A PROJECT REPORT

ON

UNDESTANDING BUYING BEHAVIOUR FOR MUTUAL FUNDS

AT

RELIANCE MONEY INDORE

BYNIRMIT VYAS

231226723nd Batch

IN PARTIAL FULFILLMENT OF

Post Graduate Program (PGP)

(2006 – 2008)

M.A.E.E.R’s MIT SCHOOL OF BUSINESSSrv. No. 124, Paud Road, Kothrud,

PUNE: 411038

CERTIFICATE OF THE COMPANY

TO BE GIVEN BY THE CONCERNED AUTHORITY IN THE ORGANISATION WHERE YOU HAVE DONE YOUR SUMMER TRAINING (ON COMPANY LETTER HEAD) AND SIGNED BY THE COMPANY PROJECT GUIDE

2

CERTIFICATE OF THE INSTITUTE (MITSOB) ON MITSOB LETTERHEAD WITH CONTENTS AS UNDER.

CERTIFICATE

This is to certify that Mr. / Miss

of MAEER’s MIT School of Business has successfully completed the project

work titled in partial

fulfillment of requirement for the award of Post Graduate Program (PGP) prescribed

by the MIT School of Business

This project is the record of authentic work carried out during the academic year

2006 – 2008.

RAJENDRA BARTAKKE

Internal Project Guide Director

3

DECLARATION (TO BE SIGNED BY THE STUDENT ON PLAIN PAPER – A 4)

DECLARATION

I, Mr / Ms_________________________________ hereby declare that this project is the

record of authentic work carried out by me during the academic year 2006 – 2008 and has

not been submitted to any other University or Institute towards the award of any degree.

Signature of the student

(Name of the Student to be written here)

Font Type: Times New Roman

Font Size: 12

Spacing: 1.5 lines

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ACKNOWLEDGEMENT

I take this opportunity to acknowledge gratefully in no uncertain terms, the patronage and

unreserved support extended to me by the management of Reliance Money, Indore. I am

highly indebted to the enlargement and cooperation extended to me by the various

members of the executive staff in this connection.

I record my sincere thanks and debt of gratitude to Mr. Rituraj Chauhan (Regional

Manager) for giving me this opportunity to undergo summer internship in their esteemed

organization. I thank Mr. Mohit Gupta (Centre Manager and our Project Guide) and M r.

Vikas Shrivastava (Centre Manager) who helped me in making my project as well as in

the office work. They provided very friendly and convinent environment to do our work

over there and helped me to the project to great extent. I own my special thanks to Mr.

Shravan Gupta (BDE) for his extended guidance, comments and from the very first day

helped me in doing my project preparation; Mr. Bhupendra Misra (BDE) also guided me

in my Questionnaire.

It is my pleasant duty to express my profound gratitude to my SIP Coordinator, Mr

Rajendra bartakke MITSOB for his support and encouragement during whole

of my Summer Internship Program as a project guide

I also thank Miss Shweta Goswami (CSE) over Reliance Money who taught me the back

office work and Miss Nuzarat who helped me in my survey.

Nirmit Vyas

5

ABSTRACT

This project provides in-depth coverage, analysis and guidance on buying decision

making process of mutual fund investors and factors affecting it. Buyer decision

processes are the decision making processes undertaken by consumers in regard to a

potential market transaction before, during, and after the purchases of a product or

service. There are many factors affecting the buying decision making process of Mutual

Fund investments. The project survey was conducted with sample size of 250 customers.

Questionnaire was prepared and four schemes were taken for the survey to reach the

findings. They are Equity Diversified Funds, Equity Linked Saving Schemes, Money

Income Plans, and Balanced Schemes.

Secondary data was also collected from different books, journals, magazines. Online

research on various websites was also done. Several factors were identified by

conducting a research. Through the research, various findings came out of the survey

about their choices on investment options, AMCs, Funds, Schemes and modes of

investments.

This study will definitely help different AMCs for their fund study of customers’

behavior and to improve their performance in the area in which they are weak and will

help to the future buyers of mutual funds.

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TABLE OF CONTENTS

SR

NO

TOPIC PAGE NO

1 INTRODUCTORY CHAPTER

1.1 Theoretical Background 8-23

1.2 Objectives of the project 24

1.3 Scope 26

1.4 Profile of the organization 25-28

2 PROJECT DESIGN

2.1 Methodology 29

2.2 Buying behavior process 30-33

2.3 Survey & questionair 34-40

2.4 Limitations 41

3 Project analysis & findings 42-51

4 Conclusions and Recommendations 52-54

5 Bibliography 55-56

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Mutual Funds Industry in India

First Phase - 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up

by the Reserve Bank of India and functioned under the Regulatory and administrative

control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the

Industrial Development Bank of India (IDBI) took over the regulatory and administrative

control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the

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

Second Phase - 1987-1993 (Entry of Public Sector Funds)

Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Canbank

Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank

Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92).

LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47,004 as assets under

management.

Third Phase - 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the

year in which the first Mutual Fund Regulations came into being, under which all mutual

funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer

(now merged with Franklin Templeton) was the first private sector mutual fund registered

in July 1993.

