final report on tax plannning thru mutual fund(10pgdm013)

8/2/2019 Final Report on Tax Plannning Thru Mutual Fund(10pgdm013)......

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A PROJECT REPORT ONA study of Preferences of mutual fund as an investment avenue for Tax Planning

ForICICI PRUDENTIAL AMC LTD, ANAND

Submitted toINDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)CHANGA

Prepared byShah Parth U

ID No: - 10PGDM 013PGDM, Quarter-4

Under the Guidance ofMs. Sheetal Thomas

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT(I2IM)CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)(AT. & PO. CHANGA388 421 TA: PETLAD DIST. ANAND,

GUJARAT)

January, 2012


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Certificate from organization:

This is to Certified that Mr Shah Parth is student of PGDM Program fromIndukaka Ipcowala Institute of Management of Charotar University of

Science and Technology, Changa, Gujarat has successfully completed his 34

days of summer training on Mutual Fund with our Company. In addition tothe same, He has also mobilized very good SIP business by taking care of

relationship with ICICI Bank, Anand.

Duration of Training was 2nd Sep 2011 to 5th Oct 2011. We wish him All the

Best for his Future Carrier ahead.

Thanks & Regards

For, ICICI prudential AMC ltd.

Anand.

Certificate from Institute:


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This is to certify that this report A study of Preferences of mutual fund as anInvestment avenue for Tax Planningis the bona fide work ofMr. PARTHSHAH, student of Second Year of PGDM Programme (2010-2012) at ICICIPRUDENTIAL ASSET MANAGEMENT COMPANY. Ltd. submitted toINDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT, CHANGA in partialfulfillment of their academic requirement of the PGDM PROGRAMME.

Project Guide: Ms. Sheetal Thomas Prof.G KrishnamurthiProject Guide: Darshan Patel (Principal)

Date: 12-12-2011Place: Changa

DECLARATION


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I Parth Shah, student of the two-year PGDM programme at Indukaka IpcowalaInstitute of Management (I2IM) hereby declare that the report on summer trainingand project work entitled A study of Preferences of mutual fund as an investmentavenue for Tax Planning is the result of my / our own work. I also acknowledge theother works / publications cited in the report.

(Signature)Place: ChangaDate: 25.12.2011 Parth Shah

AcknowledgementI, Parth Shah, am thankful to the CHARUSAT University for providing me such an

opportunity to get a first step in the corporate environment through gateway ofMutual Fund.

I am thankful to Mr. Darshan Patel, Company Guide, who gave me support at everytime during my Training Program. I am obliged to Mr. Darshan Patel, Branch Headwho provides such an important knowledge for effective communication skill to the

customer and other staff members who always ready to help in all manners theycan. I am also thankful to Ms. Sheetal Thomas, Faculty Guide who gave me

guidance and cooperation for preparation of Reports and disciplinary behavior.

Table of Contents:


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ChapterNo. Title ApproximateNo. of Pages

Title Page (Front) 01Certificates:

i. From organisationii.From Faculty Guide

02

Declaration 04Acknowledgement 04Table of Contents 05List of TablesList of GraphsExecutive Summary 07PART I ORGANISATIONAL PROFILE

1 The Company / Organisation

Company Profile Mission and Vision Products and service-mix Industry background and about industry

08

2 Functional Areas Markets and Marketing department Financial department

17

3 Types of Mutual with their investment objective Various ratios to evaluate mutual funds schemes Risk associated with mutual fund Where do mutual fund invest List of tax saving mutual fund in mutual fund

industry

22

PART II PROJECT STUDY6 Overview of the Project

Background of the study Importance of the study to the organisation Objectives of the study

34

7 Research Research Design Data Sources and Data Collection Method Sampling Plan (wherever necessary)

36

8 Data Analysis, Findings and Interpretations 379 Conclusions and Limitations 48

10 Recommendations & Suggestions 5011 Annexure 5112 Bibliography 55


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List of Graphs and Tables

SRNO. PARTICULARS PAGENO.1 Do you invest your savings for tax benefit? 37

2Do you have complete information about mutual fund?

38

3 Are you an investor, who is interested in getting good deduction fromtax?

39

4Do you know mutual fund is a good

Instrument of tax saving?40

5Among which of the following income group do you fall?

41

6Investment instruments used every year

42

7What is the Basic purpose of your investments?

43

8What returns do you receive at present from all your

investments?44

9Which types of funds would you like to prefer for your investment in

mutual fund?45

10Give your preference for how many periods would you like to invest in

mutual fund for tax savings?46


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Executive Summary:

This project is solely designed and constructed for A study of Preferences of

Mutual Fund as an investment avenue for Tax Planning. To some extent it

also covers the distribution channel for the selling and promotion of

Mutual Fund through Financial intermediaries. The importance of the

study encompasses the various investment avenues available in our

country. It analyses various investment options on certain criteria and then

compares all the options with mutual funds. The basic idea of this project is

to find out whether the people are Aware about Mutual Fund as instrument

of tax saving in the investment Avenue and better as compared to other

competitive investment Avenues.

