MUTUAL FUNDS: AN OVERVIEW

INTRODUCTION

A mutual fund is a trust that pools the savings of a number of investors that
share a common financial goal. The money thus collected is invested by the
fund manager in different types of securities depending upon the objective of
the scheme. These could range from shares to debentures to money market
instruments. The income earned through these investments and the capital
appreciation realized by the scheme are shared by its unit holders in
proportion to the number of units owned by them (pro rata). 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 portfolio at a
relatively low cost. Anybody with an investible surplus of as little as a few
thousand rupees can invest in mutual funds. Each mutual fund scheme has a
defined investment objective and strategy.

A mutual fund is the ideal investment vehicle for today’s complex and
modern financial scenario. Markets for equity shares, bonds and other fixed
income instruments, real estate, derivatives and other assets have become
mature and information driven. Price changes in these assets are driven by
global events occurring in faraway places. A typical individual is unlikely to
have the knowledge, skills, inclination and time to keep track of events,
understand their implications and act speedily. An individual also finds it
difficult to keep track of ownership of his assets, investments, brokerage
dues and bank transactions etc.

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A mutual fund is the answer to all these situations. It appoints professionally
qualified and experienced staff that manages each of these functions on a
full time basis. The large pool of money collected in the fund allows it to
hire such staff at a very low cost to each investor. In effect, the mutual fund
vehicle exploits economies of scale in all three areas- researches,
investments and transaction processing. While the concept of individuals
coming together to invest money collectively is not new, the mutual fund in
its present form is a twentieth century phenomenon.

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 STRUCTURE

Structure of the Indian Mutual Fund Industry

The Unit Trust of India dominates the Indian mutual fund industry. The UTI
has many funds/schemes in all categories i.e. equity, balanced, income, etc
with some being open-ended and some being close-ended. UTI was floated
by financial institutions and is governed by a special act of Parliament. Most
of its investors believe that the UTI is government owned and controlled,
which, while legally incorrect, is true for all practical purposes.

The second category of mutual funds is the ones floated by nationalized

banks. Canbank Asset Management floated by Canara Bank and SBI Funds
Management floated by the State Bank of India are the largest of these. GIC
AMC floated by General Insurance Corporation and Jeevan Bima Sahayog
AMC floated by the LIC are some of the other prominent ones.

The third largest category of mutual funds is the ones floated by the private
sector and by foreign asset management companies. The largest of these are
Birla Sun Life AMC, Standard Chartered AMC, etc.

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 TYPES OF MUTUAL FUNDS

Mutual fund schemes may be classified on the basis of its structure and its
investment objective.

(1) By Structure/Operational classification:

♦ Open-ended Funds-
An open-ended 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- ended schemes is liquidity.

♦ Closed-ended Funds-
A closed-ended fund has a stipulated maturity period that generally
ranges from 3 to 15 years. The fund is open for subscription only during
a specified period. 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.

♦ Interval Funds-
Interval funds combine the features of open-ended and closed-ended
schemes. They are open for sale or redemption during pre-determined
intervals at NAV related prices.

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(2) By Investment Objective/ Portfolio Classification:

♦ Growth Funds-
The aim of growth funds is to provide capital appreciation over the
medium to long term. Such scheme normally invests a majority of their
corpus in equities. It has been proven that returns from stocks, have
outperformed most other kind of investments held over the long term.
Growth schemes are ideal for investors having a long-term outlook
seeking growth over a period of time.

♦ Income Funds-
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 and Government securities. Income funds
are ideal for capital stability and regular income.

♦ Balanced Funds-
The aim of these funds is to provide both growth and regular incomes.
Such schemes periodically distribute a part of their earnings and invest
both in equities and debts. These are ideal for investors looking for a
combination of income and moderate growth.

♦ Money Market Funds-

The aim of money market funds is to provide easy liquidity, preservation
of capital and moderate income. These schemes generally invest in safer
short-term instruments such as treasury bills commercial paper etc. These

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 are ideal for Corporate and individual as a means to park their surplus
funds for short-term periods.

(3) Tax Saving Scheme

♦ These schemes offer tax rebates to the investors under specific

provisions of the Indian Income Tax laws as the government offers tax
incentives for investment in specified avenues. Investments made in
Equity Linked Savings Schemes and pension schemes re allowed as
deduction u/s 88 of I T Act 1961.

(4) Special Schemes

♦ Industry Specific Scheme –

Industry specific scheme invest only in the industries specified in the
offer document. The investment of these funds is limited to specific
industries like InfoTech, FMCG, and Pharmaceuticals etc.

♦ Index Scheme-
Index Funds attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50

♦ Sectoral Scheme –
Sectoral Funds are those, which invest exclusively in a specified industry
or a group of industries or various segments such as ‘A’ group shares or
initial public offerings.

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 CONSTITUTION OF THE MUTUAL FUND

An attempt was made for first time in SEBI GUIDELINES 1992 to spell out
for managing the affairs of mutual funds ensuring arm’s length distance
between the sponsor and the fund. The four custodians and asset
management company. Moreover in reality pooled funds of small investors
were being put to use for the advantage of the sponsors. Four constituents
for the management of mutual fund are presented in chart

Sponsors
(Promoters)

Asset
TRUSTEES Manageme
(Holding nt
Mutual
property of Company
Fund
Fund) (Managing
(A Trust)
the
investments
of fund)

CUSTODIANS
(SAFE CUSTODY
OF FUND
SECURITIES
ETC.)
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SPONSORS

It refers to anybody corporate which initiates the launching of a mutual fund.

It is this agency, which of its own or in collaboration with other body
corporate comply the formalities of establishing a mutual fund. SEBI
ensures that sponsors should have professional competence, financial
soundness and general reputation of fairness and integrity in business
transactions. Sponsor is normally not responsible for any loss or shortfall
resulting from the operations of any scheme of the fund beyond its initial
contribution towards the constitution of the trust fund.

TRUSTEES

A trustee is a person who holds the property of the mutual fund in trust for
the benefits of the units holders. A company is appointed as a trustee to
manage the mutual fund. To ensure fair dealings, mutual fund regulations
require that one cannot be a trustee or a director of a trustee company in
more than one mutual fund.

Further at least fifty percent of the trustees are to be independent of the

sponsors. Trustees take into their custody, or under their control all the
property of the mutual fund. It is trustee’s duty to observe and ensure that
AMC is managing schemes in accordance with the trust deed. Trustees for
their services are paid trusteeship fee, which is to be specified in the trust
deed.

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CUSTODIANS

SEBI requires that each mutual fund shall have a custodian for managing the
scrips bought from the market who is not in anyway associated with the
AMC. He cannot act as sponsor or trustee of any mutual fund. Further he is
not permitted to act as a custodian of more than one mutual fund without the
approval of SEBI. Custodian’s main assignment is safekeeping of the
securities or participation in any clearing system on behalf of the client to
effect deliveries of the securities.
Depending on the volume there can be co-custodian for a mutual fund.
These custodians are entitled to receive custodianship fee based on the
average weekly value of net assets or sale and purchase of securities along
with per certificate custody charges.

Asset Management Company (Investment manager)

Asset Management Company as the name implies is to be a body corporate

whose Memorandum and Articles of Association are to be approved by
SEBI. It is the AMC, which operates all the schemes of the fund. AMC can
act as AMC an AMC of only one mutual fund and cannot act as a trustee of
any other mutual fund. To ensure efficient management SEBI desires that
existing AMC should have a sound track record, dividend paying capacity
and profitability, etc. Regulations require that at least 50% of the directors
should be such who do not have any association with the sponsors or the
trustees.

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WORKING OF ASSET MANAGEMENT COMPANY

It is not required that AMC performs all its functions of its own. It can hire
services of outside agencies as per its requirements or perform all functions
of its own. The main agencies services of which an AMC may require are
depicted in the chart.

