report on icici mutual fund's effectiveness

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This document says about the effectiveness of ICICI's mutual fund in bangalore market


Executive summaryThis report analyses the customers perception on mutual funds and theirwillingness to invest in it.We did a research on the customers preference towards mutual funds. ICICI direct is one ofthe largest mutual funds distributers in India. It is committed towards guiding investors tocreate wealth. Theyhave a range of innovative products andservices. Theyguide thecustomers through all stages of investment cycle.ICICI Securities has takenanInitiative tocreateawareness about Mutual unds toitscustomers. The pro!ect is named "Mutual und Simplified#. The ob!ective is to demonstratethebenefit ofmutual fundandinvestinginMutual undthroughICICIdirect.comandasurvey about Mutual und investments frome$isting customers of ICICI Securities%Customers who have an account&.The ob!ective of our research was to find out the customers perception on mutual funds andtheir willingness to invest in it.'ere we were trying to study the customers willingness with respect to the factors such asgender( age group( occupation( etc.)ro!ect duration was * weeks and the sample si+e was ,-. The research location was central.angalore since it is near to my assigned office %Cunningham road branch ICICI direct&.Themethodusedwas/uestionnairemethodwhichwasfilledonline( therebymakingtheprocesseasier(fasterandeco0friendly.Thedatawasdirectlystoredingoogledrive. Thismade the data compilation and analysis very easy.1nce we got the data( we e$ported it to e$cel sheet and interpreted the data. 2atainterpretation was basically in the form of pie charts and bar charts. rom those charts( it wasvery easy to make out the response towards each /uestion.The !ob to fi$ an appointment was really tough. Most of the customers refused to talk and some were reluctant to meet.Travelling was another issue because most of the addresses in the database available were wrong or old. There were few customers with whom I did not meet because their office or residence was in the outskirts of city.3umber of phone calls made in a day was dependent on the follow ups I used to have or number of meeting on that particular day. 1n an average I used to call around 4- to 5- customers a day. INTROD!TIONSmall dropsof watermakeabigoceanonthisconcept mutual fundworks. Smallinvestors canalsoinvest inmutual fundandearnafair rateof returnwithlessriskcompare to shares. Mutual fund also provides the benefits of speciali+ed services( e$pertknowledge6 ta$ benefits etc. investors do not spend all their income into various goods andservices. Certain amount they will save and out of saved amount they will invest certainproportionininvestment avenues. Today( variousinvestment optionslikeland( gold(shares( debenture( bonds etc( are available for an investor. So while choosing a best possible investment option( investor has to take carefully verifyall available options. Investor will be primary looking at an investment option which willgive ma$imum return with minimum risk. So Mutual fund is e$pected a better option fortheinvestor at present. Mutual fundis different fromother interms of risk( return(li/uidity( profitability( transparency etc.Thisresearchhelpsinidentifyingtheinvestors perceptiontowardsmutualfundsdebtschemes and the factors that influence investors to invest in various debt schemes whichare managed by various fund managers of 7sset Management Company. 7long with thatan e$tra effort is put to evaluate the performance of various debt schemes using standarddeviation and 378 returns."utual fundMutual fund is vehicle to mobili+e funds from investors( to invest in different markets andsecurities( in line with the investment ob!ectives agreed upon( between the mutual fundand the investors."utual fund wor#ing processThe following figures e$plain the Mutual und Working )rocess ig.9.9: Mutual und Working )rocessThe mutual fund collects money directly or through brokers from investors. The moneyis investedinvarious instruments dependingontheob!ectiveof thescheme. Theincomegeneratedbysellingsecuritiesor capital appreciationof thesesecuritiesispassedontothe investors in proportionto their investment inthe scheme. Theinvestments are divided into units and the value of the units will be reflected in 3et7sset 8alue or 378 of the unit. 378 is the market value of the assets of the schememinusitsliabilities. The378isthenet asset valueoftheschemedividedbythenumberofunitsoutstandingonthevaluationdate. Mutual fundcompaniesprovidedaily net asset value of their schemes to their investors. $E%I&"!!ustodianTrusRegistranit$avingTrustReturnsInvestmentnit holders&"!