In order to determine customer needs and to implement marketing

strategies and programs organization aimed at satisfying those needs. As

competition become more intense company needs information on

effectiveness of their marketing tools

Due to this study investors will get very good knowledge of mutual fund and

they will find the best way to invest their savings.

The first part gives an insight about company profile and its various aspects

& the details regarding all products of the company. The second part of the Project

consist objective of study, research methodology, data and its analysis collected

through survey of 35 respondents. For the collection of Primary data, I made a

questionnaire and surveyed of 35 respondents.


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Corporate Profile:

ICICI Prudential Asset Management Company Ltd. is a joint venture between

ICICI Bank, Indias second largest commercial bank & a well-known and trustedname in the financial services in India, & Prudential Plc, one of the UnitedKingdoms largest players in the financialServices sectors. In a span of over 18 years since inception and just over 13 years ofthe Joint Venture, the company has forged a position of preeminence as one of thelargest Asset Management Companys in the country, contributing significantlytowards the growth of the Indian mutual fund industry The company managessignificant Mutual Fund Assets under Management (AUM), in addition to ourPortfolio Management Services (PMS) and International Advisory Mandates forclients across international markets in asset classes like Debt, Equity and RealEstate with primary focus on risk adjusted returns.

As an Asset Management Company, we have over 18 years of experience and arecurrently managing a comprehensive range of schemes of more than 46 Mutualfund schemes and a wide range of PMS Products for our investors spread across thecountry. We service this investor base with our own branch network of around 168branches and a distribution reach of over 42,000 channel partners.

Vision of the company:To be a dominant player in the Indian mutual fund space recognized for its highlevels of ethical and professional conduct and a commitment towards enhancinginvestor interests.


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Services and product mix:They provide mainly three types of services they are as follows:-(1)PMS (PORTFOLIO MANAGEMENT SERVICES)(2)Mutual Fund(3)Advisory Services

Services in detail:

(1)PMS (PORTFOLIO MANAGEMENT SERVICES):

ICICI Prudential Portfolio Management Services provides solutions for theinvestment needs of select clientele, through focused portfolios.

ICICI Prudential AMC was the first institutional participant to offerPortfolio Management Services to HNIs and Institutions in India, in theyear 2000. We have a successful track record of over 10 years ofexperience in offering Portfolio Management Services and today our strongbase of over 7,000 PMS clients stands testament to the quality and value ofour services. Our aim is to create a portfolio that suits your requirements;therefore we will first seek to understand a clients needs and investmentobjectives, and on that basis offer a portfolio that best suits these needs and

objectives.

(2) Mutual Fund:ICICI Prudential Mutual Fund offers a wide range of retail and corporateinvestment solutions across different asset classes like Equity, Fixed Income, RealEstate and Gold.

It has been voted as the Most Trusted Mutual Fund Brand in by Brand Equity (intheir 2011 Most Trusted Brand Survey (Conducted by The Economic TimesIntelligence Group and The Nielsen Company).

Year after year, the Fund has been consistently winning many awards in theindustry at the Fund House and Scheme Levels, the most recent ones being:

India Debt Fund House for 2011 by Morningstar


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The CNBC TV18 - CRISIL Mutual Fund of the Year Award 2009 in theCategory Debt Mutual Fund House of the Year

The organization today is an ideal mix of investment expertise, resource bandwidth

& process orientation and endeavors is to bridge the gap between savings &investments, to help create long term wealth and value for investors throughinnovation, consistency and sustained risk adjusted performance.

(3) Advisory services:The International Advisory Business Division ofICICI Prudential AssetManagement Company Ltd. advises offshore funds in jurisdictions spanning Japan,Middle East, Taiwan & Singapore.

As on June 30, 2011, we are advising a cumulative asset size of close to $1.54Billion spanning Equity, Debt & Real Estate. Through the onshore presence andlegacy of our parent company in India, we present the following benefits to offshoreinvestors:

Excellent Onshore Investment Insights and Information. Extensive on the ground research capabilities. Deep knowledge of the reputation, vision and execution capabilities of promoter-

run companies. An innate understanding of governance structures of corporate entities.

As one of the largest Asset Management Companies in India, we have had asuccessful track record in serving domestic clients across the Institutional andRetail Investor space. We are very confident in our ability to enable InternationalInvestors to participate in the long-standing India growth story and generate alphaover a medium to long term horizon.