ASSET MANAGEMENT COMPANY

Registrar Lend Legal Auditors

And Managers advisors
Transfer
Agent
Fund Investment Fund
Accounting Advisors Manager

♦ REGISTRAR AND TRANSFER AGENT.

♦ FUND ACCOUNTING.
♦ LEND MANAGERS.
♦ INVESTMENT ADVISORS.
♦ LEGAL ADVISORS.
♦ FUND MANAGER.
♦ AUDITORS.

REGISTRAR AND TRANSFER AGENTS are assigned the job of

receiving and processing the application forms of investors, issuing unit
certificates, sending refund orders, according all transfers of all units and
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maintaining all such records, repurchasing the units, redemption of units,
issuing dividend or income warrants.

FUND ACCOUNTING again depending upon on the size of the fund, its
age and number of expected transactions may be assigned to specialized
agencies. All accounting transaction is recorded and records are maintained
by such agencies.

LEAD MANAGERS select and co-ordinate activities of intermediaries

such as advertising agency, printers etc. They normally engaged by AMC for
extensive campaign about the scheme to attract the investors. They assist
AMC in approach potential investors through personal as well as through
impersonal promotion.

INVESTMENT ADVISORS may be appointed by AMC if it cannot afford

to cope up with the workload of its own. Investment advisors analyze the
market and strategies on a continuous basis. Majority of Indian Mutual Fund
have their own market analysis that design their own investment strategies.

LEGAL ADVISORS are also sometimes appointed to get legal guidance

about planning and execution of different schemes. A group of advocates
and solicitors may be appointed as legal advisors. AMC is also required to
have an auditor to undertake independent inspection and verification of its
accounting activities. AMCs may also appoint a separate fund manager for
each scheme. Such assets manager adheres to the guidelines evolved by
AMC of its own or designed through investment advisors.

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Functions of AMC

The two main functions of an Asset Management Company are discussed in

detail here.

{A} Investment

The major strength of any AMC lies in its investment function. The
investment department may be classified in four segments. These can be:

 Fund Manager
 Research and Planning Cell
 Dealer
 Underwriter

[1] Fund Manager

Asset Management Companies manage the investment of fund through a

fund manager. His basic function is to decide about which, when, how much
and at what rate securities are to be sold or bought. To a great extent the
success of any scheme depends on the caliber of the fund manager.

Many mutual funds especially in bank sponsored funds, the entire

investment exercise is not left to one individual. One mutual fund has
created two committees. First is Investment Committee which is broad based
committee having even nominees of the sponsor. It collectively decides
about the primary market investment. The second is Market Operation
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Committee having the assignment of disinvestments and interacting with
secondary market.

[2] Research and Planning Cell

This performs a very sensitive and technical assignment. Depending upon on

the operational policies, such unit can be created by AMC on its own or
research findings can be with respect of securities as well as prospective
investors. This section also assists planning new schemes and designing
innovations in schemes.

[3] Dealer

To executive the sale and purchase transactions in capital or money market,

a separate section may be created under the charge of a person called dealer
having deep understanding of stock market operations.

Sometimes, this division is under charge of marketing division of AMC.

Such brokers are to be approved Board of Directors of AMC.

[4] Underwriter

Recently mutual funds have been permitted by SEBI to go in for

underwriting of public issues to generate additional income for their
schemes. Activity will be subject to the following underwriting restrictions:

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 For the purposes of the SEBI underwriter’s regulations, the capital
adequacy of the mutual fund shall be the original corpus of any of the
scheme(s) and the undistributed gains lying to the credit of the scheme(s).
 The total underwriting obligations of the scheme shall not exceed the
total value of the corpus of any scheme together with undistributed
profits lying to the credit of the scheme.
 No understanding commitment may be undertaken in respect of the
scheme during the period of six months prior to the date of redemption of
any scheme.

{B} MARKETING

Marketing is a big challenge in business especially for mutual fund. Mutual

funds deal with small investors hard earned money. The main challenge of
marketing to mutual fund is that with same product, customers with
diversified profile viz demographic, socio-economic background, life style
and psychographics’ are to be served.

It is the marketing division, which complies with the formalities to market

the product i.e. a new scheme. Marketing people also evolve the target
amount of a scheme. The most crucial ‘marketing strategy’ is evolved to the
best advantage of the fund.

Marketing division has to evaluate the market potentials, strengths and

weaknesses. For each scheme, what is its market share is very crucial
question to design its future strategies. To identify which section of society
is under serviced, is another important assignment of marketing division.
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A mutual fund is an investment vehicle for those who want to spread their
risk and seek returns, which are better than those available from bank
deposits. Such investor education should also be taken up by marketing
division to avoid facing situations of loose of faith of investor heavy off-
loading, resulting in the huge discount to NAV.

Marketing people also have a say in dividend policy of the mutual fund.
Sufficient infrastructure facilities are to be created for quality and prompt
services.

Marketing a scheme is to be taken as marketing a consumer product.

Marketing for mutual fund is not deal-based but is relationship –based. The
psychology of investor needs deep insight. There are potential investors in
the present investors of the scheme. So understanding and responding to
their needs obviously will bring mutual funds new investors besides
retaining the present.

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 NET ASSET VALUE (NAV)

The net asset value of the fund is the cumulative market value of the assets
fund net of its liabilities. In other words, if the fund ids dissolved or
liquidated, by selling off the entire asset in the fund, this is the amount that
the shareholders would collectively own. This give rise to the concept of net
asset value per unit, which is the value represented by the ownership of one
unit in the fund.

CALCULATION OF NAV

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

Asset value is equal to

Sum of market value of shares/ debentures

+Liquid assets/ cash held, if any

+Dividend/ interest accrued

-Amount due on unpaid assets

-Expenses accrued but not paid
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NAV is computed as follows: -
(Market or Fair Value of scheme’s investments+ Current assets
including accrued income-Current liabilities and Provisions including
accrued expenses) / Number of units outstanding at the end of the day.

DETAILS OF THE ABOVE ITEMS

For liquid shares/debentures, valuation is done on the basis of the last

closing market price on the principal exchange where the security is trading.
For illiquid and unlisted and /or thinly traded shares and debentures
The value has to be estimated. For shares, this could be the book value per
share or may be market price. For debentures and bonds, value is estimated
on the basis of yields of comparable liquid securities after adjusting
liquidity. The value of fixed interest bearing securities moves in the direction
opposite to the interest rate changes valuation of debentures and bond is a
big problem since most of them are unlisted and thinly traded. This gives
considerably leeway to the AMCs on the valuation and some of the AMCs
are believed to take advantage of this and adopt flexible valuation policies
depending on the situation. Interest is payable on these on a periodic basis.
Accrued interest on a particular day is equal to the daily interest rate
multiplied by the number o days since the last interest payment date.

Usually, dividends are proposed at the time of the Annual General Meeting
and become due on the record date. There is a gap between the dates on
which it becomes due and the actual payment date. In the intermediate
period, it is deemed to be: “accrued”.

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 Expenses including management fees, custody charges etc. are calculated
on a daily basis.
BENEFITS OF MUTUAL FUND INVESTMENT

♦ PROFESSIONAL MANAGEMENT
Mutual fund provide the services of experienced and skilled professionals
backed by a dedicated investment research team that analyses the
performance and prospects of companies and selects suitable investments to
achieve the objectives of the scheme.

♦ DIVERSIFICATION
Mutual fund invests in a number of companies across a broad cross-section
of industries and sectors. This kind of diversification enables to reducing the
risk.

♦ CONVENIENT ADMINISTRATION
Mutual fund reduces paper work and helps to avoid many problems such as
bad deliveries, delayed payment etc and improves the administration
efficiency.

