A Dissertation Report

On

A STUDY OF MUTUAL FUNDS

IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY

DANISH KHAN
ROLL NO. REG. NO.

DECLARATION
I DANISH KHAN hereby declare that the dissertation entitled A STUDY OF MUTUAL FUNDS submitted to the

Place: Date: Signature of the candidate.

ABSTRACT
Indian mutual fund industry now represents perhaps the most appropriate investment opportunity for most investors. As financial markets become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. There are various choices available to the investor of today. One however needs to invest carefully, and work out various investment options and decide on how to make best of the investment in terms of monetary benefits.

A mutual fund is a common pool of money into which investors place their contributions that are to be invested in accordance with a stated objective. The ownership of the fund is thus join or mutual; the fund belongs to all investors. A single investors ownership of the fund is in the same proportion as the amount of the contribution made by him or her bears to the total amount of fund.

A mutual fund uses the money collected from investors to buy those assets which are specifically permitted by its stated investment objective. Thus, an equity fund would buy mainly equity assets- ordinary shares, preference shares, warrants etc. It is these assets which are owned by the investors in the same proportion as their contribution bears to the total contributions of all investors put together.

CONTENTS
CERTIFICATE DECLARATION ACKNOWLEDGEMENTS ABSTRACT

CHAPTER 1 INTRODUCTION 1.1 INTRODUCTION TO THE CONCEPT CHAPTER 2 - REVIEW OF LITERATURE 2.1 PURPOSE OF THE STUDY 2.2 BRIEF HISTORY OF MUTUAL FUNDS 2.3 PERFORMANCE OF MUTUAL FUNDS IN INDIA CHAPTER 3 - PRESENT STUDY 3.1 MARKET TRENDS 3.2 BANKS V/S MUTUAL FUNDS 3.3 TYPES OF MUTUAL FUNDS 3.4 ADVANTAGES & DISADVANTAGES OF MUTUAL FUNDS 3.5 MUTUAL FUND CONSTITUENTS 3.6 CALCULATION OF NAV 3.7 MARKETING STRATEGIES ADOPTED

BY THE MUTUAL FUNDS 3.8 MARKETING OF FUNDS: 3.9 CHALLENGES AND OPPORTUNITIES 3.10 REASONS FOR BAD PERFORMANCE OF MUTUAL FUNDS 3.11 MAJOR MUTUAL FUNDS COMPANIES IN INDIA CAPTER 4 RESEARCH METHODOLOGY 4.1 METHODS 4.2 DATA ANALYSIS CHAPTER 5 RECOMMENDATIONS CHAPTER 6 CONCLUSION CHAPTER 7 REFRENCES ANNEXURE

LIST OF FIGURE

S.N 1.

TITLE RATE THE FAMILIARITY AND

EXPERIENCE WITH INVESTMENTS 2. POSSIBLE INVESTMENT MOTIVES FOR PORTFOLIO. 3. 4. 5. 6. 7. CLASSIFY YOUR INVESTMENT STYLE INVESTMENT VEHICLE TYPE OF MUTUAL FUNDS DO PREFER TAX SAVING AVERTISING

CHAPTER 1
INTRODUCTION

INTRODUCTION TO THE CONCEPT WHAT IS A MUTUAL FUND?

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (pro rata). Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an inventible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

MUTUAL FUND OPERATION FLOW CHART

A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places.

CHARACTERISTICS OF A MUTUAL FUND:

Mutual funds are not guaranteed by any bank or government agency.

Mutual funds provide a rate of return, in the form of dividends, capital gains, and changes in share value.

There is always some investment risk.

Higher rates of return usually involve higher risk.

All mutual funds have costs which lower the shareholders rate of return.

Past performance is not a guarantee of future performance.

Mutual funds can be purchased through brokers or directly from the fund through its Transfer Agent

CHAPTER-2
REVIEW OF LITERATURE

PURPOSE OF THE STUDY

Indian households started allocating more of their savings to the capital markets in 1980s, with investments flowing into equity and debt instruments, besides the conventional mode of bank deposits. Until 1992, primary market investors were effectively assured good returns as the issue price of new equity issues was controlled and low. After introduction of free pricing of shares, new issues prices were higher and with greater volatility in the stock markets, many investors who bought highly priced shares lost money, and withdrew from the markets altogether. Even those investors who continued as direct investors in the stock markets realized that the key to successful investing in the capital markets lay in building a diversified portfolio, which in turn required substantial capital. Besides, selecting securities with growth and income potential from the capital market involved careful research and monitoring of the market, which was not possible for all investors. Under similar circumstances in other countries, mutual funds had emerged as professional intermediaries. Besides providing the expertise in stock market investing, these funds allow investing in small amounts and yet holding a diversified portfolio to limit risk, while providing the potential for income and growth that is associated with the debt and equity instruments. In India, Unit Trust of India occupied this place as the only capital markets intermediary from 1964 until late 1987, when the Government started allowing other sponsors also to set up mutual funds. With some ups and downs, this new class of intermediary institutions has emerged, in India as elsewhere, as a good alternative to direct investing in capital markets. Mutual funds units are investment vehicles that help small investors to take a big ride through capital market, which is not possible individually with small amount of investment.

