A PROJECT REPORT ON

MUTUAL FUND- A TOOL FOR INCREASING WEALTH

Submitted in partial fulfillment for

MASTER OF BUSINESS ADMIMISTRATION (AFFILATED BY MAHAMAYA TECHNICAL UNIVERSITY,

NOIDA )

INSTITUTE OF TECHNOLOGY & SCIENCE GHAZIABAD

Submitted by :TINKU SAINI MBA Batch (2011-2013) 1

Submitted to :-

Prof. ANUSHA AGARWAL

MANAGEMENT DEPARTMENT
DATED: ____________

CERTIFICATE

This is to certify that TINKU SAINI has done his SummerTraining Project on MUTUAL FUND-A TOOL FOR INCREASING WEALTH in ANAND RATHI Delhi under the supervision and guidance of his guide and that report embodies the work of candidate himself.

(Prof. ANUSHA AGARWAL) Internal guide

DECLERATION

I hereby declare that this Project Report entitled THE MUTUAL FUND A TOOL FOR INCREASING WEALTH is submitted in the partial fulfillment of the requirement of Master of Business Administration (MBA) of INSTITUTE OF TECHNOLOGY & SCIENCE, GHAZIABAD is based on primary & secondary data found by me in various departments, books, magazines and websites & Collected by me in under guidance of MR. RAJEEV SHUKLA.

DATE:

TINKU SAINI MBA (2011-2013)

ACKNOWLEDGEMENT

"Gratitude is not a thing of expression; it is more matter of feeling."

There is always a sense of gratitude which one express towards others for their help and supervision in achieving the goals. This formal piece of acknowledgement is an attempt to express the feeling of gratitude towards people who helpful me in successfully completing of my training. I would like to express my deep gratitude to MR. TINKU SAINI my training coordinator for their constant co-operation. He was always there with his competent guidance and valuable suggestion through out the pursuance of this research project. Special thanks to MR.SANJEEV SHUKLA who guided me to work honestly and to give valuable suggestion for improving my work Last but not least I would also like to place of appreciation to all the respondents whose responses were of utmost importance for the project. Above all no words can express my feelings to my parents, friends all those persons who supported me during my project. I am also thankful to all the respondents whose cooperation & support has helped me a lot in collecting necessary information. I would also like to thank almighty God for his blessings showered on me during the completion of project report.

(TINKU SAINI)

PREFACE Master of Business Administration is a course, which combines both theory and its applications as its contents of study in the field of management. As part and parcel of this course, every aspirant has to undergo at least six to eight weeks Industrial Training in an organization. The purpose of this training is to expose the student of management sciences with real life situations existing in the organization and to provide an insight into the various functions carried out within the organization and can visualize things what they have been taught in classrooms. Education becomes more meaningful when its theoretical aspects are combined with practical experience.One-can-easily-overcome-the-fear of -joining-organisation-after -the-completion-of thecourse-as-theenvironment-no-longer -remains-align-to-him-and-one-can-easily-fita place-for themselves.Actually, it is the life force of management. I was fortunate enough to do my training in ANAND RATHI. As a complementary to training, every trainee has to prepare and submit a report on the working of the organization. This report is in continuation of that tradition. It is an attempt to present an account of practical knowledge and observations gathered during the training. ANAND RATHI is one of the Indias leading wealth maximisation Brand that encompass every sphere of life. In a short span of time, ANAND RATHI has set an example by having a steady and confident journey to growth and success.

CONTENTS

1. 2. 3. 4. 5 6. 7. 8. 9. 10 11. 12. 13 14. 15 16.

Declaration Acknowledgement Preface Executive Summary INTRODUCTION COMPANY PROFILE ALL ABOUT MUTUAL FUND OBJECTIVES AND SCOPE RESEARCH METHODOLOGY DATA ANALYSIS & INTERPRETATION FINDINGS LIMITATION SUGGESTION & RECOMMENDATIONS CONCLUSION BIBLOGRAPHY ANNEXURES 9 13 17 77 79 82 102 105 106 109 111 112