♦ RETURN POTENTIAL
Over a medium to long term, mutual fund have the potential to provide
higher return as they invest in a diversified basket of selected securities.

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

♦ LIQUIDITY
In open-ended schemes, the investor gets the money back promptly at net
asset value related prices from the mutual fund. In closed ended, units can be
sold on a stock exchange at prevailing market price or the investor can avail
of the direct repurchase at NAV related prices by the mutual fund.

♦ TRANSPERENCY
You get regular information on the value of your investment in addition to
disclosure on the specific investment made by your scheme, the proportion
invested in each class of asset and the fund manager’s investment strategy
and outlook.

♦ FLEXIBILITY
Through features such as regular investment plans, regular withdrawal plans
and dividend reinvestment plans, you can systematically invest or withdraw
funds according to your needs and convenience.

♦ AFFORDABILITY
Investors individually may lack sufficient funds to invest in high-grade
stocks. A mutual fund because of its large corpus allows even a small
investor to take the benefit of its investment strategy
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♦ WELL REGULATED
All mutual funds are registered with SEBI and they function within the
provision of strict regulations designed to protect the interests of investors.
The operations of mutual funds are regularly monitored by SEBI

A PROFILE OF STANDARD CHARTERED

AN OVERVIEW

STANDARD CHARTERED was named after two banks that merged in

1969. They were originally known as Standard Bank of British South Africa
and the Chartered Bank of India, Australia and China.

STANDARD CHARTERED is the world’s leading emerging markets bank

headquartered in London. Their businesses however, have always been
overwhelmingly international. It operates in more than 50 countries. It is one
of the world’s most international banks, with a management team
comprising 70 nationalities.

It is listed on both the London Stock Exchange and the Stock Exchange of
Hong Kong and is in the top 25 FTSE-100 companies, by market
capitalization.

The new millennium has brought with it two of the largest acquisitions in the
history of the bank with the purchase of Grind lays Bank from the ANZ
20
Group and the acquisition of the chase consumer banking operations in
Hong Kong in 2000.

These acquisitions demonstrate standard chartered is firm committed to the

emerging markets, where they have a strong and established presence and
where they see future growth.

EXECUTIVE DIRECTORS

 Bryan Sanderson
 Mervyn Davies
 Mike De Noma
 Chris Keljik
 Richard Meddings
 Kai Nargolwala
 Peter Sands

ETHICS

STANDARD CHARTERED’S reputation is critical to being the world’s

leading emerging market bank. The preservation and enhancement of that
reputation depends upon business operating to the highest standards of
ethical conduct.

The principles that govern the behavior of the business and employees are
reflected in a group code of conduct. It is a practical working document that
guides employees through the many difficult issues that confront them.
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There follows the summary of key elements in the Group Code of Conduct:

Local Laws and Group Standards

Confidentiality and Data Protection
Suitable Products
Money Laundering
Insider Trading
Bribery and Corruption
Gifts and Entertainment
Conflicts of interest
Dealing in Standard Chartered shares
Speaking up.

AREAS OF OPERATIONS

♦ Personal Banking
♦ Business Financial Services
♦ Commercial Banking

ACCOLADES

 Best Debt House in India

 Euro money Awards for Excellence, 2003
 Best Bond House in Thailand

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 STANDARD CHARTERED MUTUAL FUNDS

AN OVERWIEW

ANZ Grindlays Mutual Fund, which has been renamed as Standard

Chartered Mutual Fund had been constituted as a trust in accordance with
the provision of Indian Trusts Act, 1882 vide a trust deed dated December
29,1999.
Standard Chartered Bank had acquired the interest of ANZ Banking Group
in the ANZ Grindlays AMC Pvt. Ltd. And subsequently these entities were
renamed as Standard Chartered AMC Pvt. Ltd. and Standard Chartered
Trustee Co. Pvt. Ltd.
Perhaps among the only domestic fund house that focuses on debt markets.
Standard Chartered Mutual Fund within a short span of 3 years manages
assets in excess of Rs.9000crs. in its seven open-ended 100% equity free
schemes.
Standard Chartered Mutual Fund galvanized an otherwise document
segment of debt funds with the launch of several innovative products and
services.
Chief among them the Short Term Plan, the Medium Term Plan and a truly
actively managed debt fund-the Dynamic Bond Fund and redemptions the
very next day for all classes.

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 INVESTMENT ALLOCATION

SCMF mainly looks towards that area of investments where they deal in
100% debts without taking leverage of equity so that risk level limits to its
minimum. However, their area of operation directly gets influenced through
bank rate and policies. From the above it can be concluded that:

 Basic investment in debt market

 Less risk
 Influenced by bank rate

Categories of allocation

Govt. of India (GOI) Securities

7.46% GOI 2017
9.39% GOI 2011
8.07% GOI 2017
5.64% GOI 2019 etc.

PSU Bonds/ FIs

IRFC
National Thermal Power Company
IDBI LIMITED
Exim Bank etc.

Corporate Debentures
Reliance Industries Ltd.
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 HDFC
Indo Gulf Corporation Ltd.
Citibank NA
GE Capital Services India
Tata Power Co. Ltd. etc.

Call Money Market

T-Bill
CBLO

Bank Deposits
Call / Reverse Repo / Others

Note: -The investment portfolio varies from scheme to scheme. Subject to

the regulations, the asset allocation pattern may change from time to time,
keeping in view market conditions, market opportunities, applicable
regulations and political and economic factors. It must be clearly understood
that the asset allocation between various types of debt instruments can vary
substantially depending upon the perception of the investment Manager, the
intention being at all times to seek to protect the interests of the Unit
holders. Such changes in the investment pattern will be for a short term and
for defensive considerations only.

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SCHEMES of Standard Chartered Mutual Fund

 Grindlays Cash Fund

 Grindlays Floating Rate Fund
 Grindlays Super Saver Income Fund- Short Term
 Grindlays Super Saver Income Fund- Medium Term
 Grindlays Super Saver Income Fund- Investment Plan
 Grindlays Dynamic Fund
 Grindlays Government Securities Fund

• GRINDLAYS CASH FUND

Fundamental Attributes

Type of Scheme :Open ended income Scheme

Entry Load :Nil
Exit Load :Nil

Investment Objective

To generate optimal returns with high liquidity by investing in high quality

money market and debt instruments.

Investment Pattern

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The corpus of the Schemes will be invested in high quality debt and money
market instruments including securities issued/guaranteed by Central Govt. /
State Govt, corporate debt of both public and private sector, CD, commercial
paper, treasury bills, interbank call and term money, securitized debt and
other permitted debt instruments.

The scheme may invest in other debt Schemes managed by the AMC or in
the debt Schemes of any Other Mutual Fund , provided it is in confirmity to
the investment objectives of the Scheme and in terms of the investment
objectives of the Schemes and in terms of the prevailing regulations.

GCF … at a glance

 Ideal Investment Horizon:

Parking of idle funds ranging from 1 day to 7 days.
 Dividend Frequency:
Daily / Weekly with compulsory investment
 Minimum fresh Application Amount:
Rs. 25000/- and in multiples of Re. 1/-
 Systematic Investment Plan:
Not applicable
 Systematic Withdrawal Plan:
Not applicable

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• GRINDLAYS FLOATING RATE FUND

Fundamental Attributes

Type of Scheme :Open ended income scheme

Entry Load :Nil
Exit Load :Nil

Investment Objective

GFRF The primary objective of the Scheme is to generate stable returns with
a low risk strategy by creating a portfolio that is substantially invested in
good quality floating rate debt or money market instruments, fixed rate debt
or money market instruments swapped for floating rate returns and fixed rate
debt and money market instruments.

