A REPORT ON

DEFINING CONSUMERS PERCEPTION TOWARDS MUTUAL FUND

A REPORT SUBMITED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF BBA PROGRAME OF GNA-IMT UNDER PUNJAB TECHNICAL UNIVERSITY

SUBMITTED TO :

SUBMITTED BY:

Ms. Khushboo Jain

Harinder kumar Uni. Roll no. 94532451189

ACKNOWLEDGEMENT

An endeavour to transform itself into success needs efforts. These efforts are individual, standing in isolation. Such individual efforts require three things for their further development. These three things being Reason, Rationality and SelfEsteem. The combination of these three basic traits delivers Productivity. However, time and again this productivity requires encouragement and guidance. This much requisite support comes in the form of individuals furthering the development of individuals. Professionals furthering the development of Amateurs. This acknowledgement is an effort to recognize these professionals who have made this project a combination of the three fundamental traits. This project report and the learning process behind it would not have been possible without the guidance of my Faculty Guide, Prof. Tapas Mahapatra. He was able to impart me with the right approach that my training required for its successful practical implementation. Secondly, my company guide at HDFC BANK LTD, Mr. Surjeet Saluja who was able to introduce me to the idea of Mutual Funds and what goes behind it. I was involved with HDFC BANK LTD (Sec. 15-c Branch) for these four weeks, and I came across a lot of people who put in their time and effort towards acclimatizing me to the workings of their organization. I express my thanks to Mr. Surjit saluja, under whose guidance and leadership I was able to enhance my financial as well as inter-personal skills. who explained to me the intricacies and the practicalities of selling, which is indeed a different ball game altogether. Lastly, (but not even a remote reference to the literal meaning of the word) I express my gratitude to the entire staff of HDFC BANK LTD . These past four weeks were of utmost importance as they added value towards my path of knowledge. I would like to end this acknowledgement by thanking the customers, clients, investors, and people at large with whom I have interacted during the course of my training I am grateful for each and every valuable interaction that brought me to a better understanding of the workings of the Mutual Fund industry and of the intricacies of Investment in India, both forming the crux of my report.

CONTENTS OF THE REPORT

SERIAL NO.

PARTICULARS

PAGE NO.

1 2 3 4 5 6 7 8 9 10

CONCEPT & WORKING REGULATORY FRAMEWORK ADVANTAGES TYPES OF MUTUAL FUNDS LIST OF MEMBERS HISTORY OF MUTUAL FUNDS TYPES OF RISK FINDINGS RECOMMENDATIONS REFRENCES
MUTUAL FUND

A Mutual Fund is a body corporate that pools the savings of a number of investors and invests the same in a variety of different financial instruments, or securities. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them. Mutual funds can thus be considered as financial intermediaries in the investment business that collect funds from the public and invest on behalf of the investors. The losses and gains accrue to the investors only. The Investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment objectives specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper and government securities.

Mutua l Fund Operation Flow Chart

WORKING OF MUTUAL FUNDS AND THEIR PERFORMANCE

Mutual funds invest their funds in capital market instruments such as shares, debentures, bonds and money market instruments and therefore the net asset value of such investments will reflect the market values of underlying assets. These market values fluctuate and therefore the net asset values of the mutual fund schemes also fluctuate. All the capital market instruments have varying degrees of risk, the degree of risk being the highest in equities and the risk factor is highlighted in the respective offer documents as well as in the abridged offer documents. The investor therefore is in the full knowledge and understanding of the risks involved in various schemes. As per SEBI regulation all mutual funds disclose their portfolio periodically and all open-ended funds offer exit option to investors at NAV based price. In the current year, the share market is passing through a bear phase with prices falling across the board and steeply in the technology scrips. Reflecting this fall in share prices, the NAVs of most of the equity schemes in general and of the technology funds in particular have also fallen. This fall in the NAVs should therefore be viewed in the context of the fall in the share prices, a phenomena which is world wide today. The fall in NAVs not only affects the investors but it has an impact on the fees and earnings of the investment managers also. It may be recalled that the mutual funds have given good returns while the market was in the upswing and even today, the non-equity schemes which account for about 60 percent of total assets under management provide competitive rates of returns.

MUTUAL

FUNDS

FUNCTION

WITHIN

STRICT

REGULATORY

FRAMEWORK The Association of Mutual Funds In India (AMFI) reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework. The different entities such as the Mutual Fund, the Asset Management Company and the Custodian operate as per the provisions of the SEBI Mutual Fund Regulation 1996 and the rules and guidelines issued by SEBI. Each of these entities has independent Boards of Directors and separate auditors. SEBI keeps a close watch on the mutual funds through periodical reports and every three months, each mutual fund submits to SEBI a report conforming compliance with regulatory provisions and mutual funds are required to record their investment decisions. Any deficiency or non-compliance is dealt with suitably by SEBI. Every year, each mutual fund is inspected by SEBI and such inspection is both a detailed scrutiny of operations and a rectification exercise. Thus, the mutual funds are strictly supervised and regulated entities and the regulatory provisions match with international standards. AMFI also is engaged in upgrading professional standards and in promoting best industry practices in diverse areas such as valuation, disclosure, transparency etc.