Mutual funds serve as a link between the saving public and the capital markets, as they mobilize savings from investors and bring them to borrowers in the capital markets. They influenced the stock markets and play an active role in promoting good corporate governance, investor protection and the health of capital markets. Mutual funds have imparted much needed liquidity into the financial system and challenged the hitherto dominant role of banking and financial institutions in the capital markets.

The present study was undertaken to Understand the perception of small investors, who are the most exploited in Indian capital Market. Analyze the type of funds available for the investor Understand the investment pattern of a common investor. Analyze factors which are considered before investing in mutual funds. Understand the trends in mutual fund industry. Importance of Marketing Strategies in mutual funds.

BRIEF HISTORY OF MUTUAL FUNDS

The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector entry to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004; it reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund companies, to market the product correctly abreast of selling.

The mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.

First Phase - 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase - 1987-1993 (Entry of Public Sector Funds) Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47, 004 as assets under management.

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

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI

(Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds. FourthPhase - since February 2003

This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on January 2003). The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of AUM and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.

PERFORMANCE OF MUTUAL FUNDS IN INDIA

Let us start the discussion of the performance of mutual funds in India from the day the concept of mutual fund took birth in India. The year was 1963. Unit Trust of India invited investors or rather to those who believed in savings, to park their money in UTI Mutual Fund.

For 30 years it goaled without a single second player. Though the 1988 year saw some new mutual fund companies, but UTI remained in a monopoly position.

The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. People rarely understood, and of course investing was out of question. But yes, some 24 million shareholders was accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of investors touched the sky in profitability factor. However, people were miles away from the preparedness of risks factor after the liberalization.

The Assets Under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn.

The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative investments. There were rather no choices apart from holding the cash or to further continue investing in shares. One more thing to be noted, since only closed-end

funds were floated in the market, the investors disinvested by selling at a loss in the secondary market.

The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal, the losses by disinvestments and of course the lack of transparent rules in the whereabouts rocked confidence among the investors. Partly owing to a relatively weak stock market performance, mutual funds have not yet recovered, with funds trading at an average discount of 1020 percent of their net asset value.

The supervisory authority adopted a set of measures to create a transparent and competitive environment in mutual funds. Some of them were like relaxing investment restrictions into the market, introduction of open-ended funds, and paving the gateway for mutual funds to launch pension schemes.

The measure was taken to make mutual funds the key instrument for long-term saving. The more the variety offered, the quantitative will be investors. At last to mention, as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time, more and more people will be inclined to invest until and unless they are fully educated with the dos and donts of mutual funds

CHAPTER 3
PRESENT STUDY

MARKET TRENDS
A lone UTI with just one scheme in 1964, now competes with as many as 400 odd products and 34 players in the market. In spite of the stiff competition and losing market share, UTI still remains a formidable force to reckon with. Last six years have been the most turbulent as well as exiting ones for the industry. New players have come in, while others have decided to close shop by either selling off or merging with others. Product innovation is now pass with the game shifting to performance delivery in fund management as well as service. Those directly associated with the fund management industry like distributors, registrars and transfer agents, and even the regulators have become more mature and responsible. The industry is also having a profound impact on financial markets. While UTI has always been a dominant player on the bourses as well as the debt markets, the new generation of private funds which have gained substantial mass are now seen flexing their muscles. Fund managers, by their selection criteria for stocks have forced corporate governance on the industry. By rewarding honest and transparent management with higher valuations, a system of risk-reward has been created where the corporate sector is more transparent then before. Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and technology sector. Funds performances are improving. Funds collection, which averaged at less than Rs100bn per annum over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. In the current year mobilization till now have exceeded Rs300bn What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than public sector mutual funds. Indeed private MFs saw a net inflow of Rs. 7819.34 crore during the first nine months of the year as against a net inflow of Rs.604.40 crore in the case of public sector funds.

Mutual funds are now also competing with commercial banks in the race for retail investors savings and corporate float money. The power shift towards mutual funds has become obvious. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way. India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund assets are not even 10% of the bank deposits, but this trend is beginning to change. Recent figures indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits rose by only 17%. (Source: Think-tank, The Financial Express September, 99) This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not close down completely. Their role as intermediaries cannot be ignored. It is just that Mutual Funds are going to change the way banks do business in the future.

BANKS
Returns Low

MUTUAL FUNDS
Better Low Moderate More Low but improving Better Transparent None

Administrative exp. High Risk Low

Investment options Less Network Liquidity Quality of assets Guarantee High penetration At a cost Not transparent Maximum Rs.1 lakh on deposits

BANKS VS MUTUAL FUNDS TYPES OF MUTUAL FUNDS

Any mutual fund has an objective of earning income for the investors and/ or getting increased value of their investments. To achieve these objectives mutual funds adopt different strategies and accordingly offer different schemes of investments. On this basis the simplest way to categorize schemes would be to group these into two broad classifications: Operational Classification and Portfolio Classification. Operational classification highlights the two main types of schemes, i.e., open-ended and close-ended which are offered by the mutual funds.

