abhishek apte final thesis report

8/3/2019 Abhishek Apte Final Thesis Report

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A Final Report Presentation on Progress

of Management Thesis Research OnA Macroscopic Examination of Mutual Fund as a goal

achievement tool with focus on SIP vis--vis lump

sum investment with particular reference to SBI, Birla

Sun Life and HDFC Mutual Funds

Prepared as a part of the Management Thesis Research-1

study as a the part of fulfillment of the requirements of the

MBA Program conducted by the ICFAI National College

Presented To:Mr. Vipin Desai

Senior Faculty and Research GuideICFAI National College

Presented byAbhishek S Apte(8NBVD069,0801213328)

ACKNOWLEDGEMENT

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INTRODUCTIONSr.No. Particulars Page No.1 Introduction 4

2Management Thesis

5-33

i.History and Statistics regarding mutualfunds

5-13

ii. Objectives 13

iii.

Mutual Funds; Formation, working and

types14-22

iv.

Advantages and Disadvantages of

Mutual Funds23-30

v. Research Methodology 30-35

3

Introduction to companies under study

and short introduction to the schemes

under comparison SBI, Birla Sun Life

and HDFC Mutual Funds

35-48

vi.

Analysis of data with illustraton and

risks 48-81

vii. Findings and Facts and Conclusions 82

viii. Appendices 83-90

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Mutual Funds Industry in India

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 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.

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Unit Trust of India is the first Mutual Fund set up under a separate act, UTI

Act in 1963, and started its operations in 1964 with the issue of units under

the scheme US-64.

History of mutual funds and Statistics

PHASES OF MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit

Trust of India, at the initiative of the Government of India and Reserve

Bank. The history of mutual fund in India can be broadly divided into four

distinct phases.

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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 in 1964. At the

end of 1988 UTI had Rs.6, 700 cores of assets under management.

SECOND PHASE 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non-UTI, public sector mutual funds set up by the

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

Name of the Mutual Fund Company Time of establishment

SBI Mutual Fund June - 1987

Can bank Mutual Fund December - 1987

Punjab National bank Mutual Fund August - 1989

Indian bank Mutual Fund November - 1989

Bank of India Mutual Fund June - 1990

Bank of Baroda Mutual Fund October - 1992

LIC Mutual Fund June - 1989

GIC Mutual Fund December - 1990

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At the end of 1993, the mutual fund industry had assets under management

of Rs.47, 004 cores.

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 the mutual funds except UTI were to be

registered and governed. The erstwhile Kothari Pioneer (now merged with

Franklin Templeton) was the first privates sector mutual fund registered in

July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a morecomprehensive 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 the total assets of Rs. 1, 12,805 cores. The Unit Trustof India with Rs. 44,541 cores of assets under management was way ahead

of other mutual funds.

FOURTH PHASE since February 2003

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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 cores 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 anadministrator 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 cores of assets under management and with thesetting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund

Regulations and with the recent mergers taking place among different

private sector funds, the mutual fund industry has entered its current phase of

consolidation and growth. As at the end of September, 2004, there were 29

funds, which manage assets of Rs. 153108 cores under 421 schemes.

How Mutual Fund is working?

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There are many entities involved in the mutual funds. Let us now discuss

each of these in details.

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Trust Indian Trust Act of 1882 is applicable to MF. It has to be formed

under trust. It should have a board of trustees and trust. Two third of the

trustees should be independent persons.

Asset Management Company

An asset management company of AMC approved by SEBI has to managethe funds by making investments in various types of securities. Minimum net

worth for the AMC is Rs.10 cr. In the constitution of its board there should

be 50% independent directors.

Custodian

There is necessity of a custodian to hold the securities of various schemes ofthe fund in its custody. It should be registered with SEBI, only when it is

eligible to be a custodian of MF.

Registrar

The registrar maintains the account of investors for both the purpose of

investment and disinvestment.

Investors

Whoever invests in the units of MF, he is an investor. He is the key person

for the MF industry. Mostly small investors who cannot keep tract over the

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capital market and are hesitant to take direct risk invest in MF with the sole

intention of maximizing returns.