Key Indicators At inception - May 98 As on May 31, 2011Assets Under Management Rs. 160 crores Rs. 50,742.07 croresNumber of Funds Managed 2 35


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INDUSTRY BACKGROUND

Changing ScenarioSince 1991, there has been a radical change in the Indian economic

environment. In the early 90s the country was confronted with a severe

crisis due to a sharp plunge in the foreign exchange reserves, a downgrading

of the credit rating, suspension of foreign private capital flows and a decline

in the industrial output. India was on the verge of defaulting on its foreign

debt obligations. The only way was to initiate reforms and a structural

adjustment program. The country would have to lift restrictions on foreign

investments, on the flow of private capital and on private initiatives in

many area of economic development.

The structural reforms focused on liberalizing industry, trade, taxation and

foreign investment, and on reforming the financial sector.

What Is An Investment?An Investment is the use of capital to create more money through the acquisition ofa security that promises the safety of the principal and generates a reasonablereturn.

Fundamentals of Investment:-There are three fundamentals of investment, namely:

SAFETY

LIQUIDITY

RETURN

The order is quite clear: Safety- always first, then the Liquidity- next and

Return- third. A lot of people fall prey to the lure of high returns, and

usually, this has resulted in a LOSS.


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INVESTMENT OPTIONS AVAILABLE IN INDIA

There are basically two kinds of investment options available for the

investor on the basis of their Risk, Return and time horizon. As per the

Return is concern one can earn a fixed rate of interest and other where the

rates fluctuate depending on certain factors prevailing in the market at that

point of time.

Given below are the options available in each category.

Investment avenues in the last decadesThe Indian investors in the last decades were very risky so the saving was

focused in high fixed earning investment. Also there were not many

investment options and investments with sovereign guarantee were

preferred. This was partly due to high interest rates in India.


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Investment AvenuesDiagram 4

1) Post office sch

Investments

Liquid Debt

Small

Savings

PPF

Post Office

RBI Bonds

Insurance Equity

Primary

Market

Secondary

Market

Fixed Return Options:

1. Post Office (KVP, NSC, M.I.S.)

2. Public Provident Fund

3. Bank Fixed Deposits

4. Government Securities or Gilts

5. RBI Taxable Bonds

6. Insurance

7. Company Debentures

8. Company Fixed Deposit

9. Infrastructure Bonds

Variable Return Options:

1. Mutual Fund

2. Shares and Stock Market

o Primary Market (IPO)

o Secondary Market

3. Bullion Market (Gold & Silver)

4. Property

5. Foreign Exchange Assets


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About the Industry

Definition:-Mutual Fund is a pool of money, collected from investors, and is invested

according to certain investment objective.

Mutual Fund is the pooling of Money from the retail investors to the

corporate investors for Sustainable growth of the investments.

Introduction:-A Mutual Fund is a pool of money, collected from investors, and is invested

according to certain investment objectives with a common financial goal. A

Mutual Fund is created when investors put their money together. The most

important characteristic of a mutual fund is that the contributors and the

beneficiaries of the fund are the same class of people, namely the investors.

The money thus collected is invested by the fund manager in different type

of securities depending upon the objective of the scheme. These could range

from shares to debentures to money market instruments. The income earned

by these instruments and the capital appreciation realized by the scheme

are shared by its unit holders in proportion to the number of units owned by

them. Thus a mutual fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally

managed portfolio at a relatively low cost. Each Mutual Fund scheme has a

defined investment objective and strategy.


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Characteristics: A mutual fund actually belongs to the investors who have pooled their

funds.

A mutual fund is managed by investment professionals and other service

providers, who earn a fee for their services, from the fund.

The pool of funds is invested in a portfolio of marketable investments.

The value of the portfolio is updated every day.

The investors share in the fund is denominated by units. The value of

the units changes with change in the portfolios value, every day.


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STRUCTURE OF ASSET MANAGEMENT COMPANY (AMC)MUTUAL FUND STRUCTURE

Source: www.hdfcfund.com

SPONSORTRUSTEE

OPERATIONSAMC

MKT./ SALES

DISTRIBUTER

MKT./ SALES

FUND

MANAGER

MUTUAL FUND

SCHEMES

INVESTORS

SEBI


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Investors

Mutual Fund Co.

( Pool of Money )

Market Fluctuates

Invest / Pool

Their Money

Invest In Number

of Stocks / Bonds

Profit/Loss from

Individual Investment

Profit/Loss from

Portfolio of Investment

Finance DepartmentProcurement of finance is mainly done through investment in Mutual Fund.

Role of Financial Department


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Financial Markets

A financial market is a market for creation and exchange of financial assets.

If we buy or sell financial assets, we will participate in financial markets in

some way or the other. This includes the various instruments for

investment contains four attributes essential for an investor for taking

investment decision: Yield of the Instrument, Liquidity, Risk Perception,

and Initial Investment.