ADVANTAGES OF MUTUAL FUNDS The advantages of investing in a Mutual Fund are: Professional Management. The major advantage of investing in a mutual fund is that you get a professional money manager to manage your investments for a small fee. You can leave the investment decisions to him and only have to monitor the performance of the fund at regular intervals. Diversification. Considered the essential tool in risk management, mutual funds make it possible for even small investors to diversify their portfolio. A mutual fund can effectively diversify its portfolio because of the large corpus. However, a small investor cannot have a well-diversified portfolio because it calls for large investment. For example, a modest portfolio of 10 bluechip stocks calls for a few a few thousands. Convenient Administration. Mutual funds offer tailor-made solutions like systematic investment plans and systematic withdrawal plans to investors, which is very convenient to investors. Investors also do not have to worry about investment decisions, they do not have to deal with brokerage or depository, etc. for buying or selling of securities. Mutual funds also offer specialized schemes like retirement plans, childrens plans, industry specific schemes, etc.

to suit personal preference of investors. These schemes also help small investors with asset allocation of their corpus. It also saves a lot of paper work. Costs Effectiveness A small investor will find that the mutual fund route is a costeffective method (the AMC fee is normally 2.5%) and it also saves a lot of transaction cost as mutual funds get concession from brokerages. Also, the investor gets the service of a financial professional for a very small fee. If he were to seek a financial advisor's help directly, he will end up paying significantly more for investment advice. Also, he will need to have a sizeable corpus to offer for investment management to be eligible for an investment advisers services. Liquidity. You can liquidate your investments within 3 to 5 working days (mutual funds dispatch redemption cheques speedily and also offer direct credit facility into your bank account i.e. Electronic Clearing Services). Transparency. Mutual funds offer daily NAVs of schemes, which help you to monitor your investments on a regular basis. They also send quarterly newsletters, which give details of the portfolio, performance of schemes against various benchmarks, etc. They are also well regulated and Sebi monitors their actions closely.

Tax benefits. You do not have to pay any taxes on dividends issued by mutual funds. You also have the advantage of capital gains taxation. Tax-saving schemes and pension schemes give you the added advantage of benefits under section 88.

Affordability Mutual funds allow you to invest small sums. For instance, if you want to buy a portfolio of blue chips of modest size, you should at least have a few lakhs of rupees. A mutual fund gives you the same portfolio for meager investment of Rs.1,000-5,000. A mutual fund can do that because it collects money from many people and it has a large corpus.

TYPES OF MUTUAL FUND SCHEMES

1. BY STRUCTURE Open Ended Schemes. Close Ended Schemes. Interval Schemes.

2. BY INVESTMENT OBJECTIVE Growth Schemes. Income Schemes. Balanced Schemes.

3. OTHER SCHEMES

Tax Saving Schemes. Special Schemes. Index Schemes. Sector Specific Schemes.

1. OPEN ENDED SCHEMES The units offered by these schemes are available for sale and repurchase on any business day at NAV based prices. Hence, the unit capital of the schemes keeps changing each day. Such schemes thus offer very high liquidity to investors and are becoming increasingly popular in India. Please note that an open-ended fund is NOT obliged to keep selling/issuing new units at all times, and may stop issuing further subscription to new investors. On the other hand, an openended fund rarely denies to its investor the facility to redeem existing units. 2. CLOSED ENDED SCHEMES The unit capital of a close-ended product is fixed as it makes a onetime sale of fixed number of units. These schemes are launched with an initial public offer (IPO) with a stated maturity period after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy or sell units on the stock exchanges where they are listed. Unlike open-ended schemes, the unit capital in closed-ended schemes usually remains unchanged. After an initial closed period, the scheme may offer direct repurchase facility to the investors. Closedended schemes are usually more illiquid as compared to open-ended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme.

3. INTERVAL SCHEMES These schemes combine the features of open-ended and closed-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices. 4. GROWTH SCHEMES These schemes, also commonly called Equity Schemes, seek to invest a majority of their funds in equities and a small portion in money market instruments. Such schemes have the potential to deliver superior returns over the long term. However, because they invest in equities, these schemes are exposed to fluctuations in value especially in the short term. 5. INCOME SCHEMES These schemes, also commonly called Debt Schemes, invest in debt securities such as corporate bonds, debentures and government securities. The prices of these schemes tend to be more stable compared with equity schemes and most of the returns to the investors are generated through dividends or steady capital appreciation. These schemes are ideal for conservative investors or those not in a position to take higher equity risks, such as retired individuals. However, as compared to the money market schemes they do have a higher price fluctuation risk and compared to a Gilt fund they have a higher credit risk.

6. BALANCED SCHEMES These schemes are commonly known as Hybrid schemes. These schemes invest in both equities as well as debt. By investing in a mix of this nature, balanced schemes seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative, long-term orientation.

7. TAX SAVING SCHEMES Investors are being encouraged to invest in equity markets through Equity Linked Savings Scheme (ELSS) by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed / switched out until completion of 3 years from the date of allotment of the respective Units. The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations, 1996 and the notifications issued by the Ministry of Finance (Department of Economic Affairs), Government of India regarding ELSS. Subject to such conditions and limitations, as prescribed under Section 88 of the Income-tax Act, 1961.

