Final Draft

A Study On Investors Preference Towards Mutual Funds In Delhi
12219103910
EXECUTIVE SUMMARY
The Present business scenario is totally consumer oriented. Every company faces stiff competition from its competitors, each provides the best product at competitive rates. As a result customers have lot of choices to get the best with the least cost. To face this competition, it is very important to know investors behavior, their needs, preference and also the motivation factors. The main focus of this report is on the investors preference towards mutual funds in Delhi. In mutual funds process various parties are involved like Sponsors, Trustees, Assets Management Company and Custodian. The objective of the study is to analyze the investors preference towards mutual funds. In this project I mentioned overview of Industry, Company profile, Vision & Values, concepts of mutual funds with risk involvement. The information regarding the topic was gathered by the Primary data source i.e. through Questionnaire. The information was collected from the executives, sr. executives and asst. managers who were the part of the organization. The researcher also came across many findings in its course of study. Major findings include awareness of the investors in mutual funds and factors affected Investors Preference while investing in mutual funds. Keeping in mind the findings and discussions the researcher has formulated many suggestions and recommendations. These recommendations as stated by the researcher that help the company to overcome the limitations faced and achieve better heights. The study concludes with many suggestions and recommendations as being stated by the researcher so as to improve the recruitment process in the organization.
GITARATTAN INTERNATIONAL BUSINESS SCHOOL
Page 1
12219103910
CHAPTER-1 INTRODUCTION
Page 2
12219103910
1.1 INTRODUCTION TO THE PROJECT:

The project lays a great stress on investors preference. The primary objective is to explain in clear and simple language, the benefits and pitfalls of investing in mutual funds and preference of investors accordingly. This project attempts to look at the subject from the point of view of an ordinary investor. The research conducted helps in finding out the different avenues preferred for investment by investors, to know whether people invest in mutual funds or not, to identify the type of schemes preferred by investors. The project report also helps in finding out investors preference and investing behavioral towards mutual funds. The present study is divided into six chapters. Chapter 1 tells about the company profile and industrial overview. Chapter 2 of the project explains the basics of a Mutual Fund including types of mutual funds advantages and disadvantages of mutual funds. Then it highlights different types risk involvement in mutual funds. A section follows this on how to invest in mutual funds which covers all things one should look at before investing in a mutual fund. Chapter 3 of the project tells about the Research Methodology and Design. Chapter 4 shows the analysis of the data. In Chapter 5 Findings of the project are shown and chapter 6 of the project tells about the Conclusion and Recommendations.
Page 3
12219103910
1.2 COMPANY PROFILE

A financial powerhouse! It was established in the year 1994, Bonanza developed into one of the largest financial services and broking house in India within a short span of time. Today, Bonanza is the fastest growing financial service with 5 mega group companies under it. With diligent effort, acknowledged industry leadership and experience, Bonanza has spread its trustworthy tentacles all over the country with pan-India presence across more than 1632 outlets spread across 535 cities. With a smorgasbord of services across all verticals in finance, Bonanzas offers you the perfect blend of financial services right from Equity Broking, Advisory Services that cover Portfolio Management Services, Mutual Fund Investments, and Insurance to exceptional depository services. Bonanza believes in being technologically advanced so that we can offer you our techsavvy customers - an integrated and innovative platform to trade online as well as offline. Besides, we also have one of the finest and most dedicated research teams with experts who have in-depth, unsurpassed knowledge of the market place. All this and more makes Bonanza the perfect place for you to take your first step in the direction of financial success.
Page 4
12219103910
1.2.1
Vision and Values
Vision
To be one of the most trusted and globally reputed financial distribution companies.
Values
Customer-centric approach At Bonanza, customers come first. And their satisfaction is not just our top priority but also the driving force for us, every single day.
Transparency Honesty is our forte. We believe in dealing on thoroughly ethical grounds, being fair and transparent with our customers.
Meritocracy We recognize and appreciate efforts put in by our employees. And we, as a matter of fact, reward and distinguish each one of them, ceaselessly.
Solidarity We believe in sharing a forthright and respectful relationship with our business partners and employees. We consider them both as our team associates, who work together. Succeed together.
1.2.2 Milestones
4th largest in terms of no. of offices for 2008-2009*.
Page 5
12219103910
Top Equity Broking House in terms of branch expansion for 2008*. 6th in terms of trading terminals in for two consecutive years 2007- 2008*. 9th in terms of Sub Brokers for 2007* Nominated among the Top 3 for the "Best Financial Advisor Awards 09" in the category of National Distributors Retail instituted by CNBC-TV18 and OptiMix
Awarded by BSE Major Volume Driver 04-05, 06-07, 07-08. Ranked 2nd by UTI MF & CNBC TV 18 Financial Awards 2009 in the category Best Financial Advisor- Retail.
Page 6
12219103910
1.2.3 Bonanza as a company:-
Different areas of the company

1. Bonanza Portfolio Ltd.
Which includes:
Member: NSE, BSE, NSDL, CDSL Distribution: PMS, Mutual Funds, IPO.
2. Bonanza Commodity Brokers Pvt. Ltd.
NCDEX AND MCX Commodity Derivatives.
3. Bonanza Global DMCC
Dubai
Gold
and
Commodity
Exchange(U.A.E) 4. Bonanza Financial Academy Arbitrage curse NCF
Table No. - 1
1.3 INDUSTRY PROFILE
Page 7
12219103910
1.3.1 Mutual Fund in India

Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value of money decreases over a period of time. One of the options is to invest the money in stock market. But a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. 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. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. Diversification means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously. 1999YEAR OF THE FUNDS Mutual funds have been around for a long period of time to be precise for 36 yrs but the year 1999 saw immense future potential and developments in this sector. This year signaled the year of resurgence of mutual funds and the regaining of investor confidence in these MFs. This time around all the participants are involved in the revival of the funds ----- the AMCs, the unit holders, the other related parties. However the sole factor
Page 8
12219103910
that gave lifer to the revival of the funds was the Union Budget. The budget brought about a large number of changes in one stroke. An insight of the Union Budget on mutual funds taxation benefits is provided later. It provided centre stage to the mutual funds, made them more attractive and provides acceptability among the investors. The Union Budget exempted mutual fund dividend given out by equity-oriented schemes from tax, both at the hands of the investor as well as the mutual fund. No longer were the mutual funds interested in selling the concept of mutual funds they wanted to talk business which would mean to increase asset base, and to get asset base and investor base they had to be fully armed with a whole lot of schemes for every investor .So new schemes for new IPOs were inevitable. The quest to attract investors extended beyond just new schemes. The funds started to regulate themselves and were all out on winning the trust and confidence of the investors under the aegis of the Association of Mutual Funds of India (AMFI) One can say that the industry is moving from infancy to adolescence, the industry is maturing and the investors and funds are frankly and openly discussing difficulties opportunities and compulsions
1.3.2 History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and the Reserve Bank. 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
Page 9
12219103910
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.
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.
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.
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
Page 10
12219103910
administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of 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.
1.3.3 MAJOR PLAYERS SBI MUTUAL FUNDS

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an desirable track record in judicious investments and consistent wealth creation. The fund traces its origin to SBI - Indias largest banking enterprise. The institution has grown vastly since its inception and today it is India's largest bank, patronized by over 80% of the top corporate houses of the country.
HDFC MUTUAL FUND (AMC):

HDFC Asset Management Company Ltd (AMC) came into existence under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage its Mutual Fund. The paid up capital of the AMC is Rs. 24.162 crores.
Page 11
12219103910
The Sponsor of Zurich India Mutual Fund, Zurich Insurance Company (ZIC), following a review of its overall strategy, had decided to divest its Asset Management business in India. The AMC had entered into an agreement with ZIC to acquire the business, subject to necessary regulatory approvals.
RELIANCE MUTUAL FUND:

Reliance Mutual Fund (RMF) is one of Indias top Mutual Funds, with Average Assets Under Management of Rs. 1,02,730 crores. (AAUM for 31st May 09 ) and an investor base of over 72.30 Lakhs. Mission statement of RMF is: To create and nurture a world-class, high performance environment aimed at delighting our customers Reliance Capital Asset Management Limited (RCAM) is a registered company under the Companies Act, 1956 was appointed to act as the Investment Manager of Reliance Mutual Fund. RCAM was approved as the Asset Management Company for the Mutual Fund by SEBI on 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. Consistent to this IMA, RCAM is legally authorized to act as Investment Manager of Reliance Mutual Fund. The net worth of the Asset Management Company including preference shares as on September 30, 2007 is Rs.151.02 crores. The total net worth of the Asset Management Company as on March 31, 2008 is Rs 709.39 crores.
Page 12
12219103910
TATA MUTUAL FUNDS: EXPERTISE THAT IS TRUSTED

Backing provided by one of the most trusted and valued brands in India; Tata Mutual Fund has earned the trust of lakhs of investors with its consistent performance and worldclass service and better returns. Tata Mutual Fund manages around Rs. 21,304.00 crores as on May 31, 2009 worth of assets across its varied offerings. Tata Mutual Fund offers an investment option for everyone, whether one is a businessman or salaried professional, a pension holder or housewife, an aggressive investor or a conservative capital builder. The Tata Asset Management philosophy is centered on consistency as well as long-term results. Tata Asset Management aims at overall excellence, within the framework of transparent and rigorous risk. Consistency: Company strives to deliver consistent results through its value-based investing method. Flexibility: Tata Mutual Fund offers investors a broad range of managed investment products in various asset classes and risk parameters, with operational flexibility to suit their different investment needs. Stability: Companys commitment is to provide the highest quality of service and integrity is the foundation upon which it builds trust with its clients. Service: Tata offer a wide range of services to assist investors have a fulfilling and rewarding financial planning experience with. Company has designed its services keeping in mind the needs of investors, giving them a smooth and hassle-free financial planning process.
1.3.4 TYPES OF MUTUAL FUND SCHEMES
Page 13
12219103910
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry. LIST OF VARIOUS FUNDS ALONG WITH THEIR MAJOR SCHEMES: Fund nameMajor SchemesAlliance Capital Mutual Fund1)Alliance 95 Fund 2)Alliance Equity Fund 3) Alliance Liquid Income FundBirla Mutual1) Birla Advantage Fund 2) Birla Income PlusKothari Pioneer Mutual Fund1)Kothari Pioneer Prima Plus 2)Kothari Pioneer Blue ChipSBI Mutual Fund1)SBI Magnum Multiplier Scheme90 2)SBI Magnum Taxgain Scheme 1993 3) SBI Magnum Bond Fund 4) SBI Rising Income SchemePrudential - ICICI1) Prudential ICICI Growth Plan 2) ICICI PremierDSP Merrill Lynch FundDSP Merrill Lynch Equity FundMorgan StanleyMorgan Stanley Growth FundTata Mutual FundTata Balanced FundCanbank Mutual FundCangangaTempleton Asset Management Ltd.Templeton India Income FundUnit Trust of IndiaUTI MIP 94 (III)LIC Mutual FundLIC Dhanvarsha Table No. 2
1.3.5 Recent trends in mutual fund industry