STATISTICS

Market Potential:

Market potential for the growth of mutual funds is huge as no investment

avenue today is free from loopholes but they miss some finer aspects of theinvestors desires which mutual funds sharply satisfy during the natural

course of operations.

Demand for mutual funds:

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The demand for mutual funds as compared to other sources of investments is

very low as compared to other sources as visible from the graph as given

below:

Banking Products have a large and seemingly unconquerable consumer

base. Hot on the trail are life mutual fund products as a rise in the literacy

rate has slowly started gaining awareness among the rural area and the

typical Indian considers it a feasible and safe idea to not only secure his own

future but also to leave a sustainable amount in the event of his demise.

Silently following are debit cards which have slowly not only associated

themselves to the ATM machines and easy cashless purchases but also

removed the tedious and cumbersome process of doing routine banking

activities like withdrawal and purchases of money. Today the Indian Bankscan proudly boast not only anytime banking but anywhere banking. Mutual

Funds are slowly taking a road ahead but will require some time to actually

make a big stage appearance sooner or later.

Ask anyone today what he wants to do with his income. The other person

immediately shoots back Invest. But go a step further and ask where and a

big question mark appears on his/her face. But every jungle has some or the

other part/corner that is unexplored or less explored but contains the most

unimaginable opportunities. Once such corner in todays world is Mutual

Funds.

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To give a brief idea about the benefits available from Mutual Fund

investment

To give an idea of the types of schemes available.

To study the market trends of Mutual Fund investment.

To study some of the mutual fund schemes and analyse them

To observe the fund management process of mutual funds

To give an idea about the regulations of mutual funds

What is mutual fund?

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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.

Thus a Mutual Fund is the most suitable investment for the common man as

it offers an opportunity to invest in a diversified, professionally managed

basket of securities at a relatively low cost. The flow chart below describes

broadly the working of a mutual fund

Scope of Mutual Funds has grown enormously over the years. In the first age

of mutual funds, when the investment management companies started to

offer mutual funds, choices were few. Even though people invested their

money in mutual funds as these funds offered them diversified investment

option for the first time. By investing in these funds they were able todiversify their investment in common stocks, preferred stocks, bonds and

other financial securities. At the same time they also enjoyed the advantage

of liquidity. With Mutual Funds, they got the scope of easy access to their

invested funds on requirements

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But, in todays world, Scope of Mutual Funds has become so wide, that

peoplesometimes take long time to decide the mutual fund type, they are

going to invest in. Several Investment Management Companies have

emerged over the years who offer various types of Mutual Funds, each type

carrying unique characteristics and different beneficial features.

Type of Mutual Fund Schemes

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BY STRUCTURE

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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.

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.

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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BY NATURE

Equity fund:

These funds invest a maximum part of their corpus into equities holdings.

The structure of the fund may vary different for different schemes and the

fund managers outlook on different stocks. The Equity Funds are sub-

classified depending upon their investment objective, as follows:

Diversified Equity Funds

Mid-Cap Funds

Sector Specific Funds

Tax Savings Funds (ELSS)

Debt funds:

The objective of these Funds is to invest in debt papers. Government

authorities, private companies, banks and financial institutions are some of

the major issuers of debt papers. By investing in debt instruments, these

funds ensure low risk and provide stable income to the investors.

Gilt Funds: Invest their corpus in securities issued by Government,

popularly known as Government of India debt papers. These Funds carry

zero Default risk but are associated with Interest Rate risk. These

schemes are safer as they invest in papers backed by Government.

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Income Funds: Invest a major portion into various debt instruments

such as bonds, corporate debentures and Government securities.

MIPs: Invests maximum of their total corpus in debt instruments while

they take minimum exposure in equities. It gets benefit of both equity anddebt market. These scheme ranks slightly high on the risk-return matrix

when compared with other debt schemes.

Short Term Plans (STPs): Meant for investment horizon for three to six

months. These funds primarily invest in short term papers like Certificate

of Deposits (CDs) and Commercial Papers (CPs). Some portion of the

corpus is also invested in corporate debentures.

Liquid Funds: Also known as Money Market Schemes, These funds

provides easy liquidity and preservation of capital. These schemes invest

in short-term instruments like Treasury Bills, inter-bank call money

market, CPs and CDs. These funds are meant for short-term cash

management of corporate houses and are meant for an investment horizon

of 1day to 3 months. These schemes rank low on risk-return matrix and

are considered to be the safest amongst all categories of mutual funds.