8. INDEX SCHEMES The primary purpose of an Index is to serve as a measure of the performance of the market as a whole, or a specific sector of the market. An Index also serves as a relevant benchmark to evaluate the performance of mutual funds. Some investors are interested in investing in the market in general rather than investing in any specific

fund. Such investors are happy to receive the returns posted by the markets. As it is not practical to invest in each and every stock in the market in proportion to its size, these investors are comfortable investing in a fund that they believe is a good representative of the entire market. Index Funds are launched and managed for such investors. 9. SECTOR SPECIFIC SCHEMES. Sector Specific Schemes generally invests money in some specified sectors for example: Real Estate Specialized real estate funds would invest in real estates directly, or may fund real estate developers or lend to them directly or buy shares of housing finance companies or may even buy their securitized assets. List of Members A) Bank Sponsored 1. Joint Ventures - Predominantly Indian a. SBI Funds Management Ltd.

2. Others a. b. c. BOB Asset Management Co. Ltd. Canbank Investment Management Services Ltd. UTI Asset Management Company Pvt. Ltd.

B) Institutions a. b. GIC Asset Management Co. Ltd. Jeevan Bima Sahayog Asset Management Co. Ltd.

C) Private Sector

1. Indian a. b. c. d. e. f. g. h. i. BenchMark Asset Management Co. Pvt. Ltd. Cholamandalam Asset Management Co. Ltd. Credit Capital Asset Management Co. Ltd. Escorts Asset Management Ltd. JM Financial Mutual Fund Kotak Mahindra Asset Management Co. Ltd. Sundaram Asset Management Company Ltd. Reliance Capital Asset Management Ltd. Tata Asset Management Private Ltd.

2. Joint Ventures - Predominantly Indian a. b. c. d. Birla Sun Life Asset Management Co. Ltd. DSP Merrill Lynch Fund Managers Limited Sahara Asset Management Co. Pvt. Ltd. HDFC Asset Management Company Ltd.

3. Joint Ventures - Predominantly Foreign a. b. c. d. e. f. g. h. i. j. ABN AMRO Asset Management (I) Ltd. Alliance Capital Asset Management (India) Pvt. Ltd. Deutsche Asset Management (India) Pvt. Ltd. HSBC Asset Management (India) Private Ltd. ING Investment Management (India) Pvt. Ltd. Morgan Stanley Investment Management Pvt. Ltd. Principal Asset Management Co. Pvt. Ltd. Prudential ICICI Asset Management Co. Ltd. Standard Chartered Asset Mgmt Co. Pvt. Ltd. Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.

History of the Indian Mutual Fund Industry

1964

1987

1993

2004

Phase 1

Phase 2

phase 3

UTI-The only player

Public/ Bank Funds established

Entry of Private & Foreign Players

FUTURE

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases.

First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and

administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund 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. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

IMPORTANCE OF RELATIONSHIP MANAGEMENT IN SELLING MUTUAL FUNDS: FUNDS

In the corporate world of today customer is considered as the king and is placed at the top and if you have won the customer then the gold coin is in your pocket. For that two rules are to be followed they are: Rule 1- customer is always right. Rule 2- if not, refer to rule 1. If these two rules are followed then the customers will always be happy and would be having a better relation with us. In the field of marketing building long term relationship is very important it is basically the backbone of marketing because customer is considered to be the most important person in the field of marketing as the whole marketing and selling depends on the relationship with the customers. Therefore relationship management plays a very important role in marketing of financial instruments. My project Marketing Of Financial Instruments Through Relationship Management is all about marketing of the financial instruments like Mutual Funds through maintaining better relationship with customers as if customers is happy he can generate a lot of business for the company by acting as advocate of the company in front of other people and by spreading the goodwill of the company to other people and by investing more and more in other financial instruments of the I.C.I.C.I bank. In this project though I am with I.C.I.C.I bank but I have to market Mutual Funds of other banks also like HSBC,SBI,PNB,HDFC and even mutual funds of RELIANCE, TATA and FRANKLIN TEMPLETON as I.C.I.C.I bank is distributor of Mutual Funds of all these banks and companies. Besides retaining old customers exploiting all modes to acquire new customers is also important. Building better relationship with the customers requires providing right type of services to the customers at the right time .I have to tap customers both within the bank as well as outside the bank then I have to counsel them about various financial instruments of the bank and have to clarify all their doubts. After clarifying their doubts I persuade them to invest their money judiciously in various financial instruments. In this project once customer has invested money in financial instruments then also my job doesnt end over there .I have to regularly inform them about the current status of their investments as well as about new fund offers and new insurance schemes and also I have to provide them services like redemption services of their amount and have to guide them continuously when to withdraw their money back which they have invested in

financial instruments so that they should earn reasonable profit over their investments. These things build better relationship with customers and generate profit for both the company as well as the customers. Marketing of financial instruments will generate regular income to the I.C.I.C.I bank as it sells the financial instruments like Mutual Funds of other banks and companies also. Thus maintaining better relationship with customers and by being in regular touch with them would help me in achieving my targets that are given to me by the bank and would also help in marketing of financial instruments. Relationship marketing is a form of marketing that evolved from direct response marketing in the 1960s and emerged in the 1980s, in which emphasis is placed on building longer term relationships with customers rather than on individual transactions. It involves understanding the customers' needs as they go through their life cycles. It emphasizes providing a range of products or services to existing customers as they need them

Mutual Fund Industry Marketing Aspect

The mutual fund industry might seem to be a finance oriented industry, but even the sale-ability of the mutual fund schemes is decided by the correct marketing mix of the AMCs. Now since the project aims at discussing the marketing strategies being followed in the Mutual Fund Industry, why not start of with a fund that changed the face of the Mutual Funds in India. I will be dealing with the Reliance Equity Fund from Reliance Mutual Fund. Reliance Mutual Fund has been recognized as India's Most Trusted Mutual Fund Brand by Economic Times - Brand Equity in a survey conducted by A C Nielsen ORG-MARG. The survey, conducted by, and published in Brand Equity, lists the top 50 service brands in the country. The Most Trusted Brands Survey aims to identify the brands that bond the best with consumers. Conducted by AC Nielsen ORG-MARG, with a sample of over 7000 distributed across socio-economic class, age, income and geography, each brand was evaluated on relatedness, perceived popularity, quality connotation, distinctiveness and repurchase intent.

