why these factors they consider, where do they invest, how do they invest,
purpose behind investment, size of investment, timing of investment & duration of
investment. This study gave us basis to profile investors.
SPONSORS
‘‘Reliance Mutual Fund’’ schemes are managed by Reliance Capital Asset Management
Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up
capital of RCAM, the balance paid up capital being held by minority shareholders.”, the
sponsor. Reliance Mutual Fund (RMF) has been sponsored by Reliance Capital Ltd (RCL).
The promoter of RCL is AAA Enterprises Private Limited. Reliance Capital Limited is a
Non Banking Finance Company. Reliance Capital Limited is one of the India’s leading and
fastest growing financial services companies, and ranks among the top three private
sector financial services and banking companies, in terms of net worth.

Reliance Capital has interests in asset management and mutual funds, life and non-
life insurance, private equity and proprietary investments, stock broking and other activities
in the financial services sector. The net worth of RCL is Rs. 5,161.23 crores as on March 31,
2007.

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THE AMC
RELIANCE CAPITAL ASSET MANAGEMENT COMPANY
Reliance Capital Asset Management Limited (RCAM), a company registered under the
Companies Act, 1956 was appointed to act as the Investment Manager of Reliance Mutual
Fund.
Reliance Capital Asset Management Limited (RCAM) was approved as the Asset
Management Company for the Mutual Fund by SEBI vide their letter no IIMARP/1264/95
dated June 30, 1995. The Mutual Fund has entered into an Investment Management
Agreement (IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997
in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is
authorized to act as Investment Manager ofReliance Mutual Fund. The net worth of
the Asset Management Company including preference shares as on September 30, 2007 is
Rs.152.02 crores.

“Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management
Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up
capital of RCAM, the balance paid up capital being held by minority shareholders.”

Reliance Capital Asset Management Limited (RCAM) was approved as the Asset
Management Company for the Mutual Fund by SEBI by their letter no. IIMARP/1264/95

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dated June 30, 1995. The Mutual Fund has entered into an Investment Management
Agreement (IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997
in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is
authorized to act as Investment Manager of Reliance Mutual Fund.

SCHEMES
1. A. EQUITY/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.
1. B. DEBT/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.
1. C. 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.

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 CHAPTER – III

RESEARCH METHODOLOGY

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 RESEARCH METHODOLOGY

Research methodology is the way to systematically solve the research problem. Research
methodology just does not deal with research methods but also consider the logic behind the
methods. It may be understood as the science of studying how research is done scientifically
and systematically. In it we study the various steps that are generally adopted by the
researcher in study of his research problem along with the logic behind them. It is necessary
for the research to know the research method and technique. He must also clearly understand
the procedure would apply to problem given to him. All this means that it is necessary for the
researcher to design the methodology from problem to problem.

So, the research methodologies adopted by the researcher in this project are as
follows:

Objective of study

 To know the awareness of mutual fund among salaried class people.

 To study the need of mutual fund for salaried class people.
 To study the benefits of mutual fund for salaried class people.
 To encourage salaried class people for investment.

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  To make the people aware of Mutual Fund and to solve their misconceptions about the
investment plan.

Population

Sum total of all the units that confirms to some designated part of specification is called
population. While conducting the research work, researcher has selected Raipur city as the
universe. All the data which has been collected is completely done in the Raipur city.

Sample

The sample is the representative unit of population. The researcher has taken the Salaried
people of Raipur city as sample.

Sample Size

Sample size refers to number of items to be selected from the population to constitute a
sample. The size of the sample should neither be excessively large, nor too small. It should be
optimum. An optimum sample size is one, which fulfills the requirement of efficiency,
reliability and flexibility. Since in this research the researcher has collected the sample
according to his own convenience and keeping in mind the time and cost constraint, so the
sample size is is 40.

Sampling Method

The researcher adopted convenient method of sampling. In this method the sample are chosen
primary on the basis of convenience to the investigator. In this type of sampling, the
researcher selects the items for the sample deliberately; his choice concerning the items
remains supreme. In other words, under this sampling the organizers of the inquiry
purposively choose the particulars unit of the universe for constituting a sample on the basis
that the small mass that they so select out of a huge one will be typical or representative of the
whole.

Source of Data collection

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The task of data collection begins after a research problem has defined. Researcher should
keep in mind two types of data, primary data and secondary data. The primary data are those,
which collected afresh and for the first time, thus happen to be original in character. The
secondary data, on the other hand, are those which have already been collected by someone
else and which have already been passed through the statistical process. Researcher while
conducting the research work has used Secondary as well as Primary source of data.

Data Collection Tools

These are the tools used for collecting data. Researcher has gathered the data by administering
questionnaire from salaried people of Raipur City.

Questionnaire

The term questionnaire refers to a self-administering process whereby the respondent

himself/herself reads the question and records his/her answers without assistance of an
interviewer. Although the instrument is essentially question asking and data gather tool. A
questionnaire is more structured and standardized. The questionnaire consists of a number of
questions printed or typed in a definite order on a form or a set of forms. This method of data
collection is quite popular in case of big enquiries.

Statistical Technique

Percentage Method was used by the researcher in the analysis of the data in his research.
Percentage refers to a special kind of ratio. Percentages are used in making comparisons
between two or more series of data. Percentages are used to describe relationships.
Percentages can also be used to compare the relative terms, the distribution of two or more
series of data.