Balanced funds: As the name suggest they, are a mix of both equity and

debt funds. They invest in both equities and fixed income securities,

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which are in line with pre-defined investment objective of the scheme.

These schemes aim to provide investors with the best of both the worlds.

Equity part provides growth and the debt part provides stability in

returns.

BY INVESTMENT OBJECTIVE

Growth Schemes: Growth Schemes are also known as equity schemes.

The aim of these schemes is to provide capital appreciation over medium

to long term. These schemes normally invest a major part of their fund in

equities and are willing to bear short-term decline in value for possible

future appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The

aim of these schemes is to provide regular and steady income to

investors. These schemes generally invest in fixed income securities such

as bonds and corporate debentures. Capital appreciation in such schemes

may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and

income by periodically distributing a part of the income and capital gains

they earn. These schemes invest in both shares and fixed income

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securities, in the proportion indicated in their offer documents (normally

50:50).

Money Market Schemes: Money Market Schemes aim to provide easy

liquidity, preservation of capital and moderate income. These schemes

generally invest in safer, short-term instruments, such as treasury bills,

certificates of deposit, commercial paper and inter-bank call money.

OTHER SCHEMES

Tax Saving Schemes: Tax-saving schemes offer tax rebates to the

investors under tax laws prescribed from time to time. Under Sec.88 of

the Income Tax Act, contributions made to any Equity Linked Savings

Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a

particular index such as the BSE Sensex or the NSE 50. The portfolio of

these schemes will consist of only those stocks that constitute the index.

The percentage of each stock to the total holding will be identical to the

stocks index weightage. And hence, the returns from such schemes would

be more or less equivalent to those of the Index.

Sector Specific Schemes: These are the funds/schemes which invest in

the securities of only those sectors or industries as specified in the offer

documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer

Goods (FMCG), Petroleum stocks, etc. The returns in these funds are

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dependent on the performance of the respective sectors/industries. While

these funds may give higher returns, they are more risky compared to

diversified funds. Investors need to keep a watch on the performance of

those sectors/industries and must exit at an appropriate time.

Types of returns

There are three ways, where the total returns provided by mutual funds canbe enjoyed by investors:

Income is earned from dividends on stocks and interest on bonds. A fund

pays out nearly all income it receives over the year to fund owners in the

form ofa distribution.

If the fund sells securities that have increased in price, the fund has a

capital gain. Most funds also pass on these gains to investors in a

distribution.

If fund holdings increase in price but are not sold by the fund manager,

the fund's shares increase in price. You can then sell your mutual fund

shares for a profit. Funds will also usually give you a choice either to

receive a check for distributions or to reinvest the earnings and get more

shares.

Net Assets Value (NAV)

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The net asset value of the funds is the cumulative market value of the

assets fund net of its liabilities. In other words, if the funds is dissolved

or liquidated, by selling of all the assets on the fund, this is amount that

the shareholders would collectively own. This gives rise to the concept

of net asset value per unit, which is the value, respected by the

ownership of one unit in the fund. It is calculated simply by dividingthe net asset value of the by the number of units. However, most people

refer loosely to the NAV per unit as NAV, ignoring the per unit. We

also abide by the same convention.

Calculation of NAV

The most important part of the calculation is the valuation of the asset

owned by the fund. Once it is calculated, the NAV is simply the net

value of assets divided by the number of units outstanding. The detailed

methodology for the calculation of the assets value is given below.

Net Asset Value is equal to

= Net Assets of the Scheme / Number of units outstanding i.e.

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(Market value of investment + Receivables +Other Accrued Income +

Other Assets Accrued Expenses Other Payables Other Liabilities

Advantages

Portfolio Diversification

An investment in mutual funds enables the unit holder to have awell diversified investment in various companies at almost anegligible cost in small volumes

Professional management

The investor in mutual funds is ridden from doing the cumbersome andtime consuming job of studying and analyzing performances of varioussecurities before investing as it is all professionally managed by theFund Managers and investors pooled money is invested only inavenues which are in a growth stage or likely to hit the growth stage of

the industry life cycle.