Portfolio classification projects the combination of investment instruments and investment avenues available to mutual funds to manage their funds. Any portfolio scheme can be either open ended or close ended. A. OPERATIONAL CLASSIFICATION

(a)

Open Ended Schemes: An open-ended Mutual fund is one that is available for subscription and repurchase on a continuous basis. These Funds do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.

(b)

Close Ended Schemes: Such schemes have a definite period after which their shares/ units are redeemed. Unlike open-ended funds, these funds have fixed capitalization, i.e., their corpus normally does not change throughout its life

period. Close ended fund units trade among the investors in the secondary market since these are to be quoted on the stock exchanges. Their price is determined on the basis of demand and supply in the market. Their liquidity depends on the efficiency and understanding of the engaged broker. Their price is free to deviate from NAV, i.e., there is every possibility that the market price may be above or below its NAV. In India as per SEBI (MF) Regulations every mutual fund is free to launch any or both types of schemes.

B. PORTFOLIO CLASSIFICATION OF FUNDS: Following are the portfolio classification of funds, which may be offered. This classification may be on the basis of (a) Return, (b) Investment Pattern, (c) Specialized sector of investment, (d) Others

(A)

RETURN BASED CLASSIFICATION: To meet the diversified needs of the

investors, the mutual fund schemes are made to enjoy a good return. Returns expected are in form of regular dividends or capital appreciation or a combination of these two.

i.

Income Funds: The aim of income funds is to provide regular and steady

income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest

rates in the country. If the interest rates fall, Navs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations ii. Growth Funds: Such funds aim to achieve increase in the value of the

underlying investments through capital appreciation. Such funds invest in growth oriented securities which can appreciate through the expansion production facilities in long run. An investor who selects such funds should be able to assume a higher than normal degree of risk. iii. Conservative Funds: The fund with a philosophy of all things to all issue

offer document announcing objectives as: (i) To provide a reasonable rate of return, (ii) To protect the value of investment and, (iii) To achieve capital appreciation consistent with the fulfillment of the first two objectives. Such funds which offer a blend of immediate average return and reasonable capital appreciation are known as middle of the road funds.

(B)

INVESTMENT BASED CLASSIFICATION: Mutual funds may also be

classified on the basis of securities in which they invest. Basically, it is renaming the subcategories of return based classification. i. Equity Fund: Such funds, as the name implies, invest most of their investible

shares in equity shares of companies and undertake the risk associated with the investment in equity shares. Such funds are clearly expected to outdo other funds in rising market, because these have almost all their capital in equity. Equity funds again can be of different categories varying from those that invest exclusively in high quality blue chip companies to those that invest solely in the new, unestablished companies. The strength of these funds is the expected capital appreciation. Naturally, they have a higher degree of risk.

ii.

Bond Funds: such funds have their portfolio consisted of bonds, debentures,

etc. this type of fund is expected to be very secure with a steady income and little or no chance of capital appreciation. Obviously risk is low in such funds. In this category we may come across the funds called Liquid Funds which specialize in investing short-term money market instruments. The emphasis is on liquidity and is associated with lower risks and low returns. iii. Balanced Fund: The funds, which have in their portfolio a reasonable mix of

equity and bonds, are known as balanced funds. Such funds will put more emphasis on equity share investments when the outlook is bright and will tend to switch to debentures when the future is expected to be poor for shares.

(c)

SECTOR BASED FUNDS: There are number of funds that invest in a specified

sector of economy. While such funds do have the disadvantage of low diversification by putting all their all eggs in one basket, the policy of specializing has the advantage of developing in the fund managers an intensive knowledge of the specific sector in which they are investing. Sector based funds are aggressive growth funds which make investments on the basis of assessed bright future for a particular sector. These funds are characterized by high viability, hence more risky.

ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a Mutual Fund are:

Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value.

Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell.

Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud.

Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash.

Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet.

Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index

Transparency Choice of schemes Tax benefits

DRAWBACKS OF MUTUAL FUNDS:

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

No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.

Fees and commissions: All funds charge administrative fees to cover their day-today expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.

Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.

Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.