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The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive

and revised Mutual Fund Regulations in 1996. The industry now functions under the

SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds

setting up funds in India and also the industry has witnessed several mergers and

acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets

of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under

management was way ahead of other UTI Mutual Fund, conforming to the SEBI Mutual

Fund Regulations, and with recent mergers taking place among different private sector

funds, the mutual fund industry has entered its current phase of consolidation and growth.

As at the end of September, 2004, there were 29 funds, which manage assets of

Rs.153108 crores under 421 schemes.

Fourth Phase - since February 2003

This phase had bitter experience for UTI. It was bifurcated into two separate entities. One

is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as

on January 2003). The Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and does not come

under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of

AUM and with the setting up of a The origin of mutual fund industry in India is with the

introduction of the concept of mutual fund by UTI in the year 1963. Though the growth

was slow, but it accelerated from the year 1987 when non-UTI players entered the

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industry.

In the past decade, Indian mutual fund industry had seen a dramatic imporvements, both

qualitywise as well as quantitywise. Before, the monopoly of the market had seen an

ending phase, the Assets Under Management (AUM) was Rs. 67bn. The private sector

entry to the fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it

reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is

less than the deposits of SBI alone, constitute less than 11% of the total deposits held by

the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the

country. Large sections of Indian investors are yet to be intellectuated with the concept.

Hence, it is the prime responsibility of all mutual fund companies, to market the product

correctly abreast of selling

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GROWTH IN ASSETS UNDER MANAGEMENT

. Viewing The Mutual Fund Industry In The Right Perspective

The mutual fund industry is a fast growing segment of the Indian Financial Market and it

provides a variety of schemes to suit the needs and risk return profile of different

categories of investors who are kept completely informed regularly through periodical

reports and statutory disclosures.

AMFI as the umbrella body of the mutual fund industry which has Unit Trust of India

and all the mutual funds as its members would like to reiterate that investors in mutual

fund schemes should not be influenced much less guided by any misplaced and patently

wrong propaganda being carried out in some quarters.

Why Mutual Funds?

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The biggest advantage of investing in MFs is that money is spread across securities and

companies, depending upon the scheme’s investment objective. This diversified exposure

helps reduces risk of loss from setbacks in one company or sector. For instance, a growth

oriented MF invests in various sectors- pharmaceuticals, consumer durables, and

infrastructure- and within them in various companies.

Similarly, a debt fund invests in debentures of companies, government bonds or short

term investments such as commercial papers, certificates of deposit and call money.

Within them, the bond fund would further diversify across bonds of different maturities

and credit ratings.

However, the fact that a fund has a diversified portfolio does not protect investor from an

overall decline market. It merely absorbs some of the shocks of sharp decline. Most MFs

employee trained investment professionals who analyse the financial environment to look

out for short and long-term opportunities to make the most of the money invested in the

fund.

MFs also offer various tax advantages such as tax free dividends.

Small investments: if you were to directly invests in shares of blue-chip companies or in

gilts (central government securities, your minimum investment would necessarily be in

five figures, too high for small investors. On the other hand the minimum investment

requirement in many MFs is as low as Rs 1,000, which ensures that almost anyone can

get started. Such plans as the Systematic Investment Plan would allow investors to put in

small amount regularly.

A share of the profits/losses: if the fund you invested is appreciates, you get a share of the

profits; but your investment is subject to any losses in value as well. Bear in mind that

losses are share among various unit-holders, and will therefore be less than if you’d

invested directly in a security.

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No assured returns: open-ended schemes do not assured returns. Unlike bank deposits,

open-ended equity or debt fund investments could fall in value. In addition, MFs are not

insured or guaranteed by any government body (unlike a bank deposit, where up to Rs

100,000 is insured by the Deposit and Credit Insurance Corporation, a subsidiary of the

RBI.)

There are strict norms for any fund that assures returns and it is now compulsory for MFs

to state that the resources that back such assurances. This is because most closed-end

funds that assured returns in the early 1990s could not stick to their guarantee, resulting

in losses to investors.

Diversification: diversification helps, if risk minimization is your objective. On the flip

side, the lack of investment focus also means you gain less than if you had invested

directly in a single security.

Where do mutual funds invest?

Based on the various types of financial available, MF schemes could invest in equity,

debt or both. Thus, your investment is managed on an ongoing basis of specific classes of

financial instruments such as stocks, fixed-income instruments and other securities in

tune with the fund’s specific investment objective.

Each investment class has its own level of returns and, of course, risk. It is necessary to

understand the reasons behind investing in a particular asset class. You could be a

conservative, aggressive, balanced or growth investor.

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Types of Mutual Funds

MFs can be classified on the basis of investment objective, nature, and load structure.

On the basis of investment objective, MFs can be classified into equity, sector, debt,

money, market, liquid and gilt schemes depending on the securities they invest in.

1. Equity/growth fund.

This is a scheme that invests only in equity. When investing in stocks, you cannot be sure

of your investment tenure or returns. As a thumb-rule, the longer the stock is held, the

higher the gains. You stand a better chance of a substantial appreciation if you invest in

stock-based funds.