EXECUTIVE SUMMARY In few years Mutual Fund has emerged as a tool for ensuring ones financial well being. Mutual Funds have not only contributed to the India growth story but have also helped families tap into the success of Indian Industry. As information and awareness is rising more and more people are enjoying the benefits of investing in mutual funds. The main reason the number of retail mutual fund investors remains small is that nine in ten people with incomes in India do not know that mutual funds exist. But once people are aware of mutual fund investment opportunities, the number who decide to invest in mutual funds increases to as many as one in five people. The trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to buy mutual funds and to use the right arguments in the sales process that customers will accept as important and relevant to their decision. This Project gave me a great learning experience and at the same time it gave me enough scope to implement my analytical ability. The analysis and advice presented in this Project Report is based on market research on the saving and investment practices of the investors and preferences of the investors for investment in Mutual Funds. This Report will help to know about the investors Preferences in Mutual Fund means Are they prefer any particular Asset Management Company (AMC), Which type of Product they prefer, Which Option (Growth or Dividend) they prefer or Which Investment Strategy they follow (Systematic Investment Plan or One time Plan). This Project as a whole can be divided into two parts.

The first part gives an insight about Mutual Fund and its various aspects, the Company Profile, Objectives of the study, Research Methodology. One can have a brief knowledge about Mutual Fund and its basics through the Project. The second part of the Project consists of data and its analysis collected through survey done on 200 people. For the collection of Primary data I made a questionnaire and surveyed of 200 people. I also taken interview of many People those who were coming at the SBI Branch where I done my Project. I visited other AMCs in Dehradoon to get some knowledge related to my topic. I studied about the products and strategies of other AMCs in Dehradoon to know why people prefer to invest in those AMCs. This Project covers the topic THE MUTUAL FUND A TOOL FOR INCREASING WEALTH. The data collected has been well organized and presented. I hope the research findings and conclusion will be of use.

Chapter - 1 Introduction
9 INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS ASPECTS.

Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.

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When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.

ADVANTAGES OF MUTUAL FUND

Portfolio Diversification Professional management Reduction / Diversification of Risk Liquidity Flexibility & Convenience Reduction in Transaction cost Safety of regulated environment Choice of schemes Transparency

DISADVANTAGE OF MUTUAL FUND

No control over Cost in the Hands of an Investor No tailor-made Portfolios Managing a Portfolio Funds Difficulty in selecting a Suitable Fund Scheme

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Chapter 2 Company Profile

13

INTRODUCTION TO ANAND RATHI

ANAND RATHI AnandRathi is a leading full service securities firm providing the entire gamut of financial services. The firm, founded in 1994 by Mr. AnandRathi, today has a pan India presence as well as an international presence through offices in Dubai and Bangkok. AR provides a breadth of financial and advisory services including wealth management, investment banking, corporate advisory, brokerage & distribution of equities, commodities, mutual funds and insurance - all of which are supported by powerful research teams. The firm's philosophy is entirely client centric, with a clear focus on providing long term value addition to clients, while maintaining the highest standards of excellence, ethics and professionalism. The entire firm activities are divided across distinct client groups: Individuals, Private Clients, Corporate and Institutions and was recently ranked by Asia Money 2006 poll amongst South Asia's top 5 wealth managers for the ultra-rich.

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ABOUT LOGO

AnandRathi is written in gold lettering with a green background. It stands for turning your money to gold. Green is the colour of money and growth. The gold lettering indicates wealth and prosperity. The font is classy and serious. It gives a personal feel, a sense of security of your money being in safe hands. The baseline 'behind every successful investoris understated.' Thats keeping in line with our philosophy of being client centric. The focus is on client. We just work behind the scenes to make money for client. MILESTONES 1994: Started activities in consulting and Institutional equity sales with staff of 15 1995: Set up a research desk and empanelled with major institutional investors 1997: Introduced investment banking businesses Retail brokerage services launched 1999: Lead managed first IPO and executed first M & A deal 2001: Initiated Wealth Management Services 2002: Retail business expansion recommences with ownership model 2003: Wealth Management assets cross Rs1500 crores Insurance broking launched. Launch of Wealth Management services in Dubai Retail Branch network exceeds 50 2004: Commodities brokerage and real estate services introduced, Wealth Management assets cross Rs3000 crores, Institutional equities business relaunched and senior research team put in place. Retail Branch network expands across 100 locations within India. 2005: Real Estate Private Equity Fund Launched, Retail Branch network expands across 200 locations within India. 15 2006: AR Middle East, WOS acquires membership of Dubai Gold & Commodity Exchange (DGCX). Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia Money 2006 poll, Ranked 6th in FY2006 for All India Broker Performance in equity distribution in the High Net worth Individuals (HNI) Category, Ranked 9th in the Retail Category having more

than 5% market share Completes its presence in all States across the country with offices at 300+ locations within India 2007: Citigroup Venture Capital International picks up 19.9% equity stake. Retail customer crosses 200 thousand Establishes presences in over 450 locations.