MUTUAL FUND CONSTITUENTS

All mutual funds comprise four constituents Sponsors, Trustees, Asset Management Company (AMC) Sponsors: The sponsors initiate the idea to set up a mutual fund. It could be a registered company, scheduled bank or financial institution. A sponsor has to satisfy certain conditions, such as capital, record (at least five years operation in financial services), default free dealings and general reputation of fairness. The sponsors appoint the Trustee, AMC and Custodian. Once the AMC is formed, the sponsor is just a stakeholder. Trust/ Board of Trustees: Trustees hold a fiduciary responsibility towards unit holders by protecting their interests. Trustees float and market schemes, and secure necessary approvals. They check if the AMCs investments are within well-defined limits, whether the funds assets are protected, and also ensure that unit holders get their due returns. They also review any due diligence by the AMC. For major decisions concerning the fund, they have to take the unit holders consent. They submit reports every six months to SEBI; investors get an annual report. Trustees are paid annually out of the funds assets 0.5 percent of the weekly net asset value. Fund Managers/ AMC: They are the ones who manage money of the investors. An AMC takes decisions, compensates investors through dividends, maintains proper accounting and information for pricing of units, calculates the NAV, and provides information on listed schemes. It also exercises due diligence on investments, and submits quarterly reports to the trustees. A funds AMC can neither act for any other fund nor undertake any

business other than asset management. Its net worth should not fall below Rs. 10 crore. And, its fee should not exceed 1.25 percent if collections are below Rs. 100 crore and 1 percent if collections are above Rs. 100 crore. SEBI can pull up an AMC if it deviates from its prescribed role.

CALCULATION OF NAV
The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below. Asset value is equal to Sum of market value of shares/debentures + Liquid assets/cash held, if any + Dividends/interest accrued Amount due on unpaid assets Expenses accrued but not paid

MARKETING STRATEGIES ADOPTED BY THE MUTUAL FUNDS

The present marketing strategies of mutual funds can be divided into three main headings: Direct marketing Joint Calls Holding and Banners Direct Marketing: This constitutes 20 percent of the total sales of mutual funds. Some of the important tools used in this type of selling are: Personal Selling: In this case the customer support officer of the fund at a particular branch takes appointment from the potential prospect. Once the appointment is fixed, the branch officer also called Business Development Associate (BDA) in some funds then meets the prospect and gives him all details about the various schemes being offered by his fund. The conversion rate in this mode of selling is in between 30% - 40%. Telemarketing: In this case the emphasis is to inform the people about the fund. The names and phone numbers of the people are picked at random from telephone directory. Sometimes people belonging to a particular profession are also contacted through phone and are then informed about the fund. Generally the conversion rate in this form of marketing is 15% - 20%.

Direct mail: This one of the most common method followed by all mutual funds. Addresses of people are picked at random from telephone directory. The customer support officer (CSO) then mails the literature of the schemes offered by the fund. The follow up starts after 3 4 days of mailing the literature. The CSO calls on the people to whom the literature was mailed. Answers their queries and is generally successful in taking appointments with those people. Advertisements in newspapers and magazines: The funds regularly advertise in business newspapers and magazines besides in leading national

dailies. The purpose to keep investors aware about the schemes offered by the fund and their performance in recent past. Hoardings and Banners: In this case the hoardings and banners of the fund are put at important locations of the city where the movement of the people is very high. Generally such hoardings are put near UTI offices in order to tap people who are at present investing in UTI schemes. The hoarding and banner generally contains information either about one particular scheme or brief information about all schemes of fund. Regular Meetings with distributors: Most of the funds conduct monthly/bi-monthly meetings with their distributors. The objective is to hear their complaints regarding service aspects from funds side and other queries related to the market situation. Sometimes, special training programmes are also conducted for the new agents/ distributors. Training involves giving details about the products of the fund, their present performance in the market, what the competitors are doing and what they can do to increase the sales of the fund. Joint Calls: This is generally done when the prospect seems to be a high net worth investor. The BDA and the agent (who is located close to the HNIs residence or area of operation) together visit the prospect and brief him about the fund. The conversion rate is very high in this situation, generally, around 60%. Both the fund and the agent provide even after sale services in this particular case. Meetings with HNIs: This is a special feature of all the funds. Whenever a top official visits a particular branch office, he devotes at least one to two hours in meting with the HNIs of that particular area. This generally develops a faith among the HNIs towards the fund.

MARKETING OF FUNDS: CHALLENGES AND OPPORTUNITIES

When we consider marketing, we have to see the issues in totality. When we say marketing of mutual funds, it means, includes and encompasses the following aspects: Assessing of investors needs and market research; Responding to investors needs; Product designing; Studying the macro environment; Timing of the launch of the product; Choosing the distribution network; Finalizing strategies for publicity and advertisement; Preparing offer documents and other literature; Getting feedback about sales; Studying performance indicators about fund performance like NAV; Sending certificates in time and other after sales activities; Honoring the commitments made for redemptions and repurchase; Paying dividends and other entitlements; Creating positive image about the fund and changing the nature of the market itself. The above are the aspects of marketing of mutual funds, in totality. Even if there is a single weak-link among the factors which are mentioned above, no mutual fund can successfully market its funds.

