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A
SUMMER INTERNSHIP REPORT
ON
INVESTMENT PLANNING OF AHMEDABADI PEOPLE
Submitted to
L.J. Institute of Engineering and Technology
In requirement of partial fulfillment of
Master’s of Business Administration(MBA)
2 year full time Program of Gujarat Technological University
Submitted on:
14th July 2010
Submitted by:
CHIRAG BHARATKUMAR GANATRA
Batch No.: 2009 -11
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Certificate
It is hereby certified that the work incorporated in the thesis
submitted entitled “Topic” submitted by (Student’s name)
comprises the result of independent and original investigation
carried out me. The material which obtained (and used) from
other sources has been duly acknowledged in the thesis.
Date: 10TH JULY 2010
Place:A’BAD Signature of the student
It is certified that the work mentioned above is carried out
under my guidance.
Date:
Place: Signature of the faculty guide
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1.1 History of the Indian Mutual Fund Industry
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) was 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.6700 crores of assets under management.
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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.44541 crores of assets under management was way ahead of other mutual funds.
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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.1, 53,108 crores under 421 schemes.
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2. Introduction to Mutual Funds
2.1 What is a Mutual Fund?
4
A Mutual Fund is a trust that pools the savings of a number of investor who share a common financial
goal. The money thus collected is then invested in capital market instruments such as shares, debentures
and other securities. The income earned through these investments and the capital appreciations realized
are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is
the most suitable investment for the common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.
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Definition of Mutual Fund
A mutual fund is just the connecting bridge or a financial intermediary that allows a group of
investors to pool their money together with a predetermined investment objective. The mutual
fund will have a fund manager who is responsible for investing the gathered money into specific
securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions
of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to others they are very
cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can
purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the
biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns.
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Organization Structure of Mutual Fund Industry
To protect the interest of the investors, SEBI formulates policies and regulates the mutual
funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to
time. MF either promoted by public or by private sector entities including one promoted by
foreign entities is governed by these regulations.
SEBI approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. Custodian, registered with SEBI, holds the securities
of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company or board of
trustees must be independent. The Association of Mutual Funds in India (AMFI) reassures the
investors in units of mutual funds that the mutual funds function within the strict regulatory
framework. Its objective is to increase public awareness of the mutual fund industry. AMFI
also is engaged in upgrading professional standards and in promoting best industry practices in
diverse areas such as valuation, disclosure, transparency etc.
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Mutual Fund Operation Flow Chart
A Mutual Fund is a trust that pools the saving of number of investors who shares a common financial goal.
The money thus collected is the invested in capital market instrument such as shares, debentures. The
income earned through these investments and the capital appreciation realized is shares by its unit
holders in proportion to the number of units owned by them. Thus a mutual fund is the most suitable
investment for the common man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.
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The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt for bank
FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital
protected funds and the profit-bonds that give out more return which is slightly higher as
compared to the bank deposits but the risk involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide
professional management, diversification, convenience and liquidity. That doesn’t mean mutual fund
investments risk free. This is because the money that is pooled in are not invested only in debts funds
which are less riskier but are also invested in the stock markets which involves a higher risk but can
expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives
market which is considered very volatile.
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2.2 Types of Mutual Funds
Types of Funds as per Structure: -
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1) Equity Funds:
Equity funds are considered to be the more risky funds as compared to other fund types, but
they also provide higher returns than other funds. It is advisable that an investor looking to
invest in an equity fund should invest for long term i.e. for 3 years or more. There are different
types of equity funds each falling into different risk bracket. In the order of decreasing risk level,
there are following types of equity funds:
a. Aggressive Growth Funds: In Aggressive Growth Funds, fund managers aspire for maximum capital
appreciation and invest in less researched shares of speculative nature. Because of these speculative
investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than
other equity funds.
b. Growth Funds: Growth Funds also invest for capital appreciation (with time horizon of 3 to 5 years)
but they are different from Aggressive Growth Funds in the sense that they invest in companies that
are expected to outperform the market in the future. Without entirely adopting speculative
strategies, Growth Funds invest in those companies that are expected to post above average
earnings in the future.
