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“A STUDY ON COMPARITIVE ANALYSIS OF VARIOUS MUTUAL FUNDS WITH SPECIAL REFERENCE TO IIFL”
A Summer Training Project Report
Submitted in partial fulfillment of the requirement for the
Award of Degree of Master of Business Administration
2011-2013
Under the Guidance of: - Submitted By:-
Mr. Nakul Anand Ankit Kumar
(Assistant Professor) Enroll No:-04514803911
DEPARTMENT OF MANAGEMENT
MAHARAJA AGRASEN INSTITUTE OF TECHNOLOGY
(Affiliated to G.G.S.I.P. University)
Sector – 22, Rohini, Delhi -110086An ISO 9001:2008 Certified Institute
AICTE NBA Accredited Institute
Certificate from the Company/Organization
This is to certify that Ankit Kumar Son of Late Sh. Ravinder Kumar pursuing
MBA from Maharaja Agrasen Institute of Technology (Affiliated to G.G.S.I.P.
University),New Delhi has successfully completed Project Report in our organization on
the topic titled, ” A STUDY ON COMPARITIVE ANALYSIS OF VARIOUS
MUTUAL FUND WITH SPECIAL REFERENCE TO IIFL”” from 04TH JUNE
2012 to 04TH AUG 2012. During his/ her project tenure in the organization/ company, we
found her hard working, sincere and diligent person and her behavior and conduct was
good during the project. We wish her all the best for her future endeavors.
Comments of Guide (if Any)1.2.3.
Name and Signature of the Mentor (Industrial Guide)
Designation
STUDENT UNDERTAKING
This is to certify that I Ankit Kumar had completed the Project titled “A
STUDY ON COMPARITIVE ANALYSIS OF VARIOUS MUTUAL
FUND WITH SPECIAL REFERENCE TO IIFL” in INDIA INFOLINE
LTD.” under the guidance of Mr. Nakul Anand in the partial fulfillment of
the requirement for the award of degree of MBA from Maharaja Agrasen
Institute of Technology (Affiliated to G.G.S.I.P. University), New Delhi.
This is an original piece of work and I had neither copied nor submitted it
earlier
Elsewhere.
Ankit Kumar
MBA
CERTIFICATE FROM GUIDE
This is to certify that the project titled “A STUDY ON COMPARITIVE ANALYSIS OF VARIOUS MUTUAL FUND WITH SPECIAL REFERENCE TO IIFL” is an academic work done by Ankit Kumar submitted in the partial fulfillment of the requirement for the award of the Degree of MBA from Maharaja Agrasen Institute of Technology (Affiliated to G.G.S.I.P. University), New Delhi under my guidance and direction. To the best of my knowledge and belief the data and information presented by her in the project has not been submitted earlier.
ABBREVIATIONS
INITIALS TERMS
SEBI Securities and Exchange Board of India
F&O Future and Option
NSE National Stock Exchange
BSE Bombay Stock Exchange
MCX Multi Commodity Exchange
NCDEX National Commodity Exchange
NSDL National Securities Depository Limited
MTM Marking-to-market
GDP Gross Domestic Product
ATM At-the-money-option
OTC Over The Counter
OPEC The Organization of the Petroleum Exporting
Counties
MFI Mutual fund Of India
AMC The company vested with the responsibility of
managing investments of the schemes of a fund in line with
the stated investment objective of each scheme.
Back End Load The difference between the NAV of the units of a
scheme and the price at which they are redeemed. The
difference is charged by the fund.
Current Load Load structure applicable currently. Funds keep
revising the load structures prospectively from time to time.
Equity Schemes Schemes where more than 65% of the investments are
done in equity and equity related securities of various
companies. These funds tend to provide maximum returns
over a long-term horizon. However, the returns from these
funds are directly linked to the stock market and are volatile
as compared to those from debt funds.
Exit Load The fee charged at the time of redemption. It amounts to
the difference between the NAV of the units of a scheme and
the price at which existing units are redeemed. The fee has to
fall within the overall limit laid down by SEBI.
Face Value The original issue price of one unit of a scheme.
Fund A mutual fund is a trust under the Indian Trust Act.
Each fund manages one or more schemes.
Growth Option A scheme where the fund ploughs back the dividend
announced. The fund allots as many units of the scheme as
are arrived at on dividing the dividend amount by the ex-
dividend NAV.
Gilt funds Funds which invest only in government securities of
different maturities with virtually no default risk. While returns
are steady and secure, they are generally lower than those
from other debt funds.
Initial Offer Price The price at which units of a scheme are offered in its
New Fund Offer (NFO).
Income / Debt Funds Funds that invest in income bearing instruments such
as corporate debentures, PSU bonds, gilts, treasury bills,
certificates of deposit, commercial papers etc. Although
these funds are less volatile, the underlying investments
carry a credit risk. Comparatively, these funds are less risky
and are preferred by risk-averse investors.
Index Funds A class of equity funds that invest in equity shares of
various companies in the same proportion in which they
appear in the composition of any popular index, such as the
BSE Sensex, S&P 500 or NASDAQ composite. The
performance of such funds closely tracks the performance of
the index.
Junk Bond A speculative bond rated BB or below."Junk bonds" are
generally issued by corporations of questionable financial
strength or without proven track records. They tend to be
more volatile and higher yielding than bonds with superior
quality ratings. "Junk bond funds" emphasize diversified
investments in these low-rated, high-yielding debt issues.
Load A sales charge or commission assessed by certain
mutual funds ("load funds,") to cover their selling costs. The
commission is generally stated as a portion of the fund's
offering price, usually on a sliding scale from one to 8.5%.
Mutual Fund An open-end investment company that buys back or
redeems its shares at current net asset value. Most mutual
funds continuously offer new shares to investors.
Net Asset Value Per
Share
The current market worth of a mutual fund share.
Calculated daily by taking the funds total assets securities,
cash and any accrued earnings deducting liabilities, and
dividing the remainder by the number of shares outstanding.
Performance performance of an investment indicates the returns
from an investment. the returns can come by way of income
distributions as well as appreciation in the value of the
investment.
Portfolio the basket of investments in which the funds of a
scheme are deployed.
Prospectus an offer document by which a mutual fund invites the public for subscription to units of a scheme, and informs them of the terms & conditions for management of the scheme on a day to day basis thereafter. the document contains information about the scheme to enable a prospective investor make an informed investment decision.
Registrar an agent appointed by the trustees of a mutual fund in consultation with the amc or by the companies for the purpose of handling the records of the unit holders or shareholders.
Redemption /
Repurchase price
the price of a unit (net of exit load) that the fund offers the investor to redeem his investment.
systematic
investment plan (sip)
a systematic investment plan allows an investor to buy units of a mutual fund scheme on a regular basis by means of periodic investments into that scheme in a manner similar to instalments paid on purchase of normal goods. the investor is allotted units on a predetermined date specified in the offer document of the scheme. here the plan allows the investor to
take advantage of the rupee cost averaging methodology.
TOPICSPAGE
NO.
1 ABSTRACT 2
2 COMPANY PROFILE 3-6
3 RESEARCH DESIGN & METHODOLOGY 7
3.1 OBJECTIVES OF THE STUDY 8
3.2 SCOPE 9
3.3 TYPE OF DATA 9
3.4 LIMITATIONS 9
3.5 TOOLS OF ANALYSIS 10
4 INTRODUCTION TO THE TOPIC 11
4.1 WHAT IS MUTUAL FUND 12
4.2 EQUITY FUNDS 12
4.3 DEBT FUNDS 13
4.4 BY INVESTMENT OBJECTIVES 14
4.5 OTHER SCHEMES 14
4.6 PROS AND CONS OF INVESTMENT IN MUTUAL FUNDS 15-18
4.7 ADVANTAGES OF INVESTMENT IN MUTUAL FUNDS 19-20
4.8 DISADVABTAGE OF INVESTMENT IN MUTUAL FUNDS 21
4.9 MUTUAL FUNDS INDUSTRY IN INDIA 21
4.10 MAJOR PLAYERS OF MUTUAL FUNDS INDUSTRY 22
4.11 CATEGORIES OF MUTUAL FUNDS 23
4.12 INVESTMENT STRATAGIES 24
4.13 WORKING OF MUTUAL FUNDS 26-28
4.14 GUIDELINES OF THE SEBI FOR MUTUAL FUNDS 29
4.15 PORTFOLIO ANALYSIS TOOLS 30
5 DATA ANALYSIS AND INTERPRETATION 31-44
6 RESEARCH FINDINGS 45
7 SUGGESTIONS 46
8 CONCLUSION 47
9 BIBLIOGRAPHY 48
10 WEBLIOGRAPHY 49
List of FiguresSr. No. Particulars Page No.
1. Diversification of India Infoline Ltd. 23
2. Concept of mutual fund 30
3. Categories of mutual fund 35
4. Risk Vs. Return 42
5. Organization of mutual fund 43
List of Tables
1. List of Stock Exchanges 19
2. Swot Analysis of IIFL 28
3. Relative comparison of Mutual funds and Other Investment
59
4. Investment risk and objective Comparison
60
List of Graphs
1. Investors Convention. 71
2. Investors 72
3. Investor’s preference. 73
4. Investment option having all round capability.
74
5. Factors while investing. 75
6. Previously Invested in mutual fund or not.
76
7. Where you find yourself as mutual fund investor.
77
8. Factors that attract you to invest in mutual fund.
78
9. Expected rate of return onInvestments 79
10. Investors risk taking ability. 80
11. Investors experience with mutual fund 81
EXECUTIVE SUMMARY
A mutual fund is a scheme in which several people invest their money for a common
financial cause. The collected money invests in the capital market and the money, which
they earned, is divided based on the number of units, which they hold.