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 CHAPTER - IV

DATA INTERPRETATION

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 DATA INTERPRETATION

1. What is your approximate monthly income?

5 – 10 thousand 10 – 15 thousand
15 – 20thousand Above 20 thousand

MONTHLY INCOME
5- 10 THOUSAND 10- 15 THOUSAND 15- 20 THOUSAND ABOVE 20 THOUSAND

15% 18%

33%
35%

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Mostly respondents covered under the study had approx monthly income of 10-15 thousand.

The respondents having 15-20 thousand as their monthly salary are having Governmental job.

The respondents having above 20 thousand as their monthly salary are having corporate job

2. What is the pattern of your income usage?

a)Income Expenditure Saving Investment
b) Income Investment Saving Expenditure

income usage pattern

b
20%

a
80%

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Nearly 80% of the respondents follow the first (traditional) investment option. The reason
behind it is they are unaware of the ideal investment pattern and the traditional plan is
followed since many decades.

3. Do you like to invest your money in financial crisis?

Yes No

investment in financial crisis

Yes
40%

No
60%

Nearly 60% of the respondent’s do not want to invest during financial crisis. The reason given
was that during financial crisis the family needs are there first priority.

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4. Of the following what at present are your investment needs?
a)to build a corpus for retirement
b)to save for children education/ marriage
c)to provide for medical emergencies
d)to provide for family financial security
e)to create wealth

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 Investment needs
bulid corpus saving for children medical
financial security create wealth

10%
20%

30%

23%

18%

Most of the respondents wanted to invest for financial security as they want to secure their
future. The investment for medical purpose has increased since there is no certainty of life.

5. Which of the following you think as investment for tax-saving?

 Mutual Fund
 Fixed Deposit
 Insurance
 Provident Fund
 All of the above

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 Investment for tax saving

Insurance
19% Mutual Fund
22%

FD
16%

PF
43%

Mostly respondents preferred Provident Fund as there investment for tax saving as they highly
rely on it and has been popular since many years.

6. Do you know about Mutual Fund?

Yes No

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 knowledge of Mutual Fund

yes
38%

no
63%

Mostly respondents are not aware of the Mutual Fund. The reason behind it was due to the
traditional investment pattern they manage to get very less fund for the investment purpose
since expenditure was done prior to investment.

7. Which feature of Mutual Fund are you aware of?

High return Diversification

NAV Tax saving

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 Awareness of which featurs of Mutual Fund
high return NAV Diversification tax saving

18%

33%

23%

28%

Most of the respondents only know that mutual fund has high return. The reason behind was
that only corporate people knew about mutual fund. The respondents having Governmental
job are not fully aware of the characteristics of mutual fund.

8. After knowing the schemes in a mutual fund, which scheme would you prefer?

Debt Equity Balanced Real Estate Gold Fund

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 Preferred schemes
Real estate
10%
Debt
20%
Gold
15%

Equity
15%

Balanced
40%

After knowing the various schemes of Mutual Fund most of the respondents opted for the
balanced fund scheme since in this fund the money is been diversified and risk is been
lowered. The respondents of corporate job agreed to invest in equity and were able to take
risk.

9. Which mode of investment would you prefer?

Investing lump sum amount Investing on monthly basis

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 Preferred mode of investment

Lump Sum
43%
Monthly Basis
57%

Mostly respondents wanted to invest on monthly basis rather than investing in lump sum.

The reason for that is on monthly basis the respondents felt they can afford to invest also there
are many commitments to be fulfilled.

10. Do you about the SIP plan?

Yes No

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 knowledge of SIP plan
Yes No

40%

60%

Mostly respondents are not aware of the SIP plan. Here the mutual fund companies can cater
to salaried people the SIP plan which will best suit their needs.

11. Would you invest in Mutual Fund knowing the fact that it provides higher return than
Fixed Deposit?
Yes No

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 Is Mutual Fund better than FD

No
27%

Yes
73%

73% of the respondents felt that mutual fund is better option than FD. The respondents were
also ready to invest in mutual fund provided that full information was supplied to them.

The respondent found Mutual Fund as the best investment plan for their investment needs and
is affordable and liked the scheme.

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 CHAPTER - V

CONCLUSION

SUGGESTION

Conclusion

 Most of the salaried class people are not aware of the ideal pattern of investment i.e.

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 they used to expend money as soon as they get there income. The ideal pattern of
investment had been liked by the respondents and wanted to adopt it.
 The mutual fund company can target the salaried class people for SIP since the
respondents preferred monthly basis investment.
 Mutual Fund as an investment tool is best for the salaried class people since they can
get good and stable return as well as there wealth also gets growth.
 The salaried class people preferred investing in Mutual Fund also because it is very
good to invest as the money is auto debited from there account.
 After getting the response from the salaried class people, the respondents have felt that
mutual fund is a better investment option than other investment schemes.

Suggestion

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 The respondents suggested that mutual fund offering company should not charge any
hidden charges.
 The respondents suggested that there should be some schemes for the salaried class
people.
 The mutual fund companies can attract more customers by holding a seminar or by
delivering presentations in schools, colleges, or even in clubs so that more and more
people would come to know about the investment plan and many would adopt the
plan.
 The banks can also offer its existing customers to invest in the Mutual Fund after
explaining the terms and conditions.
 The banks should conduct an interactive session for its customers so that they too get
the opportunity to know about Mutual Fund.

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