$tructure of "utual 'undig.9.;: Structure of Mutual fundThe structure consists of($ponsorSponsor is the person who acting alone or in combination with another body corporateestablishes a mutual fund. Sponsor must contribute at least 4-< of the net worth of theInvestment managed and meet the eligibility criteria prescribed under the Securities and=$change .oard of India %Mutual und& >egulations( 9??,. The sponsor is not responsibleor liable for any loss or shortfall resulting from the operation of the Schemes beyond theinitial contribution made by it towards setting up of the Mutual und.Trust$E!ustodianTrusteeTransfer &gent&"!nit )oldersThe "utual 'und$ponsorThe Mutual und is constituted as a trust in accordance with the provisions of the IndianTrusts 7ct( 9**; by the Sponsor. The trust deed is registered under the Indian >egistration7ct( 9?-*.TrusteeTrustee is usually a company %corporate body& or a .oard of Trustees %body ofindividuals&. The main responsibility of the Trustee is to safeguard the interest of the unitholders and ensure that the 7MC functions in the interest of investors and in accordancewith the Securities and =$change .oard of India %Mutual unds& >egulations( 9??,( theprovisions of the Trust 2eed and the 1ffer 2ocuments of the respective Schemes. 7t least;@Ard directors of the Trustee are independent directors who are not associated with theSponsor in any manner.&sset "anagement !ompany *&"!+The 7MC is appointed by the Trustee as the Investment Manager of the Mutual und. The7MC is re/uired to be approved by the Securities and =$change .oard of India %S=.I& toact as an asset management company of the Mutual und. 7t least 5-< of the directors ofthe7MCareindependent directors whoarenot associatedwiththeSponsor inanymanner. The 7MC must have a net worth of at least 9- cores at all times.!ustodianThe custodian has custody of the assets of the fund. 7s part of this role( the custodianneeds to accept and give delivery of securities for the purchase and sale transactions of thevarious schemes of the fund. 7ll custodians need to register with S=.I. The custodian isappointed by the mutual fund. 7 custodian agreement is entered into between the trusteesand the custodian. Registrar and Transfer &gentThe 7MC if so authori+ed by the Trust 2eed appoints the >egistrar and Transfer 7gent to theMutual und. The >egistrar processes the application form( redemption re/uests anddispatchesaccount statements totheunit holders. The>egistrar andTransfer agent alsohandles communications with investors and updates investor records.&uditors7uditorsareresponsiblefor theaudit of accounts. 7ccountsof theschemes needtobemaintainedindependent of theaccount of the7MC. Theauditor appointedtoaudit theschemeaccountsneedstobedifferent fromtheauditor ofthe7MC. Whiletheschemeauditor is appointed by the Trustees( the 7MC auditor is appointed by the 7MC.'und &ccountantsThefundaccountant performstheroleofcalculatingthe378(bycollectinginformationabout the assets and liabilities of each scheme.Distri,utors2istributors have a key role in selling suitable types of units to their clients i.e. the investorsin the schemes. 2istributors need to pass the prescribed certification test.!ollecting %an#ersThe investors moneys go into the bank account of the scheme they have invested in. Thesebank accounts are maintained with collection bankers who are appointed by the 7MC. &dvantages of "utual 'und for Investors(-rofessional "anagementMutual funds offer investors the opportunity to earn an income or build their wealth throughprofessional management of their investible funds. There are several aspects to suchprofessional management vi+. investing in line with the investment ob!ective( investing basedon ade/uate research( and ensuring that prudent investment processes are followed.&fforda,le -ortfolio DiversificationBnitsofaschemegiveinvestorse$posuretorangeofsecuritiesheldintheinvestmentportfolio of the scheme. Thus( even a small investment of >s.5--- in mutual fund scheme cangive investors a diversified investment portfolio. With diversification( an investor ensures thatall the eggs are not in the same basket. Conse/uently( the investor is less likely to lose moneyonall the investments at the same time. Thus( diversificationhelps reducetheriskininvestment. In order to achieve the same diversification as a mutual fund scheme( investorswill need to set apart several Cakhs of rupees. Instead( they can achieve the diversificationthrough an investment of a few thousand rupees in mutual fund scheme.

Economy of $caleThe pooling a large sums of money from so many investors makes it possible for the mutualfund to engage professional managers to manage the investment. Individual investors withsmall amounts to invest cannot( by themselves( afford to engage such professionalmanagement. Carge investment corpus leads to various other economies of scale. orinstance( costs related to investment research and office space get spread across investors.urther( thehigher transactionvolumemakes it possibletonegotiatebetter terms withbrokers( bankers and other service providers.i/uidity7t times( investors in financial markets are stuck with a security for which they cannot find abuyer0worse( at timestheycannot findthecompanytheyinvestedinDSuchinvestments(whose value the invest


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