The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by the nationalized banks and smaller private sector players. Many nationalized banks got into the mutual fund business in the early nineties and got off to a start due to the stock market boom were prevailing. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as a difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc.
Page 14
12219103910
1.2.6 SWOT ANALYSIS OF INDUSTRY STRENGTHS: Less risky compared to direct trading of shares Professional management Diversified portfolio Low at operational cost WEAKNESS: Expenses (entry & exit loads) born by investors Portfolios are not made according to the customers choice Customer does not have the custody of the investments Documentation is complicated OPPORTUNITY: Simplify the documentation Abolish entry loads Fixed deposits rates are going down that attracts the investors to invest in Mutual Funds THREATS: With abolishment of entry load no incentive will be there for the distributors to sell the funds. Instability in the market.
CHAPTER-2 THEORETICAL FRAMEWORK
2.1 Concept of Mutual fund
Page 15
12219103910
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 small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Mutual fund scheme has a defined investment objective and strategy. The Definition A mutual fund is nothing more than a collection of stocks and bonds. Investors can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund. Investors can make money from a mutual fund in three ways: 1) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution. 2) 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. 3) If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. Investors can then sell their mutual fund shares for a profit. Funds also usually give investors a choice either to receive a check for distributions or to reinvest the earnings and get more shares. Mutual Fund is a investment company that pools money from shareholders and invests in a variety of securities, such as stocks, bonds and money market instruments. Most openend mutual funds stand ready to buy back (redeem) its shares at their current net asset value, which depends on the total market value of the fund's investment portfolio at the time of redemption. Most open-end mutual funds continuously offer new shares to investors. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. In India, A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates
Page 16
12219103910
securities markets before it can collect funds from the public.Mutual funds can give investors access to emerging markets 2.2 Importance of Mutual Fund Small investors face a lot of problems in the share market, limited resources, lack of professional advice, lack of information etc. Mutual funds have come as a much needed help to these investors. It is a special type of institutional device or an investment vehicle through which the investors pool their savings which are to be invested under the guidance of a team of experts in wide variety of portfolios of corporate securities in such a way, so as to minimize risk, while ensuring safety and steady return on investment. It forms an important part of the capital market, providing the benefits of a diversified portfolio and expert fund management to a large number, particularly small investors. Now days, mutual fund is gaining its popularity due to the following reasons: l. With the emphasis on increase in domestic savings and improvement in deployment of investment through markets, the need and scope for mutual fund operation has increased tremendously. The basic purpose of reforms in the financial sector was to enhance the generation of domestic. 2. An ordinary investor who applies for share in a public issue of any company is not assured of any firm allotment. But mutual funds who subscribe to the capital issue made by companies get firm allotment of shares. Mutual fund latter sell these shares in the same market and to the Promoters of the company at a much higher price. Hence, mutual Fund creates the investors confidence. 3. As mutual funds are managed by professionals, they are considered to have a better knowledge of market behaviors. Besides, they bring a certain competence to their job. They also maximize gains by proper selection and timing of investment. 4. Another important thing is that the dividends and capital gains are reinvested automatically in mutual funds and hence are not fritted away. The automatic reinvestment feature of a mutual fund is a form of forced saving and can make a big difference in the long run. 5. The mutual fund operation provides a reasonable protection to investors. Besides, presently all Schemes of mutual funds provide tax relief under Section 80 L of the Income Tax Act and in addition, some schemes provide tax relief under Section 88 of the Income Tax Act lead to the growth of importance of mutual fund in the minds of the investors. 6. As mutual funds creates awareness among urban and rural middle class people about the benefits of investment in capital market, through profitable and safe avenues, mutual
Page 17
12219103910
fund could be able to make up a large amount of the surplus funds available with these people. 7. The mutual fund attracts foreign capital flow in the country and secures profitable investment avenues abroad for domestic savings through the opening of off shore funds in various foreign investors. Lastly another notable thing is that mutual funds are controlled and regulated by SEBI and hence are considered safe. Due to all these benefits the importance of mutual fund has been increasing. 2.3 TYPES OF MUTUAL FUNDS Mutual fund schemes may be classified on the basis of its structure and its investment objective. (1) By Structure: (a) Open-ended Funds: 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. It is the one that is available for subscription all through the year these do not have a fixed maturity. It is always open to subscribe at any time. (b) Closed-ended Funds : A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. (c) Interval Funds: Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices. (2) By Investment Objective: (a)Growth Funds: The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest 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. (b) 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,
Page 18
12219103910
corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income. (c) Balanced Funds: The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. (d) 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, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. (e) Gilt funds: These funds invest exclusively in government securities. Government securities have no default risk. NAV of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes. (f) Index funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as tracking error in the technical terms. Necessary disclosures in this regards are made in the offer document of the mutual fund schemes. There are also exchanges traded index funds launched by mutual funds which are traded on the stock exchanges. (g)Load Funds: A Load Fund is one that charges a commission for entry or exit. That is, each time investor buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history. (h) No-Load Funds: A No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to work. (3) OTHER SCHEMES: (a) Tax Saving Schemes: 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
Page 19
12219103910
(ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. (b) Sector/Industry Specific Schemes: Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like Software, FMCG, and Pharmaceuticals etc. The return in 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. (c) Off-Shore Funds: These funds will have non-residential investors and are regulated by the provision of the foreign countries where these are registered. Further, these funds are governed by the rules and procedures laid down for the purpose of approving and monitoring their performance by the Department of Economic Affairs, Ministry of finance and the directors of RBI. (d) Asset Management Mutual Funds: These are also called Asset Management Companies (AMCs). These have special characteristics of dealing with assets other than securities. These funds can acquire various assets and give them on lease basis to needy lessees.
Net Asset Value (NAV) The performance of a particular scheme of mutual fund is denoted by Net Asset Value (NAV). As defined in the AMFI booklet, net asset value is the market value of the assets of the schemes minus its liabilities. The per unit NAV is the net asset value of the schemes divided by the number of units outstanding on the Valuation Date. Sale PriceIt is the price paid when amount is invested in a scheme. It is also called offer price, it may include a sales loadRepurchase PriceIt is the price at which a close ended scheme repurchases its units and it may include a back-end/exit load. This is also called bid priceRedemption PriceIt is the price at which open ended schemes repurchase their units and close ended schemes redeem their units on maturity. Such prices are NAV related. Mutual funds invest the money collected from the investors in securities markets. In simple words, NAV is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of the schemes divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs. 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the