Investment Pattern

The corpus of the scheme will be invested in high quality debt and money
market instruments including fixed and floating coupon bearing corporate
debt of both, public and private sectors, certificates of deposit, commercial
paper, treasury bills, inter bank call and term money, securitized debt and
other permitted debt instrument. The scheme may invest in other debt
scheme managed by the AMC or in the debt schemes of any other mutual

28
fund, provided it is in conformity to the investment objectives of the
schemes and the terms of the prevailing regulations.
The fund will use derivative instrument for the purpose of hedging and
portfolio balancing.
GFRF … at a glance

 Ideal investment horizon:

Protects investment in rising rate environment in 7-15 days or up to a
month.
 Dividend frequency:
Monthly and daily / weekly with compulsory reinvestment
 Minimum fresh application amount:
Rs 500/- in multiples of Re 1/-
 Systematic investment plan:
Minimum of Rs 500/- per month with 6 PDCs or Rs 1500 per quarter
with 4 PDCs
 Systematic withdrawal plan:
Rs500/- and multiple of Re 1/-

• GRINDLAYS SUPER SAVER INCOME FUND –

SHORT TERM

Fundamentals Attributes

Type of Scheme :Open ended income scheme

Entry Load :Nil
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Exit Load :Nil

Investment Objective

The primary investment objective of the scheme is to seek to generate stable

return with low risk strategy by creating a portfolio that is invested in good
quality fixed income and money market security

Investment pattern
The corpus of the scheme will be invested in high quality debt and money
market instrument including securities issued / guaranteed by central govt./
state govt, corporate debt both public and private sector certificate of
deposit, commercial paper, treasury bills, inter bank call and term money,
securitized debt and other permitted debt instruments investment in other
debt schemes of other mutual fund can also be made subject to regulations.
The scheme may invest in short term deposits of scheduled commercial
banks as permitted under extant regulations.

GSSIF-ST ….at a glance

 Ideal investment horizon:

More than 60 days
 Dividend frequency:
Monthly
 Minimum fresh application amount:

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 Rs500/- and multiple of Re 1/-
 Systematic investment plan:
Minimum of Rs 500 p.m. with 6 PDCs or Rs 1500 p.q. with 4 PDCs
GRINDLAYS SUPER SAVER INCOME FUND-
MEDIUM TERM

Fundamentals Attributes

Type of Scheme :Open ended income scheme

Entry Load :Nil
Exit Load :0.25 %

Investment objective

The primary investment objective of the scheme is to seek to generate stable

return with low risk strategy by creating a portfolio that is invested in good
quality fixed income and money market security

Investment pattern

The corpus of the scheme will be invested in high quality debt and money
market instrument including securities issued / guaranteed by central govt./
state govt, corporate debt both public and private sector certificate of
deposit, commercial paper, treasury bills, interbank call and term money,
securitized debt and other permitted debt instruments investment in other
debt schemes of other mutual fund can also be made subject to regulations.
31
The scheme may invest in short term deposits of scheduled commercial
banks as permitted under extant regulations.

GSSIF-MT ….at a glance

 Ideal investment horizon:

More than 180 days
 Dividend frequency:
Bi- monthly
 Minimum fresh application amount:
Rs500/- and multiple of Re.1/
 Systematic investment plan:
Minimum of Rs 500 p.m. with 6 DCs or Rs 1500 p.q. with 4 PDCs
 Systematic withdrawal plan:
Rs. 500/- and in multiples of Re. 1/-

• GRINDLAYS SUPER SAVER INCOME FUND-

INVESTMENT PLAN

Fundamental Attributes

Type of Scheme :Open ended income scheme

Entry Load :Nil
Exit Load :0.5%

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Investment Objective
It is designed for the investors seeking stable returns and generally has a
medium to long-term maturity profile. It will provide stable returns over a
relatively longer tenor period of investment by investing in good quality
fixed income and money market securities.

Investment Pattern

The corpus of the scheme will be invested in high quality debt and money
market instrument including securities issued / guaranteed by central govt./
state govt., corporate debt both public and private sector certificate of
deposit, commercial paper, treasury bills, interbank call and term money,
securitized debt and other permitted debt instruments investment in other
debt schemes of other mutual fund can also be made subject to regulations.
The scheme may invest in short term deposits of scheduled commercial
banks as permitted under extant regulations.

GSSIF-IP ….at a glance

 Ideal investment horizon:

More than 365 days
 Dividend frequency:
Quarterly / Half-yearly / Yearly
 Minimum fresh application amount:
Rs.500/-and in multiples of Rs.1/-
 Systematic investment plan:
Min. of Rs.500/- p.m. with 6PDCs or Rs.1500/- p.q. with 4PDCs

33
 Systematic withdrawal plan:
Rs.500/- & in multiples of Re.1/-

• GRINDLAYS DYNAMIC BOND FUND

Fundamental attributes

Type of scheme :Open ended income fund

Entry load :Nil
Exit load :0.5 %

Investment objective

To generate optimal returns with high liquidity by active management of the

portfolio, by investing in high quality money market and debt instruments.

Investment pattern

The major investment in this scheme is in Cash Fund i.e. call money market
and income fund. The portfolio of an Income Fund consists of GOI
securities, corporate debentures, PSU bonds and money market instruments.
A major part of the Corporate Bonds that the income funds invest in, are less
liquid.
1) It will operate like a Cash Fund when interest rates are expected to rise
and will run like an Income / Gilt Fund when interest rates are expected
to fall.
34
2) The fund tries to maximize trading gains and minimize capital risk.

GDBF ….at a glance

 Ideal investment horizon:

More than 365 days
 Dividend frequency:
Quarterly / Yearly
 Minimum fresh application amount:
Rs.500/-and in multiples of Rs.1/-
 Systematic investment plan:
Min. of Rs.500/- p.m. with 6PDCs or Rs.1500/- p.q. with 4PDCs
 Systematic withdrawal plan:
Rs.500/- & in multiples of Re.1/-

• GRINDLAYS GOVERNMENT SECURITIES FUND

Fundamental attributes

Type of Scheme :Open ended income scheme

Entry Load :Nil
Exit Load :0.5 %
Investment pattern

35
1) Investment Plan: This plan is for investor seeking returns without credited
risk for more than one-year investment. It is an open ended dedicated gilt
scheme with an objective to generate optimal returns

with high liquidity by investing in Govt securities.

2) Short term Plan: This plan is for investors seeking returns without credit
risk for less than 4 months investment. It is an open ended dedicated gilt
scheme with an objective to generate optimal returns with high liquidity
by investing in Govt securities.

GGSF ….at a glance

 Ideal investment horizon:

Investment Plan (IP): More than 180 days Short Term (ST): More than 60
days.
 Dividend frequency:
(IP): Quarterly / Half Yearly / Yearly (ST): Quarterly / Monthly.
 Minimum fresh application amount:
Rs.500/-and in multiples of Rs.1/-
 Systematic investment plan:
Min. of Rs.500/- p.m. with 6PDCs or Rs.1500/- p.q. with 4PDCs
 Systematic withdrawal plan:
Rs.500/- & in multiples of Re.1/-

PLANS AVAILABLE

36
Plan A: It is a regular plan for all categories of investment whether
individuals or non-individuals. Minimum investment is Rs.500 and up to
Less than Rs.1 Crore.
Plan B: It is an institutional plan for non-individuals only. Minimum
investment is Rs.1 Crore and up to Less than 10 Crore.

Plan C: It is a super institutional plan for non-individuals only with

minimum investments of Rs.10 Crore.

OPTIONS AVAILABLE

1) Dividend mode: In this option dividend is declared for the unit holders.

(a) Dividend Pay Out: It is suitable for the investors seeking a regular and
attractive income with adequate safety by investing in a diversified
portfolio of money market and debt instruments of varying maturities
while retaining the benefit of continuous liquidity.
(b) Dividend Reinvestment: Investors opting for the Dividend option may
choose to reinvest the dividend to be received by them in additional
units of the scheme. The dividend so reinvested shall constitute a
constructive payment of the dividend to the unit holders and a
constructive receipt of the same from each unit holder for reinvest in
units.