Functions of Financial Markets:- Financial markets facilitate price discovery. The continuous interaction

among numerous buyers and sellers who through financial markets

helps in establishing the prices of financial assets.

Financial markets provide liquidity to financial assets. Investors can

readily sell their financial assets through the mechanism of financial

markets.

Financial markets considerably reduce the cost of transaction. Two major

costs associated with transaction are search costs and information costs.


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Marketing Department:-

DISTRIBUTION NETWORK OF MUTUAL FUNDS

* BROKERS are required to be AMFI certified.

ASSET MANAGEMENTCOMPANY

DISTRIBUTORS

BANKS BROKER

NON-BANKING

FINANCIAL INSTITUTIONS

CUSTOMERS CUSTOMERS CUSTOMERS


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FUND

MANAGERINVESTORS

SECURITIES & STOCK

MARKET

R

E

T

U

R

NS

POOL THEIR

MONEY TO

INVEST

GENRATE

PASS

ON TO

Mutual Fund Operation Flow Chart


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Operation DepartmentAll the Investments and Portfolio of the investors are processed by the

operation department. Even after the hard work of the sales executive, in

bringing the business is done on time, but if the operation departments

finds any fault in it, the whole application is Rejected. So its a very

important job.

Sales DepartmentThis is the department, which only looks after the increase and achievement

of the companys target. All AMC Companies appoint Banks as Agents for

selling their Companys Mutual Fund. This is a very important department

from the Profit point of view.

Service Department.Any Complains or grievances are handled by this department. The

Redemption request, Switchover request, Change of bank details are all look

after by this department and then pass on to the Operation Department


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Types of Mutual Fund:-A Mutual Fund may float several schemes, which may be classified on the

basis of its structure, its investment objectives and other objectives.

Mutual Fund schemes by structure:1. Open Ended Scheme: Open-Ended fund scheme is open for subscription

all through year. An investor can buy or sell the units at "NAV" (Net

Asset Value) related price at any time.2. Close Ended Scheme: A Close-Ended fund is open for subscription only

during a specified period, generally at the time of initial public issue. The

Close-Ended fund scheme is listed on the some stock exchanges where an

investor can buy or sell the units of this type of scheme.

3. Interval Schemes: These combine the features of open- ended and close-ended schemes. They may be traded on the stock exchange or may be

open for sale or redemption during pre- determined intervals at NAV

related prices.


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Mutual Fund schemes by Investment Objectives:

(I) EQUITY FUNDSThese funds invest a major part of their corpus in equities. The composition

of the fund may vary from scheme to scheme and the fund managers

outlook on various scrips.

The Equity Funds are sub-classified depending upon their investment

objective, as follows:

1. Growth Fund: Aim to provide capital appreciations over the medium tolong term. These schemes normally invest a majority of their funds in

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

future appreciation. These schemes are not for investors seeking regular

income or needing their money back in the short-term2. Diversified Equity Fund : Diversified equity funds are the most popular

among investors. They invest in many stocks across many sectors, and

because they have the freedom to chop and churn their portfolios as they

like, diversified equity funds are a good proxy to the stock market. If a

general exposure to equities is what you want, they are a good option.

They can invest in all listed stocks, and even in unlisted stocks. They can

invest in which ever sector they like, in what ever ratio they like.3. Equity Linked Savings Schemes (ELSS) : Equity linked savings

schemes (ELSS) are diversified equity funds that additionally offer

income tax benefits to individuals. ELSS is one of the many section 80c

instruments, along with the more popular debt options like the PPF, NSC

and infrastructure bonds. In this Section 80c grouping. ELSS is unique.

Being the only instrument to offer a total equity exposure.4. Index Fund:An index fund is a diversified equity fund; with a difference-

a fund manager has absolutely no say in stock selection. At all times, the


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portfolio of an index fund mirrors an index, both in its choice of stocks

and their percentage holding. As of March 2004, equity index funds

tracked either the Sensex or the Nifty. So, an index fund that mirrors the

Sensex will invest only in the 30 Sensex stocks that too in the same

proportion as their weight age in the index.

5. Sector Fund: Sector funds invest in stocks from only one sector, or ahandful of sectors. The objective is to capitalize on the story in the

sectors, and offer investors a window to profit from such opportunities.

Its a very narrow focus, because of which sector funds are considered the

riskiest among all equity funds.

6. Mid Cap Fund: These are diversified funds that target companies onthe fast growth trajectory. In the long run, share prices are drivenbygrowth in a companysturnover and profits. Market players refer to themas mid-sized companies and mid-cap stocks with size in this context

being benchmarked to a companys market value. So, while a typical

large cap stock would have a market capitalization of over Rs 1,000

crores, a mid-cap stock would have a market value of Rs 250-2,000 crores.