Page 20
12219103910
NAV per unit of the fund is Rs. 20. NAV is required to be disclosed by the mutual funds on a regular basis- daily or weekly- depending on the type of scheme. NAV is the rupee value of one unit of a scheme of the fund.
NAV is calculated as follows: Formula: NAV= [Net Assets of the schemes / No. of units outstanding] Whereas; Net Assets of the schemes = Fair market value of Schemes Investments + Receivables + Accrued income + Other assets - (Accrued expenses + other payables + other liabilities) Funds NAV is affected by four sets of factors: Purchase and sale of investment securities Valuation of all investment securities held Other assets and liabilities, and Units sold or redeemed Measuring Mutual Funds Performance Change in NAV The Most Common Measure PURPOSE- If an investor wants to compute the return on investment between two dates; investor can simply use the Per Unit Net Asset Value at the beginning and the end periods, and calculate the change in the value of NAV between the two dates in absolute and percentage terms.
FORMULA: NAV change in absolute terms = NAV at the end of the period / NAV at the beginning of the period and NAV change in percentage terms =(Absolute change in NAV/NAV at the beginning)*100 2.4 REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA
Page 21
12219103910
Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s, Government allowed public sector banks and institutions to set up mutual funds. In the year 1992, Securities and Exchange Board of India (SEBI) ACT was passed. The objectives of SEBI are to protect the interest the in securities and to promote the development of and to regulate the securities market. As far as mutual funds are concerned, SEBI formulated policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time .SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors. All the mutual funds whether promoted by public sector or private entities including those promoted by foreign entities are governed by the same of regulations. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. How to Set-up a Mutual Fund? A mutual fund is set up in the form of a trust, which has sponsored, Trustees, Asset Management Company (AMC) and Custodian. The trust is established by a Sponsored or more than one Sponsor who is like promoter of a company. The Trustees of the mutual funds holds its property for the benefits of the unitholders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the funds in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations require that at least two third of the directors of Trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any schemes. Parties to Mutual Funds The following are the various parties involved in the formation and working of the mutual funds: Name of the parties involvedRole and functionsSponsorEstablishes MF along with any individual/ body corporate. Liability limited to his contribution. Contribution by the Sponsor must be minimum 40% of networth of AMC (only those who qualify the criteria permitted by SEBI to set up MF)TrusteeBoard of Trustees
Page 22
12219103910
holding property of MF for the benefit of the unitholders.Asset Management Company (AMC) (Investment Managers of the Fund )Company registered under the Companies Act, 1956 and Approved by SEBI Minimum net worth of Rs. 5 crores and at least 50% of Board of AMC are independent director i.e. not connected with the sponsor organisation. No person can be Director of more than one AMC or Director of Trust Company operated by same AMC.CustodianPerson holding a certificate to carry on business of custodian of securities under SEBI (Custodian of Securities) Regulations to hold fund assets and delinked from the AMC.Table No. - 3 2.5 How to Invest in Mutual Funds? Mutual funds normally come out with an advertisement in newspapers publishing the date of launch of the new schemes. Investors can also contact the agents and distributors of mutual funds who are spread all over the country for necessary information and application forms. Forms can be deposited with mutual funds through the agents and distributors who provide such services. Now days, the post offices and banks also distribute the units of mutual funds. However, the investors may please note that the mutual funds schemes being marketed by banks and post offices should not be taken as their own schemes and no assurance of returns is given by them. The only role of banks and post offices is to help in distribution of mutual funds schemes to the investors. Investors should not be carried away by commission/gifts given by agents/distributors for investing in a particular scheme. On the other hand they must consider the track record of the mutual fund and should take objective decisions. Non-Resident Indians (NRI) can also invest in mutual funds. Normally, necessary details in this respect are given in the offer documents of the schemes. STEP 1 - Identify Investors Investment Needs Investors financial goals vary, based on their age, lifestyle, financial independence, family commitment, and level of income and expenses among many other factors. One can start with defining the investment objective. STEP 2 Choose the right mutual funds Some factors to evaluate before choosing a particular Mutual fund are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category. Others factors can be portfolio allocation, the dividend yield and degree of transparency. STEP 3 Select the ideal mix of schemes - Investing in just one mutual fund scheme may not meet all investment needs. One may consider investing in a combination of schemes to achieve their specific goals.
Page 23
12219103910
STEP 4 Invest Regulatory By investing a fixed sum each month, one can buy fewer units when the price is higher and more units when the price is low, thus bringing down the average cost per unit. STEP 5 Start early It is desirable to start investing early and stick to a regular investment plan. The power of compounding lets the investor to earn income on income and their money multiples at a compounded rate of return. 2.6 Mutual Funds: The Costs Costs are the biggest problem with mutual funds. These costs eat into investors return, and they are the main reason why the majority of funds end up with sub-par performance. What's even more disturbing is the way the fund industry hides costs through a layer of financial complexity and jargon. Some critics of the industry say that mutual fund companies get away with the fees they charge only because the average investor does not understand what he/she is paying for. Fees can be broken down into two categories: 1. Ongoing yearly fees to keep investor invested in the fund: The ongoing expenses of a mutual fund are represented by the expense ratio. This is sometimes also referred to as the management expense ratio (MER). The expense ratio is composed of the following: (a) The cost of hiring the fund manager(s): Also known as the management fee, this cost is between 0.5% and 1% of assets on average. While it sounds small, this fee ensures that mutual fund managers remain in the country's top echelon of earners. Think about it for a second: 1% of 250 million (a small mutual fund) is $2.5 million - fund managers are definitely not going hungry! It's true that paying managers is a necessary fee, but don't think that a high fee assures superior performance. (b) Administrative costs - These include necessities such as postage, record keeping, customer service, cappuccino machines, etc. Some funds are excellent at minimizing these costs while others (the ones with the cappuccino machines in the office) are not. 2. Transaction fees paid when investor buy or sell shares in a fund (loads): In case of open-ended schemes, load refers to the difference between (i) The NAV, and (ii) Purchase/ sale Price of Units. An investor may be required to bear the load the load at the time of entry (purchase of units) or/ and exit (sale of units). So, the load may be divided into two:
Page 24
A Study On Investors Preference Towards Mutual Funds In Delhi (i) Entry Load and (ii) Exit Load
12219103910
A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys one sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs. 10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs. 10 and those who offer their units for repurchase to the mutual fund will get only investment as these affect their yield/ returns. However, the investors should also consider the performance track record and service standards of the mutual funds which are more important. Efficient funds may give higher returns in spite of loads. A no-load fund is one that does not charge for entry or exit. It means the investor can enter the fund/ scheme at NAV and no additional charges are payable on purchase or sale of units. Mutual funds cannot increase the load beyond the level mentioned in the offer document. Any change in the load will be applicable only to prospective investments and not to the original investments. In case of imposition of fresh loads or increase in exiting loads, the mutual funds are required to amend their offer documents so that the new investors are aware of loads at the time of investments. A load is a sales fee charged by the fund. 2.7 Advantages of Mutual Funds Professional Management - The primary advantage of funds is the professional management of investors money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolios. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make And monitor investment. Diversification - By owning shares in a mutual fund instead of owning individual stocks or bonds, investors risk is spread out. 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. In other words, the more stocks and bonds investor own, the less any one of them can hurt investor Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money. Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would Pay for securities transactions. Liquidity - Just like an individual stock, a mutual fund allows investor to request that investors shares be converted into cash at any time.