The mutual fund industry started in India in a small way with the UTI Act creating what
was effectively a small savings division within the RBI. Over a period of 25 years this
grew fairly successfully and gave investors a good return, and therefore in 1989, as the
next logical step, public sector banks and financial institutions were allowed to float
mutual funds and their success emboldened the government to allow the private sector to
foray into this area.
The advantages of mutual fund are professional management, diversification, and
economies of scale, simplicity, and liquidity.
The disadvantages of mutual fund are high costs, over-diversification, possible tax
consequences, and the inability of management to guarantee a superior return.
The biggest problems with mutual funds are their costs and fees it include Purchase fee,
Redemption fee, Exchange fee, Management fee, Account fee & Transaction Costs.
There are some loads which add to the cost of mutual fund. Load is a type of commission
depending on the type of funds.
Mutual funds are easy to buy and sell. You can either buy them directly from the fund
company or through a third party. Before investing in any funds one should consider
some factor like objective, risk, Fund Manager’s and scheme track record, Cost factor
etc.
There are many, many types of mutual funds. You can classify funds based Structure
(open-ended & close-ended), Nature (equity, debt, balanced), Investment objective
(growth, income, money market) etc. A code of conduct and registration structure for
mutual fund intermediaries, which were subsequently mandated by SEBI. In addition,
this year AMFI was involved in a number of developments and enhancements to the
regulatory framework.
The most important trend in the mutual fund industry is the aggressive expansion of the
foreign owned mutual fund companies and the decline of the companies floated by
nationalized banks and smaller private sector players.
SBI mutual fund, Reliance Mutual Fund, UTI Mutual Fund, ICICI Prudential Mutual
Fund, HDFC Mutual Fund and Birla Sun Life Mutual Fund are one of top the five mutual
fund company in India.
CHAPTER 1
INTRODUCTION
INTRODUCTION TO CAPITAL MARKET
The capital market is the market for securities, where Companies & governments can
raise long-term funds. It is a market in which money is lent for periods longer than a year.
A nation's capital market includes such financial institutions as banks, insurance
companies, & stock exchanges that channel long-term investment funds to commercial &
industrial borrowers. Unlike the money market, on which lending is ordinarily short term,
the capital market typically finances fixed investments like those in buildings &
machinery.
Nature & Constituents:
The capital market consists of number of individuals & institutions (including the
government) that canalize the supply & demand for long term capital & claims on capital.
The stock exchange, commercial banks, co-operative banks, saving banks, development
banks, insurance companies, investment trust or companies, etc., are important
constituents of the capital markets.
The capital market, like the money market, has three important Components, namely the
suppliers of loan able funds, the borrowers & the Intermediaries who deal with the
leaders on the one hand & the Borrowers on the other.The demand for capital comes
mostly from agriculture, industry, trade the government. The predominant form of
industrial organization developed Capital Market becomes a necessary infrastructure for
industrialization. Capital market not concerned solely with the issue of new claims on
capital, But also with dealing in existing claims.
HISTORY
Established in 1875, the Bombay Stock Exchange (BSE) is Asia's first stock exchange. In
12th century France the courratiers de change were concerned with managing &
regulating the debts of agricultural communities on behalf of the banks. Because these
men also traded with debts, they could be called the first brokers. A common misbelief is
that in late 13th century Bruges commodity traders gathered inside the house of a man
called Van der Beurze, & in 1309 they became the "Brugse Beurse", institutionalizing
what had been, until then, an informal meeting, but actually, the family Van der Beurze
had a building in Antwerp where those gatherings occurred; the Van der Beurze had
Antwerp, as most of the merchants of that period, as their primary place for trading. The
idea quickly spread around Flanders & neighboring counties & "Beurzen" soon opened in
Ghent & Amsterdam.
In the middle of the 13th century, Venetian bankers began to trade in government
securities. In 1351 the Venetian government outlawed spreading rumors intended to
lower the price of government funds. Bankers in Pisa, Verona, Genoa & Florence also
began trading in government securities during the 14th century. This was only possible
because these were independent city states not ruled by a duke but a council of influential
citizens. The Dutch later started joint stock companies, which let shareholders invest in
business ventures & get a share of their profits - or losses. In 1602, the Dutch East India
Company issued the first share on the Amsterdam Stock Exchange. It was the first
company to issue stocks & bonds.
The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first
stock exchange to introduce continuous trade in the early 17th century. The Dutch
"pioneered short selling, option trading, debt-equity swaps, merchant banking, unit trusts
& other speculative instruments, much as we know them" There are now stock markets in
virtually every developed & most developing economies, with the world's biggest
markets being in the United States, United Kingdom, Japan, India, China, Canada,
Germany, France, South Korea & the Netherlands.
IMPORTANCE OF STOCK MARKET
Function and purpose
The main trading room of the Tokyo Stock Exchange, where trading is currently
completed through computers. The stock market is one of the most important sources for
companies to raise money. This allows businesses to be publicly traded, or raise
additional capital for expansion by selling shares of ownership of the company in a public
market. The liquidity that an exchange provides affords investors the ability to quickly &
easily sell securities. This is an attractive feature of investing in stocks, compared to other
less liquid investments such as real estate.
History has shown that the price of shares & other assets is an important part of the
dynamics of economic activity, & can influence or be an indicator of social mood. An
economy where the stock market is on the rise is considered to be an up-and-coming
economy. In fact, the stock market is often considered the primary indicator of a
country's economic strength & development. Rising share prices, for instance, tend to be
associated with increased business investment & vice versa. Share prices also affect the
wealth of households & their consumption. Therefore, central banks tend to keep an eye
on the control & behavior of the stock market &, in general, on the smooth operation of
financial system functions. Financial stability is the raison d'être of central banks.
Exchanges also act as the clearinghouse for each transaction, meaning that they collect &
deliver the shares, & guarantee payment to the seller of a security. This eliminates the
risk to an individual buyer or seller that the counterparty could default on the transaction.
The smooth functioning of all these activities facilitates economic growth in that lower
costs & enterprise risks promote the production of goods & services as well as
employment. In this way the financial system contributes to increased prosperity. An
important aspect of modern financial markets, however, including the stock markets, is
absolute discretion.
For example, American stock markets see more unrestrained acceptance of any firm than
in smaller markets. For example, Chinese firms that possess little or no perceived value to
American society profit American bankers on Wall Street, as they reap large
commissions from the placement, as well as the Chinese company which yields funds to
invest in China. However, these companies accrue no intrinsic value to the long-term
stability of the American economy, but rather only short-term profits to American
business men & the Chinese; although, when the foreign company has a presence in the
new market, this can benefit the market's citizens. Conversely, there are very few large
foreign corporations listed on the Toronto Stock Exchange TSX, Canada's largest stock
exchange. This discretion has insulated Canada to some degree to worldwide financial
conditions. In order for the stock markets to truly facilitate economic growth via lower
costs & better employment, great attention must be given to the foreign participants being
allowed in.
Relation of the stock market to the modern financial system
The financial systems in most western countries has undergone a remarkable
transformation. One feature of this development is disintermediation. A portion of the
funds involved in saving & financing, flows directly to the financial markets instead of
being routed via the traditional bank lending & deposit operations. The general public's
heightened interest in investing in the stock market, either directly or through mutual
funds, has been an important component of this process.
Statistics show that in recent decades shares have made up an increasingly large
proportion of households' financial assets in many countries. In the 1970s, in Sweden,
deposit accounts & other very liquid assets with little risk made up almost 60 percent of
households' financial wealth, compared to less than 20 percent in the 2000s. The major
part of this adjustment in financial portfolios has gone directly to shares but a good deal
now takes the form of various kinds of institutional investment for groups of individuals,
e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc.
The trend towards forms of saving with a higher risk has been accentuated by new rules
for most funds & insurance, permitting a higher proportion of shares to bonds. Similar
tendencies are to be found in other industrialized countries. In all developed economic
systems, such as the European Union, the United States, Japan & other developed
nations, the trend has been the same: saving has moved away from traditional
(government insured) bank deposits to more risky securities of one sort or another.
The stock market, individual investors, and financial risk
Riskier long-term saving requires that an individual possess the ability to manage the
associated increased risks. Stock prices fluctuate widely, in marked contrast to the
stability of (government insured) bank deposits or bonds. This is something that could
affect not only the individual investor or household, but also the economy on a large
scale. The following deals with some of the risks of the financial sector in general and the
stock market in particular. This is certainly more important now that so many newcomers
have entered the stock market, or have acquired other 'risky' investments (such as
'investment' property, i.e., real estate and collectables).
With each passing year, the noise level in the stock market rises. Television
commentators, financial writers, analysts, & market strategists are all overtaking each
other to get investors' attention. At the same time, individual investors, immersed in chat
rooms & message boards, are exchanging questionable & often misleading tips. Yet,
despite all this available information, investors find it increasingly difficult to profit.