Recently floated, Reliance Equity Fund became the largest fund ever in the history of Mutual Funds in India. It raised Rs. 5759 crores from 9.29 lac applications, while they started off with an aim of collecting Rs. 2200 crores.

MARKETING STRATEGIES - RELIANCE EQUITY FUND

Some of the features of the fund that wrote the history of the Indian Mutual Fund Industry are: 1) It is an open-ended diversified equity fund, with 75-100% investment in the equity related instruments and upto 25% investment in the money market instruments. This investment pattern, disclosed in the prospectus, makes it an equity based scheme. 2) The investment objective of any scheme is clearly defined in the beginning. It is published in the prospectus of the scheme. The investment objective of the Reliance Equity Fund is To seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity & equity related securities of top 100 companies by market capitalization & of companies which are available in the derivatives segment from time to time and the secondary objective is to generate consistent returns by investing in debt and money market securities. The investment objective helps the investor understand the crux of the scheme, its investment pattern. 3) The minimum investment in the scheme is Rs. 5000 and then in the multiples of Re. 1. The scheme offered the investment options of Growth as well as Dividend. 4) The entry load during the NFO was nil. However subsequent entry load will be charged during the continuous offer. The entry load varied from 2.25% for investments upto 2 crores. For an investment between 2-5 crores the entry load will be 1.25%. For an investment above 5 crores, there will not be any entry load. The exit load charged before six months of the date of allotment of the units is 2% and the same is 1% before 1 year.

5) The scheme has the option of investment through SIP and ECS modes. This gives the investor who cannot invest through the lump sum mode. Clearly no product in this competitive world can be a success unless it has the right mix of marketing strategies. Same is the case with mutual funds. In order to get an insight of the marketing strategies, I had discussions with my seniors at ICICI Bank Ltd. Their experience at the investment desk helped me a lot. Also I had an opportunity to talk to someone from the Reliance Mutual Fund who helped me with the inputs. Here are some of the marketing strategies followed to make it a success. 1.The Reliance Equity Fund targeted the audience, which was willing to take the risk. So they targeted the people who had a common goal of investing in the equity market, hence the name Reliance Equity Fund. The name in itself justified the objective of the fund. Thus, people had a clear understanding about the fund that it is aimed at investing in the Equity market. 2.The Reliance Mutual Fund relied heavily on the Reliance Brand. People sold the Brand fund by instilling the confidence just by highlighting the Reliance brand. So brand association was witnessed in case of the fund. I had personal experience where in investors showed more interest in Reliance Equity Fund simply because it is a product from Reliance. Convincing them was not at all difficult. 3.The Reliance Mutual Fund differentiated its product by adding a new feature called Hedging This feature minimized the risk of the investors investing into Hedging. the fund. 4.The Reliance Fund House focused on the distributors. The Pre-launch of the mutual fund comprised of a meet with the distributors with an aim to strengthen the channel of marketing. It is a well-known fact that the AMCs are not in direct contact with the investors, instead the distributors and the agents are. So the AMC decided to explain the product with the people who will actually sell the product. They organized a grand party for the distributors at top hotels thus strengthening Trade Relations.

5.The Reliance AMC at the time of budget roped in well known Tax Consultant Mr. Lakhotia, who briefed its distributors and agents about the tax implications on the MFs both pre as well as post budget. The same was done by way of seminars held by Mr. Lakhotia. 6.The hoardings of the Reliance mutual fund were based at the places of the high visibility as well the places, which has the high density of middle class. This was done because it is the middle class, which is the major chunk of the total investors. In Delhi the big hoardings were put up at places like the Metro Stations. Metro Stations stations proved to be an ideal place because metro is increasingly being used as a mode of transport. 7.The Reliance Mutual Fund also targeted its existing client base. In order to do so, they sent a pre-approved form to the investors directly at their places. But the form beared the same broker with whom they had invested earlier. 8.The Reliance Equity Fund, for the first time in the history of mutual funds, came up with idea of a Visa enabled ATM card. Investors at any point can get their units redeemed using the ATM card. One such transaction per month will be free, every subsequent transaction will carry a nominal charge of Rs. 28. This came about as an attractive feature aimed at saving the investor from the tedious process of redemption. 9.In the NFO, the advertisements of the fund were aired on the major newspapers, T.V. channels and F.M. Stations during the prime time. This brought about awareness in the minds of people. So much so that some of my investors who were investing in ELSS also enquired about this new fund from reliance, referring to the advertisement on the television. 10.During the training, we in the role of Financial Consultants were having the direct contact with the investors. So the Reliance AMC held a meeting where they had a presentation showing the positive picture of the Indian Economy and how has reliance mutual funds done even when the economy was not doing that good. This instilled the confidence in our minds and we could in turn convince the investor that investment at 11000 mark is also a wise decision.