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MUTUAL FUNDS
ALL ABOUT MUTUAL FUNDS

WHAT IS MUTUAL FUND BY STRUCTURE BY NATURE EQUITY FUND DEBT FUNDS BY INVESTMENT OBJECTIVE OTHER SCHEMES PROS & CONS OF INVESTING IN MUTUAL FUNDS ADVANTAGES OF INVESTING MUTUAL FUNDS DISADVANTAGES OF INVESTING MUTUAL FUNDS MAJOR PLAYERS OF MUTUAL FUNDS IN INDIA HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY CATEGORIES OF MUTUAL FUNDS INVESTMENT STRATEGIES WORKING OF A MUTUAL FUND GUIDELINES OF THE SEBI FOR MUTUAL FUND 17 COMPANIES DISTRIBUTION CHANNELS

 DOES FUND PERFORMANCE AND RANKING PERSIST? PORTFOLIO ANALYSIS TOOLS

RESEARCH METHODOLOGY

OBJECTIVE OF RESEARCH SCOPE OF THE STUDY DATA SOURCES SAMPLING DATA ANALYSIS ANNEXURES

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HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under. First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and 19

administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores. Third Phase 1993-2003 (Entry of Private Sector Funds) 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.

Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

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CATEGORIES OF MUTUAL FUND:

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Mutual funds can be classified as follow :

Based on their structure: Open-ended funds: Investors can buy and sell the units from the fund, at any

point of time.

Close-ended funds: These funds raise money from investors only once. Therefore,
after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity.

Based on their investment objective:

Equity funds: These funds invest in equities and equity related instruments. With
fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition and

individual stock weightages. ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks. iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields. iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc. v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks. vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund: Their investment portfolio includes both debt and equity. As a result, on
the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes:

i) ii)

Debt-oriented funds -Investment below 65% in equities. Equity-oriented funds -Invest at least 65% in equities, remaining in debt. 24

Debt fund: They invest only in debt instruments, and are a good option for investors
averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs. i) Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market. ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and Tbills. iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate. iv) Arbitrage fund- They generate income through arbitrage opportunities due to mispricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities. v) Gilt funds LT- They invest 100% of their portfolio in long-term government securities. 25

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term debt papers. vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities. viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.

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INVESTMENT STRATEGY

1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.

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Mutual Funds
Before we understand what is mutual fund, its very important to know the area in which mutual funds works, the basic understanding of stocks and bonds. Stocks : Stocks represent shares of ownership in a public company. Examples of public companies include Reliance, ONGC and Infosys. Stocks are considered to be the most common owned investment traded on the market. Bonds : Bonds are basically the money which you lend to the government or a company, and in return you can receive interest on your invested amount, which is back over predetermined amounts of time. Bonds are considered to be the most common lending investment traded on the market. There are many other types of investments other than stocks and bonds (including annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds. What Is Mutual Fund A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns.

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Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund

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Overview of existing schemes existed in mutual fund category Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.

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Type of Mutual Fund Schemes

BY STRUCTURE Open Ended Schemes
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Close Ended Schemes

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.

Interval Schemes
Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.

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BY NATURE
Under this the mutual fund is categorized on the basis of Investment Objective. By nature the mutual fund is categorized as follow:

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1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows:

Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on the riskreturn matrix.

2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.

MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes. 34

Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest
in both equities and fixed income securities, 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. 35

Further the mutual funds can be broadly classified on the basis of investment parameter viz, 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.

BY INVESTMENT OBJECTIVE

Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

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OTHER SCHEMES

Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index.

Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time.

Types of returns:
There are three ways, where the total returns provided by mutual funds can be enjoyed by investors:

Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.