Page 25
12219103910
Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds, and the minimum investment is small. Most companies also have automatic purchase plans whereby as little as $100 can be invested on a monthly basis. Convenient Administration-Investing in a Mutual Fund reduces paperwork and helps investor avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save investors time and make investing easy and convenient. Return Potential-Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Low Costs-Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Transparency-Investors get regular information on the value of their investment in addition to disclosure on the specific investments made by investors scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook. Flexibility-Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, investor can systematically invest or withdraw funds according to investors 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. Choices of Schemes-Mutual Funds offer a family of schemes to suit investors varying needs over a lifetime. 2.8 Ten reasons to invest in mutual funds Expert on investors side: When investors invest in a mutual fund, investor buy into the experience and skills of a fund manager and an army of professional analysts Limited risk: Mutual funds are diversification in action and hence do not rely on the performance of a single entity. More for less: For the price of one blue chip stock for instance, investors could get their self a number of units across a number of companies and industries when investors invest in a fund.
Page 26
12219103910
Easy investing: investors can invest in a mutual fund with as little as Rs.5,000. Salaried individuals also have the option of investing in a monthly savings plan. Convenience: investors can invest directly with a fund house, or through his/her bank or financial adviser, or even over the internet. Investor protection: A mutual fund in India is registered with SEBI, which also monitors the operations of the fund to protect investor interests. Quick access to investors money: It's good to know that should investor need their money at short notice, investor can usually get it in four working days. Transparency: As an investor, you get updates on the value of your units, information on specific investments made by the mutual fund and the fund manager's strategy and outlook. Low transaction costs: A mutual fund, by sheer scale of its investments is able to carry out cost-effective brokerage transactions. Tax benefits: Over the years, tax policies on mutual funds have been favourable to investors and continue to be so. 2.9 Disadvantages of Mutual Funds: Professional Management - Did investor notice how we qualified the advantage of professional management with the word "theoretically"? Many investors debate whether or not the so-called professionals are any better than investor or I at picking stocks. Management is by no means infallible, and, even if the fund loses money, the manager still takes his/her cut. We'll talk about this in detail in a later section. Costs - Mutual funds don't exist solely to make investors life easier - all funds are in it for a profit. The mutual fund industry is masterful at burying costs under layers of jargon. These costs are so complicated that in this tutorial we have devoted an entire section to the subject. Dilution - It's possible to have too much diversification. Because funds have small holdings in so many 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. Taxes - When making decisions about investors money, fund managers don't consider their personal tax situation. For example, when a fund manager sells a security, a capitalgains 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.
Page 27
12219103910
2.10 BANKS V/S MUTUAL FUNDS DIMENSIONSBANKSMUTUAL FUNDSReturnsLowBetterAdministrative exp.HighLowRiskLowModerateInvestment optionsLessMoreNetworkHigh penetrationLow but improvingLiquidityAt a costBetterQuality of assetsNot transparentTransparentGuaranteeMaximum Rs.1 lakh on depositsNoneTable No. - 4 Given the present scenario, bank deposits offer low returns. Chances are that most of Investors savings reside in bank deposits. Post income tax and inflation, it is likely that investor will be left with little or no gains. But there's a way to make investors money earn enough to beat inflation while it earns worthwhile returns diversification. And, the simplest way to diversify investors investments is to begin investing in mutual funds. 2.11 Mutual Funds: conclusion A mutual fund brings together a group of people and invests their money in stocks, bonds, and other securities. The advantages of mutual are professional management, diversification, and economies of scale, simplicity and liquidity. The disadvantages of mutual are high costs, over-diversification, possible tax consequences, and the inability of management to guarantee a superior return. There are many, many types of mutual funds. Investor can classify funds based on asset class, investing strategy, region, etc. Mutual funds have lots of costs. Costs can be broken down into ongoing fees (represented by the expense ratio) and transaction fees (loads). The biggest problems with mutual funds are their costs and fees. Mutual funds are easy to buy and sell. Investor can either buy them directly from the fund company or through a third party. 2.12 Risk Tolerance Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes
Page 28
12219103910
while making investment decisions. With an objective to make the investors aware of functioning of mutual funds, an attempt has been made to provide information in question-answer format which may help the investors in taking investment decisions. Risk is a fact of life for any investor. Stock markets go down, companies may go bankrupt, inflation rates may soar or the government may not have enough funds to pay back. The discussion on investment objectives would not be complete without a discussion on the risks that investing in a mutual fund entails. At the cornerstone of investing is the basic principal that the greater the risk investor take, the greater the potential reward. Remember that the value of all financial investments will fluctuate. Typically, risk is defined as short-term price variability. But on a long-term basis, risk is the possibility that investors accumulated real capital will be insufficient to meet investors financial goals. And if investors want to reach their financial goals, must start with an honest appraisal of their own personal comfort zone with regard to risk. Individual tolerance for risk varies, creating a distinct investment personality for each investor. Some investors can accept short-term volatility with easy, others with near panic. So whether one considers ones investment temperament to be conservative, moderate or aggressive, one investment temperament to be conservative, moderate or aggressive, one needs to focus on how comfortable or uncomfortable he will be as the value of his investment moves up or down. Management Risk Mutual funds offer incredible flexibility in managing investment risk. Diversification and Automatic Investing (SIP) are two techniques one can use to reduce investment risk considerably and reach investors long-term financial goals. Diversification When one invests is one mutual fund, he instantly spreads his risk over a number of different companies. One can also diversify over several different kinds of securities by investing in different mutual funds, further reducing his potential risk. Diversification is a basic risk management tool that one will want to use throughout his lifetime as one rebalances his portfolio to meet his changing needs and goals. Investors, who are willing to maintain a mix of equity shares, bonds and money market securities, have a greater chance of earning significantly higher returns over time than those who invest in only the most conservative investments. Additionally, a diversified approach to investing combining the growth potential of equities with the higher income of bonds and the stability of money markets--- helps moderate investors risk and enhance their potential return. Systematic Investment Plan (SIP) The unit holders of Scheme can benefit by investing specific Rupee amounts periodically, for a continuous period. Mutual fund SIP allows the investors to invest a fixed amount of