Reduction / Diversification of Risk

Here the investor enjoys a great advantage of investing in multiplestocks with a minimum amount at the same time with an expectation ofgood returns as a well diversified portfolio enables an investor toreturns from multiple companies at the same time.

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Liquidity

Unlike traditional sources of investment, the investors money doesnot get blocked up to a fixed maturity period. The invested amountcan be withdrawn at the will of the investor by selling the existingunits invested and it also adds up to cover the opportunity cost that hemight incur.

Flexibility & Convenience

Unlike traditional sources of investment, the investors money does notget blocked up to a fixed maturity period. The invested amount can bewithdrawn at the will of the investor and it also adds up to cover theopportunity cost that he might incur.

Reduction in Transaction cost

Unlike other forms of investment there are no large operationalcosts nor does the investor need to go to a broker or a brokingfirm for the purpose of investing. The transaction costs are as lowas 2.5% entry load(abolished) and 1.25% exit load which ishardly anything as compared to investments in Life Insurancewhere the middleman earns as large as 10% per annum as trailcommission.

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Though the investor can withdraw his money anytime and investit elsewhere yet during the time it lies with the fund house he/shehas no control over how much and where to invest

RESEARCH METHODOLOGY

This report is based on primary data, however primary datacollection is given more importance since it is overhearing factor inattitude studies. One of the most important users of researchmethodology is that it helps in identifying the problem, collecting,analyzing the required information data and providing an alternativesolution to the problem .It also helps in collecting the vital informationthat is required by the top management to assist them for the betterdecision making.

Data sources:

Research is totally based on primary data. Research has been done byprimary data collection, and primary data has been collected byinteracting with various people. Even secondary literature and guide

books of National Stock Exchange on mutual funds has been referred.

Duration of Study:

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The study is being carried out for a period five months, from 1st August2009 to 30th October 2009.

Sampling:

Sampling Technique

The sampling technique being used by me is stratified randomsampling, where in I have divided my target customers for mutual fundsinto a strata of 10 customers per area and surveying each oneseparately.

Sampling procedure:

The sample is selected of them who are the customers and investors .Itis also collected through personal visits to persons, shops and various

brokering organization by informal talks and through filling up thequestionnaire prepared. The data shall be analyzed by usingmathematical/Statistical tools and techniques if possible.

Sample size:

The sample size of my project is limited to a sample population of 100people.

Sample design:

Data can be presented with the help of bar graph, pie charts, line graphs etc.

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Procedure Adopted:

1. Studying the mutual fund concept

Reading about the mutual fund was the first step undertaken. This gave notonly in depth knowledge about what is been offered by the mutual fund andits scope in the current financial market but also proved useful whiledeveloping the questionnaire.

2. Decision on objective needed to be work on.

The next step and probably the most important one of all was to develop theresearch objective for the study needed to undertaken for understanding the

investors mindset and their awareness towards equity investments withreference to mutual funds. A thorough objective was already defined andthat required a reasonable degree of clarity which I managed to acquire afterconsulting with our faculty guide Mr. Vipin Desai.

3. Developing Survey instruments

All of the trainees designed a rough draft of a suitable questionnaire formatfor the survey. After a little discussion with our expert faculty guide andafter incorporating some changes incorporated by him the draft of the

questionnaire was finalized and I got myself a photo copy of the draft andultimately 100 copies of the draft per person.

After availing the copies, the survey work is under process at the end ofwhich the data so surveyed will be thoroughly analyzed under the expertguidance of the company guide.

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4. Getting questionnaire filled through interacting with

different age groups, sex, monthly income and occupation.

Accordingly I target and stand outside various places and survey them as

per the table given below:

SBI Zonal Office Sayajigunj Race course

Landmark(ICICI Bank & IDEAShowroom)

Dandia Bazar

Progress

To this day I have completed surveying the stated sample of 100

people due to which I feel my progress is just on track and I amconfident of the fact that I will be able to complete the analysis andpresentation work soon.

Literature Viewed

The literature that has been viewed by me is mostly the reports readily

available in the library of ICFAI National College. In addition the statistics

produced in the leading magazines like The Competition Success Review,

and Indian Management Journal as a source of additional reading.