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Stocks are categorized by their market capitalisation into small, medium or large, and

MFs are accordingly classified as large-cap, mid-cap or small-cap funds. The NAV of an

equity scheme will fluctuate with the stock market.

2. Sector Fund

An equity scheme that invests in shares of companies operating in specific industry is

called a sector fund. For instance, a pharma fund would only invest in pharmaceutical

companies. Sector funds are risky as they are susceptible to cyclical influences- it is

unlikely that the market will favour a particular sector for too long.

3. Equity-Linked Savings Schemes

The major portion of investment is ELSS schemes is in equity and offers 20 percent tax

rebate under section 88, subject to a maximum investment of Rs 10,000 annually.

Dividends are tax free. As an ELSS is linked to the market, it can earn substantially more

than other section 88 schemes, which offers fixed rates of return to a maximum of 11

percent.

4. Debt Fund

This fund invests in fixed income instruments such as debentures (bonds) and various

money market instruments. Here, both return and investment tenure are stated at the time

of investing. Bonds can be issued by companies or by the government (state or central).

Bonds are rated by independent credit rating agencies such as Crisil/CARE/ICRA, which

verify the company’s ability to honour its interest commitments. The NAV of debt fund

does not fluctuate as much as that of equity fund.

5. Glit Fund

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Glits are securities issued by the central government and are said to carry sovereign or

minimal risk.

6. Money Market Fund

This fund invests exclusively in money market instruments, including commercial paper,

commercial bills, treasury bills, government securities with an unexpired maturity of up

to one year, call or notice money, certificate of deposit, usance bills and other instruments

specified by the RBI. These funds have minimum lock-in period of 15 days. Till recently,

the RBI regulated money market funds but they now come under Sebi.

7. Liquid Fund

A liquid fund is the same as a money market fund, but avoids a lock-in period. Most of

them lock funds in for up to three days to protect against banking procedural

inefficiencies. Used as an alternative to current account balances, a liquid fund is ideally

suited to investors who want to park their funds for a very short time- seven to eight days.

Consequently, fund houses process redemption requests within 24 hours instead of the

standard three working days. The minimum investment in these funds is Rs 25,000.

8. Balanced Fund

Balanced schemes invest in both equity and debt, with 50-75 percent in equity and the

rest in debt. It is important to know the stocks to bonds ratio in a fund to understand the

risks and rewards structure.

MFs are classified on the basis of their nature into:

1) Closed-end schemes

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A mutual fund scheme in which the maturity period is specified is called closed-end

scheme. These schemes are traded on stock exchanges at prices determined by market

factors. These funds have a specific maturity dates and the number of units issued is fixed

for the entire tenure. Closed-end schemes are bought and sold by investors through

brokers. As the number of units is fixed, the AMC doesn’t figure in buy/sell process.

2) Open-end schemes

MF schemes that continuously offer new units to the public are called open-end schemes.

They offer units for sale without specifying any duration for redemption. The fund is

legally require to buy back or redeem outstanding units at the unit holders’ request. The

AMC is obliged to do the buying and selling of units duration designated working days

and hours.

HOW TO MAKE MONEY FROM MFS

Most MFs have two types of plans- dividend and growth. In a debt fund, the MF may

return the interest/dividend it receives on investments as dividends. An equity/balanced

fund may also pay periodic dividends when it realizes a profit on the sale of stocks held

in its portfolio.

Remember, it is the appreciation in the NAV that is offered as dividends, and the NAV

falls to the extent of the dividend declared (and then some more in the case of debt funds,

because of taxes). As dividends are tax-free it is a good option for investors in the highest

tax bracket. For investors who opt out of dividends, the growth option let them encash the

appreciation by redeeming units at the NAV.

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Whenever a scheme declares a dividend, it fixes a cut-off date called the record date to

determine the list of investors who will be eligible for the dividend. After the record date,

the schem’s NAV is reduced by the amount of dividend and investors who join the

scheme post-record date do so at the ex-dividend NAV.

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 golbal organisation evolved in 1871 and is being

represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from

India. Birla Sun Life Mutual Fund follows a conservative long-term approach to

investment. Recently it crossed AUM of Rs. 10,000 crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under

the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the

AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank

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AG is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing

Development Finance Corporation Limited and Standard Life Investments Limited.

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital

Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund

acts as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee

Company. It is a joint venture of Vysya and ING. The AMC, ING Investment

Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the

largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup

on 13th of October, 1993 with two sponsorers, Prudential Plc. and ICICI Ltd. The Trustee

Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset

Management Company Limited incorporated on 22nd of June, 1993.

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Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation

Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on

August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the

AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch

offshor fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today

it is the largest Bank sponsored Mutual Fund in India. They have already launched 35

Schemes out of which 15 have already yielded handsome returns to investors. State Bank

of India Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor

base of over 8 Lakhs spread over 18 schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsorers for

Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The

investment manager is Tata Asset Management Limited and its Tata Trustee Company

Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country with

more than Rs. 7,703 crores (as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is

presently having more than 1,99,818 investors in its various schemes. KMAMC started

its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering

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to investors with varying risk - return profiles. It was the first company to launch

dedicated gilt scheme investing only in government securities.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages

the UTI Mutual Fund with the support of UTI Trustee Company Privete Limited. UTI

Asset Management Company presently manages a corpus of over Rs.20000 Crore. The

sponsorers of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank

(PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The

schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management

Funds, Index Funds, Equity Funds and Balance

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The

sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is

the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which

was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of

various schemes under which units are issued to the Public with a view to contribute to

the capital market and to provide investors the opportunities to make investments in

diversified securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard

Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard

Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated

with SEBI on December 20,1999.