(II) DEBT FUNDS


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These Funds invest a major portion of their corpus in debt papers.

Government authorities, private companies, banks, and financial

institutions are some of the major issuers of debt papers. By investing in

debt instruments, these funds ensure low risk and provide stable income to

the investors.

Debt funds are further classified as:-

1. Gilt Funds: Invest their corpus in securities issued by Government,popularly known as GOI debt papers. These Funds carry zero Default

risk but are associated with Interest Rate risk. These schemes are saferas they invest in papers backed by Government.

2. Income Funds: Income funds aim to maximize debt returns for themedium to longer term. Invest a major portion into various debt

instruments such as bonds, corporate debentures, and Government

securities.

3. MIPs: Invests around 80% of their total corpus in debt instrumentswhile the rest of the portion is invested in equities. It gets benefit of both

equity and debt market. These scheme ranks slightly high on the risk-

return matrix when compared with other debt schemes.

4. Short Term Plans (STPs): Meant for investors with an investmenthorizon of 3-6 months. These funds primarily invest in short term papers

like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some

portion of the corpus is also invested in corporate debentures.

5. Liquid Funds: Also known as Money Market Schemes, These funds aremeant to provide easy liquidity and preservation of capital. These

schemes invest in short-term instruments like Treasury Bills, inter-bank


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

cash management of corporate houses and are meant for an investment

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

matrix and are considered the safest amongst all categories of mutual

funds.

6. Floating Rate Funds: These income funds are more insulated frominterest rate than their conventional peers. In other words, interest rate

changes, which cause the NAV of a conventional debt fund to go up or

down, have little, or no, impact on NAVs of floating rate funds.

(III) BALANCED FUNDS

These funds, as the name suggests, are a mix of both equity and debt funds.

They invest in both equities and fixed income securities, which are in line

with pre-defined investment objective of the scheme. These schemes aim to

provide investors with the best of both the worlds. Equity part provides

growth and the debt part provides stability in returns.

Each category of funds is backed by an investment philosophy, which is pre-

defined in the objectives of the fund. The investor can align his own

investment needs with the funds objective and invest accordingly.

(IV) HYBRID FUNDS:-


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1. Growth and Income Fund: Strike a balance capital appreciation andincome for the investors. In these funds portfolio is a mix between

companies with good dividend paying record and those with potential

capital appreciation. These funds are less risky than growth funds bit

more than income funds.

2. Asset Allocation Fund: These funds follow variable asset allocationpolicy. These move in an out of an asset class (equity, debt, money

market or even non-financial assets). Asset allocation funds are those,

which follow more stable allocation policies like balanced funds. Those,

which flexible allocation policies, are like aggressive growth or

speculative funds.

VARIOUS CRITERIA TO EVALUATE THE MUTUAL FUNDS SCHEMES

The most important and widely used measures of performance are:-Basic criterions to evaluate the mutual fund schemes P/E ratio

Turnover ratio

Expense ratio

Standard deviation

P/E Ratio:-


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A valuation ratio of a company's current share price compared to its per-

share earnings.

EPS:-

Calculated as:

EPS is the profit that a company makes on a per share basis. So, if EPS is

one, the PE ratio will reflect the price that an investor will pay for this one

rupee of the company's profits. Higher PE ratio signifies that investor

expectation from these shares is higher. This is because the growth in share

price is expected to follow earnings growth.

In general, a high P/E suggests that investors are expecting higher earnings

growth in the future compared to companies with a lower P/E. However, the

P/E ratio doesn't tell us the whole story by itself. It's usually more useful to

compare the P/E ratios of one company to other companies in the same

industry, to the market in general or against the company's own historical

P/E.

Turnover Ratio:-


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The turnover ratio is the lower of the total sales or total purchases over the

period divided by the average of the net assets. Higher the turnover ratio,

greater is the volume of trading carried out by the fund.

The turnover ratio is more important for equity and balanced funds where

the trading cost of equities is substantial. So, each time a fund manager

buys and sells, he has to keep in mind that the cost of buying and selling

will eat into the fund's returns. Dynamic equity funds, which can move

rapidly between sectors, will obviously have a higher turnover ratio. Here

risk will not be just of the fund manager making a wrong call on a sector but

also that of turnover risk. In comparison a passively managed fund, such as

an index fund, will have a lower turnover rate compared to an active fund as

it has to just mirror the index.

The only trading here will be due to investments, redemptions, and changes

in the index. Also, it is not meaningful to use turnover ratio for new

schemes, which are not fully invested. As the scheme is deploying its assets

there will be more transactions, at least buy orders, as compared to a fund`

which is fully invested. Turnover ratio is less relevant for income funds as

brokerage costs are much lower, and hence they will have a lower potential

to eat into returns. So, even though gilt funds may have equally high

turnover as compared to equity funds, the impact of this turnover is much

less.