The two reports that have been referred as previous reports are:

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Is direct investment in mutual funds better than share markets: An

analytical overview: sadik hussain

Mutual Funds Awareness survey: Birla Sun Life Mutual fund.

Both of the above reports aim at establishing a common belief that mutual

funds awareness and progress is at a very slow level in Baroda City and by

my research I would convince them that the mutual funds awareness inBaroda is also growing at a fast pace thanks to some active mutual fund

distribution houses like Religare Fin Mart Securities Pvt. Ltd., Karvy

Securities, Anand Rathi Investments etc. and also from the survey of the

people and their awareness regarding mutual funds.

Scenario Of Mutual Funds In India

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sectors and identify stocks that promise high performance in thefuture.

This team works in tandem with a compliance and risk-monitoringdepartment, which ensures minimisation of operational risks while

protecting the interests of the investors.

Quite naturally many of our equity funds have delivered consistent

returns to investors and have repeatedly out performed benchmarkindices by wide margins.

THE BRAIN BEHIND THE GAME

Head Portfolio Management Services / Fund Manager :

Nipa Ladiwala

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has anenviable track record in judicious investments and consistent wealthcreation.The fund traces its lineage to SBI - Indias largest bankingenterprise. The institution has grown immensely since its inception andtoday it is India's largest bank, patronised by over 80% of the top corporatehouses of the country.

SBI Mutual Fund is a joint venture between the State Bank of India andSocit Gnrale Asset Management companies that manages over US $500Billion Worldwide.In twenty years of operation, the fund has launched 38schemes and successfully redeemed fifteen of them. In the process it has rewardedits investors handsomely with consistent returns.A total of over 5.4 millioninvestors have reposed their faith in the wealth generation expertise of the MutualFund.

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Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment

managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla

Group and the Sun Life Financial Services Inc. of Canada. The joint venture brings

together the Aditya Birla Group's experience in the Indian market and Sun Life's

global experience.

Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one

of India's leading Mutual Funds managing assets of a large investor base.

The fund offers a range of investment options, which include diversifiedand sector specific equity schemes, fund of fund schemes, hybrid and

monthly income funds, a wide range of debt and treasury products and

offshore funds.

BSLAMC follows a long-term, fundamental research based approach to

investment. The approach is to identify companies, which have excellent

growth prospects and strong fundamentals. The fundamentals include the

quality of the companys management, sustainability of its business modeland its competitive position, amongst other factors. Birla Sun Life Asset

Management Company has one of the largest team of research analysts in

the industry, dedicated to tracking down the best companies to invest in.

SCHEMES

BIRLA SUN LIFE CAPITAL PROTECTION ORIENTEDFUND-3 YRS- DIVIDEND

BIRLA SUN LIFE CAPITAL PROTECTION ORIENTEDFUND-3 YRS- GROWTH

Birla Sun Life Dynamic Bond Fund-Discipline Advantage Plan-Growth

Birla Sun Life Dynamic Bond Fund-Retail Plan-Growth

Birla Sun Life Dynamic Bond Fund-Retail Plan-Monthly Dividend

Birla Sun Life Dynamic Bond Fund-Retail Plan-QuarterlyDividend

Birla Sun Life Fixed Maturity Plan - Annual Series 3-Dividend

Birla Sun Life Fixed Maturity Plan - Annual Series 3-Growth

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Avenues of Investment

Ranking of investment avenu

34

18

30

3

15 14

3636

410 8

2523

12

32

14139

25

39

30

82

56

40

10

20

30

40

50

60

Equity

Capital

Debt

Capital

Fixed

Deposite

Real Estate Others

Avenues of investme

Numberofpeople

1st Rank2nd Rank

3rd Rank

4th Rank

5th Rank

As evident from the above chart Fixed Deposits, Equity capital investments

and Real estate form a major part of preferred investment avenues of people.

The common belief that people displayed during the survey was that most of

them gave a prominent nod on the mention of fixed deposits. But

surprisingly from the survey it was revealed that fixed deposits no longerdominated the market as the leading and most trusted investment avenue but

the category of others showed most people ranking as 1st rank. On inquiring

people told that trust and safety was no longer a problematic factor due to

efficient corporate governance on them and strict regulatory controls and

avenues like gold exchange schemes, mutual funds, postal deposits and

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saving schemes, NSC, KVP and some people displayed a small preference

towards bonds and debentures.