c. Speciality Funds: Specialty Funds have stated criteria for investments and their portfolio comprises
of only those companies that meet their criteria. Criteria for some specialty funds could be to
invest/not to invest in particular regions/companies. Specialty funds are concentrated and thus, are
comparatively riskier than diversified funds... There are following types of specialty funds:
I. Sector Funds: Equity funds that invest in a particular sector/industry of the market are known
as Sector Funds. The exposure of these funds is limited to a particular sector (say Information
Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is why
they are more risky than equity funds that invest in multiple sectors.
II. Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one or
more foreign companies. Foreign securities funds achieve international diversification and
hence they are less risky than sector funds. However, foreign securities funds are exposed to
foreign exchange rate risk and country risk.
III. Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market
capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds.
Market capitalization of Mid-Cap companies is less than that of big, blue chip companies (less
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than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies have market
capitalization of less than Rs. 500 crores. Market Capitalization of a company can be calculated
by multiplying the market price of the company's share by the total number of its outstanding
shares in the market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of
Large-Cap Companies which gives rise to volatility in share prices of these companies and
consequently, investment gets risky.
IV. Option Income Funds*: While not yet available in India, Option Income Funds write options
on a large fraction of their portfolio. Proper use of options can help to reduce volatility, which
is otherwise considered as a risky instrument. These funds invest in big, high dividend yielding
companies, and then sell options against their stock positions, which generate stable income
for investors.
d. Diversified Equity Funds: Except for a small portion of investment in liquid money market,
diversified equity funds invest mainly in equities without any concentration on a particular
sector(s). These funds are well diversified and reduce sector-specific or company-specific risk.
However, like all other funds diversified equity funds too are exposed to equity market risk. One
prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As per
the mandate, a minimum of 90% of investments by ELSS should be in equities at all times. ELSS
investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time of filing
the income tax return. ELSS usually has a lock-in period and in case of any redemption by the
investor before the expiry of the lock-in period makes him liable to pay income tax on such
income(s) for which he may have received any tax exemption(s) in the past.
e. Equity Index Funds: Equity Index Funds have the objective to match the performance of a specific
stock market index. The portfolio of these funds comprises of the same companies that form the
index and is constituted in the same proportion as the index. Equity index funds that follow broad
indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that follow narrow
sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and
therefore, are more risky.
f. Value Funds - Value Funds invest in those companies that have sound fundamentals and whose
share prices are currently under-valued. The portfolio of these funds comprises of shares that are
trading at a low Price to Earning Ratio (Market Price per Share / Earning per Share) and a low
Market to Book Value (Fundamental Value) Ratio. Value Funds may select companies from
diversified sectors and are exposed to lower risk level as compared to growth funds or specialty
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funds. Value stocks are generally from cyclical industries (such as cement, steel, sugar etc.) which
make them volatile in the short-term. Therefore, it is advisable to invest in Value funds with a
long-term time horizon as risk in the long term, to a large extent, is reduced.
g. Equity Income or Dividend Yield Funds - The objective of Equity Income or Dividend Yield Equity
Funds is to generate high recurring income and steady capital appreciation for investors by
investing in those companies which issue high dividends (such as Power or Utility companies
whose share prices fluctuate comparatively lesser than other companies' share prices). Equity
Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as
compared to other equity funds.
2. Debt/Income Funds:
Funds that invest in medium to long-term debt instruments issued by private companies, banks,
financial institutions, governments and other entities belonging to various sectors (like infrastructure
companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile funds that seek to
generate fixed current income (and not capital appreciation) to investors. In order to ensure regular
income to investors, debt (or income) funds distribute large fraction of their surplus to investors.