11.During the end of the NFO, the distributors offered incentives to the direct selling agents, who came in the direct contact of the investors. The incentives included monetary benefits on each application-received basis.

Marketing Strategies - Standard Chartered Enterprise Equity Fund

The fund, as the name suggests will be equity based fund. It aims at investing in the IPOs (Initial Public Offerings). The scheme is a closed ended one having a lock in period of 3 years. On completion of 3 years, the scheme will be subsequently converted into an open ended scheme. The investment objective of the fund is as follows: The investment objective of the Scheme is to seek to generate capital growth from a portfolio of predominantly equity and equity-related instruments (including equity derivatives). The scheme may also invest in debt and money market instruments to generate income. 1) It is a closed ended scheme which aims at investing 65%-100% of the total corpus in the equity market. It also aims at investing 0-35% in the Debt & Money market instruments and securitized Debt. 2)The scheme intends to invest in the IPOs coming in the next 3 years. They intend to take the benefit of the windfall gain by selling the shares allotted to them on listing. Actually the shares are generally allotted on the premium. So the scheme intends to take the advantage of this premium listing. 3)The scheme bears a trusted name in the mutual fund industry Standard Chartered name. The name of Standard Chartered is a well known name in the industry and their earlier funds have done well. So the investor confidence is with the AMC. They rightly did the Brand Association. 4)The timing of the scheme is very good. This scheme is followed by the various high profile IPOs namely that of Hutch, DLF, Parsavnath, RCVL, Indian AirlineAir India combine, Air Deccan. Mostly all these IPOs are expected t9 have a high

price band. Naturally it might be out of the reach of many people, with the chances of getting the shares being very bleak. Investment in IPOs through MF is a different concept and this is where they have differentiated their product. 5)So the AMC is targeting the audience which is willing to invest in the IPOs but due to high price band or dim chances of getting the shares, they do not expect to get the allotment. So the AMC plans to target this segment of audience. 6)The Pre-launch of the fund marked a grand presentation followed by the cocktail and dinner for its brokers, agents and banking partners. These are the people who sell the fund. So they are in direct contact of the people. The AMC aimed at strengthening the channels of marketing. 7)The Relationship Manager from the fund house kept visiting the Branch from time to time. He was always in touch with us and helped us whenever we had some problem. This was done with a motive of forming a relationship. Naturally we also pushed a product of someone we knew. So this was done to make Customer Relationship, their direct customers being banks, agents etc. 8)They had big hoardings having high visibility in the public places. These hoardings created a awareness in the minds of general people about the product. 9)The advertisements of the MF were all over in the media. They used both the print media (newspapers like TOI, HT, and Economic Times etc.), electronic media (T.V. and Radio). They engaged in aggressive advertising and the advertisements were aired at prime times. One such example was the airing of the advertisement during Business Baazigar on Zee T.V. 10)There were incentives being offered by the fund house to the direct selling agents or the people who actually sell their products. This is done to push the product. 11)Also they had actually done a technical study about the profit that people had during the IPOs from windfall gain during the past three years. So they made this study available to the investors easily. This was done to strengthen the confidence in the minds of the prople about the product.

12)They used e-marketing. They had the articles all over the internet websites having high number of hits. I happen to go through these articles on the net myself o rediff.com, economictimes.com etc.

Marketing Strategies by other Mutual Funds

Now I will be discussing the marketing strategies of certain other mutual fund companies. Though the marketing strategies of these companies are much similar to those followed by other companies. 1) Starting off with the Prudential ICICI Mutual Fund. Since it being the ICICIs own fund is pushed aggressively. I remember having so much pressure of selling their Fusion Fund. 2)They already have the reach and they keep on strengthening the ties. This is done by a dedicated Relationship Manager of a certain area. He/She is responsible to strengthen the customer relationship. 3)During their Emerging Star fund, they aggressively marketed the name of the Fund Manager NILESH SHAH. This is because he is considered the top most fund manager in the country. 4)Nearly all the funds extensively market the returns coming out the schemes. This further builds positive vibes around the scheme and the Fund House. I came across such situation with the Emerging Star fund. They gave 109% return which was all over the media. 5)Fidelity marketed their Special Situations Fund by flooding the investors with the review of their similar ongoing fund in UK. That fund has given 21000% returns in past 25 years.

INDIAN MUTUAL INDUSTRY - CHALLENGES AHEAD

From the interaction with the seniors and the people from the industry, there are certain conclusions that can be derived. We all have a perception that the Indian Mutual Fund Industry is on a high but actually the Indian Mutual Fund Industry is in its nascent stages. When compared to the Mutual Fund Industry of the world, it becomes quite evident that the Indian Mutual Fund Industry has a long way to go. A startling example of the same could come from the fact that all over the world there are 55,920 schemes and the figure is meager 495 in India. It is very recently that the Indian investors have started taking in more risk. This can be attributed to the fact that earlier there were only Debt funds in the market whereas now we have Equity based funds coming in large numbers. Further the industry has not penetrated the Indian household. A large chunk of the investment in the mutual funds is from the metros. This is reflected from the fact that the distribution network of the industry is more or less restricted to the metros and urban India. 1) The Indian mutual funds industry has been growing at a healthy pace of