Motives behind investment

Investment needs of people

1

21

8

43

27

119

252629

9

20

39

1517

2728

18

9

18

52

22

1079

0

10

20

30

40

50

60

Tax benefits Return on

investment

Liquidity

position

Future

Security

Retirement

Benefits

Investment needs

Numberofpeopleran

kin

1st rank

2nd rank

3rd rank

4th rank

5th rank

Our analysis of the consolidated answers of people revealed that maximum

number of people naturally told they invested for returns. After the need for

returns is satisfied the people opined that they save for meeting expected

future needs for e.g marriage, pregnancy, educational fees of children, day-

to-day expenses like provisions, medicines etc as well as for unpredicted

future occurrences e.g. accident, donations and charity etc. After the abovebasic motives people opined that tax planning is the most important motive

that they consider for which mutual funds ELSS (Equity Linked Savings

Scheme) was opined as an effective avenue which provides an excellent

level of returns in spite of having a three year bond period as it gives the

option to switch between various schemes of the fund house and sti . Very

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few people opined for liquidity availability as a separate motive as it already

gets covered and not surprisingly very few people consider retirement

planning as an avenue for investment.

Span of investment

Span of investment in various avenues

17%

43%

21%

19%

1 year

1-3 year

3-5 year

Excess of 5 years

The analysis of the responses of people revealed that most people invest for

a period of 1 to 3which is considered (as medium term) as a safe and

adequate period for investing their money and also getting a certain degree

of attractive returns. Some people also believe in investing for a relatively

higher period of 3 to 5 years for something more than the average investor.

Some people invest for a very short period and mostly invest in short term

sources of finance like liquidity fund, floating fund, monthly income plans in

various mutual fund schemes. While, the premium investors having large

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idle funds prefer investments in the long term periods in excess of 5 years

mostly consisting of avenues like Real Estate, Life Insurance products and

even mutual fund schemes, national savings schemes and largely in equity

capital of multiple number of companies

Awareness of mutual funds

On being questioned about awareness of people 47% of the people replied

that they know about the concept of mutual funds while 53% of people

honestly and bluntly replied that they knew nothing about mutual funds and

neither were they interested in knowing about it as if it was somethingdangerous

Actual Investors in Mutual Funds

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From the analysis of the previous question we revealed tht a large proportion

of the sample population were not aware about mutual funds and not

surprisingly the number of people actually making the investment in mutual

funds turned out to be a much lower 25% while the number of people

actually not investing in mutual funds was relatively much higher i.e. 75%

which revealed the fact that there are a significant number of people who

invest in mutual funds without any actual basic knowledge and have

invested just because of experiences and pressures from other people e.g.

Family, relatives, marketing personnel, experiences of others etc. and also

a distinct class who have fair amount of know-how of how of

working of mutual funds but dont invest out of the fear of

market uncertainty.

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AMC WiseInvestors

The above chart was the most complex chart to analyze because it was

difficult to categorize the investors into fanatics or die-hard fans of a

mutual fund house and of a purposeful and smart investor. As above chart

Birla Sunlife Mutual Fund rules the market with 65 people noding of

possession of units in BSL Muttual Fund House, followed by HDFC

Joining the race after recent declaration of dividends and lagging way

behind was found SBI Mutual Fund with a meagre fan-following.

But a pleasant surprise was the number of people who were purposefulinvestors who had investments pooled into more than one of the fund

houses and 10 to 12 people had investments in all the three fund houses.

This meant a pleasant discovery on the part of the mutual fund houses

and the realization of a fact that investors are now becoming smarter

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learning from the one and half yearly recession and the turbulent share

market cyclones that passed through India..

Lumpsum V/S SIP

When enquired about the reasons for not investing in SIP as compared to

lump sum investments in mutual funds, the people put forward the above

reasons for not investing in mutual funds as per their understanding and

probably due to varied experiences while playing in the share market.