2) Growth Option: Seeks to provide capital appreciation with adequate

safety by investing in a diversified portfolio of money market and debt
instruments of varying maturities while retaining the benefit of

37
 continuous liquidity. Dividends are not declared under this scheme. The
income continues to remain invested in the scheme and will be reflected
in the NAV of units.

SWOT ANALYSIS

STRENGTHS WEAKNESSES
 Fund manager skill.  Lower Rate of Interest.

 Portfolio Management.  Lesser Goodwill.

 Innovative Ideas.

OPPURTUNITIES THREATS
 Security Transaction Tax.  Rebate under section 88.

 Long-term Investment Benefits.  Providend Fund Benefit.

 Liquidity.  Fixed Deposits and

Government
Securities.
 Lesser Risk.
 Rise in Inflation.
 Tax Efficient.
 Unit Linked Insurance.

SWOT Analysis implies that judging the organization on the basis of it

strengths, weaknesses, opportunities, threats. So for the same purpose
38
generation of strengths and weaknesses come from the internal environment
of the organization and opportunities and threats come from external macro
environment like legal, economic, etc. The description of each is given
below:

STRENGTHS

Fund manager’s skill: Investing the funds in the various debt schemes
through fund manager is one of the strength for SCMF because they had to
constantly look upon a well diversified sector for investment and investing
in such a way as to provide optimal and maximum return.

Portfolio management: Investment is made in diversified securities wit

varying maturity period so as to provide reasonable and less risky returns to
the investors.

Innovative ideas: Standard Chartered AMC has innovative and objective

oriented ideas regarding investments. Looking the current situation
prevailing this mutual fund provides different schemes like short-term-cash
funds schemes and long-term floaters. According to the needs of the
investors like buying houses or children education, this mutual fund enables
to provide satisfactory investment schemes.

WEAKNESSES

Lower rate of Interest: One of the weaknesses which is usually suffered by

this debt house is providing lesser rate of return as compared to what
39
investor gets in investing government securities and public provident fund
and other schemes like insurance.

Lesser goodwill: Being a foreign and private sector organization it has

lesser goodwill than public sector funds like SBI mutual funds that has
government backing.

OPPORTUNITIES

Security Transaction Tax: As per the current budget debt fund house is
exempted from security transaction tax and thus has an edge over other
equity mutual funds.

Long-term Investment Benefits: The long-term investment schemes

provided by the debt house not only gives a faster growth of NAV but also
provides long-term capital gain tax benefits (10% without indexation and
20% with indexation).

Liquidity: The schemes of SCMF provide high liquidity as the amount can
be withdrawn any time with a lock in period of just 6 months in few
schemes.

Lesser Risk: Keeping the above points in the mind the possibility of
uncertainty and risk comes to its minimal because of the fact that principal
amount always remain intact and no kind of loss booking on it.

40
THREATS

Rebate under section 88: The schemes do not enjoy the benefits of rebate
under section 88 on investments.

PF Benefits: As the PF provides stable 8% return on savings, which is not

necessarily available in schemes.

FD and the Government Securities: The investment in these schemes

provides 100% safety of the amount, which is not as appropriate in the
schemes.

Rise in Inflation: In the current scenario because of the rise of crude oil
prices and the delayed monsoons economy of India has touched 7.5%
inflation rate and this has discouraged the investment in debt funds.

Unit linked Insurance Plan: This scheme provides safety of investments as

well as returns on the basis of market conditions, which proves to be the
biggest threat to debt funds.

41
 THE RESEARCH

Research has to be undertaken in a systematic manner, to ensure tat

problems dealt with properly and that nothing overlooked. The systematic
way, in which research was undertaken and referred to as the research
process, to which there are a number of stages. Each stage is explained in
brief in context with the project undertaken, as written as under:

NATURE OF MARKET RESEARCH

Information plays an important role in helping firm to make decisions. A

firm undertakes marketing research to uncover facts about both buyer and
non-buyers of its products. This involves ascertaining the nature of wants
and assessing the current and potential demand for products and services.
Information can help to reduce the element of uncertainty and guess work in
making marketing decision. Main divisions of marketing research are as
follows:

• Product research: Concerned with the design, development and testing

of new products, the improvement of existing products and prediction of
trends in consumer preferences related to styling, product performance,
and quality of materials.

• Customer research: Covering such matters as buyer behavior in

relationship to social, economic and cultural factors.
• Sales research: Examining the selling activities of a company, usually by
sales outlets, territories, agencies and so on.
42
• Promotion research: Concerned with testing and evaluation the
effectiveness of the various methods used in promoting company’s
products or services. This includes things such as exhibitions public
relation campaigns, merchandising, consumer and trade advertising, etc.

Customer
Research

Product Sales Promotion

Research Research Research

TITLE

43
 “Marketing of Mutual Funds with Competitive
Analysis in Present Scenario.”

Problem Identification / Objectives of the Project

For a project to be successful, definition of objectives is the most important

thing. The main objective of the project undertaken were:

a) To market the mutual funds.

b) To have a Competitive Analysis with other players in the industry.

It can be further segregated into following points:

a) To increase the customer base regarding the SCMF which was launched
in Jaipur in January only.
b) To create awareness among the investors for this investment vehicle,
which is still at inception stage in Jaipur context.
c) To find out the attractiveness of the mutual funds as compared to other
investment avenues.

Significance of the study

The underlying motives of the research were to furnish the organization with
vital information and facilitate the researcher to gain a practical insight to
the market scenario. The study proved significant in terms of catering to the
interests of both the company and the researcher.

44
Significance to the organization

The study enabled the organization to know about the perception of

investors for investment in various investment avenues; the benefits people
are looking forth from the mutual funds and the flaws in the various
schemes.

RESEARCH METHODOLOGY

45
Research Design

The research was “Descriptive” in nature as it dealt with describing the

market and the buying behavior of consumers. The research was designed to
discover the potentiality of the mutual fund market at Jaipur and also the
survey of the investor’s to know about their perception, the psychological
factors associated with the product, the benefits they are looking forth from
the product and how do they rank in terms of risk and returns associated
with it. The research was carried out after dividing the market into segments
and the segment selected for the research was Jaipur Stock Exchange
Limited (JSEL for Stock Brokers) and Industrialists considering them the
potential investors for this investment avenue i.e. mutual fund.

Sample Design

The first step in order to accomplish the task was to draw a sample. To serve
this purpose, the sampling technique adapted was: “Random Sampling”.
For that purpose JSEL and Industrial areas at Jaipur was visited and
maximum number of Stock Brokers and Industrialists were surveyed with an
avowed objective of minimizing bias and maximizing the reliability of the
data. Also, by adopting this procedure it was ensured that the sample drawn
would have the same composition and characteristics of the population.

46
Type of Universe

The investors/potential investors were basically those from the JSEL and
Industrialists at Jaipur. The Universe comprised of the finite number of
customers and it can be considered homogenous in nature, to a great extent.

Size of the Sample

Since, the population was homogenous in nature to a large extent, hence a

sample size of 25 respondents were taken into account to achieve the
objective of the study. Other prominent factors, kept in view while
determining the size of the sample were size of the population, the number
of questions in the schedule, the sampling procedure adopted and the time
constraint. Thus a sample consisting of 25 respondents were chosen, which
fulfilled the requirements of efficiency, reliability and flexibility.