Stock prices skyrocket with little reason, then plummet just as quickly, & people who
have turned to investing for their children's education & their own retirement become
frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.
This is a quote from the preface to a published biography about the long-term value-
oriented stock investor Warren Buffett. Buffett began his career with $100, and $100,000
from seven limited partners consisting of Buffett's family and friends. Over the years he
has built himself a multi-billion-dollar fortune.
Role of Capital Market
The primary role of the capital market is to raise long-term funds for governments, banks,
& corporations while providing a platform for the trading of securities. This fundraising
is regulated by the performance of the stock & bond markets within the capital market.
The member organizations of the capital market may issue stocks & bonds in order to
raise funds. Investors can then invest in the capital market by purchasing those stocks &
bonds.
The capital market, however, is not without risk. It is important for investors to
understand market trends before fully investing in the capital market. To that end, there
are various market indices available to investors that reflect the present performance of
the market.
Regulation of the Capital Market
Every capital market in the world is monitored by financial regulators & their respective
governance organization. The purpose of such regulation is to protect investors from
fraud & deception. Financial regulatory bodies are also charged with minimizing
financial losses, issuing licenses to financial service providers, and enforcing applicable
laws.
The Capital Market’s Influence on International Trade
Capital market investment is no longer confined to the boundaries of a single nation.
Today’s corporations and individuals are able, under some regulation, to invest in the
capital market of any country in the world. Investment in foreign capital markets has
caused substantial enhancement to the business of international trade
The Primary and Secondary MarketsThe capital market is also dependent on
two sub-markets – the primary market & the secondary market. The primary market deals
with newly issued securities & is responsible for generating new long-term capital. The
secondary market handles the trading of previously-issued securities, & must remain
highly liquid in nature because most of the securities are sold by investors. A capital
market with high liquidity & high transparency is predicated upon a secondary market
with the same qualities.
List of Stock Exchanges in India
The Ludhiana Stock Exchange Association Ltd National Stock Exchange of India Ltd
The Gauhati Stock Exchange Association Ltd Inter-Connected Stock Exchange of India
Ltd
Bhubaneswar Stock Exchange Association Ltd Vadodara Stock Exchange Ltd
The Uttar Pradesh Stock Exchange Ltd. Jaipur Stock Exchange Ltd
Saurashtra Kutch Stock Exchange Association
Ltd.
Bombay Stock Exchange Ltd
Over The Counter Stock Exchange Of India Ahmedabad Stock Exchange Ltd
The Pune Stock Exchange Ltd Bangalore Stock Exchange Ltd
Coimbatore Stock Exchange Ltd The Calcutta Stock Exchange Association
Ltd
The Cochin Stock Exchange Ltd The Delhi Stock Exchange Association Ltd.
Magadh Stock Exchange Association The Hyderabad Stock Exchange Ltd
Madhya Pradesh Stock Exchange Ltd Madras Stock Exchange Ltd
Table1.1
About the organization
The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd
(NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of India’s premier
providers of financial services.
IIFL offers advice and execution platform for the entire range of financial services
covering products ranging from Equities and derivatives, Commodities, Wealth
management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking,
Gold bonds and other small savings instruments.
We have a presence in:
Equities our core offering, gives us a leading market share in both retail and institutional
segments. Over a million retail customers rely on our research, as do leading FIIs and
MFs that invest billions.
Private Wealth Management services cater to over 2500 families who have trusted us
with close to Rs 25,000 crores ($ 5bn) of assets for advice.
Investment Banking services are for corporates looking to raise capital. Our forte is
Equity Capital Markets, where we have executed several marquee transactions.
Credit & Finance focuses on secured mortgages and consumer loans. Our high quality
loan book of over Rs. 6,200 crores ($ 1.2bn) is backed by strong capital adequacy of
approximately 20%.
IIFL Mutual Fund made an impressive beginning in FY12, with lowest charge Nifty
ETF. Other products include Fixed Maturity Plans.
Life Insurance, Pension and other Financial Products, on open architecture complete
our product suite to help customers build a balanced portfolio.
IIFL has received membership of the Colombo Stock Exchange becoming the first
foreign broker to enter Sri Lanka. IIFL owns and manages the
website, www.indiainfoline.com, which is one of India’s leading online destinations for
personal finance, stock markets, economy and business. IIFL has been awarded the ‘Best
Broker, India’ by FinanceAsiaand the ‘Most improved brokerage, India’ in
the Asia Money polls. India Infoline was also adjudged as ‘Fastest Growing Equity
Broking House - Large firms’ by Dun & Bradstreet. A forerunner in the field of equity
research, IIFL’s research is acknowledged by none other than Forbes as ‘Best of the
Web’ and ‘…a must read for investors in Asia’.
Our research is available not just over the Internet but also on international wire services
like Bloomberg, Thomson First Call and Internet Securities besides others where it is
amongst one of the most read Indian brokers.
IIFL is a listed company with a consolidated group net worth of about Rs 1,800 crores.
The income and net profit during FY2010-11 were Rs. 14.7 bn and Rs. 2.1 bn
respectively.
The Group has a consistent and uninterrupted track record of profits and dividends since
its listing in 2005. The company is listed on both Exchanges and also trades in the
derivatives segment.
IIFL’s Crisil and ICRA Rating for short term is top rated as CRISIL A1+ and ICRA
(A1+) respectively. For long term, IIFL has been rated ICRA (AA-) by ICRA and
CRISIL AA-/Stable by CRISIL indicating high degree of safety for timely servicing of
financial obligations.
IIFL is near you physically: we are present in every nook and cranny of the country, with
over 3,000 business locations across 500 cities in India. You can reach us in a variety of
ways, online, over the phone and through our branches. All our offices are connected
with the corporate office in Mumbai with cutting edge networking technology. The group
caters to a customer base of about a million customers.
Our physical presence in key global markets includes subsidiaries in Colombo, Dubai,
New York, Mauritius, London, Singapore and Hong Kong.
The company has a network of 596 branches spread across 345 cities and towns. It has
more than 500000 customers.
India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock
Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both the
exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services and
Portfolio Management Services. It offers broking services in the Cash and Derivatives segments of
the NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL as a
depository participant, providing a one-stop solution for clients trading in the equities market. It has
recently launched its Investment banking and Institutional Broking business.
Fig 1.1
A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. These
services are offered to clients as different schemes, which are based on differing investment
strategies made to reflect the varied risk-return preferences of clients.
India Infoline Media and Research Services Limited
The content services represent a strong support that drives the broking, commodities,
mutual fund and portfolio management services businesses. Revenue generation is
through the sale of content to financial and media houses, Indian as well as global.
It undertakes equities research which is acknowledged by none other than Forbes as ‘Best
of the Web’ and ‘…a must read for investors in Asia’. India Infoline’s research is
available not just over the internet but also on international wire services like Bloomberg
(Code: IILL), Thomson First Call and Internet Securities where India Infoline is amongst
the most read Indian brokers.
India Infoline Commodities Limited.
India Infoline Commodities Pvt Limited is engaged in the business of commodities
broking. Our experience in securities broking empowered us with the requisite skills and
technologies to allow us offer commodities broking as a contra-cyclical alternative to
equities broking. We enjoy memberships with the MCX and NCDEX, two leading Indian
commodities exchanges, and recently acquired membership of DGCX. We have a multi-
channel delivery model, making it among the select few to offer online as well as offline
trading facilities.
India Infoline Marketing & Services
India Infoline Marketing and Services Limited is the holding company of India Infoline
Insurance Services Limited and India Infoline Insurance Brokers Limited.
(a) India Infoline Insurance Services Limited is a registered Corporate Agent with the
Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate
Agent for ICICI Prudential Life Insurance Co Limited, which is India’s largest private
Life Insurance Company. India Infoline was the first corporate agent to get licensed by
IRDA in early 2001.
(b) India Infoline Insurance Brokers Limited India Infoline Insurance Brokers Limited is
a newly formed subsidiary which will carry out the business of Insurance broking. We
have applied to IRDA for the insurance broking licence and the clearance for the same is
awaited. Post the grant of license, we propose to also commence the general insurance
distribution business.
India Infoline Investment Services Limited
Consolidated shareholdings of all the subsidiary companies engaged in loans and
financing activities under one subsidiary. Recently, Orient Global, a Singapore-based
investment institution invested USD 76.7 million for a 22.5% stake in India Infoline
Investment Services. This will help focused expansion and capital raising in the said
subsidiaries for various lending businesses like loans against securities, SME financing,
distribution of retail loan products, consumer finance business and housing finance
business. India Infoline Investment Services Private Limited consists of the following
step-down subsidiaries.
(a) India Infoline Distribution Company Limited (distribution of retail loan products)
(b) Moneyline Credit Limited (consumer finance)
India Infoline Housing Finance Limited (housing finance)
IIFL (Asia) Private Limited
IIFL (Asia) Private Limited is wholly owned subsidiary which has been incorporated in
Singapore to pursue financial sector activities in other Asian markets. Further to
obtaining the necessary regulatory approvals, the company has been initially capitalized
at 1 million Singapore dollars.
India Infoline Investment Services Ltd:
India Infoline Investment Service Ltd is also a 100% subsidiary of India Infoline Ltd. It
has an NBFC license from the Reserve Bank of India (RBI) and offers margin funding
facility to the broking customers.