My Portfolio, My Choice

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When the people were queried about how they preferred style ofdesigning an investment portfolio then most of them were found pointing

their fingers straight at their family members, relatives and friends as

their chief financial advisors. Some salaried income group opined that

they were getting the perceived value for thepayments they were getting

from their broker or intermediary who in their opinion were doing a fair

job and advising in the best intrest of their clients. Some knowledgeable

citizens to pointed out the value of self help and the slogan My

investment,my way.A small group of people still continues to follow the

traditional method of consulting market experts and/or investment gurus.

Frequency of checking the portfolio

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The consumers on going through this question were found unwilling to

answer this question honestly and many of them pointed out that they

monitored their investments mostly each month while a distinct majority

pointed out that they never bothered to check their portfolio and largely

admitted that they had nothing like fixed expectations and whatever was

available as returns to them would be agreeable unless it was a loss. While

an equivalent majority of people decided larger frequency of time to monitor

portfolios like quarterly and yearly and some even sincerely prefer tomonitor their portfolios regularly at ten days or fortnight.

Ranking of reasons for investing in

mutual funds

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From the consolidated answers of the people the reasons people putforward for investing in mutual funds were many. Majority of people out of

those who invest in mutual funds pointed out at risk profile of the mutual

funds and their ability to earn better returns as compared to traditional

investment avenues like fixed deposits, life insurance etc. Some of the

people pointed out that they liked the factors of professional management

and past performance in dealings as the main factors influencing their

decision to invest in mutual funds. Small majority of the people even pointed

that they also considered investing because of the lower costs involved andthe brand name of the asset management company as they perceived brand

name as the level of security of their invested sum.

Reasons for not investing

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From the consolidated answers of the people the reasons people put

forward for not investing in mutual funds were many. Majority of people

out of those who invest in mutual funds blamed lack of knowledge,

uncertainty of returns, and bad experiences of past mutual funds

investment as common reasons. In addition people also agreed to

limitations like Risk profile, difficult of choosing appropriate funds and

lack of confidence in the ability of the fund managers.

The Way Forward for the Mutual Fund Investors

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There is no one mutual fund that will be suitable to all kinds of investors. Hence,

mutual fund investors need to identify a suitable fund for them. This would be the

first step towards making successful investments in mutual funds. Identifying a

suitable fund can be done in a two-step manner as follow:

a. Selecting a fund with investment objectives and preferences, return

objectives, time horizon and risk tolerances that meet the requirements

of the investor.

b. Selecting a fund that has a detailed asset allocation strategy by fundtype category to reflect the investment objectives of the fund.

b. To select a suitable fund, investors should read the fund's prospectus

completely before making investment. By reading investment objectives,

the fund's financial goals and the type of securities chosen can be known.

c. An investor can make out whether or not a fund is advisable for him by

determining if the goals are congruent with his own investment goals.

d. Investor should also ensure that the fund is comparing itself with an

appropriate benchmark.

e. Another important aspect investors have to carefully examine is the fees

and expenses charged by the fund.

Finally, investors should always be conscious of the fact that mutual funds invest

their funds in capital market instruments such as shares, debentures, bonds and

money market instruments, and that all the capital market instruments have risk.

Therefore an investor is supposed to have full knowledge and understanding that

mutual fund investments are subject to market risk and should manage the risks

carefully for a safe and happy investment.

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Conclusions

It is note worthy to notice the following facts regarding the public awareness

regarding various alternatives of investment and a growing shift from

traditional investment avenues like PPF, Fixed Deposits and Bonds etc. to

more profitable and short term investment avenues like mutual funds and

equity exchange stock market. But still in a saturated markets like baroda

mutual funds need to put extra efforts in pushing forward mutual fund as a

profitable avenue for investment.

Findings and Facts.

Lack of proper efforts to educate people regarding

mutual funds investment and promote themselves better as compared

to the traditional avenues.

Due to the abolition of entry load on mutual funds

investment the fund houses along with their broking partners have

faced a large shake up as investors are increasing their rush to invest

but the profitability of the fund houses has gone down.

Large scale confusion among employees of

mutual fund houses due to fear of unemployment due to lower

profitability of fund house and cost cutting activities.

Turbulent activity in the Indian Share Market has

shattered mutual fund hopes of finding new business.