Page 29
12219103910
Rupees every month or quarter for purchasing additional units of the Scheme at NAV based prices. SIP is an investment strategy which attempts to acquire mutual fund units at regular intervals regardless of what direction, the market is moving. In order to participate in SIP, an investor has to concentrate on three things: (a) How much money he can invest each month? (b) Depending on the risk-profile, he should select a mutual fund scheme. (c) Invest the required amount each period in the fund. SIP is suitable for an investor who wants to tap the long-term potential of equities and is willing to invest regularly. Investors who want invest good amount but are unable to pile up a big amount in one shot, would also find SIP to be worthwhile. So, SIP is not a mutual fund, rather it is method of investing in a mutual fund. It is a simple strategy designed to help investors to accumulate wealth in a disciplined manner over long-term, to provide for the following benefits: (a) Power of compounding by investing now (b) Cost Averaging (c) Convenience (d) Disciplined Investing Exchange Traded Funds: Exchange Traded Funds (ETFs) are hybrid funds that combine the future of mutual funds and investment trusts. ETFs are passively managed funds that track a benchmark index and are traded in the financial markets like common stock. As ETFs poses the attributes of common stock, investors can also implement trading strategies like margins trading using ETFs, which would not have been possible with other mutual funds. ETFs do not distribute unites in lieu of payment in cash. ETFs are based on the units vs. basket of stocks concept. The fund exchanges blocks of units called creation units in exchange for a portfolio deposit of stock and the cash component. While some of the institutional investors hold creation units in their own portfolios, other like broker dealer sell them to individual investors via the exchange. ETFs vs. Mutual Fund (a) ETFs are priced at the market, whereas mutual funds are priced once daily, at the end of business. (b) Since ETFs have focused on indexes, their fully invested nature results in a pure play on asset class. AttributeETFIndex
Page 30
12219103910
Mutual FundDiversificationYesYesTraded throughout the dayYesNoCan be bought on marginYesNoTracks an index or sectorYesYesCan be sold shortYesNoLow expense ratioYesSometimesTrade at any brokerage firmYesNo Table No. - 5
2.13 Types of Risk All investments involve some form of risk. Even an insured bank account is subject to the possibility that inflation will rise faster than investors earnings, leaving investor with less real purchasing power than when investor started. Consider these common types of risk ands evaluate them against potential rewards when investors select an investment. RISK Managing Risks Diversification SIP Types of Risk Market Inflation Credit Interest Rate Employees Exchange Rate Investment Government Policies Market Risk: At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the stock prices of both an Questionnaire outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is due to market risk.
Page 31
12219103910
Inflation Risk: Sometimes referred to as loss of purchasing power Whenever inflation sprints forward faster than the earnings on investors investment, he/she run the risk that he/she will actually be able to buy less, not more. Inflation risk also occurs when prices rise faster than investors returns. Credit Risk: In short, how stable is the company or entity to which investor lend his/her money when he/she invest? How certain is he/she that it will be able to pay the interest investor are promised, or repay their principal when the investment matures? Inflation Risk: Changing interest rates affect both equities and bonds in many ways. Investors are reminded that predicting which way rates will go is rarely successful. A diversified portfolio can help in offsetting these changes. Effect of loss of key professionals and inability to adapt: An industries key asset is often the personnel who run the business i.e. intellectual properties of the key employees of the respective companies. Given the ever changing complexion of few industries and the high obsolescence levels, availability of qualified, Trained and motivated personnel are very critical for the success of industries in few sectors. It is, therefore, necessary to attract key personnel and also to retain them to meet the changing environment and challenges the sector offers. Failure or inability to attract/retain such qualified key personnel may impact the prospects of the companies in the particular sector in which the fund invest. Exchange Risks: A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative impact on companies which in turn would have an effect on the investment of the fund. Investment Risk: The sectored fund schemes, investments will be predominantly in equities of select companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than more diversified portfolio equities. Changes in the Government Policy: Changes in Government policy especially in regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund.
Page 32
12219103910
CHAPTER-3 RESEARCH METHODOLOGY AND DESIGN
3.1 RATIONALE OF THE STUDY Research, refers to a search for knowledge. In fact, research is an art of scientific investigation. The project is being done as a part of summer internship program of Gitarattan International Business School, Rohini, Delhi. The Rationale of the study is to know the Investors Preference towards Mutual Funds in Delhi. 3.2 OBJECTIVES OF THE STUDY This Project makes the study on Investors Preference towards Mutual Fund. The objective of this study: To identify the investors preference towards mutual funds while investing in mutual funds. To find out the perception of the investors regarding different mutual funds schemes (on the basis on maturity period) and to examine where investors wish to invest. To find the investment patterns of investors to invest in mutual funds. To know the factors, which are considered by the investors while investing in mutual fund To identify preferred investment-mix by the investors. 3.3 SCOPE OF STUDY The study is limited to Mutual Fund. Mutual funds have come as a much needed help to these investors. It is a special type of institutional device or an investment vehicle through which the investors pool their savings which are to be invested under the guidance of a team of experts in wide variety of portfolios of corporate securities in such a way, so as to minimize risk, while ensuring safety and steady return on investment. So in order to study the investors preference towards mutual, the various factors that influence the buying behavior of an investors towards mutual funds, a sample of 100 was chosen from DELHI. 3.4 DATA COLLECTION:
Page 33
12219103910
Both the Primary and Secondary sources have been used to collect the desired data for the study. A. Primary Sources: Collection has been done through the means of: a) Questionnaires- In order to get the primary data, a close ended questionnaire has been design to conduct the study. b) Interviews- In addition to the questionnaire, some other relevant questions were also asked to get the information regarding their preferences. B. Secondary Sources: Secondary data collected with the help of books available in the library and Internet, company brochures, product brochures, the company website etc. 3.5 SAMPLING TECHNIQUE: Random sampling was chosen as the sample selection procedure. SAMPLE SIZE: The sample size was 100 respondents. They were interviewed individually and asked to fill the questionnaires. 3.6 LIMITATIONS OF THE STUDY Limited scope because of restricted availability of time. Unavailability of concerned person at the time of survey. Time and other factors, which are beyond the human limitations, have also a bearing on the study. Funds at the disposal of the researcher were limited. Unwillingness of the Respondents: - Unwillingness of the respondents was also barrier, as they thought it was just an ordinary survey. Moreover, a few respondents thought that the Questionnaire might leak out their personal information.
CHAPTER-4
Page 34
12219103910
DATA ANALYSIS AND INTERPRETATION
DATA ANALYSIS & INTERPRETATION Without understanding the nature of investors it is very difficult to customize the product. So Investors having different profile are studied having different occupation, income, age and marital status. A questionnaire has been drafted which used to classify the nature of investor and analysis of data collected is given below: What comes in your mind first while making an investment? Security & Saving High returns INVESTMENT OBJECTIVE
5 0% 4 0% %of Inves tors 3 0% 2 0% 1 0% 0% S ecurity &H h R ig eturn B Tax enefit S aving Inves ent Options tm S ecurity & S aving H hR ig eturn Tax Benefit
Tax benefit
Figure No. - 1 InterpretationOn the basis of above finding, it was analysed that 50% of the respondents wanted Security& saving, 20% of them wanted high return, and rests 30% of them wanted Tax benefit. So, maximum percentage goes to Security & Saving. Are you aware of Investments in mutual funds? Yes No
Page 35
12219103910
INVESTORS AWARENESS FOR MUTUAL FUNDS