MANAGEMENT OF INDIA INFOLINE
Mr. Nirmal Jain
Nirmal Jain is the founder and Chairman of India Info line Ltd. He holds an MBA
degree from IIM Ahmedabad, and is a Chartered Accountant and a Cost Accountant. He
has had an impeccable professional and academic track record. He then joined hands with
two local brokers to set up their equity research division Inquire, in 1994. His work set
new standards for equity research in India. In 1995, he founded his own independent
financial research company, now known as India Info line Ltd.
Mr. R Venkataraman
Venkataraman is the co-promoter and Executive Director of India Infoline Ltd.
He holds a B.Tech degree in Electronics and Electrical Communications Engineering
from IIT Kharagpur and an MBA degree from IIM Bangalore. He has held senior
managerial positions in various divisions of ICICI Limited, including ICICI Securities
Limited, their investment banking joint venture with J P Morgan of USA and with BZW
and Taib Capital Corporation Limited. He has also held the position of Assistant Vice
President with G E Capital Services India Limited in their private equity division.
The Board of Directors
Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India
Infoline comprises:
Mr. Sat Pal Khattar (Non Executive Director)
Mr. Sanjiv Ahuja (Independent Director)
Mr. Nilesh Vikamsey (Independent Director)
Mr. Kranti Sinha (Independent Director)
SWOT ANALYSIS India Infoline (IIFL)
Parent Company India Infoline Ltd.
Category Brokerage Houses, Consumer Financial Services
Sector Banking and Financial Services
Tagline/ Slogan Knowledge is the edge; Its all about money, honey
USP One of the leading players in the Indian financial services space
STP
Segment Brokerage
Target Group Urban and Rural Investors
Positioning Complete Investment and Stock trading Solutions
SWOT Analysis
Strength
1. Wide range of financial products
2. Successful implementation of “Insurance broking” model
3. Online portal’s successful branding as “5paisa.com”
4. Have over 2500 offices in India in over 500 cities
5. First Indian brokerage house to get membership of Singapore
Exchange
6. IIFL has been awarded the ‘Best Broker, India’ , ‘Most improved
brokerage, India’ , ‘Fastest Growing Equity Broking House’
Weakness
1. High risk exposure as seen by conservative population
2. Less emphasis on advertising causes lack of brand visibility
Opportunity
1. High income Urban families
2. More penetration into the growing cities
Threats
1. Stringent Economic measures by Government and RBI
2. Entry of foreign finance firms in Indian Market
Competition
Competitors
1. Share khan
2. Indiabulls
3. Angel Broking
ABOUT THE TOPIC
Mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. This pool of money is invested in accordance with a stated
objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to
all investors. 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 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. A Mutual Fund is an investment tool that allows small investors access to
a well-diversified portfolio of equities, bonds and other securities. Each shareholder
participates in the gain or loss of the fund. Units are issued and can be redeemed as
needed. The funds Net Asset value (NAV) is determined each day.
Investments in securities are spread across a wide cross-section of industries
and sectors and thus the risk is reduced. Diversification reduces the risk because all
stocks may not move in the same direction in the same proportion at the same time.
Mutual fund issues units to the investors in accordance with quantum of money
invested by them. Investors of mutual funds are known as unit holders.
Fig: 1.2
When an investor subscribes for the units of a mutual fund, he becomes part owner
of the assets of the fund in the same proportion as his contribution amount put up
with the corpus (the total amount of the fund). Mutual Fund investor is also known
as a mutual fund shareholder or a unit holder. Any change in the value of the
investments made into capital market instruments (such as shares, debentures etc) is
reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the
market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a
scheme is calculated by dividing the market value of scheme's assets by the total
number of units issued to the investors.
ADVANTAGES OF MUTUAL FUND
Portfolio Diversification
Professional management
Reduction / Diversification of Risk
Liquidity
Flexibility & Convenience
Reduction in Transaction cost
Safety of regulated environment
Choice of schemes
Transparency
DISADVANTAGE OF MUTUAL FUND
No control over Cost in the Hands of an Investor
No tailor-made Portfolios
Managing a Portfolio Funds
Difficulty in selecting a Suitable Fund Scheme
HISTORY OF THE INDIAN MUTUAL FUND
INDUSTRY
The mutual fund industry in India started in 1963 with the formation of Unit Trust
of India, at the initiative of the Government of India and Reserve Bank. 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 a dramatic improvement,
both qualities wise as well as quantity wise. Before, the monopoly of the market
had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion.
The private sector entry to the fund family raised the A sum to Rs. 470 billion in
March 1993 and till April 2004; it reached the height if Rs. 1540 billion.
The Mutual Fund Industry is obviously growing at a tremendous space with 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 establisheds on 1963 by an Act of Parliament by the
Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and
the Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI was Unit
Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under
management.
Second Phase – 1987-1993 (Entry of Public Sector Funds )
1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual
fund in June 1989 while GIC had set up its mutual fund in December 1990.At the
end of 1993, the mutual fund industry had assets under management of Rs.47,004
crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
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. As at the end of
January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.
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 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.
consolidation and growth. As at the end of September, 2004, there were 29 funds,
which manage assets of Rs.153108 crores under 421 schemes.
CATEGORIES OF MUTUAL FUND:
Fig 1.3
Mutual funds can be classified as follow :
Based on their structure:
Open-ended funds: Investors can buy and sell the units from the fund,
at any point of time.
Close-ended funds: These funds raise money from investors only once.
Therefore, after the offer period, fresh investments can not be made into the
fund. If the fund is listed on a stocks exchange the units can be traded like
stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New
Fund Offers of close-ended funds provided liquidity window on a periodic
basis such as monthly or weekly. Redemption of units can be made during
specified intervals. Therefore, such funds have relatively low liquidity
Based on their investment objective:
Equity funds: These funds invest in equities and equity related instruments.
With fluctuating share prices, such funds show volatile performance, even losses.
However, short term fluctuations in the market, generally smoothens out in the long
term, thereby offering higher returns at relatively lower volatility. At the same time,
such funds can yield great capital appreciation as, historically, equities have
outperformed all asset classes in the long term. Hence, investment in equity funds
should be considered for a period of at least 3-5 years. It can be further classified
as:
i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty
is tracked. Their portfolio mirrors the benchmark index both in terms of
composition and individual stock weightages.
ii) Equity diversified funds- 100% of the capital is invested in equities
spreading across different sectors and stocks.
iii|) Dividend yield funds- it is similar to the equity diversified funds except
that they invest in companies offering high dividend yields.
iv)Thematic funds- Invest 100% of the assets in sectors which are related
through some theme.
e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking
sector fund will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
Balanced fund: Their investment portfolio includes both debt and equity. As a
result, on the risk-return ladder, they fall between equity and debt funds. Balanced
funds are the ideal mutual funds vehicle for investors who prefer spreading their
risk across various instruments. Following are balanced funds classes:
i) Debt-oriented funds -Investment below 65% in equities.
ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.
Debt fund: They invest only in debt instruments, and are a good option for
investors averse to idea of taking risk associated with equities. Therefore, they
invest exclusively in fixed-income instruments like bonds, debentures, Government
of India securities; and money market instruments such as certificates of deposit
(CD), commercial paper (CP) and call money. Put your money into any of these
debt funds depending on your investment horizon and needs.
i) Liquid funds- These funds invest 100% in money market instruments, a large
portion being invested in call money market.
ii) Gilt funds ST- They invest 100% of their portfolio in government securities
of and T-bills.
iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in
debt instruments which have variable coupon rate.
iv)Arbitrage fund- They generate income through arbitrage opportunities due to
mis-pricing between cash market and derivatives market. Funds are allocated to
equities, derivatives and money markets. Higher proportion (around 75%) is put in
money markets, in the absence of arbitrage opportunities.
v) Gilt funds LT- They invest 100% of their portfolio in long-term
government securities.
vi) Income funds LT- Typically, such funds invest a major portion of the
portfolio in long-term debt papers.
vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line
with that of the fund.
INVESTMENT STRATEGIES
1. Systematic Investment Plan: under this a fixed sum is invested each
month on a fixed date of a month. Payment is made through post dated cheques or
direct debit facilities. The investor gets fewer units when the NAV is high and more
units when the NAV is low. This is called as the benefit of Rupee Cost Averaging
(RCA)
2. Systematic Transfer Plan: under this an investor invest in debt oriented
fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity
scheme of the same mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a
mutual fund then he can withdraw a fixed amount each month.
MUTUAL FUND FEES AND EXPENSES
Mutual fund fees and expenses are charges that may be incurred by investors who hold
mutual funds. Running a mutual fund involves costs, including shareholder transaction
costs, investment advisory fees, and marketing and distribution expenses. Funds pass
along these cost to investors in a number of ways.
1. TRANSACTION FEES
i) Purchase Fee: It is a type of fee that some funds charge their shareholders when they
buy shares. Unlike a front-end sales load, a purchase fee is paid to the fund (not to a
broker) and is typically imposed to defray some of the funds costs associated with the
purchase.
ii) Redemption Fee: It is another type of fee that some funds charge their shareholders
when they sell or redeem shares. Unlike a deferred sales load, a redemption fee is paid to
the fund (not to a broker) and is typically used to defray fund costs associated with
shareholders redemption.
iii) Exchange Fee: Exchange fee that some funds impose on shareholders if they
exchange (transfer) to another fund within the same fund group or "family of funds."