Industries Selected:

• Aditya Aluminum
• Arora Industries
• Jyoti Ice Factory
• Vipul Motors Ltd
• Roshan Motors
• Modi Marble Industries
• Kanta Tools
• Vatika Arts

47
• Shree Shyam Oil & Dal Mills
• Rajasthan Electronics
• Gopal Ice Factory
• Bhavani Printers
• Chandan Craft Private Ltd
• Exporters India
• Hues India Private Ltd

Stock Brokers Selected:

• Mr. Sunil Bakliwal

• Mr. Narendra Bharuka
• Stock Holding Corporation
• Binod Tholia & co
• Flora Securities
• Kamal Fincap Ltd
• PKG Finstock Pvt Ltd
• Raman Ramniwas
• Mr. Rajendra Tapuria
• Mr. Anshul Sharma

Method of Data Collection

48
Schedule {Performa containing set of Questions} was developed to conduct
the survey. The researcher put to the respondents the questions from the
Performa and recorded the replies.
The schedule was the best available alternatives for data collection. The
other options were that of Interview and Questionnaire. The schedule had
many features which added value to its use as a tool for accumulation of
required information. Firstly, the segment i.e. Industrialists segment which is
very busy profession; the chances of the non-response would have been very
large. Moreover, if the mailing was used it would have made the task of
follow up extremely difficult.
Interview as a tool, is quite economical but it is difficult to record and retain
the information and especially if the queries include open ended questions.
Moreover, schedule serves the purpose of a structured form of the interview.
Though, schedule has limitations like, error on behalf of researcher while
recording the response or putting forward the query. It solved the purpose of
data collection for the project.

Contents of the Schedule

The schedule mainly comprised close- ended questions. A structured

schedule was preferred for the study. Also, the language of the questions was
kept as simple as possible and the questions were made as unambiguous as
possible. The questions have been arranged in a form to provide all the
needed information in maximum possible standardized form. The schedule
consisted of questions, which probed for the preference and the reasons for
certain buying pattern of the respondents.

49
In order to evaluate the efficiency of the schedule, a pilot survey was carried
out. On the basis of the findings of the pilot survey, necessary alternations
were made in the schedule to make it more effective.

LIMITATIONS OF THE STUDY

 Due to time constraint the survey could be conducted only in Jaipur. This
proved to be a limitation because the results thus obtained cannot be
accurately generalized for the entire country.
 The nature of the project demanded the information to be collected in full
details and hence the questionnaire was a much lengthier one. Which
took much time of the subjects to fill and hence some of them did not
give complete information.
 The sampling error that appeared due to the kind of sampling technique
adopted.
 Indifference and lack of interest disposed by a few respondents leading to
unauthentic responses.
 Time proved to be a major constraint as far as collection and analysis of
data was concerned.

To overcome the above limitations and to minimize their impact on the

findings of my report I had to meet more respondents than my actual sample
size.

50
 Q 1. With what purpose do you
invest?

20% 15%
Savings
Returns
Tax benefit
30% 35% Safety

The investors’ main purpose of investment is good returns and then tax
benefits. After that safety of funds is considered and then the savings. And
so their investment pattern depends upon the above-mentioned factors.

51
 Q.2. Are you aware of mutual funds as
an investment avenue?

10%

Yes
No

90%

Investors’ preference for financial assets is diverse and varied. 90%

respondents said Yes and 10% said that they are unaware, such a high
percentage of aware investors indicated that mutual fund concept is though
recent in Jaipur, it is there in the mindset of the investors.

52
 Q.3. Have you ever invested in a
mutual fund?

22%

No
Yes

78%

Mutual fund is a recent phenomenon with regard to Jaipur. The study

conveyed positive sentiments towards it, almost 78% said that they had
invested in mutual fund and only 22% said that they have not invested.

53
 If no, is there any specific reasons for
the same?

23% Unassured
returns
45%
Risky

Both
32%

The findings were based on three parameters-

1. Un assured returns
2. Risky
3. Both
45% of the investors are reluctant due to unassured returns while 32%
investors find investment in MFs risky option while 23% don’t invest due to
both the reasons.

54
 Q.4. How would you rank an
investment in Mutual Funds on the
following parameters

17%
Liquidity
42%
15% Returns
Safety
Tax benefit
26%

Considering the fact that every individual has got his/her requirements
regarding an investment. Their investment decisions are mainly based upon-
1. Liquidity
2. Returns
3. Safety
4. Tax benefit
In present scenario the mutual fund investor basically looks for liquidity
next feature is returns, safety and then tax benefit.

55
 Q.5. Would you like to invest in a low
return and low risk Mutual Fund?

40%
No
Yes
60%

Investors basically look for high return investments but still 40% investors
prefer low return and low risk mutual fund i.e. 100% debt fund.

56
 Q.6. If in MF, then you invest in-

20%
Balanced Fund
Equity Fund
50%
Debt Fund
30%

50% of the investors make their investments in balance funds so as to have

risk and returns in equal ratio.
30% of the investors make their investments in equity funds so as to earn
higher returns.
And,
20% of the investors make their investments in debt funds so as to have
moderate returns with low risk.

57
 Q.7. Investors' readiness stage about
the products of SCMF

32% Unaware
36%
Aware
Interested
20% 12% Intending to invest

This forms the behavioral base for segmenting the market. A market consists
of people in different stages of readiness to buy a product. Some are
unaware of, some are aware some are interested and some are intending by
the product.
36% of the respondents are intending to buy the product. But 32% are
unaware about the product 20% are interested and 12% are aware of the
product of SCMF.

58
For individual investors

Q.1 What is the general investment

pattern.

21%
32% Mutual Funds
Insurance
11% Share Market
Real Estate
36%

The investors like industrialists have their main investment in share market,
as they are risk players i.e. 36 % and then 32 % have their investment in real
estate and 21 % prefer to invest in mutual funds and 11 % in Insurance
sector.

59
 Q.2 Schemes of SCMF most prefered

10% 5%
GDBF
15% GSSIF-IP
GSSIF-MT
70% GGSF

The individual investors prefer mainly GDBF i.e. 70% as it as it is most

active trading fund and it provides maximum returns with low risk.
GSSIF-IP attracts 15% of individual investors
GSSIF-MT is prefer by 10% investors and
5% prefer GGSF.

60
 Q.3 Options under schemes of SCMF
prefered.

Growth
18%
7% Dividend Pay Out

75% Dividend
Reinvestment

75% of the investors prefer growth plan in the schemes as it provides long
term capital gain benefits along with the returns and then 18% prefer
dividend reinvestment plan as the dividend gets reinvested thereby
increasing number of units and 7% investors prefer dividend payout option
which provides periodic returns.

61
For institutional investors

Q.1 What is the general investment

pattern.

5%
20% Current Account
Mutual Funds
Share Market
10% 65%
Others

65 % of the institutional investors have their investments in current account

to avail the liquidity and 20 % prefer to invest in share market so as to earn
higher returns while 10 % invest in mutual funds and 5 % in other
investment avenues.

62
 Q.2 Schemes of SCMF most prefered

40%
GCF
GFRF
60%

The 60 % institutional investors invests in GFRF as it provides

100 % capital preservation and adjust according to the increasing benchmark
rate to give higher returns and,
40% investors invest in GCF.

63
 DEBT FUND HOUSE ….WHICH ASSURRES
SAFETY

Standard Chartered reflects for what it stands for a reflection that ultimately
leads to well design products and services. Easy to follow and better sense to
satisfy the need of investors. The vision they carry and the brand they have
shows the dedication for the work they do for example, Standard Chartered
Mutual Fund run a dummy portfolio for a period of 6 months before
launching their one of the long-term investment plan.

As a debt fund house or as a matter of fact the only 100% debt fund house in
India go beyond the one ubiquitous debt fund inform products that had
different maturity profile and hence appeal to a wider section of the investor
that usually invests in the debt funds. Some of the Standard Chartered
Mutual Funds are short-term GCF, in medium term GSSIF-MT, long-term
Dynamic bond fund and GSSIF-IP.