NO 10% YES NO YES 90%
Figure No. - 2 InterpretationOn the basis of above finding, it was analyzed that out of the sample size of 100 respondents, 90% were aware from Investments in mutual funds. Rests 10% were not aware from mutual funds investment.
INVESTMENT IN MUTUAL FUNDS
Have you ever invested in mutual funds? Yes No If Yes which one _____________________________ NOT 0% If No than Why INVESTED No proper guidance Risky Investment
40% INVESTED 60%
Lack of Knowledge
Page 36
12219103910
Figure No. - 3 InterpretationOn the basis of above finding it was analyzed that, 60% respondents had already invested in mutual funds. Rests 40% people out of the sample size not invested in mutual funds because of various reasons like no proper guidance, risk involvement, and lack of knowledge regarding mutual funds. If yes then would you prefer equity or debt? Equity Balancer Debt
INVES TMENTCRITERIA
10 8 No. of 6 Investors 4 2 0 10 8 6
Debt
E quity Balancer Investm Options ent
Figure No. 4
Debt
E quity
Ba ncer la
InterpretationOn the basis of above finding, it was analyzed that out of 40 respondents those had not invested in mutual funds, 24 people want to invest in mutual funds. Out of 24 people, 6 respondents want to invest in Debt, 8 respondents wanted to invest in Equity & and 10 respondents want to invest in balance fund. But 16 respondents out of those had not
Page 37
12219103910
invested in mutual funds; they do not prefer to invest in mutual funds because they think that investments in mutual funds are Risky.
Did you find it profitable? Yes Figure No. 5 InterpretationOn the basis of above finding, it was analyzed that 83% respondents said that investments in mutual funds were profitable. No
What do you think who can better guide you for investment making? Broker/ Agent Banks Investment Consultants
INVESTMENT GUIDANCE INVESTMENT GUIDERES Figure No. - 6 InterpretationOn the basis of above finding, it was analyzed that 20% respondent wanted to invest their money through banks, 50% respondents wanted to invest through investment consultancy & Rests 30% wanted to invest their money through Brokers. Through this analysis, this study reached to the conclusion that still plenty of rooms left for growth of mutual funds as the old conventional tools are still ruling the investor.
Which Factors considered while investing in Mutual Funds?
Page 38
12219103910
Percentage of factors consider while investing Figure No. - 7 InterpretationWhile investing, respondents consider mainly for the goodwill of the institution then they go for the past return of Funds. Different sectors of the fund come next and the size and volume of the business last.
What are the Sources of Information to Investors? Figure No. 8 InterpretationIt was analyzed that while making the investment in any mutual fund generally the investors preferred professional support i.e. of a financial advisor or reports and articles on the net. News programs on TV are also a good source.
Which scheme is preferred most by investors? Figure No. - 9 InterpretationIt was analyzed that out of the 60% of investors who invested their money in mutual funds, 40% investors are investing in Open Ended scheme, 30% of investors are investing in close ended Scheme & other 30% are investing other schemes.
Page 39
12219103910
CHAPTER-5 FINDINGS
5.1 Findings: After collecting primary data and analyzing them graphically it can be concluded that: It was found that 50% of the respondents wanted Security& saving, 20% of them wanted High return, and rests 30%of them wanted Tax benefit. So, maximum percentage goes to Security & Saving. 90% of the respondents were aware of Investments in mutual funds. Out of the entire sample of 100 respondents, 60% people had already invested in mutual funds. It was analyzed that out of 40 respondents those had not invested in mutual funds, 24 people want to invest in mutual funds. Out of 24 respondents, 6 respondents wanted to invest in Debt, 4 respondents wanted to invest in Equity & 5 respondents wanted to invest in balance fund. But 8 respondents those had not invested in mutual funds, they do not wanted to invest in mutual funds because they think that investments in mutual funds are Risky. It was found that 83% respondents said that investments in mutual funds were profitable. It was analysed that 20% respondents wanted to invest their money through banks, 50% of the respondents wanted to invest through investment consultancy & Rest 30% wanted to invest their money through Brokers. Through this analysis, this study reached to the conclusion that still plenty of rooms left for growth of mutual funds as the old conventional tools are still ruling the investor. While investing, investors consider mainly for the goodwill of the institution then they go for the past return of Funds. Different sectors of the fund come next and the size and volume of the business last.
Page 40
12219103910
It was analyzed that while making the investment in any mutual fund generally the investors preferred a professional support i.e. of a financial advisor or reports and articles on the net. News programs on TV are also a good source. It was analyzed that 40% respondents invested in Open Ended scheme, 30% of respondents invested in close ended Scheme & other 30% respondents invested other schemes.
CHAPTER-6 CONCLUSION AND RECOMMENDATIONS
Conclusion A mutual fund brings together a group of people and invests their money in stocks, bonds, and other securities. The advantages of mutual funds are professional management, diversification, simplicity and liquidity. The disadvantages of mutual funds are high costs, over-diversification, possible tax consequences, and the inability of management to guarantee a superior return. Mutual funds have lots of costs. Costs can be broken down into ongoing fees and transaction fees. The biggest problems with mutual funds are their costs and fees. Mutual funds are easy to buy and sell. Investors can either buy them directly from the fund company or through a third party.
Page 41
12219103910
Mutual fund industry is growing at faster pace and there is a lot of scope for investing more and more by people and getting benefit out of this. The analysis of questionnaire is also done, which was filled by investors. The study on investors preference towards mutual fund has several findings on the basis of analysis and interpretation of data. These findings are given below: Most of the people want security of their money Most of the people are aware of the mutual fund Most of the people have invested in mutual fund. People who have not invested in mutual fund they think that it is risky. They want to invest in balance fund Perception of investors about the mutual fund is that they think that it is profitable. Some people which are not aware about mutual fund are related to rural and sub urban area. They have not proper knowledge about mutual fund. Some people think it is risky. Some people have the problem of income source. Some people want to invest in property rather than mutual fund. Whatever, it is, but mutual fund industry has a bright future India. 6.2 RECOMMENDATIONS: Now Indian Market growing very fast. So there are lots of scopes in the M.F. Industry. So company should have to follow these recommendations: Adverting is the best tool to create awareness among the investors for Mutual Fund. Today customer is the king, more and providing best customer service attracts more customers. Sufficient information should be provided to the staff members of the Firm, so that they can do their work easily. Company must have to perpetrate the Sub-Urban area as well as rural areas. There should be strong distribution channel of the mutual funds companies so that they are closely connected to consumers, they must be properly trained by the companies to
Page 42
12219103910
sell products according to the needs of the customer, give suitable suggestions to the customer . Simplify the forms, make them easy to fill
BIBLIOGRAPHY
Page 43
12219103910
BIBLIOGRAPHY BOOKS Kothri ,C.R., (1990), Research Methodology, new age international(pltd) (2nd edition) Kishore, Ravi M., (2007) Financial Management, Taxmann Allied Services (P.) Ltd (6th edition) Rustagi, R.P., (2009) Investment Management, Sultan Chand & Sons- (3rd edition) Websites: http://www.fool.com/investing/etf/mutual-funds-v-etfs.aspx Last accessed on 12th September, 2011 http://www.rediff.com/money/2007/apr/03mfseries.htm Last accessed on 20th August, 2011 htp://www.kotakmutual.com/kmw/mf_school/mutual-funds-investments-basics.htm Last accessed on 18th September, 2011 http://www.bonanzaonline.com/About-Us/Overview Last accessed on 2nd, September, 2011 http://www.bonanzaonline.com/About-Us/Vision-Values Last accessed on 1st August, 2011 http://www.bonanzaonline.com/About-Us/Milestones Last accessed on 2nd August, 2011 http://www.fundsupermart.co.in/main/home/whyUnitTrusts.svdo Last accessed on 1st October, 2011 http://www.appuonline.com/mf/knowledge/industry.html Last accessed on 11th October, 2011 http://finance.indiamart.com/india_business_information/mutual_fund_companies.html Last accessed on 21st October, 2011
Page 44
12219103910
Annexure
QUESTIONNAIRE Investment Details: What comes in your mind first while making an investment? Security & Saving High returns Tax benefit Are you aware of Investments in mutual funds? Yes No Have you ever invested in mutual funds? Yes No If Yes which one _____________________________ If No No proper guidance Risky Investment Lack of Knowledge If Q. 3 is No then would you like to invest in mutual funds? Yes No If yes then would you prefer equity or debt? Equity Balancer Did you find it profitable? Yes No Debt
What do you think who can better guide you for investment making? Broker/ Agent Banks Investment Consultants 8. Assign the ranks to the following in order of their importance in information about the investment opportunities. a) Prospectus ( ) b) Newspapers and Magazines ( ) c) Electronic Media ( ) d) Agents ( ) e) Friends ( ) imparting
Page 45
12219103910
9. Which of the following factors do you consider while investing in mutual funds? (Please tick). Factor a) Name of goodwill of institution ( ) b) Size/Volume of business ( ) c) Sector to which a fund belongs (Pvt./Public) ( ) d) Past Return of funds ( ) 10. a) b) c) Which of the schemes do you prefer most? (Please tick) Open-ended ( ) Close-Ended ( ) Other ( )
Personal Details: Name Occupation and Designation : Age : Marital Status : Spouse status : Annual household Income : Less than 1.5 1.5 to 3 Children ________________ ____________________________________ ____________________________________ ____________________________________ ____________________________________ 3 to 5 Above 5 Their age _________
Page 46
12219103910
Page 47

