1

A Project Report On INVESTMENT ANALYSIS AND PROSPECT OF MUTUAL FUND

Submitted for the partial fulfillment of

MASTER OF BUSINESS ADMINISTRATION

Session (2009-2011)
SUBMITTED TO:CONTROLLER OF EXAMINATION M.D UNIVERSITY ROHTAK SUBMITTED BY:PAWAN KUMAR MBA IV Sem. Roll No. 21
REG. NO -09-KITG-6815

KIIT COLLEGE OF ENGINEERING

ACKNOWLEDGEMENT
The satisfaction which accompanies the successful completion of any task would be incomplete without the mention of people who made it possible. Because the success is the epitome of hard work, perseverance, undeterred missionary zeal, determination and most encouraging guidance and advice serving as a beacon light and crowing out effort with success. I express my sincere thanks to my project guide Mrs. Priyanka Thakur for his whole-hearted support, inspiring guidance and encouragement throughout the project work

TABLE OF CONTENTS
S.No.
1 2 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Particulars
Executive Summary Company profile Objective &scope of study Introduction to the topic Concept of mutual fund Organization of mutual fund Advantages of mutual Funds. Drawbacks of mutual Funds. Evolution of mutual Funds Types of mutual Funds Major mutual Fund companies How to compare mutual fund Future of mutual fund Regulatory aspects Research Methodology Questionnaire & Information Analysis Through Graphical Representation Observation & Findings Suggestions Limitations Bibliography & References

Page No.
4 5 7 9 12 15 16 18 20 23 26 34 36 39 43 46 65 66 68 69

EXECUTIVE SUMMARY :

4 The project titled INVESTMENT ANALYSIS AND PROSPECT OF MUTUAL FUND was carried out for ANANDRATHI FINANCIAL SERVICES. Anand Rathi Financial Services is the brokerage firm. In this project report I have made an analysis that what is the investment pattern, what is the prospect and how Mutual Funds have emerged a better investment option in India in recent years giving the investors higher returns, liquidity, safety against traditional investment avenues like- bank FD, post office savings, investment in volatile stock market etc. With the growth of the Indian economy due to various economic factors including industrialization, growth of infrastructure & services industries, increased foreign direct investment & foreign institutional investments, the Indian companies have grown to become Global Business Giant . So, the market capitalization of the Indian companies has grown which has resulted in the building of a strong capital market. People are also now more willing to invest and are ready to take risk. All this development has proved to be a good atmosphere for Mutual Fund investments in India. Now a days investment of savings has assumed great importance. Mutual Funds offer a wide array of schemes to suit the customers different investment objectives as per their financial position, risk taking capability, age etc.

COMPANY PROFILE:-

Anand Rathi (AR) 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. 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 croreRetail Branch network exceeds 50 Insurance broking launched Launch of Wealth Management services in Dubai.

2004: Retail Branch network expands across 100 locations within Indian Commodities brokerage and real estate services introduced Wealth Management assets cross Rs3000croresInstitutional equities business relaunched and senior research team put in place.
2005:

Retail Branch network expands across 180 locations within India Real Estate Private Equity Fund Launched.

OBJECTIVE OF THE STUDY

7 The objective is to check the popularity & growth of Mutual Funds and whether Mutual Funds are really having a better prospect in India. The needs and wants of the client is taken into consideration In this project the great emphasis is given to understand what investor want out of their investments in different schemes of Mutual Fund, how they compare it with traditional investment instruments, what is the number of increase in the investor base.

SCOPE OF THE STUDY

8 The scope of the study is inform & guide the investors about the various Mutual Fund Schemes and helps them to select the best scheme as per their requirement. Investors are the customers of the different companys mutual funds schemes during my project I worked with Anand Rathi Financial Services, Bhilwara.

Reasons For Selecting The Topic

To Study the Investment Pattern and what is the prospect of mutual fund.