 WIDENING, BROADENING AND DEEPENING THE MARKETS There are certain issues that are directly linked with the marketing of mutual funds, the first of which is widening, broadening and deepening of the market for the mutual fund products. Consider the geographical spread of the investors in the mutual fund industry.. In fact there are only around 35 centers in the country, which account for almost 95% of the funds mobilized. Considering the vast nature of this country, the first priority is that the geographic spread has to be widened and the market has to be deepened. Secondly, the mutual funds must try to spread their wings not only within the country, but also outside the country. A. Markets in Rural and Semi-Urban Areas There exists a large investor base in rural and semi-urban areas, having a population of about one lakh, which normally has access to only post office savings and bank deposits. This is the single largest untapped market for mutual funds in India. Rural marketing, unlike the marketing of mutual funds in the metros and urban areas, would require a completely different strategy, and different means of communication to the target customer. Typically, investors in the rural and semi-urban areas are not well educated and are inadequately exposed to the capital market mechanisms. Therefore, more emphasis has to be given to the electronic media and other forms of publicity such as wall paintings, hoardings, and educational films. It is also important to utilize the services of local intermediaries like gram sevaks, postmasters, school teachers, agricultural cooperative societies and rural banks. It would therefore be more expensive to market mutual funds in such markets than marketing in the cities. The mutual fund industry can collectively undertake this job of creating awareness among the rural population about the mutual funds as a new form of savings; translate that awareness into increased fund mobilsation.

B. Overseas Markets The second aspect with respect to the widening and deepening the market is expanding the overseas investor base. A target group with large potential, which can be tapped is nonresident Indians. If offered after sales services of international standard, reasonable return and easy access to information, NRIs are willing to invest in Indian mutual funds. The expansion of the distribution network and quick dissemination of information, coupled with prompt and timely service, efficient collection and remittance mechanism, will play an important role in mobilizing and retaining these funds. NRIs will also require a continuous presence in their market, because that generates trust and confidence, which translates into sustained mobilization of funds.

PRODUCT INNOVATION AND VARIETY

A. Investor Preferences The challenge for the mutual funds is in the tailoring the right products that will help mobilizing savings by targeting investors needs. It is necessary that the common investor understands very clearly and loudly the salient features of funds, and distinguishes one fund from another. The Indian investor is essentially risk averse and is more passive than active. He is not interested in frequently changing his portfolio, but is satisfied with safety and reasonable returns. Importantly, he understands more by emotions and sentiments rather than a quantitative comparison of funds performance with respect to an index. Mere growth prospects, in an uncertain market, are not attractive to him. The investor is ready to invest his money over a long period, provided there is a purpose attached to it which is linked to his social needs and therefore appeals to his sentiments and emotions. That purpose may be his childs education and career development, medical expenses, health care after retirement, or the need for steady and sure income after retirement.

B. Product Innovations With the debt market now getting developed, mutual funds are tapping the investors who require steady income with safety, by floating funds that are designed to primarily have debt instruments in their portfolio. The other area where mutual funds are concentrating is the money market mutual funds, sectoral funds, index funds, gilt funds besides equity funds. The industry can also design separate funds to attract semi-urban and rural investors, keeping their seasonal requirements in mind for harvest seasons, festival seasons, sowing seasons, etc.

DISTRIBUTION NETWORK Among the competitors to the mutual fund industry, Life Insurance Corporation with its dedicated sales force is offering insurance products; banks with their friendly neighborhood presence offer the advantage of extensive network; finance companies with their hefty upfront incentives offer higher returns; shares provided the market is moving favorably also attract direct investments from retail investors. It is against this background that the merits and demerits of the alternative methods of distribution have to be studied. Retail through agents The alternative distribution channels that are available are selling, or using lead managers and brokers along with sub-brokers, for selling units. The experience of UTI has been that, if necessary motivation and incentive is provided to the retailer agents, they are likely to be more successful than the lead managers. This is because, there is a sense of loyalty amongst agents, in anticipation of getting continuous business throughout the year, and the trust and credibility that has been generated or will be generated by being loyal to one institution. Savings in advertisement and publicity expenses is also affected, as the target

of communication is restricted to a few group of individuals, since the agent will function as a facilitator, informer and educator. The reduced cost benefit will ultimately accrue to the investor in the form of higher returns.

ADVERTISING AND SALES PROMOTION By their very nature, mutual funds require higher advertisement and sales promotion expenses than any consumer product offering measurable performance. Different kinds of advertising and sales promotion exercises are required to serve the needs of different classes of investors. For instance, an aggressive push marketing strategy is required for retail markets, where investors are not adequately aware of the product and do not have specialized skill in financial market, in contrast with pull marketing strategies for the wholesale market. There are certain issues with reference to advertisement, publicity literature and offer documents, which deserve attention. Most of the mutual fund advertisements look similar, focusing on scheme features, returns and incentives. An investor exposed to the increasing number of mutual fund products finds that all the available brands are rather identical, and cannot appreciate any distinction. The present form of application, brochures and other literature is generally lengthy, cumbersome and at times complicated leading to higher emphasis on advertisement. One of the limiting factors is the regulatory framework governing advertisements of mutual fund products. For instance, in the offer documents, mutual funds are required to mention the fund objectives in clear terms. Immediately thereafter, the first risk factor that has to be mentioned is that there is no certainty whether the objectives of the fund will be achieved or not. Some more relaxation in these may facilitate bringing more novelty in advertisements, within a broad framework, without luring investors through false promises, and will certainly improve the situation.