Although debt securities are generally less risky than equities, they are subject to credit risk (risk of
default) by the issuer at the time of interest or principal payment. To minimize the risk of default, debt
funds usually invest in securities from issuers who are rated by credit rating agencies and are considered
to be of "Investment Grade". Debt funds that target high returns are more risky. Based on different
investment objectives, there can be following types of debt funds:
A. Diversified Debt Funds - Debt funds that invest in all securities issued by entities belonging to all
sectors of the market are known as diversified debt funds. The best feature of diversified debt funds
is that investments are properly diversified into all sectors which results in risk reduction. Any loss
incurred, on account of default by a debt issuer, is shared by all investors which further reduces risk
for an individual investor.
B. Focused Debt Funds*: Unlike diversified debt funds, focused debt funds are narrow focus funds that
are confined to investments in selective debt securities, issued by companies of a specific sector or
industry or origin. Some examples of focused debt funds are sector, specialized and offshore debt
funds, funds that invest only in Tax Free Infrastructure or Municipal Bonds.
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C. High Yield Debt funds: As we now understand that risk of default is present in all debt funds, and
therefore, debt funds generally try to minimize the risk of default by investing in securities issued by
only those borrowers who are considered to be of "investment grade". But, High Yield Debt Funds
adopt a different strategy and prefer securities issued by those issuers who are considered to be of
"below investment grade". The motive behind adopting this sort of risky strategy is to earn higher
interest returns from these issuers. These funds are more volatile and bear higher default risk,
although they may earn at times higher returns for investors.
D. Assured Return Funds: Although it is not necessary that a fund will meet its objectives or provide
assured returns to investors, but there can be funds that come with a lock-in period and offer
assurance of annual returns to investors during the lock-in period. Any shortfall in returns is suffered
by the sponsors or the Asset Management Companies (AMCs). These funds are generally debt funds
and provide investors with a low-risk investment opportunity. However, the security of investments
depends upon the net worth of the guarantor (whose name is specified in advance on the offer
document).In the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI)
that assured specified returns to investors in the future. UTI was not able to fulfill its promises and
faced large shortfalls in returns. Eventually, government had to intervene and took over UTI's
payment obligations on itself. Currently, no AMC in India offers assured return schemes to investors,
though possible.
E. Fixed Term Plan Series: Fixed Term Plan Series usually are closed-end schemes having short term
maturity period (of less than one year) that offer a series of plans and issue units to investors at
regular intervals. Unlike closed-end funds, fixed term plans are not listed on the exchanges. Fixed
term plan series usually invest in debt / income schemes and target short-term investors. The
objective of fixed term plan schemes is to gratify investors by generating some expected returns in a
short period.
3. Gilt Funds:
Also known as Government Securities in India, Gilt Funds invest in government papers (named dated
securities) having medium to long term maturity period. Issued by the Government of India, these
investments have little credit risk (risk of default) and provide safety of principal to the investors.
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However, like all debt funds, gilt funds too are exposed to interest rate risk. Interest rates and prices
of debt securities are inversely related and any change in the interest rates results in a change in the
NAV of debt/gilt funds in an opposite direction.
4. Money Market / Liquid Funds:
Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt
instruments. These securities are highly liquid and provide safety of investment, thus making money
market / liquid funds the safest investment option when compared with other mutual fund types.
However, even money market / liquid funds are exposed to the interest rate risk. The typical
investment options for liquid funds include Treasury Bills (issued by governments), Commercial
papers (issued by companies) and Certificates of Deposit (issued by banks).
5. Hybrid Funds:
As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities,
debts and money market securities. Hybrid funds have an equal proportion of debt and equity in
their portfolio. There are following types of hybrid funds in India:
Balanced Funds: The portfolio of balanced funds include assets like debt securities, convertible
securities, and equity and preference shares held in a relatively equal proportion. The objectives
of balanced funds are to reward investors with a regular income, moderate capital appreciation
and at the same time minimizing the risk of capital erosion. Balanced funds are appropriate for
conservative investors having a long term investment horizon.
Growth-and-Income Funds: Funds that combine features of growth funds and income funds are
known as Growth-and-Income Funds. These funds invest in companies having potential for
capital appreciation and those known for issuing high dividends. The level of risks involved in
these funds is lower than growth funds and higher than income funds.