In the primary capital market, Mutual Funds serve as a link between the saving public and the corporate sector, as they channelize savings from investors and corporations. In the secondary capital markets, they participate as investors and trade with other investors. By the very nature of their activities and by virtue of being knowledgeable and informed investors, they influence the markets and play an active role in promoting good corporate governance, investor protection and the health of capital markets.

Mutual funds have imparted much needed liquidity into the financial system and have provided an alternative to the dominant role of banking and financial institutions in the financial markets.

INTRODUCTION
We can study the growth of Mutual Funds in broadly two parts :1. Global Scenario 8

9 2. Indian scenario

Global Scenario
Mutual Funds have emerged as relatively new attractive option for the investments worldwide in recent years. The traditional investment options Like- Bank FD, post office Savings, Govt. Bonds and Investment in the Shares are no longer very attractive , because Govt. deposits give lesser returns and Stock market is very much volatile which makes the investments risky . So, all this has resulted into the emergence of Mutual Funds which gives Comparatively Higher returns with safety. Mutual Funds now represent the most appropriate investment opportunity for the small investors. As financial markets become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. The popularity of Mutual Funds can be imagined from the fact that in the birthplace of Mutual Funds the U.S.A. - the fund industry has already overtaken the banking industry, with more money under Mutual Fund management than deposited with banks.

Indian Scenario
The Indian Mutual Fund industry has opened up many exciting opportunities to Indian investors. A new phenomenon has started under which more savings now being entrusted to the funds .Despite the expected continuing growth in the industry, Mutual Fund is still a new financial intermediary in India. 9

10

Hence, it is important that the investors, the Mutual Fund agents/distributors, financial planners, investment advisors and even the fund employees acquire the better knowledge of what Mutual Funds are, what they can do for investors and what they cannot, and how they function differently from other financial intermediaries such as banks. Place of Mutual Funds in Financial Markets Indian households started allocating more of their savings to the capital markets in 1980s, with investments flowing into equity and debt instruments, besides the conventional mode of bank deposits. With greater volatility in the stock markets, many investors who bought highly priced shares lost money, and withdrew from the markets altogether. Even those investors who continued as the direct investors in the stock markets realized that the key to successful Besides, selecting the securities with growth and income potential from the capital market involved careful research and monitoring of the market , which was not possible for all investors. Under similar circumstances in other countries, Mutual Funds had emerged as professional intermediaries. Besides providing the expertise in the stock market investing, these funds allow investing in small amounts and yet holding a diversified portfolio to limit risk, while providing the potential for income and growth that is associated with debt and equity instruments.

10

11 Investment Features Risk/return High potential

Stocks Fixed-Income Investments Annuities Money Market Funds Time Deposits (CDs)

Moderate

Low (fixed)High (variable)

Low

Low

Key objective

Growth of capital

Regular income

Retirement income

Competitive interest on cash reserves

Competitive interest on cash reserves Conservative investors

Suitability

Aggressive growth investors

Incomeoriented investors Long or intermediate term

Retirement investors

Conservative investors

Time frame Long term

Long term

Intermediate or short term

Intermediate or short term

Issuer

Corporations

Government or corporations

Insurance companies

Mutual fund companies

Financial institutions

FDIC insurance Tax advantages

No

No

No

No

Yes

No

Yes (tax-free Yes (taxmunicipal bonds) deferred growth)

Yes (tax-free money market funds)

No

CONCEPT OF MUTUAL FUND

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities.

11

12 The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. 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 The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives, which are launched from time to time.

A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI), which regulates securities markets before it, can collect funds from the public. 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:

The flow chart below describes broadly the working of a mutual fund:

12

13

Mutual Fund Operation Flow Chart

13

14

ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:

14

15

Advantages Of Mutual Funds

If the Mutual Fund is emerging as the favorite investment vehicle, it is because of many advantages it has over other forms and avenues of investing, particularly for the investors who has limited resources available. The following are the major advantages offered by mutual Funds to all investors

Diversification:- The best mutual funds design their portfolios so individual

investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value.