To study for the title: “MARKETING OF MUTUAL FUNDS WITH

COMPETITIVE ANALYSIS IN PRESENT SCENARIO”. The
researcher should undergo the various characteristics of Standard Chartered
Mutual Fund (SCMF) before generating the marketing strategy of SCMF.

64
 RISK-ASSOCIATION

CHARACTERISTICS
EASY RETURNS
LIQUIDITY

DIVERSIFICATION

Risk Association: This is one of the area where what is right for one
investor may be not for another as this attribute is subjective in nature.
Being a debt fund house it keeps all the debt schemes with it, which
counter balance the risk association attached with the securities trading and
stock markets. Due to this reason of providing or covering the risk investor
invest in debt funds.

Returns: The schemes provide low but stable returns due to investments in
money market securities and call money market, which is Safe Avenue.

Easy Liquidity: This is the characteristic where funds can be withdrawn at

any time, which ensures the availability at any point of time.

Diversification: The investments of funds has diversified portfolio so as to

ensure the liquidity as well as safety and moderate returns.

65
 After studying and analyzing the characteristics the marketing strategy of
SCMF has to be defined which says that

Marketing strategy for an investing house generally considers as the

investment strategy, which they use to attract the investor. Investment
strategy for the present time can be analyzed by looking two dimensions
that is Macro and Micro factors.

When the researcher wants to tell the Macro factor it means the current
present scenario of the Indian economy. This Indian economy can be
judged by looking the present environment.

 What is environment?

The present environment is the amalgamation of three diverse features:

• Richness: implies the resources it has.

• Dynamism: implies the degree of changes present.
• Complexity: states the degree of stability in the environment.

 What features exactly present environment has?

The present environment can be defined with keeping the following points
in mind:
• Monsoon factor: The slow picked up monsoon took a lost in terms of
output CMIE (Central Monitoring for Indian Economy) showed GDP
6%.
66
• The higher rate of crude oil prices increased the higher inflation, which
affects on profitability of company depending upon their bargaining
powers with consumers and suppliers.
• Interest Rate is already up trend higher rate will impact both on
investment and consumption activity of the economy.

These are some points that depict the volatile nature and uncertainty of the
current environment.

After studying the environment it is equally important look further the

budget of 2004-2005 regarding the effect of budget on debt funds.

The summarized budget left its effect on various investment

instruments.

As per current budget the securities transaction tax of .15% of the value of
transaction to be shared equally by the buyer and the seller of security tax
has been levied on all stock market transactions, the quantum depends on the
kind of trade carried out by the investor.
Impact on debt fund and its dividend

The new budget has put all dealings in bond and govt. securities out of
transaction purview because they are not directly being traded in the stock
market. This implies that the long-term capital gains on debt fund will be
taxed at the existing rates. (10% without indexation benefits and 20% with
indexation benefits)

67
Likewise short-term capital gains will attract tax at the marginal rate of
income.

Impact on dividend
Dividends in the debt fund including (MIPs) will continue to attract 12.5%
dividend distribution tax that will be paid by mutual funds.
 Following are the micro factors in the summarized form telling the
internal strengths and weaknesses of the SCMF.

STRENGTHS

Fund manager’s skill:

Investing the funds in the various debt schemes through fund manager is one
of the strength for SCMF because they had to constantly look upon a well
diversified sector for investment and investing in such a way as to provide
optimal and maximum return.

Portfolio management:
Investment is made in diversified securities wit varying maturity period so
as to provide reasonable and less risky returns to the investors.

Innovative ideas:
Standard Chartered AMC has innovative and objective oriented ideas
regarding investments. Looking the current situation prevailing this mutual
fund provides different schemes like short-term-cash funds schemes and
long-term floaters. According to the needs of the investors like buying

68
houses or children education, this mutual fund enables to provide
satisfactory investment schemes.

WEAKNESSES

Lower rate of Interest:

One of the weaknesses which is usually suffered by this debt house is
providing lesser rate of return as compared to what investor gets in investing
government securities and public provident fund and other schemes like
insurance.

Lesser goodwill:
Being a foreign and private sector organization it has lesser goodwill than
public sector funds like SBI mutual funds that has government backing.

After looking the characteristics, macro factors (including the relevant part
of the budget), micro factors in the summarized form, now the researcher
wants to highlight the working of the SCMF, which enables the researcher to
generate the tentative strategy for the investment and enable to analyze its
future prospects in Rajasthan.

69
 THE WORKNG OF STANDARD CHARTERED
MUTUAL FUND

Being an investment house it’s working can be measured in terms of returns

on investment, average maturity profile of securities and net asset value
(NAV).

Returns on investments
It implies that by investing in this debt fund, what returns does the investor
get. For this purpose, it can be known as:

 9% GOI 2014 means getting 9% interest rate till the maturity in the year
2014.

Average maturity period

It means the average maturity of security in which the investment by the
debt fund has been made

Net asset value

It implies that summation of market value of securities and accrued income
–(fund house expenses) /number of outstanding units.

70
COMPETITVE ANALYSIS OF
STANDARD CHARTERED MUTUAL
FUNDS WITH OTHER MUTUAL
FUNDS AND INVESTING OPTIONS.

71
COMPARITIVE ANALYSIS OF THREE MONTHS WITHIN THE
FUNDS

ON THE BASIS OFAVERAGE MATURITY PROFILE

DETAILS OF MAY 2004 (1) JUNE 2004 (2) NET EFFECT
SCHEMES

GFRF 98 DAYS 84 DAYS With increasing

diversity of
availability of
floating rate
instruments in
the market, the
scheme has been
able to diversify
its floating rate
benchmarks to a
considerable
extent and reduce
the average
maturity.
GSSIF-MT 24 MONTHS 20 MONTHS The scheme has
reduced maturity
to 20 months
from 24 months
in keeping with
the general view
on interest rate
movements
GDBF 50 MONTHS 17 MONTHS The average
maturity of
GDBF has been
cut to 17 months
from 50 months
as gilt exposure
has been reduced
with maturity
presence in the
liquid sectors.

72
 ON THE BASIS OF RETURNS

DETAILS OF MAY-2004 JUNE -2004 BENCHMARK

SCHEME PERFORMANCE*

GFRF 4.99 % 4.90 % 4.74 %

GGSIF-MT 5.04 % 5.17 % 4.43 %
GDBF 8.25 % 6.82 % 5.11 %

* By: CRISIL
* Source: CAGR.

The above done analysis was based on the of following parameters

 On the basis of average maturity profile.
 On the basis of returns.

73
WITH OTHER INVESTING OPTIONS & MUTUAL FUNDS
(a) Based on Returns
Scheme On
Returns (%) Ranking
Name Date
1 3 6 1 Since 1 3 6 1 Since
Month Month Month year Launch Month Month Month year Launch

Prudential ICICI
Short-term Plan- 03 Sep
Dividend Monthly 0.49 1.01 2.31 4.54 7.00 1 1 1 1 2
04

Chola Freedom
Income Short
03 Sep
Term-Dividend 0.42 0.99 2.08 4.40 6.56 2 2 4 5 6
Monthly 04

Birla Bond Plus

Retail - Growth
03 Sep
0.39 0.96 2.15 4.43 6.67 3 3 3 3 5
04
Templeton India
Short-term
03 Sep
Income Plan- 0.34 0.82 2.25 4.47 6.80 4 4 2 2 3
Dividend Monthly 04

HDFC High
Interest Short
Term Plan-
03 Sep
0.33 0.73 1.99 4.42 6.80 5 5 5 4 4
Dividend Monthly 04

Grindlays Super
Saver Income
Fund Short-term- 0.21 0.57 1.76 4.14 7.15
03 Sep
6 6 6 6 1
Dividend Monthly 04

The rankings displayed here are all intra group rankings and are based on
the relative performance of each scheme vis-a-vis each other.