2. PERIODIC FEES
i) Management Fee: Management fees are fees that are paid out of fund assets to the
funds investment adviser for investment portfolio management, any other management
fees payable to the funds investment adviser or its affiliates, and administrative fees
payable to the investment adviser that are not included in the "Other Expenses" category.
They are also called maintenance fees.
ii) Account Fee: Account fees are fees that some funds separately impose on investors in
connection with the maintenance of their accounts. For example, some funds impose an
account maintenance fee on accounts whose value is less than a certain dollar amount.
3. OTHER OPERATING EXPENSES
Transaction Costs: These costs are incurred in the trading of the funds assets. Funds with
a high turnover ratio, or investing in illiquid or exotic markets usually face higher
transaction costs. Unlike the Total Expense Ratio these costs are usually not reported.
LOADS
Definition of a load
Load funds exhibit a "Sales Load" with a percentage charge levied on purchase or sale of
shares. A load is a type of Commission (remuneration). Depending on the type of load a
mutual fund exhibits, charges may be incurred at time of purchase, time of sale, or a mix
of both. The different types of loads are outlined below.
Front-end load:
Also known as Sales Charge, this is a fee paid when shares are purchased. Also known
asa "front-end load," this fee typically goes to the brokers that sell the funds shares.
Front-end loads reduce the amount of your investment. For example, lets say you have
Rs.10,000 and want to invest it in a mutual fund with a 5% front-end load. The Rs.500
sales load you must pay comes off the top, and the remaining Rs.9500 will be invested in
the fund. According to NASD rules, a front-end load cannot be higher than 8.5% of your
investment.
Back-end load: Also known as Deferred Sales Charge, this is a fee paid when shares
are sold. Also known as a "back-end load," this fee typically goes to the brokers that sell
the funds shares. The amount of this type of load will depend on how long the investor
holds his or her shares and typically decreases to zero if the investor holds his or her
shares long enough.
Level load / Low load:
Its similar to a back-end load in that no sales charges are paid when buying the fund.
Instead a back-end load may be charged if the shares purchased are sold within a given
timeframe. The distinction between level loads and low loads as opposed to back-end
loads, is that this time frame where charges are levied is shorter.
No-load Fund:
As the name implies, this means that the fund does not charge any type of sales load. But,
as outlined above, not every type of shareholder fee is a "sales load." A no-load fund may
charge fees that are not sales loads, such as purchase fees, redemption fees, exchange
fees, and account fees.
RISK V/S. RETURN:
Fig 1.4
ORGANIZATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the
Organizational set up of a mutual fund
Fig 1.5
A Mutual Fund is set up in the form of trust, which has sponsor, trustees, asset
management company (AMC), and custodian. The trust is established by sponsor or more
than one sponsor who is like a promoter of company. The trustee of mutual fund holds its
property for the benefit of unit holders. Asset Management Company (AMC) approved
by SEBI manages the funds by making investments in various types of securities.
Custodian, who registered with SEBI, holds the securities of the fund in its custody. The
trustees are vested with the general power of superintendence and direction over AMC.
They monitor the performance and compliance of SEBI regulations by mutual fund.
SEBI regulations required that at least two thirds of the directors of trustee company or
board of trustees must be independent i.e. they should not be associated with sponsors.
Also, 50% of the directors of the AMC must be independent. All mutual funds are
required to be registered with SEBI before they launch their schemes.
MAJOR MUTUAL FUND COMPANIES IN INDIA
ABN AMRO MUTUAL FUND
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO
Trustee(India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset
Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is
the custodian of ABN AMRO Mutual Fund.
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 a AUM of Rs.10, 000 crores.
BANK OF BARODA 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 Assets Management Company
Limited is the AUM 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 sponsors namely
Housing Development Finance Corporation Limited and Standard Life Investments
Limited.
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 on 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 13 October, 1993 with two sponsors, Prudential Plc. and the AMC is Prudential ICICI
Asset Management Company Limited incorporated on 22 June, 1993.
SAHARA MUTUAL FUND
Sahara Mutual Fund was setup on July 18, 1996 with Sahara India financial Corporation
Ltd. as the sponsor. Sahara Assets 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 crore Approximately.
Today it is the largest Bank sponsored Mutual Fund in India. They already launched 35
schemes out of which 15 have already yield 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 is a Trust under the Indian Trust Act, 1882. The sponsors for Tata
Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment
manger is Tata management Limited is one of the fastest in the country with more than
Rs.7,703 Crore(as on 2005) of AUM.
KOTAK MAHINDRA ASSTE MANAGEMENT COMPANY
Kotak Mahindra Asset Management Company is a subsidiary of KMBL. It is presently
having more than 1, 99,818 investors in its various schemes. KMAMC stared 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 to dedicated
gilt scheme investing only in government securities.
UNIT TRUST OF INDIA MUTUAL FUND
UTI Asset Management Company Private Limited, established in Jan 24, 2003 manages
the UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTI
Asset Management Company presently manages a corpus of over Rs.20, 000 crore. The
sponsors of UTI Mutual Fund are Bank of Baroda, Punjab National Bank, State Bank of
India, and Life Insurance Corporation of India. The schemes of UTI Mutual Fund are
Liquid Funds, assets Management Funds, Index Funds and Balanced Funds.
RELIANCE MUTUAL FUND
Reliance Mutual Fund 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 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 setup 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 MUTUAL FUND
The group, Franklin Templeton investment is a California based company with a global
AUM of US $409.2(as on 2005). It is one of the largest financial service group 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
Morgan Stanley is a world wide financial services company and its leading in the market
in securities, investment management and credit services. Morgan Stanley investment
management was established in the year 1975. it provides customized asset management
services and products to governments, corporations, pension funds and non profit
organizations. Its services are also extending to high net worth individuals and retail
investors. In India it is known as Morgan Stanley investment management Private Ltd.
and its AMC is Morgan Stanley Mutual Fund. This is the first closed end diversified
equity scheme serving the needs of Indian retail investors focusing on the long term
capital appreciation.
ESCORT MUTUAL FUNDS
Escort Mutual Funds was set up on April 15th, 1996 with Escorts Finance Ltd. as its
sponsor. The Trustee Company is Escorts Investments Trust Ltd.. Its AMC was
incorporated on Dec1st, 95 with the name Escorts Asset Management Ltd. ALLAINCE
CAPITAL MUTUAL FUND Alliance Capital Mutual Fund was set up on December 30,
1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsor. The
Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset
Management India Pvt. Ltd. with the corporate office in Mumbai.
BENCHMARK MUTUAL FUND
Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial
Services Pvt. Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as the
trustee Company. incorporated on October 16, 2000 and headquartered in Mumbai,
Benchmark Assets Management Company Pvt. Ltd. is the AMC.
CAN BANK MUTUAL FUND
Can Bank Mutual Fund was setup on December 19, 1987 with Canara Bank
acting as the sponsor. Canara bank investment Management Service Ltd. incorporated on
March 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.
CHOLA MUTUAL FUND
Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance
Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the
Trustee Company and AMC is Cholamandalam AMC Limited.
LIC MUTUAL FUND
Life Insurance Corporation on India setup LIC Mutual Fund on 19th June 1989. It
contributed Rs.2 crore 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 bsiness on 29th April 1994. The Trustees of LIC Mutual Fund have appointed
Jeevan Bima Sahayog Asset Management Company Ltd. as the Investment Managers for
mutual fund.
GIC MUTUAL FUND
GIC Mutual Fund, sponsored by General Insurance Corporation of India, a government
of India undertaking and the four Public Sector General Insurance Companies, viz.
National Insurance Co. Ltd, the New India Assurance Co. Ltd. the Oriental Insurance Co.
Ltd and United India Insurance Co. Ltd and is constituted as a Trust in Accordance with
the provisions of the Indian Trusts Act, 1882.
IIFL MUTUAL FUND
India Infoline Asset Management Company Ltd. ("AMC") was incorporated under the
Companies Act, 1956 on March 22, 2010, having its Registered Office at IIFL Centre,
3rd Floor Annex, Kamala City, Senapati Bapat Marg, Lower Parel, Mumbai 400 013.
AMC has been appointed as the Investment Manager to IIFL Mutual Fund by the Trustee
vide Investment Management Agreement (IMA) April 29, 2010, executed between India
Infoline Trustee Company Ltd. and India Infoline Asset Management Company Ltd.
Sponsor: India Infoline Limited (IIFL)
Trustee: India Infoline Trustee Company Limited
Investment Manager: India Infoline Asset Management Company Limited
Statutory Details: IIFL Mutual Fund has been set up as a Trust under the Indian Trust
Act, 1882.
PARAMETERS OF MUTUAL FUND EVALUATION:
Risk
Returns
Liquidity
Expense Ratio
Composition of Portfolio Risks
Risk Associated With Mutual Funds
Investing in mutual funds as with any security, does not come without risk. One of the
most basic economic principles is that risk and reward are directly correlated. In other
words, the greater the potential risk, the greater the potential return. The types of risk
commonly associated with mutual funds are:
Market Risk:
Market risk relate to the market value of a security in the future. Market prices fluctuate
and are susceptible to economic and financial trends, supply and demand, and many other
factors that cannot be precisely predicted or controlled.