Professional Management: Most mutual funds pay topflight professionals to

manage their investments. These managers decide what securities the fund will buy and sell.

Regulatory oversight: Mutual funds are subject to many government

regulations that protect investors from fraud.

15

16

Liquidity: It's easy to get your money out of a mutual fund. Write a check, make
a call, and you've got the cash.

Convenience: You can usually buy mutual fund shares by mail, phone, or over
the Internet.

Low cost: Mutual fund expenses are often no more than 1.5 percent of your
investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index.

Transparency: Mutual Fund schemes are said to be Transparent because they

show the clear allocation of Funds to Investors.

Flexibility: Mutual funds are flexible because they change time to time and if
Investors wants his money back before the maturity of the Fund He/she can easily redeem.

16

17

Drawbacks Of Investing Through Mutual Funds

While the benefits of investing through Mutual Funds far outweigh the disadvantages ,an investor and his advisor should be aware of a few shortcomings of using the the Mutual Fund as an investment vehicle :

No Guarantees:

No investment is risk free. If the entire stock market declines in value, the value of mutual funds shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.

Fees and commissions:

All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.

Taxes:

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.

17

18

Management risk:

When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.

No Control Over Costs: Since investors do not directly monitor the funds operations they cannot control the costs effectively. Regulators therefore usually limit the expenses of mutual fund.

Managing a Portfolio of funds:As the number of mutual funds increases, in order to tailor a portfolio for himself, an investor may b holding a portfolio of funds, with the costs of monitoring them and using them, incurred by him.

18

19

EVOLUTION OF MUTUAL FUNDS IN INDIA

The Indian Mutual Fund industry has come a long way since the inception of UTI in 1963. According to AMFI the evolution of industry can be broadly divided into four phases, which mark its transaction from the period when UTI ruled the roost to a period of competition and increased awareness among investors.

FIRST PHASE (1964-87)

The Unit Trust of India was the sole player in the industry. Created by an Act of parliament in 1963,UTI launched its first product, the UTI Scheme 1964, which is even today the single largest mutual fund scheme. UTI created a numbe4r of products such as monthly income plans, Childrens plans, equity-oriented schemes and offshore funds during this period. UTI managed assets of Rs 6700 crore at the end of this phase.

SECOND PHASE (1987-93)

In 1987 public sector banks and financial institutions entered the mutual fund industrys mutual fund was the first non UTI fund to be set up in 1987, Significant shift of investors from deposits to mutual fund industry happened during the period .Most funds where Growth oriented closed ended funds. By the end of this period, assest under UTI management grew to Rs 38,247 crore and public sector funds managed Rs 8750 crore

THIRD PHASE (1996-1999)

.

19

20 The implementation of the new SEBI regulations and the restructuring of the mutual fund industry led to rapid asset growth. Bank mutual funds were re-cast according to the SEBI recommended structure, and UTI came under voluntary SEBI supervision.

FOURTH PHASE (1999-2003)

This phase was marked by very rapid growth in the industry, and significant increase in market of private sector players. Assests crossed Rs 1,00,000 crore. The tax break offered to mutual funds in 1999 created arbitrage opportunities for a number of institutional players. Bond funds and liquid funds registered the highest growth in this period ,accounting for nearly 60% of the assests. UTI share of the industry dropped below 50%..

20

21

GROWTH IN ASSETS UNDER MANAGEMENT

The graph indicates the growth of assets over the years.

21

22

Types of Mutual Fund Schemes

Mutual Funds have specific investment objectives such as growth of capital, safety of principal or tax exemption, an investor can select one fund or any number of different funds to meet the specific goals. In general mutual fund fall under 3 general categories: -

Schemes according to Maturity Period Schemes according to Investment Objective Other Schemes.

1.