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Pros & cons of investing in mutual funds:

For investments in mutual fund, one must keep in mind about the Pros and cons of investments in mutual fund.

Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they are professional managed, by well qualified professional. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive way to make and monitor their investments. 2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. 3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to bring down the average cost of the unit for their investors. 4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want. 5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.

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Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds doesnt perform in neither the market, as their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professionals are any better than mutual fund or investor himself, for picking up stocks. 2. Costs The biggest source of AMC income, is generally from the entry & exit load which they charge from an investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon. 3. Dilution - Because funds have small holdings across different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money. 4. Taxes - when making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

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MAJOR PLAYERS OF MUTUAL FUND IN INDIA

At present following are the main players in the Mutual Fund Industry:1. Unit Trust of India. 2. ABN Amro Mutual Fund. 3. Benchmark Mutual Fund. 4. Birla Sun life Mutual Fund. 5. Can bank Mutual Fund. 6. DBS Chola Mutual Fund. 7. DSP Merrill Lynch Mutual Fund. 8. Deutsche Mutual Fund. 9. Escorts Mutual Fund. 10. Fidelity Mutual Fund. 11. HDFC Mutual Fund. 12. HSBC Mutual Fund. 13. ICICI Prudential Mutual Fund. 14. ING Vysya Mutual Fund. 15. Kotak Mahindra Mutual Fund. 16. LIC Mutual Fund. 17. Lotus India Mutual Fund. 40

18. Optimix Mutual Fund. 19. Principal Mutual Fund. 20. Quantum Mutual Fund. 21. Reliance Mutual Fund. 22. SBI Mutual Fund. 23. Sahara Mutual Fund. 24. Sundaram BNP Paribas Mutual Fund. 25. Tata Mutual Fund. 26. Taurus Mutual Fund.

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Guidelines of the SEBI for Mutual Fund Companies :

To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody. According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees must be independent. The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework. Its objective is to increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading professional standards and in promoting best industry practices in diverse areas such as valuation, disclosure, transparency etc. Documents required (PAN mandatory): Proof of identity : 1. Photo PAN card 2. In case of non-photo PAN card in addition to copy of PAN card any one of the following: driving license/passport copy/ voter id/ bank photo pass book. Proof of address (any of the following ) :latest telephone bill, latest electricity bill, Passport, latest bank passbook/bank account statement, latest Demat account statement, voter id, driving license, ration card, rent agreement.

42 Offer document: An offer document is issued when the AMCs make New Fund Offer(NFO). Its advisable to every investor to ask for the offer document and read it before investing. An offer document consists of the following:

RISK V/S. RETURN:

Interpretation:
In the above graph we see that as the risk is increasing return is also increasing. We can say that risk is directly propotional to the return Here, we see that in liquid funds, debt fund, balanced fund risk is less so return is also less. While in index funds, equity funds, sectoral funds risk is high so return is also high

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Chapter - 3 Objectives of study

77

OBJECTIVES OF THE STUDY 1. To find out the Preferences of the investors for Asset Management Company. 2. To know the Preferences for the portfolios. 3. To find out the most preferred channel. 4. To find out what should do to boost Mutual Fund Industry.

78

Chapter 4 Research Methodology

79 RESEARCH METHODOLOGY
This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones.

Data sources:
Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites.

Duration of Study:
The study was carried out for a period of two months, from 28th May to 10th July 2012.

80

Sample size:

The sample size of my project is limited to 200 people only. Out of which only 120 people had invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund.

Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs etc.

81

Chapter 5 Data Analysis & Interpretation

82 ANALYSIS & INTERPRETATION OF THE DATA

1. (a) Age distribution of the Investors of Dehradoon

Age Group No. of Investors

<= 30 12

31-35 18

36-40 30

41-45 24

46-50 20

>50 16

Investors invested in Mutual Fund

35 30 25 20 15 10 5 0 <=30 31-35 36-40 41-45 46-50 >50 Age group of the Investors 12 18 30 24 20 16

Interpretation:

According to this chart out of 120 Mutual Fund investors of Dehradoon the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs.