Political Risk:
Changes in the tax laws, trade regulations, administered prices etc. is some of the many
political factors that create market risk. Although collectively, as citizens, we have
indirect control through the power of our vote, individually as investors, we have
virtually no control.
Inflation Risk:
Inflation or purchasing power risk, relates to the uncertainty of the future purchasing
power of the invested rupees. The risk is the increase in cost of the goods and services, as
measured by the Consumer Price Index. Interest Rate Risk: Interest Rate risk relates to
the future changes in interest rates. For instance, if an investor invests in a long term debt
mutual fund scheme and interest rate increase, the NAV of the scheme will fall because
the scheme will be end up holding debt offering lowest interest rates.
Business Risk
Business Risk is the uncertainty concerning the future existence, stability and
profitability of the issuer of the security. Business Risk is inherent in all business
ventures. The future financial stability of a company can not be predicted or guaranteed,
nor can the price of its securities. Adverse changes in business circumstances will reduce
the market price of the company’s equity resulting in proportionate fall in the NAV of
mutual fund scheme, which has invested in the equity of such a company.
Economic Risk :
Economic Risk involves uncertainty in the economy, which, in turn can have an adverse
effect on a company’s business. For instance, if monsoons fall in a year, equity stocks of
agriculture bases companies will fall and NAVs of mutual funds, which have invested in
such stocks, will fall proportionately. There are 3 different methods with the help of
which we can measure the risk.
Measurement of risk
I. Beta Coefficient Measure Of Risk
Beta relates a fund’s return with a market index. It basically measures the sensitivity
of funds return to changes in market index.
If Beta = 1Fund moves with the market i.e. Passive fund
If Beta < 1Fund is less volatile than the market i.e. Defensive Fund
If Beta > 1Funds will give higher returns when market rises & higher losses when
market falls i.e. Aggressive Fund
II. Ex –Marks or R-squared
Ex –Marks represents co relation with markets. Higher the Ex-marks lower the risk of
the fund because a fund with higher Ex-marks is better diversified than a fund with lower
Ex-marks.
Standard Deviation Measure of Risk:
It is a statistical concept, which measures volatility. It measures the fluctuations of
fund’s returns around a mean level. Basically it gives you an idea of how volatile your
earnings are. It is broader concept than BETA. It also helps in measuring total risk and
not just the market risk of the portfolio.
How to Calculate the Value of a Mutual Fund:
The investors’ funds are deployed in a portfolio of securities by the fund manager. The
value of these investments keeps changing as the market price of the securities change.
Since investors are free to enter and exit the fund at any time, it is essential that the
market value of their investments is used to determine the price at which such entry and
exit will take place. The net assets represent the market value of assets, which belong to
the investors, on a given date.
Net Asset Value or NAV of a mutual fund is the value of one unit of investment in the
fund, in net asset terms.
NAV = Net Assets of the scheme / Number of Units Outstanding Where Net Assets are
calculated as:-(Market value of investments + current assets and other assets + Accrued
income – current liabilities and other liabilities – less accrued expenses) / No. of Units
Outstanding as at the NAV date NAV of all schemes must be calculated and published at
least weekly for closed-end schemes and daily for open-end schemes.
The major factors affecting the NAV of a fund are.
Sale and purchase of securities
Sale and repurchase of units
Valuation of assets
Accrual of income and expenses
SEBI requires that the fund must ensure that repurchase price is not lower than
93% of NAV (95% in the case of a closed-fund). On the other side, a fund may
sell new units at a price that is different from the NAV, but the sale price cannot
be higher than 107 % of NAV. Also the difference between the repurchase price
and the sale price of the unit is not permitted to exceed 7% of the sale price.
Measuring Mutual Fund Performance:
We can measure mutual fund’s performance by different method:
• Absolute Return Method:
Percentage change in NAV is an absolute measure of return, which finds the NAV
appreciation between two points of time, as a percentage
.e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 12 months then Absolute
return = (22 – 20)/20 X 100 =10%
• Simple Annual Return Method :
Converting a return value for a period other than one year, into a value for one year, is
called as annualisation In order to annualize a rate, we find out what the return would be
for a year, if the return behaved for a year, in the same manner it did, for any other
fractional period .E .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months
then Annual Return = (22 – 20) /20 X 12/6 X 100 = 20%
• Total Return Method :
The total return method takes into account the dividends distributed by the mutual fund,
and adds it to the NAV appreciation, to arrive at returns .Total Return =(Dividend
distributed + Change in NAV)/ NAV at the start X 100
e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months if in between dividend
of Rs 4 has then Total Return = {4 + (22 – 20)}/20 X 100 = 30%
• Total Return when dividend is reinvested
This method is also called the return on investment (ROI) method. In this method, the
dividends are reinvested into the scheme as soon as they are received at the then
prevailing NAV (ex-dividend NAV).= ((Value of holdings at the end of the period/ value
of the holdings at the beginning) – 1)*100
E.g. An investor buys 100 units of a fund at Rs. 10.5 on January 1, 2007. On June 30,
2007 he receives dividends at the rate of 10%. The ex-dividend NAV was Rs. 10.25. On
December 31, 2007, the fund’s NAV was Rs. 12.25. Value of holdings at the beginning
period= 10.5*100= 1050 Number of units re-invested = 100/10.25 = 9.756 End period
value of investment = 109.756*12.25 = 1344.51 Rs. Return on Investment =
((1344.51/1050)-1)*100 = 28.05%
• Compounded Average Annual Return Method:
This method is basically used for calculating the return for more than 1 year. In this
method return is calculated with the following formula: A = P X (1 + R / 100) N Where P
= Principal invested A = maturity value N = period of investment in years R =
Annualized compounded interest rate in %R = {(Nth root of A / P) – 1} X 100E. g: If
amount invested is Rs. 100 & in the end we get return of Rs. 200 & period of investment
is 10 years then annualized compounded return is 200 = 100 (1 + R / 100) 10Rate = 7.2
%
RETURNS:
Returns have to be studied along with the risk. A fund could have earned higher return
than the benchmark. But such higher return may be accompanied by high risk. Therefore,
we have to compare funds with the bench marks, on a risk adjusted basis. William Sharpe
created a metric for fund performance, which enables the ranking of funds on a risk
adjusted basis.
Sharpe Ratio = Risk Premium
Funds Standard Deviation
Treynor Ratio = Risk Premium
Funds Beta
Risk Premium = Difference between the Fund’s Average return and Risk free return on
government security or treasury bill over a given period .
LIQUIDITY:
Most of the funds being sold today are open-ended. That is, investors can sell their
existing units, or buy new units, at any point of time, at prices that are related to the NAV
of the fund on the date of the transaction. Since investors continuously enter and exit
funds, funds are actually able to provide liquidity to investors, even if the underlying
markets, in which the portfolio is invested, may not have the liquidity that the investor
seeks.
EXPENSE RATIO:
Expense ratio is defined as the ratio of total expenses of the fund to the average net assets
of the fund. Expense ratio can actually understate the total expenses, because brokerage
paid on transactions of a fund are not included in the expenses. According to the current
SEBI norms, brokerage commissions are capitalized and included in the cost of the
transactions.
Expense ratio = Total Expenses
Average Net Assets
COMPOSITION OF THE PORTFOLIO:
Credit quality of the portfolio is measured by looking at the credit ratings of the
investments in the portfolio .Mutual Fund fact sheets show the composition of the
portfolio and the investments in various asset classes overtime.
Portfolio turnover rate is the ratio of lesser of asset purchased or sold by funds in the
market to the net assets of the fund.
If Portfolio ratio is 100% means portfolio has been changed fully. When Portfolio ratio is
high means expense ratio is high.
Portfolio Ratio = Total Sales & Purchase
Net Assets of fund
In order to meaningfully compare funds some level of similarity in the following factors
has to be ensured.
Size of the funds
Investment objective
Risk profile
Portfolio composition
Expense ratios
Fund evaluation against benchmark:
Funds can be evaluated against some performance indicators which are known as
benchmarks. There are 3 types of benchmarks:
Relative to market as whole
Relative to other comparable financial products
Relative to other mutual funds
Relative to market as whole:
There are different ways to measure the performance of fund w.r.t market as
Equity Funds
• Index Fund – An Index fund invests in the stock comprising of the index in the same
ratio. This is a passive management style.
For example,
Market Index Fund - BSE Sensex
Nifty Index Fund – NIFTY
The difference between the return of this fund and its index benchmark can be explained
by “TRACKINGERROR”.
• Active Equity Funds:
The fund manager actively manages this fund. To evaluate performance in such case we
have to select an appropriate benchmark.
Large diversified equity fund - BSE 100
Sector fund - Sectoral Indices
• Debt Funds :
Debt fund can also be judged against a debt market index e.g. I-BEX
Table 1.3
Table 1.4
TREATMENT FOR THE INVESTORS (UNITHOLDERS)
Tax benefits of investing in the Mutual Fund
As per the taxation laws in force as at the date of the Offer Document, some broad
income tax implications of investing in the units of the Scheme are stated below. The
information so stated is based on the Mutual Funds understanding of the tax laws in force
as of the date of the Offer Document, which have been confirmed by its auditors. The
information stated below is only for the purposes of providing general information to the
investors and is neither designed nor intended to be a substitute for professional tax
advice. As the tax consequences are specific to each investor and in view of the changing
tax laws, each investor is advised to consult his or her or its own tax consultant with
respect to the specific tax implications arising out of his or her or its participation in the
Scheme .Implications of the Income-tax Act, 1961 as amended by the Finance Act, 2006
To the Unit holders
(a.) Tax on Income In accordance with the provisions of section 10(35)(a) of the Act,
income received by all categories of unit holders in respect of units of the Fund will be
exempt from income-tax in their hands. Exemption from income tax under section 10(35)
of the Act would, however, not apply to any income arising from the transfer of these
units.