16.44% for the last 8 years which is far superior as compared to the growth rate for the worldwide mutual fund industry, which has been around 13% in the same period. 2) The Indian mutual funds industry has Rs 204,519 crores worth of assets under management as on 30th Nov 2005, which is a spectacular growth of 37% from last year, the growth can be attributed to the booming equity markets in majority of the countries across the globe. The rise has been higher in case of India because of the comparatively smaller base. 3) 4) As on 30th June 05, worldwide mutual funds manage assets worth $16.41 Equity fund assets represent 43% of the worldwide mutual fund assets, trillion, while India has a meager 0.22% share of the world market. while money market funds are 19%, and share of bond funds stands at 20%. Balanced funds represent 9% of the total assets. The Indian story is however quite

different - the equity fund assets have formed only 27% of the total Indian industrys AUM as on 30th June 05. 5) This is despite the fact that the equity inflows in India have witnessed a stupendous rise of 134% in the last one year. The equity assets in India represented only 15% of the total mutual fund assets a year back (June 2004). 6) The equity cult has been spreading fast in the country and investors have started recognizing the significance of the mutual fund route to enter the stock markets. The Indian mutual fund industry is moving towards the international trends where the mutual funds have very high acceptance level and are preferred over direct investment in stocks. 7) 8) 9) 10) The huge participation of Indian investors in the NFOs recently As on November 30, 2005 the equity assets have increased to almost 36% of Liquid/ money market funds comprise of a large part of the Indian mutual Large institutions and corporate houses park their surplus short term funds demonstrates the increased acceptance levels of equity mutual funds in the country. the total Indian mutual fund assets bringing it close to the global levels. fund assets and stands at 37% as compared to their worldwide share of 19%. in liquid schemes as it provides with tax efficient returns, instant liquidity and superior performance at minimal risk. 11) Worldwide, there are about 55,920 schemes and 41% are equity-oriented schemes, whereas 24% are Bond funds, 20% are balanced/mixed funds, and 6% are money market funds. In India there are 495 schemes as on 30th Nov 05 and 42% are equity-oriented schemes, 41% are Bond Funds, 7% are in the balanced category and 8% are Liquid funds. 12) Indian MF industry typically has concentrated on Debt funds and their variants in the past, but things have started turning around recently with more and more equity schemes being launched of these schemes, the larger funds hold the maximum assets as revealed below: 13) In the equity category, top 10 schemes in terms of corpus; hold 27% of total assets. Top 15 schemes hold 35% and top 20 schemes hold 42%. Top 28 schemes hold more than 50% of the assets. Considering there are 217 schemes in the equity

category the dominance of some of the top schemes is quite clear. A handful of players in the industry manage a large chunk of money as of now. But with more global asset management companies queuing to enter the Indian markets we expect a more equitable distribution of funds. Now for all its growth in last years, the market is still very small and restricted both in terms of penetration. 14) The Industry faces competition from other traditional investment avenues as

well - insurance, pension plans and provident fund investments, company deposits and fixed deposits etc. 15) 16) The Indian equity space has a long way to go before they catch up with The Indian MF Industry have grown on the back of some really strong traditional mode of investment. performance of the Indian equity market, but, it remains to be seen whether the industry has matured enough to handle the downside as well, when the tide is not in their favour. For the industry to emerge as a preferred investment vehicle for the common investor, it has to overcome other hurdles also such as, penetration and expanding the market reach. 17) The existing network of Distributors that the industry is heavily reliant

on is concentrated in few major cities and metros only and it has to expand geographically.for 18) I feel that customer education and investor reach especially in the semiurban and rural areas are the two biggest challenges before the industry today and industry players have to put up a concentrated effort if Indian Mutual Fund space is to become as big as their counterparts do globally.

GROWTH IN ASSETS UNDER MANAGEMENT

RISK ASSOCIATED WITH MUTUAL FUNDS

The Risk-Return Trade-off The most important relationship to understand is the risk-return tradeoff. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Hence it is upto investor, the investor to decide how much risk you are willing to take. In order to do this you must first be aware of the different types of risks involved with your investment decision. Market Risk Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. Credit Risk The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cashflows determines the Credit

Risk faced by you. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. A AAA rating is considered the safest whereas a D rating is considered poor credit quality. Inflation Risk Rs. 100 today is worth more than Rs. 100 tomorrow.Remember the time when a bus ride costed 50 paise? The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A welldiversified portfolio with some investment in equities might help mitigate this risk.

Interest Rate Risk In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment.

Political/Government Policy Risk Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa.

Liquidity Risk Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities.

FINDINGS On the basis of my research I found the following results. 1. The Graph is based upon the Occupation of the people and their preference in choosing the Asset Management Company.
25 No. of people 20 15 10 5 0 Scheme Type 6 3 1 Return Fund Record manager 22 7 1 3 2 1 Brand Name 4 0 0 Salaried Self Employed Professional

Salaried Self Employed Professional

I. Returns record is considered most important factor for salaried people in selecting any Asset Management Company. II. Scheme type is the next priority of the customer while selecting the Asset Management Company. III. Fund manager and brand name is not seriously analyzed by the customers and this is because of the lack of customer education about Mutual Fund

2. The Graph is based upon the Occupation of the people and there preference area of investment .

O c c u p a tio n V s In v e s tm e n t M a d e P ro fe s s io na l
S elf-E m p loy e d 1 00 % 80 % 60 % 40 % 20 % 0% E qu ity In s u ran c eM u tu a l P .O B an k F .D o m p a ny C F u n d S aving B o n ds S ala rie d

I. Salary class people are more inclined towards Mutual Funds as compared to self employed and professionals . II. Self employed and professionals are more keen in investment in equity and company bonds.3. The Graph is based upon the Occupation of people and investment made in Mutual Fund Schemes.