74
 On
Scheme Name Returns (%) Ranking
Date
1 3 6 1 Since 1 3 6 1 Since
Month Month Month year Launch Month Month Month year Launch

03
Chola Triple Ace-
0.84 -0.43 0.39 1.83 11.50 1 1 1 1 3 Sep
Dividend Quarterly
04
Prudential ICICI
03
Income Plan-
0.55 -1.47 -0.66 0.76 11.21 2 3 4 6 5 Sep
Dividend Quarterly
04

Grindlays Super
03
Saver Income
0.44 -1.42 -0.54 1.20 11.06 3 2 3 3 6 Sep
Investment-
04
Dividend Quarterly

03
Birla Income Plus-
0.41 -1.77 -0.80 0.84 12.12 4 6 6 5 2 Sep
Dividend Quarterly
04

Templeton India 03
Income Builder- 0.28 -1.72 -0.77 1.04 12.28 5 5 5 4 1 Sep
Quarterly Dividend 04

HDFC Income 03
Fund-Dividend 0.28 -1.49 -0.47 1.24 11.38 6 4 2 2 4 Sep
Quarterly 04

The rankings displayed here are all intra group rankings and are based on
the relative performance of each scheme vis-a-vis each other.

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Other Avenues

(1) Public Provident Fund (PPF) –

It is the most feasible option for the long term. But the interest rate on PPFs
has fallen from 12% in 1998 to 8% now. For those in the highest tax slab,
locking in money here is not tax-efficient. A PPF account locks in money for
at least 15 years, albeit with limited liquidity. A loan can be taken from the
account between the third and sixth financial years from the date of opening
the account. Another benefit is that a PPF account cannot be attached by a
court of law or through any decree.

(2) Post Office Schemes–

(a) Time Deposits:

In the post office schemes, the rates
Range from 6.25% for a one-year deposit to 7.50 % for a five-year deposit.
The post office schemes interest income is eligible for tax exemption (till Rs.
9000 per FY) under-section 80L of income tax ACT. Post office deposits
being a central govt. scheme are completely tax-free. There is a lock in
period of six months. This is best for short to medium investment horizon.

(b) National saving certificate, Kisan Vikas Patra –

NSC carry an interest rate of 8 % and provides you a twin benefit of tax
rebate under section 88 and interest income exemption under section 80L.
KVPs don’t provide tax relief, they just serve as an assured long-term
investment vehicle, and KVPs are suitable for investors nearing the

76
retirement. Investment in KVPs can be withdrawn after 2 ½ years; NSCs
don’t offer such a window.

(c) PO Monthly Income Scheme and Recurring Deposit Account –

The Post Office monthly income scheme is possibly one of its kinds is
offering an assured regular income. This gives an annual return of 8 %. For
tax efficiency, financial planners recommend investors in the higher tax
bracket to stay away from the post office monthly income scheme, as the
interest income would be taxable at higher rates.

(3) RBI Saving Bonds –

In this scheme, there is 8% savings bond that is taxable, and a 6.5% tax- free
savings bond – without any investment ceiling. The interest can be paid half-
yearly or accumulated.
The 6.5% tax-free bonds mature in 5 yrs., they can be encashed after 3 yrs.;
the 8% bond locks in your money for six years.
The 6.5% tax-free bonds are recommended for those in the high-income tax
bracket and the 8% bonds for those in the lower bracket.

(4) FDs – banks and companies–

The falling interest rates have hit the bank FD holder the most. Over the past
4-5 yrs., bank FD interest rates have almost halved. And with inflation
hovering above 5%investment can shrink in real terms. And interest income
above rs 9000 is taxable.

77
The increasing defaults in company deposits have made them riskier so
investment for 1 to 3 years is best.

(5) Unit Linked Insurance Plan (ULIP) –

It is the product where the benefits are expressed in terms of no. Of units and
unit price. It can be viewed as a combination of insurance and mutual funds.

The advantage is that these are simple, clear, and easy to understand. It also
leads to an efficient use of capital. The income on ULIP is exempted from
tax and provides life insurance. The no. Of units that a customer would get
depends on the unit price when he pays his premium. The daily unit price is
based on market value of underlying assets (Bonds, shares, debentures, etc.)

Strategy to invest in the SCMF is followed by the philosophy of SCMF

follows for its investment pattern.

THE PHILOSPHY

The investment philosophy of all schemes is to deliver upper quartile

returns, but without compromising on the quality of credit. For instance, out
of our total funds under management, around 96-97% is into AAA or
equivalent securities.

Managing the interest rate risk through a proprietary model called 3D-factor
process. SCMF have identified 13 factors that drive interest rate track these

78
to give a full picture of what is happening in the market and helps to
determine the future direction of interest rates, the credit risk monitor
through credit evaluation model.

After doing the summer training in SCMF looking it’s all dimensions of
working its prospects, its strengths that are their core competencies.
Now considering all the factors, researcher wants to give the tentative
investment strategy which if incorporated enables to generate good amounts
of funds.

Further the strategy is discussed with the future prospects as researcher

believes that both strategy and the future prospects exists together and other
highlighted points cannot be studied in isolation or under separate head.

79
 RECOMMENDATIONS

1. Investor friendly environment – Company should lay emphasis to create

investor friendly environment by helping the investors in selecting the right
type of the schemes. Hence manpower should be increased to handle the
back office responsibilities.

2. Service Centers – Few of the potential cities of Rajasthan should have

some kind of representation of the Standard Chartered Mutual Fund in the
form of Investors service centers.

3. Investors education Programme – Timely organizing such kind of

programmes by calling professionals from various fields of Finance and
especially from the members from the Fund managing team at Mumbai will
increase investors trust in the investment with the company.

4. Survey indicated Jaipur to be a highly potential city in terms of the

potential customers of the Mutual Fund in near future. This can only
increase by their continuous liasioning through advertising and properly
coordinated promotional program.

5. The Jaipur Branch office – the only at Rajasthan should undertake a

really planned promotional program keeping in purview the whole of
Rajasthan. Local newspapers, T.V. channels, Billboards and catchy
hoarding should do it.

80
6. The company should focus its attention on those schemes, which have
given good returns over the years. This will give boost to the investor’s
confidence in the company and also help the company in increasing its
clientele.

7. The company should categorize the investors into investors –

potential investors – high net worth investors and so on, there profile
should be properly maintained which will help in better understanding
the needs of its customers and suggesting the optimum mix of the
schemes accordingly.

8. The recent launches like Grindlays Floating Rate Fund –Long Term
Plan and All Seasons Bond Fund (Funds of Funds) looking at the
volatility in the current market has proved to be efficient for the fund.
The SCMF should look more forward to such schemes.

81
 BIBLIOGRAPHY

1. Bansal, Lalit, K., Mutual Funds – Management & Working, Deep &
Deep Publications New Delhi, 1996.
2. Griffeth, Bill, The Mutual Fund Masters, Probus Publishing, Chicago,
Illinois, Cambridge, England, 1995.
3. Jain Nabhi Kumar, Manuals of SEBI – Guidelines, Nabhi
Publications, New Delhi, August 1996.
4. Kothari C.R., Research Methodology, New Delhi, Wishwa Prakashan,
1990.
5. Kotler P., Marketing Management, Prentice Hall of India Private
Limited, New Delhi, 1999.
6. Kulshrestha C.M., Mastering Mutual Funds, New Delhi, Vision Books
Pvt. Ltd., 1994.

Websites

1. www.standardcharteredmf.com
2. www.standardchartered.com
3. www.indiainfoline.com
4. www.moneycontrol.com
5. www.indiatimes.com
6. www.amfi.com

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Magazines

1. Business World
2. Business Today
3. Business India

Newspaper

1. Economic Times
2. Financial Express
3. The Hindu
4. Business Standard

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