Schemes according to Maturity Period : -

a)

Open ended Scheme - An open-ended fund or scheme is one that is

available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. The key feature of open-end schemes is liquidity.

b)

Close ended Scheme - The fund is open for subscription only during a

specified period at the time of launch of the scheme. A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years

22

23

Schemes according to Investment Objective : Growth / Equity Oriented Scheme - The aim of growth funds is to provide capital
appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities.

Income / Debt Oriented Scheme - The aim of income funds is to provide regular
and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments.

Balanced Fund - The aim of balanced funds is to provide both growth and regular
income as such schemes invest both in equities and fixed income securities

Money Market or Liquid Fund - These funds are also income funds and their aim is
to provide easy liquidity, preservation of capital and moderate income

Gilt Fund - These funds invest exclusively in government securities

Index Funds - Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty),

23

24

Other Schemes: -

Sector Specific Funds/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

Tax Saving Schemes - These schemes offer tax rebates to the investors under specific
provisions of the Income Tax Act, 1961 . E.g. Equity Linked Saving Schemes (ELSS).

Fund of Funds (FoF) scheme - A scheme that invests primarily in other schemes of
the same mutual fund or other mutual funds is known as a FoF scheme

Load or no-load Fund - A Load Fund is one that charges a percentage of NAV for
entry or exit.

24

25

Major Mutual Fund Companies: -

Franklin Templeton India Mutual Fund

The group, Franklin 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.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing Development Finance Corporation Limited and Standard Life Investments Limited.

25

26

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.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 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 Corers 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 sponsors 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 is one of the fastest in the country with more than Rs. 7,703 corers (as on April 30,2005) of AUM.

26

27

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 Private Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Corer. The sponsors 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 Funds.

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 AG is the custodian.

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.

27

28

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 corers.

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.

28

29

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 sponsors, 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.

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.

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 to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities.

29

30

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.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investment 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 nonprofit organizations. 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 focusing on a long-term capital appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Escorts 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.

30

31

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsor. The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. with the corporate office in Mumbai.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.

Can bank Mutual Fund

Can bank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the sponsor. Can bank Investment Management Services Ltd. incorporated on March 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.

31

32

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 Corers towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Company started its 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.

32

33

How to compare mutual funds

Choosing a mutual fund seems to have become a very complex affair lately. There are no dearth of funds in the market and they all clamor for attention. The most crucial factor in determining which one is better than the rest is to look at returns. Returns are the easiest to measure and compare across funds. At the most trivial level, the return that a fund gives over a given period is just the percentage difference between the starting Net Asset Value (price of unit of a fund) and the ending Net Asset Value. Returns by themselves don't serve much purpose. The purpose of calculating returns is to make a comparison. Either between different funds or time periods. And, you must be careful not to make a mistake here. Or else, you could end up investing in the wrong funds.

Invest in various funds, not one

Absolute returns Absolute returns measure how much a fund has gained over a certain period. So you look at the NAV on one day and look at it, say, six months or one year or two years later. The percentage difference will tell you the return over this time frame. But when using this parameter to compare one fund with another, make sure that you compare the right fund. To use the age-old analogy, don't compare apples with oranges. So if you are looking at the returns of a diversified equity fund (one that invests in different companies of various sectors), compare it with other diversified equity funds. Don't compare it with a sector fund which invests only in companies of a particular sector. Don't even compare it with a balanced fund (one that invests in equity and fixed return instruments).
Why has my fund not declared a dividend?

33

34

Benchmark returns
This will give you a standard by which to make the comparison. It basically indicates what the fund has earned as against what it should have earned. A fund's benchmark is an index that is chosen by a fund company to serve as a standard for its returns. The market watchdog, the Securities and Exchange Board of India, has made it mandatory for funds to declare a benchmark index. In effect, the fund is saying that the benchmark's returns are its target and a fund should be deemed to have done well if it manages to beat the benchmark. Let's say the fund is a diversified equity fund that has benchmarked itself against the Sensex. So the returns of this fund will be compared vis-a-viz the Sensex. Now if the markets are doing fabulously well and the Sensex keeps climbing upwards steadily, then anything less than fabulous returns from the fund would actually be a disappointment. If the Sensex rises by 10% over two months and the fund's NAV rises by 12%, it is said to have outperformed its benchmark. If the NAV rose by just 8%, it is said to have underperformed the benchmark. But if the Sensex drops by 10% over a period of two months and during that time, the fund's NAV drops by only 6%, then the fund is said to have outperformed the benchmark.