Asset Allocation Funds: Mutual funds may invest in financial assets like equity, debt, money
market or non-financial (physical) assets like real estate, commodities etc.. Asset allocation
funds adopt a variable asset allocation strategy that allows fund managers to switch over from
one asset class to another at any time depending upon their outlook for specific markets. In
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other words, fund managers may switch over to equity if they expect equity market to provide
good returns and switch over to debt if they expect debt market to provide better returns. It
should be noted that switching over from one asset class to another is a decision taken by the
fund manager on the basis of his own judgment and understanding of specific markets, and
therefore, the success of these funds depends upon the skill of a fund manager in anticipating
market trends.
6. Commodity Funds:
Those funds that focus on investing in different commodities (like metals, food grains, crude oil etc.) or
commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity
fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a
commodity fund that invests in all available commodities is a diversified commodity fund and bears less
risk than a specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in gold, gold
futures or shares of gold mines) are common examples of commodity funds.
7. Real Estate Funds:
Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized
assets of housing finance companies, are known as Specialized Real Estate Funds. The objective of these
funds may be to generate regular income for investors or capital appreciation.
8. Exchange Traded Funds (ETF):
Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end
mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like
a single stock at index linked prices. The biggest advantage offered by these funds is that they offer
diversification, flexibility of holding a single share (tradable at index linked prices) at the same time.
Recently introduced in India, these funds are quite popular abroad.
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9. Fund of Funds:
Mutual funds that do not invest in financial or physical assets, but do invest in other mutual fund
schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a portfolio
comprising of units of other mutual fund schemes, just like conventional mutual funds maintain a
portfolio comprising of equity/debt/money market instruments or non financial assets. Fund of Funds
provide investors with an added advantage of diversifying into different mutual fund schemes with even
a small amount of investment, which further helps in diversification of risks. However, the expenses of
Fund of Funds are quite high on account of compounding expenses of investments into different mutual
fund schemes.
Types of Mutual Fund Scheme
1. Open-ended Schemes: -
An open-end fund is one that is available for subscription all through the year. These do not have a fixed
maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The
key feature of open-end schemes is liquidity.
2. Close-ended Schemes: -
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund
is open for subscription only during a specified period. Investors can invest in the scheme at the time of
the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges
where they are listed. In order to provide an exit route to the investors, some close-ended funds give an
option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.
3. Interval Schemes: -
Interval Schemes are that scheme, which combines the features of open-ended and close-ended
schemes. The units may be traded on the stock exchange or may be open for sale or redemption during
pre-determined intervals at NAV related prices.
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2.3 Advantages of Mutual Funds
Professional Management: -
The basic advantage of funds is that, they are professional managed, by well qualified
professional. Investors purchase funds because they do not have the time or the expertise to
manage their own portfolio. A mutual fund is considered to be relatively less expensive way to
make and monitor their investments.
Diversification: -
Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk is
spread out and minimized up to certain extent. The idea behind diversification is to invest in a large
number of assets so that a loss in any particular investment is minimized by gains in others.
Economies of Scale: -
Mutual fund buy and sell large amounts of securities at a time, thus help to reducing transaction costs,
and help to bring down the average cost of the unit for their investors.
Liquidity: -
Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and
when they want.
Simplicity: -
Investments in mutual fund are considered to be easy, compare to other available instruments in the
market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby
as little as Rs. 2000, where SIP start with just Rs.50 per month basis.
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2.4 Disadvantages of Mutual Funds
Professional Management: -
Some funds doesn’t perform in neither the market, as their management is not dynamic enough to
explore the available opportunity in the market, thus many investors debate over whether or not the so-
called professionals are any better than mutual fund or investor him self, for picking up stocks.
Costs: -
The biggest source of AMC income is generally from the entry & exit load which they charge from
investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers
of jargon.
Dilution: -
Because funds have small holdings across different companies, high returns from a few investments
often don't make much difference on the overall return. Dilution is also the result of a successful fund
getting too big. When money pours into funds that have had strong success, the manager often has
trouble finding a good investment for all the new money.
Taxes: -
When making decisions about your money, fund managers don't consider your personal tax situation.