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Appendices

Questionnaire on the A Macroscopic view On Mutual Fund as a GoalAchievement Tool with Emphasis on SIP and Lump Some Investment

(Please tick or write the required details as per the questionformat,*=compulsory)

CUSTOMER PROFILE

*Name: _____________________________________________________

*Age: ________

Address: __________________________________________

__________________________________________

__________________________________________

__________________________________________

*Mobile No: __________________________

*Occupation: _____________________

*Annual Income: Up to Rs. 200000 Rs. 200000-400000

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Rs. 400000-500000 > 500000

*Gender: Male Female

1. What is your preferred avenue for investment?

(Rank from 1 to 5 as per your choice, 1=most preferred, 5=last

preferred)

a) Equity Capital _____

b) Debt Capital/bonds _____

c) Fixed Deposits in Banks _____

d) Real Estate _____

e) Others _____

2. What is your goal of investment? (Please Rank 1 to 4)

1) Tax Benefits ______

2) Returns on investment ______

3) Liquidity position ______

4) Future Security ______

3. On an average what is the period for which you invest?

1 year 1-3 years 3-5 years

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Excess of 5 years

4. Do you know about mutual funds?

Yes No

5. Do you invest in mutual funds? (If answer is yes then kindly skip question

no 8, and if it is no then please skip Q6 and Q8)

Yes No

6. If answer (to question no 5) is yes then kindly name the scheme you invest

SBI Mutual Fund HDFC Mutual Fund

Birla Sun Life Multiple

Others

_____________________________________________________

(In case ofother option kindly specify the name of the asset managementcompany)

7. How do you think you can describe your investment strategy in a word?

Aggressive Consultative Watchful Conservative

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8. Do you know the concept ofSIP (Systematic Investment Plan)?

Yes No

9. How much have the last two financial years of recession affected your

portfolio?

Drastically Significantly Average Not at all

10. How lump sum investment can be beneficial as compared to SIP?

________________________________________________________

11. Which goals are achieved by Mutual funds?

_______________________________________________________________

_______________________________________________________________

12. How SIP can be beneficial?

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

13. How lump sum investment can be beneficial as compared to SIP?

_______________________________________________________________

______________________________________________________________________________________________________________________________

14. Which scheme(s) do you select? e.g. monthly income or fixed maturity

plan etc.

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_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

15. What are the preferable reasons for preferring those schemes?

______________________________________________________________________________________________________________________________

_______________________________________________________________

16. Why do you prefer direct investment in mutual funds as compared to

Equity trading?

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

17. How do you design your mutual funds portfolio?

_______________________________________________________________

_______________________________________________________________

18. Would you prefer investment in real estate funds or gold funds?Why?

______________________________________________________________________________________________________________________________

19. At how much frequency do you prefer to check your portfolio?

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_______________________________________________________________

20. How do you perceive the service quality of mutual funds?

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

21. Do you assess how much money has grown in mutual funds?

_______________________________________________________________

_______________________________________________________________

22. Do you know about the services ofwww.moneycontrol.com?

_______________________________________________________________

_______________________________________________________________

23. If mutual funds give you more than your traditional long term investments

(e.g. Fixed Deposits, Bonds Etc.). Would you consider investing in mutual

funds?

Definitely Yes I dont know Definitely No

24. What factors would you consider while making an investment in mutual

funds as compared to other sources of investment?(Please Rank 1 to 7)

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High returns _____

Low costs _____

Professional management _____

Brand Name _____

Risk Profile _____

Past performance of the fund _____

Transparency

25. What is the reason for not investing in mutual funds particularly as

compared to mutual funds?(Please rank from 1 to 5)

Bad Experience ______

Lack of knowledge ______

Lack of confidence in service provider ______

Uncertainty of Returns ______

Difficulty in choosing ______

ABBREVIATIONS USED IN MUTUAL FUNDSNSDL-National Securities Depository Limited

SEBI- Securities and Exchange Board of India

AMFI-Association of Mutual Funds in India

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AMC- Asset Management Company

MF- Mutual Funds

MoF- Ministry of Finance

Fun.Man-Fund Manager

BSE-Bombay Stock Exchange

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abhishek apte final thesis report

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