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Franklin Templeton India Mutual Fund

The group, Frnaklin Templeton Investments is a California (USA) based company with a

global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial

services groups in the world. Investors can buy or sell the Mutual Fund through their

financial advisor or through mail or through their website. They have Open end

Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid

schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed

end Income schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the market

in securities, investmenty management and credit services. Morgan Stanley Investment

Management (MISM) was established in the year 1975. It provides customized asset

management services and products to governments, corporations, pension funds and non-

profit organisations. Its services are also extended to high net worth individuals and retail

investors. In India it is known as Morgan Stanley Investment Management Private

Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the

first close end diversified equity scheme serving the needs of Indian retail investors

focussing on a long-term capital appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as its

sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was

incorporated on December 1, 1995 with the name Escorts Asset Management Limited.

Alliance Capital Mutual Fund

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Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital

Management Corp. of Delaware (USA) as sponsorer. 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 sponsorer and Benchmark Trustee Company Pvt. Ltd. as the Trustee

Company. Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark

Asset Management Company Pvt. Ltd. is the AMC.

Canbank Mutual Fund

Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the

sponsor. Canbank Investment Management Services Ltd. incorporated on March 2, 1993

is the AMC. The Corporate Office of the AMC is in Mumbai.

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 of India set up LIC Mutual Fund on 19th June 1989. It

contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was

constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. .

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The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund

have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the

Investment Managers for LIC Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a

Government of India undertaking and the four Public Sector General Insurance

Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd.

(NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII)

and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act,

1882.

OBJECTIVE

TO UNDERSTAND THE CONSUMER BUYING BEHAVIOUR AND

INVESTMENT PATTERN IN INDORE.

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PROFILE OF THE ORGANIZATION

Reliance Money is a online portal and a brokerage firm of Reliance Capital.It provide

online services for equity trading , forex , commodity exchange etc..It provide following

benefits.

Single - Window Access

You will be able to transact in Equity, Equity & Commodity Derivatives, Offshore

Investments, Mutual Funds, IPOs, Life Insurance, General Insurance, Money Transfer,

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Money Changing and Credit Cards, amongst others.

Cost-effective

An introductory offer, pay a flat fee of just Rs 500/-* and transact for 1 year or a

specified transaction value, whichever is earlier.

Convenient & Safe

You can access Reliance Money's services through the Internet, Transaction Kiosks, the

phone (Call & Transact), our all - India network of associates

Your account is safeguarded with a unique security number that act as a dynamic

password and changes every 32 seconds.

3-in-1 facility

A single window for Banking, Trading and Demat Account

And transfer funds across accounts seamlessly!

Value-Added services:

CEOs' / Expert views on the economy and financial markets

Risk Analyser for analysis of your risk profile

Asset Allocators to build an appropriate investment portfolio

Reliance Capital

Reliance Capital Limited (RCL) is a Non-Banking Financial Company (NBFC)

registered with the Reserve Bank of India under section 45-IA of the Reserve Bank of

India Act, 1934. RCL was incorporated as a public limited company in 1986 and is now

listed on the Bombay Stock Exchange and the National Stock Exchange (India).

With a net worth of over Rs 3,300 crore and over 165,000 shareholders, Reliance Capital

has established its presence as a leading player in the financial services sector in the

country. On conversion of outstanding equity instruments, the net worth of the company

will increase to about Rs 4,100 crore.

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Reliance Capital sees immense potential in the rapidly growing financial services sector

in India and aims to become a dominant player in this industry and offer fully integrated

financial services. It is headed by Anil Ambani.

Reliance Capital is one of India’s leading and fastest growing private sector financial

services companies, and ranks among the top 3 private sector financial services and

banking companies, in terms of net worth.

Reliance Capital has interests in asset management and mutual funds, life and general

insurance, private equity and proprietary investments, stock broking and other activities

in financial services.

Reliance Capital launches retail broking operations--12 April 2007

Reliance Capital has announced its foray into the brokerage business through Reliance

Money promoted by Anil Dhirubhai Ambani Group firm Reliance Capital. Reliance

Money will offer a 'fixed' flat fee structure and would offer highly competitive rates

based on the flat fee structure instead of the contemporary system where investors pay

brokerage fees (percentage) for each transaction conducted in the stock markets.

Reliance Money would offer the brokerage services across 700 cities including Delhi and

Mumbai through 3,000 outlets.

Investors would need to pay brokerage at the rate of 0.05 per cent for delivery trades and

0.005 per cent for non-delivery trades (fixed fee of Rs500 for delivery trades up to Rs10

lakh and / or non-delivery trades up to Rs1 crore), the company said.