 QUALITY OF SERVICE This industry primarily sells quality of services, given that the performance cannot be promised. It is with this attribute along with procedural simplicity, that the fund gradually builds its brand and its class of loyal investors. The qualities of services are broadly categorized as: Timely services after the sale of the units; and Continuous reporting of investment performance. Mutual fund managers must give due attention and evaluate their performance on each front. They may also consider an option of conducting a service audit for controlling and improving the quality of service.

MARKET RESEARCH
Investment in mutual fund is not a one-time activity. It is a continuous activity. The same investor, if satisfied, will come to the fund again and again. When the investor sends his application, it is not only an application, but it also contains vital information. Most of this information if tabulated and analyzed, would provide important insights into investor needs, preferences and behavior and enables us to target customers need more accurately, to achieve better penetration, deeper loyalty and reduced costs. It is in this context that direct marketing will assume increased importance. Knowing the customer thoroughly is of utmost importance. Unlike the consumer goods industry, it is not possible for mutual fund industry to test market and have pilot projects before launch. At the same time, focusing and concentrating on a particular geographic area where the fund has a strong presence and proven marketing network, can help reduce network, can help reduce issue expenses and ultimately translate into higher returns for the investor.

MARKET SEGMENTATION
1) Retail Segment This segment characterizes large number of participants but low individual volumes. It consists of individuals, Hindu Undivided Families, and firms. It may be further subdivided into: i. Salaried class people; ii. Retired people; iii. Businessmen and firms having occasional surpluses; iv. HUFs for long term investment purpose. These may be further classified on the basis of their income levels. It has been observed that prospects in different classes of income levels have different patterns of preferences of investment. Similarly, the investment preferences for urban and rural prospects would differ and therefore the strategies for tapping this segment would differ on the basis of differential life style, value and ethics, social environment, media habits, and nature of work. The marketing strategy involving indirect selling through agency network and creating awareness through appropriate media would be more effective in this segment. 2) Institutional Segment This segment characterizes less number of participants, and large individual volumes. It consists of banks, public sector units, financial institutions, foreign institutional investors, insurance corporations, provident and pension funds. This class normally looks for more specialized professional investment skills of the fund managers and expects a structured product than a ready-made product. The tax features and regulatory restrictions are the vital considerations in their investment decisions. Each class of participants, such as banks, provides a niche to the fund managers in this segment. It requires more of a personalized and direct marketing to sustain and increase volumes.

3) Trusts This is a highly regulated, high volumes segment. It consists of various types of trusts, namely, charitable trusts, religious trust, educational trust, family trust, social trust, etc. each with different objectives. Its basic investment need would be safety of the principal, regular income and hedge against inflation rather than liquidity and capital appreciation. This class offers vast potential to the fund managers, if the regulators relax guidelines and allow the trusts to invest freely in mutual funds.

4) Non-Resident Indians This segment consists of very risk sensitive participants, at times referred as fair weather friends. They need the highest cover against political and exchange risk. They normally prefer easy exit with repatriation of income and principal. They also hold a strategic importance as they bring in crucial foreign exchange a crucial input for developing country like ours. Marketing to this segment requires special kind of products for groups of foreign countries depending upon the provisions of tax treaties. The range of suitable products is required to design to divert the funds flowing into bank accounts.

5) Corporate Generally, the investment need of this segment is to park their occasional surplus funds that earn return more than what they have to pay on account of holding them. Alternatively, they also get surplus fund due to the seasonality of the business, which typically become due for the payment within a year or quarter or even a month. They need short term parking place for their fund. This segment offers a vast potential to specialized money market managers. Given the relaxation in the regulatory guidelines, fund managers are expected design products to this segment.

REASONS FOR BAD PERFORMANCE OF MUTUAL FUNDS

Most investors associate mutual funds with Master gain, Monthly Equity Plans of SBI Mutual Fund, UTI and Canbank Mutual Fund and of course Morgan Stanley Growth Fund. This is so because these funds truly had participation from masses, with a fund like Morgan Stanley having more than 1 million investors. Investors feel that after 5 years, Morgan Stanley Growth Fund units still trade below the original IPO price of Rs 10. It is incorrect to think that all mutual funds have performed poorly. If one looks at some income funds, they have come with reasonable returns. It is only the performance of equity funds, which has been poor. Their poor performance has been amplified by the closed end discounts i.e. units of these funds quoting at sharp discounts to their NAV resulting in an even poorer return to the investor. One must remember that a Mutual Fund does not provide assured returns and neither can it "manufacture" returns out of thin air. Returns provided by mutual funds are a function of the returns in the underlying asset class in which the fund invests. Good funds can beat returns in their asset class to some extent but thats all. One more issue is that the fund managers in many funds were not "professionally qualified and experienced". This is especially true of some of the funds floated by nationalized banks. Some of these individuals were transferred from the parent organization and did not really know much about investment management. Lastly, investors would do well to have a look at the investments, which they made on their own. In most cases, they would have done much worse than the mutual funds. We have received numerous requests for advice from individual investors on what to do about their own investments. If that were any indicator, investors would have done really badly.