(b.) Tax on capital gains: As per the provisions of section 2(42A) of the Act, a unit of a
Mutual Fund, held by the investor as a capital asset, is considered to be a short-term
capital asset, if it is held for 12 months or less from the date of its acquisition by the unit
holder. Accordingly, if the unit is held for a period of more than 12 months, it is treated
as a long-term capital asset
Computation of capital gain Capital gains on transfer of units will be computed after
taking into account the cost of their acquisition. While calculating long-term capital
gains, such cost will be indexed by using the cost inflation index notified by the
Government of India. Individuals and HUFs, are granted a deduction from total income,
under section 80C of the Act upto Rs. 100,000, in respect of specified investments made
during the year (please also refer paragraph d).
Long-term capital gains
As per Section 10(38) of the Act, long-term capital gains arising from the sale of unit of
an equity oriented fund entered into in a recognized stock exchange or sale of such unit of
an equity oriented fund to the mutual fund would be exempt from income-tax, provided
such transaction of sale is chargeable to securities transaction tax.
Pursuant to an amendment made in the Finance Act, 2006, effective 1April 2006,
companies would be required to include such long term capital gains in computing the
book profits and minimum alternated tax liability under section 115JB of the Act.
Short -term capital gains
As per Section 111A of the Act, short-term capital gains from the sale of unit of an
equity oriented fund entered into in a recognized stock exchange or sale of such unit of an
equity oriented fund to the mutual fund would be taxed at 10 per cent, provided such
transaction of sale is chargeable to securities transaction tax.
The said tax rate would be increased by a surcharge of:
- 10 per cent in case of non-corporate Unit holders, where the total income exceeds
Rs.1,000,000,
- 10 per cent in case of resident corporate Unit holders, and
- 2.5 per cent in case of non-resident corporate unit holders irrespective of the amount of
taxable income.
Further, an additional surcharge of 2 per cent by way of education cess would be charged
on amount of tax inclusive of surcharge.
In case of resident individual, if the income from short term capital gains is less than the
maximum amount not chargeable to tax, then there will be no tax payable.
Further, in case of individuals/ HUFs, being residents, where the total income excluding
short-term capital gains is below the maximum amount not chargeable to tax1, then the
difference between the current maximum amount not chargeable to tax and total income
excluding short-term capital gains, shall be adjusted from short-term capital gains.
Therefore only the balance short term capital gains will be liable to income tax at the rate
of 10 percent plus surcharge, if applicable and education cess.
Non-residents
In case of non-resident unit holder who is a resident of a country with which India has
signed a Double Taxation Avoidance Agreement (which is in force) income tax is
payable at the rates provided in the Act, as discussed above, or the rates provided in the
such agreement, if any, whichever is more beneficial to such non-resident unit holder.
Investment by Minors
Where sale / repurchase is made during the minority of the child, tax will be levied on
either of the parents, whose income is greater, where the said income is not covered by
the exception in the proviso to section 64(1A) of the Act. When the child attains majority,
such tax liability will be on the child.
Losses arising from sale of units
As per the provisions of section 94(7) of the Act, loss arising on transfer of units, which
are acquired within a period of three months prior to the record date (date fixed by the
Fund for the purpose of entitlement of the unit holder to receive income from units) and
sold within a period of nine months after the record date, shall not be allowed to the
extent of income distributed by funds in respect of such units.
SEBI REGULATIONS:
As far as mutual funds are concerned, SEBI formulates policies and regulates the
mutual funds to protect the interest of the investors.
SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds
sponsored by private sector entities were allowed to enter the capital market.
The regulations were fully revised in 1996 and have been amended thereafter
from time to time.
SEBI has also issued guidelines to the mutual funds from time to time to protect
the interests of investors.
All mutual funds whether promoted by public sector or private sector entities
including those promoted by foreign entities are governed by the same set of
Regulations. The risks associated with the schemes launched by the mutual funds
sponsored by these entities are of similar type. There is no distinction in
regulatory requirements for these mutual funds and all are subject to monitoring
and inspections by SEBI.
SEBI Regulations require that at least two thirds of the directors of trustee
company or board of trustees must be independent i.e. they should not be
associated with the sponsors.
Also, 50% of the directors of AMC must be independent. All mutual funds are
required to be registered with SEBI before they launch any scheme.
Further SEBI Regulations, inter-alia, stipulate that MFs cannot guarantee returns
in any scheme and that each scheme is subject to 20 : 25 condition [i.e. minimum
20 investors per scheme and one investor can hold more than 25% stake in the
corpus in that one scheme].
Also SEBI has permitted MFs to launch schemes overseas subject various
restrictions and also to launch schemes linked to Real Estate, Options and Futures,
Commodities, etc
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 30 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 high professional and ethical
standards 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.
Associations of Mutual Fund of India do 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.
AMFI undertakes all India awareness programme for investors in order to
promote proper understanding of the concept and working of mutual funds.
At last but not the least association of mutual fund of India also disseminate
information’s on Mutual Fund Industry and undertakes studies and research either
directly or in association with other bodies.
AMFI Publications: AMFI publish mainly two types of bulletin. One is on the monthly
basis and the other is quarterly. These publications are of great support for the investors
to get intimation of the knowhow of their parked money.
CHAPTER 2RESEARCH
METHODOLOGY
OBJECTIVES
To study the benefits available from Mutual Fund investment.
To give an idea of the types of schemes available.
To analyze about the market trends of Mutual Fund investment.
To study some popular mutual fund schemes.
Observe the fund management process of mutual funds.
Explore the recent developments in the mutual funds in India.
To give an idea about the regulations of mutual funds
Methodology
The technique deployed to analyze and interpret the data for the purpose of hitting the
target objectives plays a crucial role. The effective research technique has a significant
contribution for effective objective achievement. Throughout this project I have blanked
some of the questions placed in the questionnaire and the secondary data gathered
Developing a Research plan:
A proper plan was developed and finalized and decision regarding data sources, research
sampling plan was designed. The research was exploratory as well as conclusive in nature
and the database was gathered through secondary and primary sources in order to achieve
the objective of the study.
Type of Research methods:
The research technique used for the study involve following two methods:
1.) Exploratory Research: The exploratory research was used to search the secondary and
primary database in form of survey of the customers dealing with various mutual fund
companies with the help of questionnaire. The hypothesis for the research has been
generated in the following manner:
- Survey of Individuals
2.) Conclusive research: The database for the research has been conducted
systematically; and its observations and analysis has been done as per the research
objectives.
Sample Design:-
Sample Size: The Total sample size was 30
Sampling Method: - The study is based on the non-probability sampling and wherein
convenience sampling was used to collect the data by picking out people in the most
convenient and fastest way to immediately get their reactions.
Research Type:
The research types used for the above mentioned research methods are as follows:
Analytical
The analytical research instruments include surveys and fact-findings and enquire of
different kinds. As it is a data base project, analytical research is done to make facts and
information already available, analyze these to make critical evaluation.
Empirical
Empirical research relies on experience/observation. This is a data base research, coming
up with conclusion.
Data Sources:
Database serves as a base for concluding any type of research. It is necessary to know
which type of data is relevant for the present research. As the present study is a literature
survey, secondary data plays a crucial role in concluding the project. While secondary
data are easy to measure and quantify, relatively easy to assign money value, objectively
based, a common measure of organizational performance and very credible, the primary
data on the other hand are difficult to measure or quantify directly, difficult to assign
money value in absolute term, subjective, less creditable as a performance measure and
usually behaviorally oriented.
Primary data source
Secondary data source
1.)Sources of primary data were feedback of the questionnaire from the investors as well
as non-investors in various mutual funds, the person authorize for selling of mutual funds
and managers of various banks having their mutual fund schemes.
2.) Secondary data sources are those which have already been passed through the
statistical process. In the present study secondary data is used to from the literature
reviews of various banks.
CHAPTER 3DATA ANALYSIS
&INTERPRETATION
Ques 1.) Are you conventional of making investments?
Graph 3.1
INTERPRETATION:According to this chart out of 30 investors of Delhi mostly conventional of making investment i.e. 53% and others are not i.e. 47%.
Ques 2.) Are you planning to invest in future?
Graph 3.2
INTERPRETATION
According to this chart out of 30 investors of Delhi majority of the investors are planning to invest in near future i.e. 87% and very few are not eager in investments i.e. 13%.
Ques 3.) What kind of investment you prefer the most?
Graph 3.3
INTERPRETATION From above graph it can be inferred that of 30, people have invested in fixed deposit 19%, 9% in insurance, 16% in mutual funds, 19% in real estate, 12% in commodity, 12% in equity, and 13% in gold.
Ques 4.) From the following, which Investment option do you think has good All-round capacity performing ability?