The best mutual fund scheme for you

34

35 FUTURE OF MUTUAL FUNDS IN INDIA

Mutual Fund AUMs Growth Month/Year Mar99 Mar00 Mar01 Mar02 Mar03 Mar-05 Sep-06 7-Dec 13762 6 45 15114 1 9

MF AUM's Change in % over last yr

68984 93717 83131 94017 75306

149300

26

13

12

25

Some facts for the growth of Mutual Funds in India :-

100% growth in the last 6 years. Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide.

Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. We have approximately 29 mutual funds which is much less than having more than 800. There is a big scope for expansion. 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products. SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance. Trying to curb the late trading practices. 35

36

Introduction of Financial Planners who can provide need based advice

REGULATORY ASPECT :-

Schemes of mutual funds: The Asset management company shall launch no schemes unless the trustees approve such scheme and a copy of the offer has been filed with the Board. Every mutual fund shall along with the offer documents of each scheme pay filing fees. The offer document shall contain disclosures, which are adequate in order to enable the investors to make informed investment decision including the disclosure non maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor. A close-ended scheme shall be fully redeemed at the end of the maturity period. Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution. The mutual fund and asset management company shall be liable to refund the application money to the applicants: If the mutual fund fails to receive the minimum subscription amount referred to in clause (i) of sub- regulation. If the moneys received from the applicants for units are in excess of subscription as referred to in clause (ii) of sub-regulation.

36

37

Procedure for Action In Case Of Default: On and from the date of the suspension of the certificate or the approval, as the case may be, the mutual fund, trustees or asset management company, during the period of suspension and shall be subject to the direction of the Board with regard to any records, documents, or securities that may be in its custody or control relating to its activities as mutual funds, trustees or the asset management company.

Restrictions on Investments:
A mutual fund scheme shall not invest more than 15% of its NAV in debt instrument issued by a single issuer, which are rated not below investment grade by a credit rating agency authorize to carry out such activity under the act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company. A mutual fund Scheme shall not invest more than 10% of its NAV in unrated debt instrument issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the Board of Trustees and the Board of Asset management.

No mutual funds under all its schemes should own more than 10% of any companys paid up capital carrying voting rights.

Such transfers are done at the prevailing market price for quoted instrument on spot basis.

37

38 The securities so transferred shall be in conformity with the investment objectives of the scheme to which such transfer has been made. An scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregated intercourse inter scheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund. The initial issue expenses in respect of any scheme may not exceed 6% of the funds raised under that scheme. Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in Badla finance. Every mutual fund shall get the securities purchased or transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature. Pending deployment of funds of a scheme a mutual fund can invest the funds of the scheme in short term deposits of scheduled commercial banks.

No mutual fund scheme shall make any investment in ; o Any unlisted security of an associate or group company of the sponsor or

38

39 o Any security issued by way of private placement by an associate or group company of the sponsor. The listed securities of group companies of the sponsor which is in excess of 30% of the net assets (of all the schemes of a mutual fund)

No mutual fund scheme shall invest more than 105 of its NAV in the equity shares or equity related instrument of any company. Provided that, the limit of 10 percent shall not be applicable for investments in index fund or sector or industry specific schemes.

RESEARCH METHODOLOGY
1. Data requirements :
a. Name, address and phone number of individuals. b. Investment about Share Market. c. Investment Pattern of individuals. d. Awareness about Mutual Funds.

2. Primary data:a. Data collected by meeting people who come into the branches of Anand Rathi

Financial Services in Bhilwara.

b. Data collected with the help of Venue Operation.