Industry rates vary between 0.4 per cent to 0.85 per cent for delivery trades and between

0.05 per cent and 0.10 per cent for non-delivery trades

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Reliance Capital Limited is a financial services company. The Company has interests in

asset management and mutual funds, life and general insurance, private equity and

investments, stock broking and other activities in financial services. In April 2007, the

Company launched Reliance Money, an online financial services and solutions portal,

which provides its customers with investment and trading access to equities, equity

options, commodities futures, mutual funds, initial public offerings (IPOs), life and

general insurance products, offshore investments and credit cards. It operates in four

business segments: finance and investment, asset management, general insurance and

other. Others include foreign exchange, money transfer, pharmaceuticals, healthcare and

logistics.

Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group (R-

ADAG) is one of the fastest growing mutual funds in the country.

Reliance Mutual Fund offers investors a well rounded portfolio of products to meet

varying investor requirements. Reliance Mutual Fund (RMF) is one of India’s leading

Mutual Funds, with Assets Under Management (AUM) of Rs. 59,857 crore (AUM as on

30th June 2007) and an investor base of over 3.4 million.

Reliance Mutual Fund constantly endeavours to launch innovative products and customer

service initiatives to increase value to investors.

Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management

Ltd., a wholly owned subsidiary of Reliance Capital Ltd.

Reliance Capital is one of India's leading and fastest growing private sector financial

services companies, and ranks among the top 3 private sector financial services and

banking companies, in terms of net worth.

Reliance Capital has interests in asset management and mutual funds, life and general

insurance, private equity and proprietary investments, stock broking and other financial

services.

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METHODOLOGY

1) Understand the process through which the customer is taken from the time he

enters the dealership till the time the deal is finalized.

2) After the deal is finalized, make a list of all the documents required for a loan

application if the customer wants to avail the loan facility and also a list of

documents required for registration of the vehicle in the name of customer.

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3) Lay down clear cut instructions to the sales force regarding collecting all the

documents required by the bank for loan so as to avoid the delays for loan

application.

4) Maintain close and personal relations with financial institutions dealing in

providing loans to Agricultural Equipments so that First Enquiry Reports (FI) of

the cases can be done at the earliest and also the Demand Order (DO) is released

early so as to fasten the retail cycle.

5) Proper filing of the documents of the customer to be given prime importance.

Each customer should have a dedicated file with his documents and papers in it,

one copy to be kept at the dealership which can be useful in time of contingencies.

6) The next step being to take measures to enhance the market share of Mahindra

Tractors.

7) To do that an analysis is being carried out to identify the strengths and

weaknesses of the business which will help in developing business ideas and also

formulate competitive strategies.

Consumer Buying Behaviour  

What influences consumers to purchase products or services? The consumer buying

process is a complex matter as many internal and external factors have an impact on the

buying decisions of the consumer.

When purchasing a product there several processes, which consumers go through. These

will be discussed below.

1. Problem/Need Recognition

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How do you decide you want to buy a particular product or service? It could be that your

DVD player stops working and you now have to look for a new one, all those DVD films

you purchased you can no longer play! So you have a problem or a new need. For high

value items like a DVD player or a car or other low frequency purchased products this is

the process we would take. However, for impulse low frequency purchases e.g.

confectionery the process is different.

2. Information search

So we have a problem, our DVD player no longer works and we need to buy a new one.

What’s the solution? Yes go out and purchase a new one, but which brand? Shall we buy

the same brand as the one that blew up? Or stay clear of that? Consumer often go on

some form of information search to help them through their purchase decision. Sources of

information could be family, friends, neighbours who may have the product you have in

mind, alternatively you may ask the sales people, or dealers, or read specialist magazines

like What DVD? to help with their purchase decision. You may even actually examine

the product before you decide to purchase it.

3. Evaluation of different purchase options.

So what DVD player do we purchase? Shall it be Sony, Toshiba or Bush? Consumers

allocate attribute factors to certain products, almost like a point scoring system which

they work out in their mind over which brand to purchase. This means that consumers

know what features from the rivals will benefit them and they attach different degrees of

importance to each attribute. For example sound maybe better on the Sony product and

picture on the Toshiba , but picture clarity is more important to you then sound.

Consumers usually have some sort of brand preference with companies as they may have

had a good history with a particular brand or their friends may have had a reliable history

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with one, but if the decision falls between the Sony DVD or Toshiba then which one shall

it be? It could be that the a review the consumer reads on the particular Toshiba product

may have tipped the balance and that they will purchase that brand.

4. Purchase decision

Through the evaluation process discussed above consumers will reach their final

purchase decision and they reach the final process of going through the purchase action

e.g. The process of going to the shop to buy the product, which for some consumers can

be as just as rewarding as actually purchasing the product. Purchase of the product can

either be through the store, the web, or over the phone.

Post Purchase Behaviour

Ever have doubts about the product after you purchased it? This simply is post purchase

behaviour and research shows that it is a common trait amongst purchasers of products.