Graph 3.4
INTERPRETATION
Out of 30 investors, they found that stock has the most all round investment performing ability i.e. 40%, than mutual funds 27%, than real estate 20% and finally money market 13%.
Ques 5.) While investing your money factor you prefer the most?
Graph 3.5
INTERPRETATION
Out of 30 investors, 7 people prefer to invest where there is low risk, 15 prefer to invest where there is high return and remaining 8 prefer easy liquidity.
Ques 6.) Have you ever invested in mutual fund or are you aware about mutual funds?
Graph 3.6
INTERPRETATION
From the above chart it is inferred that 63% of the people are aware of mutual funds and its operations and 37% are not aware of mutual funds and its operations.
Ques 7.) Where do you find yourself as mutual fund investor?
Graph 3.7
INTERPRETATION
From the above chart it can be inferred that 60% of the investors have partial knowledge of mutual funds and its operations, whereas 13% are fully aware, 20% are totally ignorant and 7% are aware of only specific scheme of the 30 respondents.
Ques 8.) What are the factors that attract you to invest in mutual fund?
Graph 3.8
INTERPRETATION
Out of the 30 investors, 33% invested to get tax benefit, 46% invested to get good returns, 8% invested to get the professional management of the fund managers and 13% invested because of other specific reasons.
Ques 9.) What is your expected rate of return on Investments in a year?
Graph 3.9
INTERPRETATION
Out of the 30 investors the expected rate of return upto 10% were 9, 10-15% were of 10, 15-20% were of 5 and above 20% were of 6 investors.
Ques 10.) How do you rate the risk taking ability?
Graph 3.10
INTERPRETATION
From the above chart it can be inferred that the risk bearing ability of the investors, out of 30 investors 53% are medium risk takers, 34% are low risk takers and 13% can bear high risk.
Ques 11.) How do you rate your experience with Mutual Funds?
Graph 3.11
INTERPRETATION
From the above chart it can be interpreted that experience of the investors was 7% poor, 27% average, 46% good and 20% excellent of the 30 respondents.
CHAPTER 4
FINDINGS
&
CONCLLUSION
Findings
In Delhi the age groups of 20-25 were more in numbers. The second most
investors were in the age group of 30-35 and least were in the age group of above
40.
In Delhi most of the investors were graduates or post graduates. Investors below
high school were very few in numbers.
In occupation group most of the investors were employed and very few of them
were students or unemployed.
In family income group , between Rs. 1,50,000-5,00,000 were more in numbers,
the second most were in the group of 5,00,000-10,00,000, and least were in the
group of 10,00,000 and above.
About all respondents had a savings A/c in the bank, 75% invested in fixed
deposits, only 25% invested in mutual fund.
Mostly respondents preferred high return while investment, the second most
preferred low risk and least preferred was liquidity.
Only 63% respondents were aware of the mutual fund and its operations and 37%
are not.
Among 30 respondents 27% found mutual fund has all round investment
performing capability, 40% found stocks, 20% real estate and 13% money market.
Among 30 respondents 30% expected rate of return to be upto 10%, 33%
expected it to be 10-15%, 17% expected it to 15-20% and 20% expected it to be
more than 20%.
87% of the investors wanted to invest in near future and only 13% were not of
making investment.
Out of the 30 investors, 33% invested to get tax benefit, 46% invested to get good
returns, 8% invested to get the professional management of the fund managers
and 13% invested because of other specific reasons
CONCLUSION
Mutual Funds now represent perhaps 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. As the investor always try to maximize the returns and minimize
the risk. Mutual fund satisfies these requirements by providing attractive returns with
affordable risks. The fund industry has already overtaken the banking industry, more
funds being under mutual fund management than deposited with banks. With the
emergence of tough competition in this sector mutual funds are launching a variety of
schemes which caters to the requirement of the particular class of investors. Risk takers
for getting capital appreciation should invest in growth, equity schemes. Investors who
are in need of regular income should invest in income plans.
The stock market has been rising for over three years now. This in turn has not only
protected the money invested in funds but has also helped to grow these investments.
This has also instilled greater confidence among fund investors who are investing more
into the market through the MF route than ever before.
Mutual funds like Reliance India mutual funds, SBI mutual funds, and LIC mutual fund
provide major benefits to a common man who wants to make his life better than previous.
India’s largest mutual fund, UTI, still controls nearly 80 per cent of the market. Also, the
mutual fund industry as a whole gets less than 2 per cent of household savings against the
46 percent that go into bank deposits.
Some fund managers say this only indicates the sectors potential."If mutual funds
succeed in chipping away at bank deposits, even a triple digit growth is possible over the
next few years.
CHAPTER 5
LIMITATIONS
LIMITATIONS
Time and money are critical factors limiting this study.
The data provided by the prospects may not be 100% correct as they too have
their limitations.
The study is limited to selected mutual fund schemes.
CHAPTER 6SUGGESTIONS
AND RECOMMENDATIONS
Suggestions and recommendation
The most vital problem spotted is of ignorance. Investor should be made aware of
the benefits. Nobody will invest until and unless he is fully convinced. Investor
should be made to realize that ignorance is no longer bliss and what they are
losing by not investing.
Mutual fund offers a lot of benefit which no other single option could offer. But
most of the people are not aware of what a mutual fund is? Then only see it is just
another option. So the advisors try to change their mind. The advisors should
target more and more young investors. Young investors as well as the person at
the height of their career would like to for advisors due to lack of time and
expertise.
Mutual fund company need to give the training of individual financial advisor
about the fund/scheme and its objectives, because they are the main source to
influence the investors.
Before making any investment financial advisors should first enquire about the
risk tolerance of the investor/customer, their need and time(how long they want to
invest). By considering these three things they can take the customers into
considerations.
Younger people under age 35 are a new customer group. So making greater
efforts with younger customers who show some interest in investing should pay
off.
Customers with graduate level education are easier to sell to and there is large
untapped market there. To succeed however, advisors must provide sound advise
and high quality.
Systematic Investment Plan (SIP) is one the innovative products
l a u n c h e d b y A s s e t s M a n a g e m e n t c o m p a n i e s v e r y r e c e n t l y i n
t h e industry. SIP is easy for monthly salaried person as it provides
the facility of do the investment in EMI. Though most of the
prospects and potential investors are not aware about the SIP. There is a large
scope for the companies to tap the salaried persons.
BIBLIOGRAPHY
BIBLIOGRAPHY
BOOKS:
1. Nataragan and Gordan “Financial Services and Markets” Himalaya Publishing
House, Mumbai (Edition 2000)
2. Clifford Gomez “Financial Markets, Institutions and Financial services” Prentice-
Hall of -India Pvt. Ltd. (Edition 2008)
3. Ponithavatih Pandian “Security Analysis and Portfolio -Management” Vikas
Publishing House Pvt. Limited (Edition 2009)
4. A.K Vashisht and R.K Gupta “Investment Management and Stock market” Deep
& Deep publications Pvt. Ltd. (Edition 2005)
5. S. Kevin “Security Analysis and Portfolio Management” Prentice- Hall of -India
Pvt. Ltd. (Edition 2003)
6. Donald E. Fisher, Ronald J. Jordan “Security Analysis and Portfolio-Management”
Pearson Prentice hall (Edition 2006)
News Papers- The Economic Times and Business line
Magazines:- Business World India Today and Outlook Money
Television Channel (CNBC)
Mutual funds Handbook
Web sites
WWW.IIFL.COM
WWW.SBIMF.COM
WWW.MONEYCONTROLINDIA. COM
WWW.AMFINDIA.COM
WWW.MUTUALFUNDSINDIA.COM
WWW.INDIAMART.COM
WWW.BSEINDIA.COM
WWW.NSEINDIA.COM
APPENDICES
QUESTIONNAIRE
1. Are you conventional of making investments?
o YES o NO
2. Are you planning to invest in future?o Yes o No
`3. What kind of investment you prefer the most?
Equity Mutual Fund Fixed Deposit Gold/ Sliver Real Estate PPF/PF Insurance
4. From the following, which Investment option do you think has good All-round capacity performing ability?
Stock market Money market Mutual Fund Other (specify)
5. While investing your money, which factor you prefer the most?
Liquidity Low risk High return Other(Specify)
6. Have you ever invested your money in mutual fund or are you aware about mutual funds?
o Yeso No
7. Where do you find yourself as mutual fund investor?
o Totally ignoranto Partial knowledgeo Fully awareo Aware of only specific schemes
8. What are the factors that attract you to invest in mutual fund?
Good returns Tax benefit/exemption Professional management Other(Specify)
9. What is your average annual income
o Below 150000o 150000-500000o 500000-1000000o Above 1000000
10. What is your expected rate of return on Investments in a year?
o Up-to 10%o 10-15%o 15-20%o Above 20%
11. How do you rate the risk taking ability?
o Lowo Mediumo Averageo High
12. Do you think mutual fund is a safe investment?Low 1 2 3 4 5 High
13. Which other facilities would you like Mutual Funds to provide you with?________________________________________________________________________________________________________________________________________________________________________________________________________________________
14. Any Mutual Fund scheme you are satisfied with?________________________________________________________________________________________________________________________________________________________________________________________________________________________
15. How do you rate your experience with Mutual Funds?
o Pooro Averageo Goodo Excellent