In Short, Turnover ratio is a measure of how a fund's portfolio changes in a

year. This ratio indicates how much a fund is trading. Understanding

turnover ratio helps in gaining insights into a fund's performance.

Risk Associated With Mutual Fund:-


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Interest Rate Risk: Bond price move inversely to changes in interest

rate. If interest rate go up bond price come down and vice-versa changes

in bond price will affect the NAV of income funds since NAV is compiled

on a daily basis, the effect of interest rate fluctuation will get reflected in

the NAV.

Liquidity Risk: This prefers to at which security can be sold at or nearits true value. The primary assessment of liquidity risk is the spread

between the bid price and the offer price quoted by dealer.

Credit Risk: Credit risk or default risk refers to the risk that oninvestors of a fixed income security may default. Because of the risk,

debentures are sold at a fixed spread above these offered a treasury

security, which are considered as risk free. Normally, fixed income

security will fluctuate depending upon the actual changes in the

provided level of credit risk and actual event of default.

Market Risk: The prices of shares are subject to wide price fluctuationsdepending upon market conditions over which nobody has a control.

Moreover, every economy has to pass through a cycle-Boom, Recession,

Slump and Recovery. The phase of the business cycle affects the market

conditions largely.


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Where Do Mutual Fund Invest?Broadly, mutual funds invest in 3 types of asset classes:

Stocks: Stocks represent ownership or equity in a company, popularlyknown as shares.Bonds: These represent debt from companies, financial institutions, orgovernment agencies.Money market instruments: This includes short term debt instrument suchas treasury bills, certificate of deposits and inter-bank call money.

What Is Net Asset Value?Net Asset Value (NAV) denotes the performance of a particular scheme of a

Mutual fund. Mutual funds invest the money collected from the investors in

Securities markets. In simple words, Net Asset Value is the market value of

the securities held by the scheme. Since market value of securities changes

Every day, NAV of a scheme also varies on day to day basis. The NAV per

Unit is the market value of securities of a scheme divided by the total

number of units of the scheme on any particular date. For example, if the

market value of securities of a mutual fund scheme is Rs 200 lakh and themutual fund has issued 10 lakh units of Rs. 10 each to the investors, then

the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by

the mutual funds on a regular basis - daily or weekly - depending on the

type of scheme.


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Basic Concepts and Loads in Mutual Fund:-

1. Determination of NAV: The NAV of the any scheme at any time shall bedetermined by dividing the net assets of the scheme by the number of

outstanding units on the valuation date.

The NAV of the scheme will be calculated on daily basis:

Fair/market value of securities + ApprovedIncome + Receivable + other assets +Unauthorized issue Exp. Accrued exp.-payables-Other liabilities

NAV per unit = ------------------------------------------------------------------ No. of units outstanding of the scheme

2. Recurring Expenses: The total annual recurring expenses of the schemeexcluding issue or redemption expenses.

3. Entry Load: The load charged at the time of investment is known asentry load. Its meant to cover the cost that the AMC spends in the

process of acquiring subscribers commission payable to brokers,

advertisements, register expenses etc. The load is recovered by way of

charging a sale price higher than the prevailing NAV.

4. Exist Load: Some AMC do not charge an entry load but they charged anexist load i.e., they deduct a load before paying out the redemption

proceeds. Psychologically, investors are much more willing to pay exist

loads as compared to entry loads.

Unit: Units mean the investment of the unit holders in a scheme. Eachunit represents one undivided share in the assets of a scheme. The value

of each unit changes, depending on the performance of the fund.


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List of Tax Saving Mutual fund in Mutual Fund Industry:


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Background of the Study:-

This project is solely designed and constructed for A study of Preferences of

Mutual Fund as an investment avenue for Tax Planning. To some extent it

also covers the distribution channel for the selling and promotion of

Mutual Fund through Financial intermediaries.Importance of the Study:-

The importance of the study encompasses the various investment avenues

available in our country. It analyses various investment options on certain

criteria and then compares all the options with mutual funds. The basic idea

of this project is to find out whether the people are Aware about Mutual

Fund as instrument of tax saving in the investment Avenue and better as

compared to other competitive investment Avenues.

In order to determine customer needs and to implement marketing

strategies and programs organization aimed at satisfying those needs. As

competition become more intense company needs information on

effectiveness of their marketing tools

Due to this study investors will get very good knowledge of mutual fund and

they will find the best way to invest their savings.


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Objectives of the study:-

Primary Objective:Investors preference about the Mutual Fund as Compared to other

Investment Avenues for tax saving instrument.