Manufacturers of products clearly want recent consumers to feel proud of their purchase,

it is therefore just as important for manufacturers to advertise for the sake of their recent

purchaser so consumers feel comfortable that they own a product from a strong and

reputable organisation. This limits post purchase behaviour. i.e. You feel reassured that

you own the latest advertised product.

Factors influencing the behaviour of buyers.

Consumer behaviour is affected by many uncontrollable factors. Just think, what

influences you before you buy a product or service? Your friends, your upbringing, your

culture, the media, a role model or influences from certain groups?

Culture is one factor that influences behavior. Simply culture is defined as our attitudes

and beliefs. But how are these attitudes and beliefs developed? As an individual growing

up, a child is influenced by their parents, brothers, sister and other family member who

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may teach them what is wrong or right. They learn about their religion and culture, which

helps them develop these opinions, attitudes and beliefs (AIO) . These factors will

influence their purchase behavior however other factors like groups of friends, or people

they look up to may influence their choices of purchasing a particular product or service.

Reference groups are particular groups of people some people may look up towards to

that have an impact on consumer behavior. So they can be simply a band like the Spice

Girls or your immediate family members. Opinion leaders are those people that you look

up to because your respect their views and judgments and these views may influence

consumer decisions. So it maybe a friend who works with the IT trade who may influence

your decision on what computer to buy. The economical environment also has an impact

on consumer behavior; do consumers have a secure job and a regular income to spend on

goods? Marketing and advertising obviously influence consumers in trying to evoke them

to purchase a particular product or service.

Peoples social status will also impact their behaviour. What is their role within society?

Are they Actors? Doctors? Office worker? and mothers and fathers also? Clearly being

parents affects your buying habits depending on the age of the children, the type of job

may mean you need to purchase formal clothes, the income which is earned has an

impact. The lifestyle of someone who earns £250000 would clearly be different from

someone who earns £25000. Also characters have an influence on buying decision.

Whether the person is extrovert (out going and spends on entertainment) or introvert

(keeps to themselves and purchases via online or mail order) again has an impact on the

types of purchases made

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SURVEY

The survey was conducted of 250-sample size. Customers while taking buying decision

process considered various factors. Broadly three factors were there. They are risk, age

and income. The results after doing as follows.

Age group

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The age group of 20 to 40 can take risk and like to go for equity funds as it consists of

more risk more returns. While the age group 40 to 60 has more responsibilities and their

financial goals are there so they are somewhat scared as equity or growth funds consist of

risk, so even though they give more returns but having high risk they prefer to go for

MIP or income funds. Debt schemes or money market schemes. In this way age group

plays very crucial factor in choosing the mutual fund as a kind of investments and the

schemes under it.

Risk and Responsibilities

The person who has higher responsibilities of his family and various financial goals are

attached to that like child education, their marriage etc. these responsibilities would scare

him to go for investing in mutual funds as higher volatility and higher risk is involved in

it and even if he goes for it, he would choose Debt schemes, income schemes, money

market schemes which do not have any risk. The peoples who are single or have fulfilled

all responsibilities are ready to take risk and invest in high return schemes.

Income group

There may be higher income group, middle income group or lower income group. Higher

income group can bear risk so they can go for investing in mutual fund and in that too

they can go for growth funds and equity funds. Middle income group are moderate risk

taker so they might go for investment in mutual funds that might choose any other group

are satisfied in investing in fixed deposits. Post offices schemes, small savings as their

money is safe there but mutual fund consists risk so they don’t want their money to let go

out of their hand just to get more to take more risk.

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Questionnaire for the survey of Buying Decision-

Making Process of Mutual Fund Investors:

NAME:

AGE:

OCCUPATION:

1) Under which income group do you come? (yearly)

a) >1,00,000

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b) >3,00,000

c) >5,00,000

d) >10,00,000

e) more than that

2) At which stage you are?

a) Single

b) Married

c) Married and having children

d) Middle age

e) Retirement Stage

3) What is your purpose to invest in various financial products?

a) For returns

b) To fulfill future financial goals

c) For financial security

d) For regular saving habits

4) Where would you like to make your investments?

a) Mutual Funds

b) Fixed Deposits

c) Post Office Schemes

d) Insurance

e) Bonds

f) Equity Booking

5) How much weightage would you give for Mutual Funds in your financial

planning out of 100%?

a) 25%

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b) 50%

c) 75%

d) 100%

6) Why would you consider mutual fund important in your financial plan?

a) For more diversification

b) For Liquidity

c) For more returns

d) For Transparency

e) For more safety

7) Have you invested in Mutual Fund before?

a) Yes

b) No

8) If yes, since how many years you are investing in it? Specify it.

9) In which schemes had you invested? Specify that.