For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how
profitable the individual is from the sale. It might have been more advantageous for the individual to
defer the capital gains liability.
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2.5 Association of Mutual Funds in India (AMFI)
With the increase in mutual fund players in India, a need for mutual fund association in India was
generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was
incorporated on 22nd August, 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI.
Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under
the supervision and guidelines of its Board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional
and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of
both protecting and promoting the interests of mutual funds as well as their unit holders.
The objectives of Association of Mutual Funds in India
The Association of Mutual Funds of India works with 38 registered AMCs of the country. It has certain
defined objectives which juxtaposes the guidelines of its Board of Directors. The objectives are as
follows:
This mutual fund association of India maintains a high professional and ethical standard in all
areas of operation of the industry.
It also recommends and promotes the top class business practices and code of conduct which is
followed by members and related people engaged in the activities of mutual fund and asset
management. The agencies who are by any means connected or involved in the field of capital
markets and financial services also involved in this code of conduct of the association.
AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.
Association of Mutual Fund in India does represent the Government of India, the Reserve Bank
of India and other related bodies on matters relating to the Mutual Fund Industry.
It develops a team of well qualified and trained Agent distributors. It implements a programme
of training and certification for all intermediaries and other engaged in the mutual fund industry.
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AMFI undertakes all India awareness programme for investors in order to promote proper
understanding of the concept and working of mutual funds.
SEBI Regulations Regarding Mutual Fund :
Mutual Funds shall be established in the form of trusts under the Indian Trust Act and
managed separately formed asset Management Company.
Money Market mutual Fund would be regulated by the RBI and Other Mutual Funds Would be
regulated by SEBI.
Fifty percent (50%) members of the board of AMC must be independent directors and must
have no connection with sponsoring organization.
The directors should have at least 10 years experience in the field of Portfolio management,
Financial Administration.
The AMC should have minimum Net Worth of RS 10 crores
An AMC can not act as the AMC for another Mutual Fund
AMCS are also allowed to do other fund based businesses such as providing investment
management services to offshore funds, other mutual funds, venture capital funds, and insurance
companies.
The minimum amount to be raised with each Closed-End scheme should be Rs. 20 crores and
for the Open-Ended scheme Rs 50 crores.
Each Scheme of the Mutual Fund is registered with SEBI before it is floated in the market.
Closed end schemes should not be kept open for subscription for more than 45 days. For open
ended schemes, the first 45 days should be considered for determining the target figure.
The initial issue expenses should not exceed 6% of the funds raised under each scheme.
For each scheme there should be a separate and responsible Fund Manager.
All Mutual Funds mu8st distribute a minimum of 90% of their profits in any given year.
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2.6 Major Mutual Fund Companies in India
CCllaassssiiffiiccaattiioonn ooff AAMMCC’’ss CCuurrrreennttllyy OOppeerraattiinngg
Bank Sponsored:
SBI Fund Management Ltd.
BOB Asset Management Co. Ltd.
Canbank Investment Management Services Ltd.
UTI Asset Management Company Pvt. Ltd.
Private Sector:
Indian:-
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.
Reliance Capital Asset Management Ltd.
Sahara Asset Management Co. Pvt. Ltd
Sundaram Asset Management Company Ltd.
Tata Asset Management Private Ltd.
DWS Mutual Fund
JP Morgan Mutual Fund
Lotus India Mutual Fund
Tuarus Mutual Fund
PNB Mutual Fund
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Predominantly India Joint Ventures:-
Birla Sun Life Asset Management Co. Ltd.
DSP Merrill Lynch Fund Managers Limited
HDFC Asset Management Company Ltd.
Jardine Fleming Mutual Fund
Quantum Mutual Fund
Predominantly Foreign Joint Ventures:-
ABN AMRO Asset Management (I) Ltd.
Alliance Capital Asset Management (India) Pvt. Ltd.
Deutsche Asset Management (India) Pvt. Ltd.
Fidelity Fund Management Private Limited
Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.
HSBC Asset Management (India) Private Ltd.
ING Investment Management (India) Pvt. Ltd.