Occupation Vs Best Option

100% 80% 60% 40% 20% 0% Balanced Growth Income Funds Tax saving Professional Self- Employed Salaried

I. Salary class people are risk averse, they are more inclined towards Balanced Scheme, and they even prefer the Schemes of Income and Tax Saving. II. Self employed people are risk takers and expect high returns. They prefer the Growth Schemes. III. Professionals generally prefer the Income and Tax saving Schemes.

4. The Graph is based upon Income of the people with respect of their investment made in different sectors.

Income Vs Investment Made

100% 80% 60% 40% 20% 0% Below 2 2 lac to 4 lac to 6 lac to Above 8 Lac 4 lac 6 lac 8 lac lac Company Bond Bank F.D P.O saving Mutual Fund Insurance Equity

I. Customers within the income range of 2 lakh to 8 lakh are keen interested in Mutual Funds. II. Equity is preferred by those who have income of 8 lakh and above.

5. The Graph is based upon the income group and the best fund where they want to invest there money.

Income Vs Best Fund

100% 80% 60% 40% 20% 0% Below 2 2 lac to 4 lac to 6 lac to Above 8 Lac 4 lac 6 lac 8 lac lac Tax saving Income Growth Balanced

I. Income group of below 2 lakh cant afford to take too much of risk and thus to be on the safer side , they generally invest in Income and Balanced funds. II. Balanced Schemes are mostly preferred by Income group 4 lakh to 8 lakh. III. Growth plan is preferred by the group of 2 lakh to 4 lakh and 6 lakh to 8 lakh. IV. Tax Saving funds are popular with the people who earn more than 8 lakh per annum.

6. The Graph is based upon age of the people and their respective investments.

A g e V s In v e s tm e n t O p tio n
100% A b o ve 5 5 8 0 % 4 1 -5 5 60% 3 1 -4 0 40% 2 5 -3 0 20% 1 9 -2 4 0% E q u it y In s u ra n c eM u t u a l P . O B a n k F ,D o m p a n y C fu n d S a vin g B ond In v e stm e n t O p tio n s

I. The age group of 25 to 40 years is the most prospective customer segment for Mutual Fund. II. Younger people of below 25 year are risk takers and thus apart from Mutual Funds they even directly invest in equity. III. Older people are risk averse and opt for safer options to invest.

7. The Graph is based upon the age group and the best fund where they want to invest there money.

Age Group Vs Best Fund

100% 80% 60% 40% 20% 0% 19-24 25-30 31-40 41-55 Above 55 Age Tax Saving Income Growth Balanced

I. Growth plans are generally preferred by people who fall in age group of 19 to 24 and 41 to 55. this category have customers who are risk takers and expect high returns. II. Balanced is mostly preferred by the age of 31 to 40 years. It is even liked by the age group of below 31 years to a reasonable extent. III. Tax Saving funds are more popular among the people above 40 years of age. IV. Income fund is predominant in the age group of 25 to 30 years.

8. The Graph is based on the knowledge of the customer relating with their occupation.

100% 80 % 60 % 40 % 20 % 0% Q uie t W e ll N o th in g V e ry L ittleM o d e ra te C o n ve rs a n to n ve rs a n t C 0 3 0 1 6 0 9 25 2 2 1 1 0 0 P ro fe s s io n a ls S e lf E m p loy e d S a la rie d

P ro fes s ion a ls S a larie d

S e lf E m p lo y e d 0

I. The level of awareness in salaried class is too wide where in it ranges from nothing to quiet conversant. II. Self employed people are towards the conversant side but still many of them lack the adequate level required. III. Professional are well versed with the concept and the industry of Mutual Funds.

9. The Graph is based on the income of the consumer and their investment in various schemes.

Income Vs Investment Scheme

100% 80% 60% 40% 20% 0% Below 2 2 lac to 4 lac to 6 lac to Above 8 Lac 4 lac 6 lac 8 lac lac Tax Saving Money market Balance Growth Income

I. Lower income group of below 2 lakh are more attracted towards the income and money market Schemes as they cannot afford to take too much of risk. II. Balanced scheme is more popular with the income group of 2 lakh to 6 lakh . This group is even inclined towards growth Schemes to certain extent . III. Persons with a salary of 6 lakh and above are fascinated by tax saving and money market schemes.

10. The Graph is showing the influential factor among the consumer.

Influential Factor
35 30 25 20 15 10 5 0 T.V News paper/Magazine Friends/Family Banners Internet

No.of People

Series1

I. Major chunk are fascinated by the Newspapers/ Magazine. II. Second best instrument to fascinate the customer is the internet. Because internet provide the easy and quickest way to get the information.