Final Draft

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Final Draft

Hochgeladen von

Copyright:

Verfügbare Formate

A Study On Investors Preference Towards Mutual Funds In Delhi

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

1.1 INTRODUCTION TO THE PROJECT:

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

1.2 COMPANY PROFILE

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

Vision and Values

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

1.2.3 Bonanza as a company:-

Different areas of the company

2. Bonanza Commodity Brokers Pvt. Ltd.

NCDEX AND MCX Commodity Derivatives.

3. Bonanza Global DMCC

Exchange(U.A.E) 4. Bonanza Financial Academy Arbitrage curse NCF

1.3 INDUSTRY PROFILE

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

1.3.1 Mutual Fund in India

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

1.3.2 History of the Indian Mutual Fund Industry

First Phase 1964-87

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

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

Third Phase 1993-2003 (Entry of Private Sector Funds

Fourth Phase since February 2003

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

1.3.3 MAJOR PLAYERS SBI MUTUAL FUNDS

HDFC MUTUAL FUND (AMC):

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

RELIANCE MUTUAL FUND:

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

TATA MUTUAL FUNDS: EXPERTISE THAT IS TRUSTED

1.3.4 TYPES OF MUTUAL FUND SCHEMES

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

1.3.5 Recent trends in mutual fund industry

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

CHAPTER-2 THEORETICAL FRAMEWORK

2.1 Concept of Mutual fund

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

A Study On Investors Preference Towards Mutual Funds In Delhi