10) Do you feel those schemes were beneficial for you? Specify with the reason

how they were.

a) Yes

b) No

11) Which AMC would you prefer to make your investments in Mutual Funds?

a) Reliance Mutual Fund

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b) ICICI

c) HDFC

d) Franklin Templeton

e) DSP Merrill Lynch

f) Any Other

12) How would you choose the AMC to go for investments in Mutual Funds?

a) By Brand name

b) By past performances

c) Fund Manager

d) By available types of funds

13) What would be your mode of investments?

a) Online directly

b) Through agents

c) With the help of various Mutual Fund Research Portal

d) Through PMS

14) Which kind of Mutual Fund would you like to go for?

a) Growth

b) Balanced

c) Tax Saver

d) MIP

e) Income Scheme

f) All

15) By structure which type of funds would you go for?

a) Open-ended

b) Close-ended

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c) Interval

d) All

16) What do you consider while choosing the schemes?

a) More returns

b) Less risk

c) Tax saving

d) Past performance

17) In which scheme would you like to go for in?

a) Equity Diversified

b) Balanced

c) ELSS

d) MIP

e) All

18) If Equity diversified then which scheme?

a) Reliance Vision

b) HDFC Top 200

c) Franklin Flexicap

d) DSP Merrill Lynch equity fund

e) ICICI Dynamic

19) If ELSS then which scheme?

a) SBI Magnum Tax Gain

b) HDFC Tax Saver

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c) ICICI Tax Saver

d) Franklin Tax Shield

20) If Balanced then which scheme?

a) HDFC Prudence Fund

b) ICICI Balanced Fund

c) DSP Merrill Lynch Fund

d) Kotak Balanced Fund

21) If MIP then which scheme?

a) FT India MIP- Plan A-Growth

b) Reliance MIP Growth

c) Prudential ICICI MIP- Cumulative

d) DSP ML Savings Plus- Moderate Fund- Growth

22) In an all, what would be your buying process of Mutual Funds? Describe

LIMTATIONS

Sample size is small only 250 investors were asked there views for investment

pattern.

1. Survey and findings are only limited to Indore city not on India and globally.

2. Time limit was only 2 months.

3. Only three factors or parameters were taken into consideration risk, income group

and age group.

4. No physiological and social factors are considered.

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Analysis and findings

1. The study was conducted on the percentage of people investing in Mutual Fund and other options

42

weightage

0%5%

10%15%20%25%30%35%40%

weightage

According to the survey, the Maximum weightage is given to Mutual fund as their

investment option. After mutual fund the importance is given to post office schemes,

Fixed Feposits, Insurance, Bonds and Equity Broking

2. Preferences of the customers in selection of Mutual Funds of different AMCs.

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We can see that the Maximum number of customers have selected ICICI Mutual Funds.

Which is 34%, Reliance and franklin Templeton is preferred 22% percentage individually

.where as HDFC and DSP Merrill Lynch are given preference as 19 and 3 percent

respectively.

1. The customers preferred AMCs after considering factors like Brand name, Past performance, Fund Manager, Type of Funds available and schemes available.

44

According to survey, 39% people choose AMC on the basis of funds and schemes

available and 32% people choose according to the Brand name. While 16% people look

at past performance of the AMC and it’s corpus size or AUM size and 13% of people

would like to go with the fund manager available in that AMC as all the decision would

be taken out by the fund manager available there.

2. There are various ways available to invest in mutual funds like online direct investment in mutual fund, customers can invest through agents, can take help of various Mutual fund Research portal and they can also go through Portfolio Management Service. The following chart shows preferable mode of investment by customers.

45

According to the survey, most of the customers prefer to make investment through agents

because it is easiest way and helpful, 46%(115) people prefer to invest in mutual fund

through agents. 35% (88) people selected research portal to invest. Some like to invest

directly online, as they prefer to invest on their own so 16% (40) people.3% people

selected PMS as option for the mode of investment.

5. Another factor which affect the buying decision process of customers is the kind of fund. As there are Growth fund, Balanced fund, Tax saving fund, MIP etc. Their preferences for different fund is shown below.

46

In this way, maximum weightage is given by the people to growth funds with 83%. 22% people prefer to buy balanced fund. 33% prefer tax saving fund. 15% people prefer to take income schemes as they want less risk. 45% prefer MIP and 52% prefer all schemes.

6. There are open-end schemes, close-end schemes, Interval schemes. People chose the fund by structure in the following ways.

47

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We can see that 103 people prefer to invest in all kind of fund that is 41% to diversify

risk. After that people prefer Open-ended schemes, as 28% (70) people will invest. While

22% will go with Close-ended schemes and 9% with Interval schemes.

7. Four major schemes were taken for conducting the survey that was explained earlier. They are equity diversified schemes, balanced schemes, ELSS, MIP. The survey was conducted to find the preference of people on the basis of schemes offered by various AMCS.

48

We can see that 46% of the people 115 people like to make investment in all the schemes

to diversify the risk. 22% (55) people prefer to invest in equity diversified fund, 6%

people prefer to invest in MIP plan, 33 people prefer to make investment in Take saving

ELSS Schemes, 3% people choose Balanced schemes to make investment.

8. The survey was conducted with Reliance Vision, HDFC Top 200, Franklin Flexi cap, DSP Merrill Lynch and ICICI Dynamic Schemes under Equity Diversified Schemes.

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In equity diversified fund I have selected few schemes like reliance Visison, HDFC Top

200, Franklin Flexicap, DSP Merrill Lynch, ICICI Dynamic Equity Fund. According to

the weightage given by people, 30% of the people 75 in numbers like to go for HDFC

Top 200, 20% would go for ICICI Dynamic , 21% with Franklin flexicap, 18% in

Reliance Vision and 6% want to invest in DSP Merrill Lynch.