(b). Educational Qualification of investors of Dehradoon

Educational Qualification Graduate/ Post Graduate Under Graduate Others Total Number of Investors 88 25 7 120

6% 23%

71%

Graduate/Post Graduate

Under Graduate

Others

Interpretation:

Out of 120 Mutual Fund investors 71% of the investors in Dehradoon are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under HSC).

c). Occupation of the investors of Dehradoon

Occupation
Govt. Service Pvt. Service Business Agriculture Others .

No. of Investors
30 45 35 4 6

50 No. of Investors 40 30 20 10 0 Govt. Service Pvt. Service Business 35 45 30 4 Agriculture 6 Others

Occupation of the customers

Interpretation: In Occupation group out of 120 investors, 38% are Pvt.

Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.

(d). Monthly Family Income of the Investors of Dehradoon. Income Group

<=10,000 10,001-15,000 15,001-20,000 20,001-30,000 >30,000 50 45 40 35 30 25 20 15 10 5 0

No. of Investors
5

12 28 43 32

No. of Investors

43 28 5 <=10 12 10-15 15-20 20-30 >30 32

Income Group of the Investorsn (Rs. in Th.)

Interpretation:
In the Income Group of the investors of Dehradoon, out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income

group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000

(2) Investors invested in different kind of investments. Kind of Investments

Saving A/C

Fixed deposits Insurance Mutual Fund Post office (NSC) Shares/Debentures Gold/Silver Real Estate

No. of Respondents 195 148 152 120 75 50 30 65

Kinds of Investment

65
Po st O G Sa In ffi su vi ce old ng /S ra ( ilv nc NS A/ C) er e c

30 50 75 120 152 148 195 0 50 100 150 200 250

No.of Respondents

Interpretation: From the above graph it can be inferred that out of 200 people,
97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits,

60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate.

3. Preference of factors while investing

Factors (a) Liquidity (b) Low Risk (c) High Return (d) Trust

No. of Respondents

40

60

64

36

18%

20%

32%

30%

Liquidity

Low R k is

H hR ig eturn

Trus t

Interpretation:
Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust

88

4. Awareness about Mutual Fund and its Operations

Response No. of Respondents

Yes 135

No 65

33%

67%

Y es

No

Interpretation:

From the above chart it is inferred that 67% People are aware of Mutual Fund and its operations and 33% are not aware of Mutual Fund and its operations. 89

5. Source of information for customers about Mutual Fund

Source of information Advertisement Peer Group Bank Financial Advisors No. of Respondents 18 25 30 62

7 0 6 0 5 0 4 0 3 0 2 0 2 5 1 0 1 8 0 Advertisem entPeer Group

No. of R espondents

6 2 3 0 B nk a F ncia ina l Advisors

S ource of Inform tion a

Interpretation:
From the above chart it can be inferred that the Financial Advisor is the most important source of information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund Through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement.

90

6. Investors invested in Mutual Fund

Response YES NO Total No. of Respondents 120 80 200

No 40%

Yes 60%

Interpretation:
Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested in Mutual Fund. 91

7. Reason for not invested in Mutual Fund

Reason Not Aware Higher Risk Not any Specific Reason

No. of Respondents

65 5 10

13%

6%

81%
Not Aware H her R k ig is Not Any

Interpretation:
Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any specific reason.

92 8. Investors invested in different Assets Management Co. (AMC) Name of AMC

SBIMF UTI HDFC

No. of Investors 55 75 30

Reliance ICICI Prudential Kotak Others

75 56 45 70

Others HDFC Name of AMC Kotak SBIMF ICICI Reliance UTI 0 20 40 No. of Investors 60 30 45 55 56

70

75 75 80

Interpretation:
In Dehradoon most of the Investors preferred UTI and Reliance Mutual Fund. Out of 120 Investors 62.5% have invested in each of them, only 46% have invested in SBIMF, 47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC.

93

9. Reason for invested in SBIMF

Reason
Associated with SBI Better Return Agents Advice

No. of Respondents
35 5 15

27%

9%

64%

As ociated with S s BI

B etter R eturn

Ag ents Advice

Interpretation:
Out of 55 investors of SBIMF 64% have invested because of its association with Brand SBI, 27% invested on Agents Advice, 9% invested because of better return. 94

10. Reason for not invested in SBIMF Reason

Not Aware

No. of Respondents
25

Less Return Agents Advice

18 22

34%

38%

28%
Not Aw are L Return ess Ag ent's Advice

Interpretation:
Out of 65 people who have not invested in SBIMF, 38% were not aware with SBIMF, 28% do not have invested due to less return and 34% due to Agents Advice.