MAJOR MUTUAL FUNDS COMPANIES IN INDIA

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing Development Finance Corporation Limited and Standard Life Investments Limited.

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsorers, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993.

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18 schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsorers for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country with more than Rs. 7,703 crores (as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having more than 1,99,818 investors in its various schemes. KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Privete Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20,1999.

Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India

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

Escorts Mutual Fund

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

Alliance Capital Mutual Fund

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

Canbank Mutual Fund

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

LIC Mutual Fund

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

GIC Mutual Fund

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

CHAPTER-4
RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
Investment in mutual fund is not a one-time activity. It is a continuous activity. The same investor, if satisfied, will come to the fund again and again. When the investor sends his application, it is not only an application, but it also contains vital information. Most of this information if tabulated and analyzed would provide important insights into investor needs, preferences and behavior and enables us to target customers need more accurately, to achieve better penetration, deeper loyalty and reduced costs. It is in this context that direct marketing will assume increased importance. Knowing the customer thoroughly is of utmost importance. Unlike the consumer goods industry, it is not possible for mutual fund industry to test market and have pilot projects before launch. At the same time, focusing and concentrating on a particular geographic area where the fund has a strong presence and proven marketing network, can help reduce network, can help reduce issue expenses and ultimately translate into higher returns for the investor. Very little research on investor preference is available, but the industry can collectively have a data bank, and share the information for appropriate use. This study on Mutual funds in India has been based on primary as well as secondary data sources. The primary data is collected by the getting the questionnaire filled from the common investor above the age of 25. For this research, I have made use of a questionnaire for ascertaining the investment pattern of a common investor. The questionnaire consisted of 13 questions in total, each question having various multiple choices. Depending upon the choice selected by the respondent, each

respondent gets a total score which represents his degree of favorability towards the kind of investment he makes and his knowledge about the investments. The main aim of conducting the survey using a questionnaire was to understand the perception of small investors, who are the most exploited in Indian capital Market, analyze the type of funds available for the investor and understand the investment pattern of a common investor, importance of marketing Strategies in mutual funds. This was done by ascertaining the average response of all the samples for the total 13 questions asked in the questionnaire. The results for the 13 questions asked were further graphically represented, showing the favorability towards different parameters. The secondary resources used in the study are: Books Journals Magazine Articles Internet Websites.

DATA SOURCE:
Both primary and secondary data are collected for the study, both play vital role at the time of analysis. To give a suitable recommendation to the existing problems, primary data played a major role; also secondary data is necessary to give proper support to the primary data.

SAMPLE SIZE-50

Primary data: has been collected from the agra region with the help of questionnaire. Secondary data: has been collected from the internet, print media& investor.

METHOD OF DATA COLLECTION:

Several alternative media are available for obtaining information from respondent through communication .respondent may be interviewed in person or interviewed by telephone, or they may be mailed a questionnaire to which they are asked to respond.

Primary data has been collected by personal interview of investor. in few cases the concerned person refused to give an appointment and has to collect information through phone

DATA ANALYSIS
1. Rate the familiarity and experience with investments a) Familiar and experienced b) Familiar but not experienced c) Not familiar and inexperienced C 7%

A 15%

B 28%
2. What is your anticipated Investment time frame?
a) Long term - more than 7 years b) Medium term - 4 to 7 years c) Short-medium term - 1 to 3 years d) Short term - less than 1 year
9% 6%

15% 20%

3. Which of the following are possible investment motives for you with regard to a portfolio?

a) Keeping aside money generated from business / profession, to specifically generate

alternate source of income / wealth

b) Preserving wealth, after accounting for inflation and taxes c) Regular income to meet present commitments and expenses d) Building a corpus to meet specific future requirements 18% 18% 16% 14% 12% 10% 10% 8% 6% 4% 2% 0% 9% 13%

4. How would you like to classify your investment style?

a) Conservative b) Moderate c) Aggressive

29% 30%

25%

20% 15% 15%

10% 6% 5%

0% A B C

5. Assume that you have invested Rs. 10,000 in a mutual fund and the value of the investment dropped to Rs. 8,500 after six months. What would you be most likely to do?

a) I would move the money to a bank fixed deposit. b) I would wait till the value reached 10,000 and then move to another fund. c) I would not do anything. d) I would invest more in the fund to bring down my average cost of acquisition

6% 16% 16% 12%

6. Your key objective when considering an investment vehicle is?

a) Income only b) Income and some Capital Growth c) Balance of Capital Growth and Income d) Capital Growth and some Income