3. Secondary data:39

40

Data collected by referring to the database already maintained in the Anand Rathi

Financial Services.

4. Data Collection Techniques :a. Filling of questionnaire by the customers of the Anand Rathi Financial Services, b. Reference of branch manager of Anand Rathi Financial Services.

Literature Survey:The project is based on pure findings of facts. Development of Working Hypothesis:-The Hypothesis could be developed by discussing with the concerning department heads and guides about this exploratory research and reached to the conclusion that the data is to be collected by personal interaction with the customers, asking them about the services and the improvement required. First of all they are aware of mutual funds or not and then analyzing the findings to reach to the objectives of research. Collection of Data:-There was secondary data available for the study and also primary data collected by carrying out by the survey which has been carried out to through personal interviews of the customers. The sample size was roughly 100. a. Sampling methods: - A sample is the representative of the population which will predict the behavior of the whole universe. b. The sampling size put under two categories: Probability sampling and non probability sampling.

40

41

Probability sampling:This is the process of selecting the elements or group of elements from as well defined population by such procedure which gives every element in the population an equal chance of being selected for observation. The sampling method use for this survey is the area sampling which is a sub type of probability sampling.

Sampling size:Large sample gives reliable result than small sample. However, it is not feasible to target entire population or even a substantial portion to achieve a reliable result. So, in this aspect selecting the sample to study is known as sample size. Hence, for my project my sample size was 100.The Sample Size of 100 is not enough to draw a conclusion but as per the time assigned it was difficult to take a sample size more than 100.The Sample Size consist of both the Professional and Business class people.

Execution of the project:It is the very important step in the research process accuracy findings depends on how systematically the study has been carried out in time so that it can make some sense when required. I have executed the project after prior discussion with the guide and structured in following steps: a. Preparation of questionnaire. b. Collection of list of some of the clients interview of the customer so that more interaction is impossible and the variety of responses can be registered to have a good data for analysis.

41

42 c. Visiting the corporate and asking about their feedback on the mutual funds services they are availing. Try to find out their satisfaction level with the existing mutual fund

Q1. Do you believe in the concept of investment ?

YES NO TOTAL 89 11 100

Percentage of people making any investment

1 1 % YES NO 89%

It has been observed that approximately 90% of the correspondents invest in some or the other financial instrument. Though the percentage of choice of investment may vary due to different factors such as age, education, risk etc.

42

43

Q2. Who manages your Portfolio ?

a. Help of Brokerage House
Brokerage House By Yourself Total 47 53 100

b. By Yourself

It has been observed that there is no major difference between the percentage of people who invest using scientific tools and those whose who believe in their intuition but it is seen that the younger generation is more leaning towards usage of scientific tools than their peers.

43

44

47% 53%

Brokerage House by Y ourself

Q3. Name of the tools you have invested in ?

a. Insurance
YES NO TOTAL 77 23 100

LIC

23%

YES NO

77%

44

45

A major chunk who have been interviewed it has been observed that almost 80% have some kind of insurance policy. It has also been observed that though LIC is a public sector undertaking, people of all ages have more faith in it as compared to other private sector companies.

B. Bank (Fixed deposit)

YES NO TOTAL 49 41 100

Banks(Fixed Deposit)

YES NO

45

46

There is no major difference between the number of people who prefer keeping their money in fixed deposit and who dont opt for it. There is however a growing concern about the falling interest rate in banks on fixed deposit.

C. Mutual Funds
YES NO TOTAL 34 66 100

BONDS & Debentures

YES NO

46

47

It has been observed that only 34% they have invested in Mutual Funds AS compared to those who have not. This may be due to less knowledge about it or the time of re-demption.

D. Equities & Share Market

YES NO TOTAL 45 55 100

Equity & Share Market

YES YES NO NO

47

48

By the chart, we observe that the percentage of people investing in equity and share market is not much but there is a going interest among people especially the younger generation to invest so as to make quick bucks with the market boom.