Equity: Diversified

Fund

Fund Rating

Launc h Apr1997 Apr2000 May2004 Feb2003 Jan1994 Sep2004 Dec1994 Aug2000 Jul2002 Mar2005 Sep1996 Dec2002 Feb2004 Apr1997 Apr2000 May2004 Feb2003 Nov2003 Jul2004 Oct2004 Jun1998

NAV

Sinc e Laun ch 22.83 20.58 40.90 54.95 12.30 26.71 20.30 20.67 31.98 0.55 23.84 69.12 23.75 22.83 20.58 40.90 54.95 14.93 39.90 28.10 23.63

YTD

DSPML Equity DSPML Opportunities DSPML T.I.G.E.R. DSPML Top 100 Equity HDFC Capital Builder HDFC Core & Satellite HDFC Equity HDFC Growth Fund HDFC Index Sensex Plus HDFC Premier Multi-Cap HDFC Top 200 HSBC Equity HSBC India Opportunities DSPML Equity DSPML Opportunities DSPML T.I.G.E.R. DSPML Top 100 Equity Prudential ICICI Advisor-Very Aggressive Prudential ICICI Discovery Prudential ICICI Emerging STAR Prudential ICICI Growth

Not Rated Not Rated

28.73 25.85 14.09 26.27 36.98 12.67 68.01 24.36 70.60 10.06 51.97 35.75 12.99 28.73 25.85 14.09 26.27 12.22 13.99 12.81 43.09

2.39 -0.81 0.64 -3.91 5.05 3.88 3.41 1.33 -0.82 0.87 -3.30 -3.57 2.39 -0.81 0.64 -3.91 0.02 8.62 7.38 -1.46

Not Rated

Not Rated Not Rated

Not Rated Not Rated

Not Rated Not Rated Not Rated Not Rated Not Rated

Prudential ICICI Power Reliance Equity Opportunities Reliance Growth Reliance Vision Franklin India Bluechip Franklin India Flexi Cap Franklin India Opportunities Franklin India Prima Franklin India Prima Plus FT India Life Stage FoF 20s

Not Rated

Sep1994 Mar2005 Oct1995 Oct1995 Nov1993 Feb2005 Mar2004 Nov1993 Sep1994 Nov2003

36.62 9.91 126.6 4 88.13 61.69 9.70 11.29 121.4 6 63.74 13.18

12.92 -0.86 30.32 25.48 26.47 -3.00 26.80 24.40 19.07 21.23

-0.97 12.9 5 7.37 -3.71 -1.22 10.4 9 2.18 -0.77

Not Rated Not Rated

Not Rated

Funds which were available for the selling in the ICICI Bank during the tenure of our work for 14 weeks. It was nice experience working with the staff of ICICI Bank and the experience which was gained at the time of selling Mutual Funds and coming across many unknown things which, not being in the market couldnt have been possible to study. Working with the Bank and the staff was being a wonderful experience for me. Many things which are of practical nature and not given in any of the books are taught in the field which are of great help in the near future. You got to learn many things like, how to talk to a person and what expressions to show at the right time. There are good and bad people in the organization and you got to teach lot many things from them. What I experienced while working was not to indulge in the politics at the working place as these things have shorter life span and not in long run.

Sales done during the service tenure :-

RELIANCE EQUITY OPPORTUNITY FUND HDFC MULTI-CAP FUND (Highest among my peers) FIDELITY

Rs. Rs.

4, 00,000 1, 30,000

Rs. 12, 48,000

(Topped for three consecutive days in Northern India) HSBC EQUITY FUND (Highest among my peers) DSPML FRANKLIN TEMPLETON SYSTEMATIC INVESTMENT PLAN (SIP) RECOMMENDATIONS Customer education of the salaried class individuals is far below standard. Thus Asset Management Companys need to create awareness so that the salaried class people become the prospective customer of the future. Early and mid earners bring most of the business for the Asset Management Companys. Asset Management Companys thus needed to educate and develop schemes for the persons who are at the late share. earning or retirement stage to gain the market Rs. Rs. 80,000 1, 10,000 Rs. 3, 50,000

64 APPLICATIONS

Returns record must be focused by the sales executives while explaining the schemes to the customer. Pointing out the brand name of the company repeatedly may not too fruitful.

The target market of salaried class individual has a lot of scope to gain business, as they are more fascinated to Mutual Funds than the self employed.

Schemes with high equity level need to be targeted towards self employed and professionals as they require high returns and are ready to bear risk.

Salary class individuals are risk averse and thus they must be assured of the advantage of risk diversification in Mutual Funds.

The choice range of salaried class individuals is too wide, thus the exact requirement of customer must be assessed before advising him for any scheme.

The major target market for the Asset Management Companys is the persons with the income range of 2 to 8 lakhs and they must be approached to gain investments.

High end customers with a income of above 8 lakhs are more interested in saving taxes and hence tax saving schemes fit to their requirement.

Low end customers require more of fixed returns and they cant take high risk because of limited financial resources. Thus income schemes need to be recommended for this segment.

Balanced schemes must be focused while explaining the schemes to the income segment of 4 lakhs to 6 lakhs.

Direct sales force can target the self employed and professionals as they are conversant with Mutual Funds and thus convincing them with the word of mouth wont be a too tough job.

During my research I found that the consumer wants a quick grievance solving mechanism. Consumer doesnt want to come to the office/branch for solving the grievance. So the Asset Management Companys should have to work upon that.

Most of the consumer is fascinated towards the open ended schemes. So the company should have more attention on open ended scheme.

Asset

Management

Companys

for

its

advertisement

and

promotional activity should go for Newspaper/Magazine and Internet.

REFRENCES Websites Capitalmarket.com Mutualfundsindia.com Mfindia.com Business-standard.com Valueresearchonline.com Amfiindia.com Magazines Economic Times Financial Times Capital Markets