10% 18%

14% 9%

7. You would like to invest in?

a) Bank accounts, Debt and Debt Mutual Funds b) Equities and Mutual Funds c) Real Estate and Real Estate Funds d) Commodities and Commodity Funds
16%

16% 14% 12% 10% 8% 6% 4% 2% 0%

15%

12%

7%

8. Which type of mutual funds do you prefer? a) By Structure: i. ii. Open-ended Funds Closed-ended Funds

b) By Investment Objective: i. ii. iii. iv. c) Other Schemes: i. ii. iii. iv. Tax Saving Schemes Industry Specific Schemes Index Schemes Sectoral Schemes Growth Funds Income Funds Balanced Funds Money Market Funds

12%

17%

21%

9. Are you aware of the tax saving benefits available in investment of mutual funds?

a) Yes

b) No

Slice 2 14%%

Slice 1 36%%

10. Do you think that advertising plays an important role in spreading the awareness amongst investors for investing in mutual funds?

a) Yes

b) No
No 10%

Yes 40%%

CHAPTER-5
RECOMMENDATION

RECOMMENDATIONS

More awareness is required regarding the differences in various schemes. Insider trading should be prohibited. Promote distributor for expansion of the Industry Less government involvement as far as management is concerned. Schemes to be made more investor friendly. Fund houses should increase tie ups with more banks for direct credit facility of the dividends. commission should be distributed properly(with in the time) more schemes should be added services should be improved for the investor protection locking problem should be changed there should more tie-ups with other bank Edge over the competitors in terms of product and services.

CHAPTER-6
CONCLUSION

CONCLUSION
The Indian corporate scene is gradually transforming to cope with globalization and liberalization of the Indian economy. Indian shareholders are getting restless to prevent corporate board from offering them inferior deals. Mutual funds need to devise different strategies for companies with different types of ownerships. In an effort to realign ownership with control, the company should not develop a too comfortable relationship with the stakeholders. This may also work against the interests of the minority shareholders. Mutual funds will have to do what the market fails to do- take initiative to make the market for corporate control more efficient to counter the abuse of the separation of ownership from control and the lack of contestability in the corporate boards, which are the root causes of existing corporate governance practices. The initiatives as suggested will help mutual funds not only release value for the shareholders in many inefficient companies but also in the process promote better corporate governance practices in the Indian corporate sector.

CHAPTER-7
REFERENCES

REFERENCES

BOOKS

AMFI workbook SEBI note on investor Grievances- Rights & Remedies Shanbhag. A.N. - Annual Investment Planner Nandagopal . P. - Investors Handbook Pozen . Robert C. -Mutual Fund Business

WEBSITES www.amfiindia.com www.moneycontrol.com www.indiainfoline.com www.equitymaster.com www.google.com www.nse-india.com

APPENDIXS QUESTIONNAIRE
Q1. How would you rate your familiarity and experience with investments?

a) Familiar and experienced b) Familiar but not experienced c) Not familiar and inexperienced

Q2. What is your anticipated Investment time frame?

a) Long term - more than 7 years b) Medium term - 4 to 7 years c) Short-medium term - 1 to 3 years d) Short term - less than 1 year

Q3. Which of the following are possible investment motives for you with regard to a portfolio?
a) Keeping aside money generated from business / profession, to specifically generate

alternate source of income / wealth

b) Wealth creation, with no alternative uses for the money in the foreseeable future c) Preserving wealth, after accounting for inflation and taxes d) Building a corpus to meet specific future requirements

Q4. How would you like to classify your investment style?

a) Conservative b) Moderate c) Aggressive

Q5. Assume that you have invested Rs. 10,000 in a mutual fund and the value of the investment dropped to Rs. 8,500 after six months. What would you be most likely to do?

a) I would move the money to a bank fixed deposit. b) I would wait till the value reached 10,000 and then move to another fund. c) I would not do anything. d) I would invest more in the fund to bring down my average cost of acquisition

Q6. Your key objective when considering an investment vehicle is?

a) Income only b) Income and some Capital Growth c) Balance of Capital Growth and Income d) Capital Growth and some Income e) Capital Growth Only

Q7 You would like to invest in? a) Bank accounts, Debt and Debt Mutual Funds b) Equities and Mutual Funds c) Real Estate and Real Estate Funds d) Commodities and Commodity Funds Q8. Which type of mutual funds do you prefer? a) By Structure: i. ii. Open-ended Funds Closed-ended Funds

b) By Investment Objective: i. ii. iii. iv. c) Other Schemes: i. ii. iii. iv. Tax Saving Schemes Industry Specific Schemes Index Schemes Sectoral Schemes Growth Funds Income Funds Balanced Funds Money Market Funds

Q9. Are you aware of the tax saving benefits available in investment of mutual funds?

a) Yes

b) No

Q10. Do you think that advertising plays an important role in spreading the awareness amongst investors for investing in mutual funds?

a) Yes Other Information: Name: ____________________

b) No

Age: ______________________

Occupation: ________________

Gender: ___________________