Morgan Stanley Investment Management Pvt. Ltd.
Optimix Mutual Fund
Principal Asset Management Co. Pvt. Ltd.
Prudential ICICI Asset Management Co. Ltd.
Standard Chartered Asset Mgmt Co. Pvt. Ltd.
Institutions:
GIC Asset Management Co. Ltd.
Jeevan Bima Sahayog Asset Management Co. Ltd.
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Source (For Page-1to23): www.amfiindia.com
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3.1 Company Profile
Prudent CAS Ltd, historically known as Prudent Fund Manager established in 2000, is a
registered investment company offering fee-based money management, financial planning, and
investment advisory services. We help you build a personalized investment strategy to ensure
your financial goals are met. We focus on each client, build investment strategies tailored to
specific client needs, and regularly review those strategies to increase the likelihood of success.
What are your goals and aspirations? We'd like to know. Then we can determine an investing
strategy that helps you achieve your full potential.
We Understand - The difference between selling and marketing. Prudent believes in
understanding the customer needs and offering the product that can match his requirement
(marketing) as against just selling what product is already available. Owing to the inherent
professional expertise we first study and understand the investment requirements and
circumstances. Our experts assess the investors' need and their risk profile. Once the entire
comparative analysis is done then the best possible option is advised to the investors. The best
possible option provides the proper asset allocation to various asset classes and also the
estimated risk involved.
This helps us to provide our clients an optional basket of funds rather than selling the typical
available funds. This approach lets us set our focus on the quality work rather than the just the
quantity. Here it is worth mentioning that though we are involved in wide spectrum and heavy
quantum of activities but, if ever it comes to a choice Prudent CAS always prefers to be the best
rather then being the biggest.
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3.2 Overview of Company
Managing Director : Mr. Sanjay Shah
CEO : Mr. Shirish Patel
Director : Mr. Chirag Shah
HOD Details:
IT Head : Mr. Yogi Kanani
Accounts Head : Mr. Chirag Kothari
HR Head : Mr. Dashrathsinh Chundawat
Direct Sales : Mr. Deven Shah (Ahmadabad & North Gujarat Region)
Mr. Rohit Patel (Baroda)
Mr. Satyesh Desai (South Gujarat Region)
Indirect Sales : Mr. Jigar Parekh (North & West India)
Mr. Manoj Singh (Mumbai Region)
Mr. Bhanu P STomar (Pune Territory)
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Head Office Address : Prudent Corporate Advisory Service Ltd.
701, Sears Tower,
Gulbai Tekra,
Off. C.G.Road,
Ahmedabad 380006
Contact : Tel. No: (079) 40209600
Project Guide : Mr. Ayaj Mansuri
Mr. Chirag Modi
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3 Organization Structure
Source (For Page-24to26): www.prudentcorporate.com www.prudentchannel.com
MR.SANJAY SHAH MANAGING DIRECTOR
MR. SHIRISH PATEL
CEO
MR. CHIRAG SHAH
DIRECTOR
INDIRECT
SALES
BACK OFFICE IT BACK OFFICE HR ACCOUNTS DIRECT
SALES
CUSTOMERCARE TRANSCATION INCOME BROKEAGE
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4. Research Methodology
I. Title of project : Investment & Tax Planning of Investors
II. Objectives :
Primary:
To know the investment planning of investors.
To know the tax planning of investors.
Secondary :
To know the Risk-Return pattern of investment.
To know the investment percentage of investor’s income.
To know what influences most preferred for investments.
To know the investors’ preferences regarding the mutual fund scheme
& pattern
To know the percentage of total investment in tax saving funds.
To compare the investment & tax planning of investors on basis of their
occupation.
“On the basis of this research company can focus on investors as per their occupation & their
investment pattern.”
III. Research Type :Basic Research
IV. Research Design :Descriptive
V. Types of Data : Primary
VI. Research Approach : Survey Research
VII. Research Instrument: Questionnaire, Mechanical instrument(
Manual & MS Excel)
VIII. Contact Method : Personnel
IX. Sample Size :360