Secondary ObjectiveTo infer whether mutual fund is better options or not. As Compared to other

Investment Avenues.


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Research Methodology:-

a) Research Design: Descriptive Design

b) Data Collection Method: Survey Method

c) Universe(place): Petlad

d) Sampling Method: Non probability convenience sampling method

e) Sample Size: 35 respondents

f) Sampling Unit: General

g) Data Source: Primary data

h) Data Collection Instrument: Structured Questionnaire.


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Data analysis and interpretations:-

1). Do you invest your saving for tax benefit?

Investment Willingness:-

Investment Willingness.

We observe that out of total respondents 21 people are not investing their

savings for tax benefit and remaining are investing for tax benefit..

Investment Number Of RespondentsYes 14

No 21

Total 35

Number Of Respondents

Yes

No

Total


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2). Do you have complete information about mutual fund?

Awareness Level:-

We observe that out of total respondents 32% people are aware of mutual fund

while 40% were unaware about mutual fund and remaining 28% know little bit of

mutual fund

Information Number Of RespondentsYes 11

No 14

Not Much 10

Total 35


Yes

No

Not Much

Total


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3). Are you an investor, who is interested in getting good deduction from tax?

Interested in Tax Deduction:-

We observe that out of all respondents 20 people are interested in getting gooddeduction from tax and remaining people are not at all interested in getting

deduction from tax.

Information Number Of RespondentsYes 20

No 15

Total 35


Yes

No

Total


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4). Do you know mutual fund is a good instrument of tax saving?

Awareness for Tax saving:-

We observe that 22 of all the respondents are not at all aware of mutual

fund as a tax saving and 13 are aware of that mutual fund is good

instrument of tax saving.

Investment Number Of RespondentsYes 13

No 22

Total 35


Yes

No

Total


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5). Among which of the following income group do you fall?

Income Group:-

We observe that out of total respondents 5 people falls under less than 100000income level, 11 people under 100000 to 200001, 7 people under 200001 to 300000and remaining 12 people under 300000 and more than that

Income group Number Of Respondents> t1,00,000 5

1,00,001-2,00,000 11

2,00,001-3,00,000 7

3,00,001 & more 12

TOTAL 35

0

5

10

15

20

25

30

35

40




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6). Investment instruments used every year

Investment Holding:-

We observe from the above data that people preferred insurance as a moreinvestment option as compared to other like mutual fund, govt. securities, RBIBonds, PPF and NSC.

Investment Number Of RespondentsMutual fund 03

Govt securities and gilts Nil

RBI Bonds Nil

NSC 5

PPF 7Insurance 20

Total 35

0

10

20


Number Of

Respondents


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7). what is the Basic purpose of your investments?

Purpose for Investment:-

We observe that out of total respondents peoples main purpose for investment is ofsavings (16)Thereafter wealth creation (7), high return (6), tax benefit (4) and riskdiversification (2).

Investment purpose Number Of RespondentsHigh return 6

Tax benefit 4

Saving 16

Wealth creation 7

Risk diversification 2

Total 35

0

5

10

15

20

25

30

35




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8). what returns do you receive at present from all your investments?

Returns from Investment:-

We observe that 14 people get returns under 5 to 10%,10 people get under

10 to 15%, 5 under 15 to 20% and remaining 4 and 2 under 5 to 10% and

more than 20% respectively.

Investment Returns Number Of RespondentsLess than 5% 4

5%-10% 14

10-15% 10

15%-20% 5

Greater than 20% 2

Total 35

0

5

1015

20

25

30

35




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9). Which types of funds would you like to prefer for your investment in

mutual fund ?

Fund Preference:-

We observe that out of total respondents, people preferred more balance fund intheir portfolio followed by equity and then debt. So, we can say that people wants to

maintain both equity and debt in their portfolio

Investment preference Number Of RespondentsEquity fund 8

Debt fund 7

Balanced fund 20

Total 35


Investment preference

Equity fund

Debt fund

Balanced fund


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10). Give your preference for how many periods would you like to invest in

mutual fund for tax savings?

Investment period:-No. of years No. of Respondents

Three year 6

Five year 10

Seven year 14

More than seven year 5

Total 35

We observe that people preferred to invest in mutual fund for savings purpose forseven year as compared to three, five, etc..

No. of Respondents

Three year

Five year

Seven year

more than seven year

Total


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Results and Findings:-

We observe that % of people invest their savings for tax benefit inmutual are 40% while remaining 60% not invest in mutual fund.

We observe that % of people aware about mutual fund are only 32%while 40% not at all aware and remaining 28% have limitedinformation about mutual fund.

We observe that % of people are interested in getting good deductionfrom tax are only 58% and remaining 42% are not at all interested ingetting deduction from tax.