95

11. Preference of Investors for future investment in Mutual Fund Name of AMC
SBIMF UTI HDFC Reliance ICICI Prudential

No. of Investors 76 45 35 82 80

Kotak Others

60 75

Others K otak Nam of AMC e IC I Prudential IC R eliance H F DC UTI S BIMF 0 20 35 45 60

75

80 82

76 40 60 80 100

No. of Inves tors

Interpretation:
Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63% in SBIMF, 62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual Fund. 96

12. Channel Preferred by the Investors for Mutual Fund Investment

Channel No. of Respondents Financial Advisor 72 Bank 18 AMC 30

25%

15%
F ncia Advisor ina l B nk a AMC

60%

Interpretation:
Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through AMC and 15% through Bank.

97

13. Mode of Investment Preferred by the Investors

Mode of Investment No. of Respondents One time Investment 78 Systematic Investment Plan (SIP) 42

35%

65%

One tim Inves ent e tm

S IP

Interpretation:
Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through Systematic Investment Plan. 98

14. Preferred Portfolios by the Investors Portfolio

Equity Debt Balanced

No. of Investors
56 20 44

37%

46%

17%

Equity

Debt

Balance

Interpretation:
From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17% preferred Debt portfolio 99

15. Option for getting Return Preferred by the Investors

Option No. of Respondents Dividend Payout 25 Dividend Reinvestment 10 Growth 85

21%

8% 71%
D ividend Payout Dividend R einves ent tm Growth

Interpretation:
From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout and 8% preferred Dividend Reinvestment Option. 100

16. Preference of Investors whether to invest in Sectoral Funds Response Yes No No. of Respondents 25 95

21%

79%

Y es

No

Interpretation:
Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because there is maximum risk and 21% prefer to invest in Sectoral Fund.

101

Chapter 6

Findings

102 Findings
Age Group of 36-40 years were more in numbers. The second most Investors were in the

age group of 41-45 years and the least were in the age group of below 30 years. In Occupation group most of the Investors were Govt. employees, the second most

Investors were Private employees and the least were associated with Agriculture.

In family Income group, between Rs. 20,001- 30,000 were more in numbers, the second

most were in the Income group of more than Rs.30,000 and the least were in the group of below Rs. 10,000. About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits,

Only 60% Respondents invested in Mutual fund. Mostly Respondents preferred High Return while investment, the second most preferred

Low Risk then liquidity and the least preferred Trust. not. Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not have Only 67% Respondents were aware about Mutual fund and its operations and 33% were

invested in Mutual fund. Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is not any

specific reason for not invested in Mutual Fund and 6% told there is likely to be higher risk in Mutual Fund. 103 Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI Prudential has

also good Brand Position among investors, SBIMF places after ICICI Prudential according to the Respondents. Out of 55 investors of SBIMF 64% have invested due to its association with the Brand

SBI, 27% Invested because of Advisors Advice and 9% due to better return. Most of the investors who did not invested in SBIMF due to not Aware of SBIMF, the

second most due to Agents advice and rest due to Less Return.

For Future investment the maximum Respondents preferred Reliance Mutual Fund, the

second most preferred ICICI Prudential, SBIMF has been preferred after them. 60% Investors preferred to Invest through Financial Advisors, 25% through AMC (means

Direct Investment) and 15% through Bank. 65% preferred One Time Investment and 35% preferred SIP out of both type of Mode of

Investment. The most preferred Portfolio was Equity, the second most was Balance (mixture of both

equity and debt), and the least preferred Portfolio was Debt portfolio. Maximum Number of Investors Preferred Growth Option for returns, the second most

preferred Dividend Payout and then Dividend Reinvestment. Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted to invest

in Sectoral Fund.

104

LIMITATION

Some of the persons were not so responsive. Possibility of error in data collection because many of investors may have not given actual answers of my questionnaire. Some respondents were reluctant to divulge personal information which can affect the validity of all responses.

105

Suggestion

106

The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing.