9.The survey was conducted by taking a few schemes under ELSS Scheme. They are SBI Magnum Tax Gain, HDFC Tax Server, and Franklin Tax Shield. Their preferences is shown in the following chart

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Preferences Given To Various Schemes Under ELSS

In ELSS SBI Magnum Tax Gain Fund, HDFC tax Saver and Franklin Tax Shield were

taken in survey and people give highest weightage to ICICI Tax Saver with 41% and

31% of the people with 78 in number like to invest in SBI magnum Tax Gain and 15% of

the people like to go for Franklin Tax Shield.

10. The survey was conducted by taking few schemes under balanced schemes. They are HDFC Prudence Fund, ICICI Balanced Fund, DSP Merrill Lynch Balanced Fund and Kotak Balanced Fund. Their preference given by the people is shown under the following chart.

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Preferences Given To the Schemes Under Balanced Fund

For balanced scheme HDFC Prudence Fund , ICICI Balanced Fund , DSP Merrill Lynch

Balanced Fund and Kotak Balanced Fund were taken for survey. 56% of the people with

140 in number want to go for ICICI Balanced Fund, 22% 0f the people like to go for DSP

Merrill Lynch and 3% of the people like to go for HDFC Prudence Fund.

Recommendations

AMCs should provide each and every scheme, which are available in the market

that is provided by others AMCs also so that they can serve better. As we can see

that ICICI had maximum weightage and DSP Merrill Lynch had the least

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weightage assigned by the people with 3%. HDFC should also improve its

performance.

As we have seen that most of the people like to take decisions through agents for

the investments. So maximum number of agents should be provided for them, so

they can make maximum investments.

Most of the people like to go for Growth Fund, so in this respect various varieties

in the schemes should be offered with great benefits.

People like to go for Growth Fund , so in this respect various verities in the

schemes should be offered with great benefits

People like to go for in Open-end schemes so most beneficial Schemes should be

availed with Open-end schemes.

Under Equity Diversified Fund, DSP Merrill Lynch has least rank and weightage

just 6%, so it has to provide good schemes in Equity Funds.

Under ELSS, HDFC Tax Saver has 15% weightage as compared to ICICI Tax

Saver, which has 41% and SBI Magnum Tax Gain, which has 31%, so it has to

better schemes as compared to the other two.

Under Balanced Fund, SBI Balanced Fund has only 3% weightage as compare to

56% in ICICI Balanced Fund, 22% in DSP Merrill Lynch Balanced Fund and

19% in HDFC Prudence Fund, SBI has good marking under ELSS, but it has to

improve in Balanced Fund.

Conclusion

Through the survey it was found that 25% of the people do not want to make

investment in mutual funds as it is subjected to market risk.

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Those who are interested in investing in mutual fund have given highest

weightage comparing other investment options. There are some people who want

to invest 100% amount into mutual funds.

People have given highest weightage with 34% to ICICI as AMC, then 22% to

Reliance and Franklin Templeton and HDFC and DSP Merrill Lynch as 19% and

3% respectively.

39% people choose AMC by the type of fund available, 32% through brand name,

16% through past performance and 13% through fund managers.

46% of the people with 115 in number out of 250 like to make investment through

agents, and 35% of the people with 88 in number like to do online investments,

while 3% would use PMS.

33% of the people like to invest in Growth Fund, 53 people with 21% of the

people like to invest in all funds, 18% of the people would go for MIP, 13% of the

people like to invest in Tax Saving Schemes, 6% of the people like to go with

Income Schemes.

By the structure, 41% of the people like to invest in all the funds, while 28% of

the people would go for open-end Scheme and 22% would go for Closed-end

Scheme with that of 9% people like to go for interval schemes.

Scheme wise 46% people would go for all kinds of schemes and 22% people with

55 in number like to invest in Equity Diversified Fund, after that 16% of the

people would go with MIP plan, 13% of the people like to invest in Tax Saving

Purpose and 3% of the people would invest in Balanced Scheme.

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In this way, there are various processes of buyers to invest in mutual funds and

various modes as the survey says, most of the people like to invest through agents,

some of them like to take help of Research Portal, while other wants to invest

directly online and very rare of them like to take help of PMS.

There are various factors affecting the purchase of mutual fund risk, income

group, age group, options of AMCs, different types of funds, and different types

of schemes.

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Reference:

Anjaria, D.C.AMFI Mutual Fund Testing Programme Workbook,

Mumbai, Association of Mutual Fund inIndia; 2006

Kotler Philip and Keller Kevin Lane. Marketing Management.

Websites

www.reliancemoney.com

www.amifiindia.com

www.moneycontrol.com

www.mutualfund.about.com

www.uti.com

www.centurialbop.org

www.wikipedia.com

www.outlookmoney.com

www.decisionpoint.com

www.investorswords.com

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Glossary

AMC - Asset management company

M.F - Mutual Fund

MIP - Monthly Income Plan

NAV - Net Asset Value

ELSS - Equity Linked Saving Schemes

PMS - Portfolio Management Service

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