We observe that % of people are aware that mutual fund as goodinstrument of tax saving are 59% while 41% are not aware that mutualfund is a good instrument of tax savings.

We observe that out of all the instruments used every year, 58% peopleused insurance, 20% people used PPF, 15% people used NSC andremaining only 7% used mutual fund for tax saving purpose.

We observe that % of returns people get from their presentinvestments are

Less than 5%-11%5 to 10%-40%10 to 15%-29%15 to 20%-14%More than 20%- 6%

So, from above we can come to know that people get more returns between 5to 10% as compared to other returns.

We observe that out of the funds preference people have veryconservative approach towards it. The % of people preferred balancedfund are 58% while 23% preferred equity funds and remaining 19%preferred debt funds.


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Limitations of the Study:-

-Sample size was limited to 35 because of limited time and thus unable to

represent the whole population.

-The research is limited to petlad town only, if the same research would

have been carried in another place, the results could vary.

-Sometimes the respondents because of their business didnt able to

concentrate while filling up the questions.

-My own inexperience and limited fund resources might have affect the

research study.


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Conclusions:-

The mutual fund investors prefer more of the Balanced fund as they

want more return on their money. They avoid going in the debt fund

because they can get same amount of return on there banks that is

also without taking any risk.

Usually people preferred to invest in mutual fund during NFO rather

than seeing the performance of mutual fund scheme. Sometimes due

to lack of detailed awareness about mutual fund schemes the

investors seek advice of distributors.

Investors feel that the AMC should go for more promotional activities

& should try to come up with new innovative schemes which can

easily be understood by the investors.

People will not accept the entry load if the company would charge any

such type loads during NFO because during NFO the investors were

not sure whether the given scheme can really give them better return

or not.


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Suggestions:-

There is need to build awareness of the new funds among the

investors with constantly being in contact with them.

Some of investors have asked for periodical market report about stock

market so that they can get the knowledge properly.

AMCs should go for increasing more awareness about different

facilities of investment such as SIP& STP among investors.

ICICI must try to locate hard working distributors who are providing

good business in their respective geographical area.

Investors are never going to accept the entry load during NFO. So

such type of activity should be avoided as much as possible.

The company should advertise their tax saving plan more so that they

can gain more customers.


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Annexure:-

Questionnaire:-

Dear, Sir/madam

Name:-

Qualification:-

Gender: - M F

Address:-

Contact No:-

E-mail Id:

I (Parth shah) am the student of Indukaka Ipcowala Institute of

Management, Charusat University, Changa, and presently doing a project

on A study of Preferences of mutual fund as an investment avenue for TaxPlanning.I request you to kindly fill the Questionnaire below and assure you that the

data generated shall be kept confidential.

(1)Do you invest your savings for tax benefit?

Yes No

2). Do you have complete information about mutual fund?

Yes No Not Much

3). Are you an investor, who is interested in getting good deduction from

tax?

Yes No

4). Do you know mutual fund is a good instrument of tax saving?

Yes No


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5). Among which of the following income group do you fall?

> 100000

100001-200001

200001-300001

300001-more

6). Investment instruments used every year

(Pl. tick from the following the investment options that you use and

prefer)

Used Preferred (Rank them in order of

your preference)

Mutual Fund

Insurance

RBI Bonds

Govt. Securities or Gilts

NSC

PPF

Reasons for less preference in mutual fund?

(Pl. Rank your less preference reason on the scale of 1 to 5)

(1)Uneven returns

(2)Risky as it deals with equity / market driven

(3)No awareness

(4)No Control Over Cost

(5)Delay in Redemption

(6)Non-availability of Loans


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7) What is the Basic purpose of your investments?

Investment Purpose

(1)High Return

(2)Saving

(3)Tax Benefit

(4)Wealth creation

(5)Risk Diversification

8). what returns do you receive at present from all your investments?

Investment Returns

(1)Less than 5%

(2)5 to 10%

(3)10 to 15%

(4)15 to 20%

(5)Greater than 20%

9). which types of funds would you like to prefer for your investment in

mutual fund?

Investment preference

(1)Equity Fund

(2)Debt Fund

(3)Balanced Fund


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10). Give your preference for how many periods would you like to invest in

mutual fund for tax savings?

Investment period

(1)Three year

(2)Five year

(3)Seven year

(4)More than seven year

Thank you!!!!!!!


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Bibliography:-

www.icicipruamc.com

www.amfiindia.comwww.mutualfund.com
http://www.icicipruamc.com/http://www.icicipruamc.com/http://www.amfiindia.com/http://www.amfiindia.com/http://www.njfundz.com/http://www.njfundz.com/http://www.njfundz.com/http://www.amfiindia.com/http://www.icicipruamc.com/

final report on tax plannning thru mutual fund(10pgdm013)

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