Mutual funds offer a lot of benefit which no other single option could offer. But most of

the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. Mutual Fund Company needs to give the training of the Individual Financial Advisors

about the Fund/Scheme and its objective, because they are the main source to influence the investors. Before making any investment Financial Advisors should first enquire about the

risk tolerance of the investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration. Younger people aged under 35 will be a key new customer group into the future, so

making greater efforts with younger customers who show some interest in investing should pay off. Customers with graduate level education are easier to sell to and there is a large untapped

market there. To succeed however, advisors must provide sound advice and high quality. 107 Systematic Investment Plan (SIP) is one the innovative products launched by Assets

Management companies very recently in the industry. SIP is easy for monthly salaried person as it

provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.

108

Conclusion

109

Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, Channels etc. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and Income is growing the number of mutual fund investors are also growing. Brand plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are many AMCs in Dehradoon but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and their Assets Under Management is larger than others whose Brand name are not well known like Principle, Sunderam, etc. Distribution channels are also important for the investment in mutual fund. Financial Advisors are the most preferred channel for the investment in mutual fund. They can change investors mind from one investment option to others. Many of investors directly invest their money through AMC because they do not have to pay entry load. Only those people invest directly who know well about mutual fund and its operations

110

BIBLIOGRAPHY
WEBSITES website: WWW.SBIMF.COM website: WWW.MONEYCONTROL.COM website: WWW.AMFIINDIA.COM website: WWW.ONLINERESEARCHONLINE.COM website: WWW.WIKIPEDIA.ORG website: WWW.VALUEONLINERESERCH.COM website: WWW.MUTUALFUNDSINDIA.COM

111

ANNEXURES

112

QUESTIONNAIRE
A study of preferences of the investors for investment in mutual funds.
1. Personal Details: (a). Name:(b). Add: (c). Age:(d). Qualification:Graduation/PG (e). Occupation. Pl tick () Govt. Ser Pvt. Ser Business Agriculture Others Under Graduate Others Phone:-

(g). What is your monthly family income approximately? Pl tick (). Up to Rs.10,000 Rs. 10,001 to 15000 Rs. 15,001 to 20,000 Rs. 20,001 to 30,000 Rs. 30,001 and above

2. What kind of investments you have made so far? Pl tick (). All applicable. a. Saving account e. Post Office-NSC, etc b. Fixed deposits f. Shares/Debentures c. Insurance g. Gold/ Silver d. Mutual Fund h. Real Estate

3. While investing your money, which factor will you prefer? . (a) Liquidity (b) Low Risk (c) High Return

(d) Trust

4. Are you aware about Mutual Funds and their operations? Pl tick (). 113 5. If yes, how did you know about Mutual Fund?

Yes

No

a. Advertisement

b. Peer Group

c. Banks

d. Financial Advisors Yes No

6. Have you ever invested in Mutual Fund? Pl tick (). 7. If not invested in Mutual Fund then why? (a) Not aware of MF (b) Higher risk (c) Not any specific reason

8. If yes, in which Mutual Fund you have invested? Pl. tick (). All applicable. a. SBIMF b. UTI c. HDFC d. Reliance e. Kotak f. Other. specify

9. If invested in SBIMF, you do so because (Pl. tick (), all applicable). a. SBIMF is associated with State Bank of India. b. They have a record of giving good returns year after year. c. Agent Advice 10. If NOT invested in SBIMF, you do so because (Pl. tick () all applicable). a. You are not aware of SBIMF. b. SBIMF gives less return compared to the others. c. Agent Advice 11. When you plan to invest your money in asset management co. which AMC will you prefer? Assets Management Co. a. SBIMF b. UTI c. Reliance d. HDFC e. Kotak f. ICICI

12. Which Channel will you prefer while investing in Mutual Fund? (a) Financial Advisor (b) Bank (c) AMC

13. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick (). a. One Time Investment b. Systematic Investment Plan (SIP)

14. When you want to invest which type of funds would you choose? a. Having only debt portfolio b. Having debt & equity portfolio. c. Only equity portfolio.

15. How would you like to receive the returns every year? Pl. tick (). a. Dividend payout b. Dividend re-investment c. Growth in NAV

16. Instead of general Mutual Funds, would you like to invest in sectorial funds? Please tick (). Yes No

115