E. Post Office Savings

YES NO TOTAL 31 69 100

Post Office Savings

31% YES NO 69%

48

49

Out of the total correspondent only, 31% they invest in post office savings. This could be due to falling interest rate and better return by other tools

F. Real Estate
YES NO TOTAL 42 58 100

Real Estate

42% YES NO 58%

49

50

The correspondent who said YES are 42% and who said NO is 58% but this will change, as people are more comfortable in real estate and with falling interest rate people try to find new avenue of investments.

G. Gold
YES NO TOTAL 41 59 100

50

51

Out of the total correspondent questioned 41% say they prefer to invest in gold while 59% say they dont.

H. Others
YES NO TOTAL 39 61 100
OTHERS

39% YES NO 61%

51

52

Of all the correspondents asked, only 39% said they have other options to invest other than the conventional options.

Q4. What Features of a Brokerage House attract you ?

Good Services Low Brokerage Friendly Environment Expert Advice 30 57 10 3

52

53 About 60% of people said that they invest between 10%-60% of their total income in some or other types of financial tools. A major chunk of people belonging to this segment are from IT sector who are young, large disposable income and have a little knowledge about investment and are willing to take risk.

Q5. Are you aware about mutual funds?

YES NO TOTAL 65 35 100

Aw areness about m utual funds

35% YES NO 65%

53

54

Only 35% of correspondent said they dont know any thing about mutual fund and 65% said they know about mutual funds but what we found that they have just a primary or very negligible knowledge about mutual funds and not really aware of the concept called MUTUAL FUND.

Q6. Do you know different type of mutual scheme present in the market?

YES NO TOTAL

36 64 100
Types of mutual funds

100% 80% 60% 40% 20% 0% Yes No

54

55

Out of total corresponds only 36% said that they know about various mutual schemes as this number is very small it explains that people still dont know about various schemes in the market. It also shows that even those who have bought mutual funds are still ignorant about the different schemes.

Q7. Which mode of investment have you chosen in mutual funds?

SIP Lump sum OTHERS TOTAL 15 45 40 100

investment about mutual funds

50% 40% 30% 20% 10% 0% SIP Lump sum Others 15% 45% Series1

40%

55

56

The percentage of person who say that mutual fund is SIP is 15%, an those who say it is Lump sum is 45% but a major percentage of corresponds opt as other which is about 40%. These are people who say that mutual funds are high risk and high gain or even people who have no opinion.

Q8. Have you ever invested in mutual fund?

YES NO TOTAL

41 59 100
investment in mutual funds

60 50 40 30 20 10 0 Yes No

56

57

Out of the total correspondents asked about 41% have said that they had invested in mutual funds before while 59% said NO. Out of the total people who have said yes a majority of them are young, having disposable income and willingness to take risk.

Q9. How you choose a mutual fund?

BRAND NAME HIGH NAV HIGH RETURNS ADVERTISING OTHERS TOTAL

40 35 30 25 20 15 10 5 0 Brand Name

35 26 15 12 12 Choosing of100 mutual fund

57
High NAV High Returns Advertising Others

58

It has been observed that brand name does matter when people are choosing a mutual fund as 35% said brand name. The next is NAV at about 26%. These two factors play a major role during selection of mutual funds

THE RISK RETURN GRAPH FOR VARIOUS MUTUAL FUNDS:-

Sector Funds Equity Funds Balanced Fund Income Funds Liquid Funds RISKS 58

R E T U R N S

59

The above Graph shows the Risk and Returns generated by different Funds. Liquid Funds are less Risky and also generate less Returns where as Sector Funds are more Risky but generate more Returns.

By the example of above two Funds it is clear that Risk and Returns are directly proportional to each other. Other Funds like Equity Funds, Balanced Funds and Income Funds also give the same percentage of Returns as the Risk involved

OBSERVATIONS & FINDINGS

Based on the study and research done following is the list of my observation and findings: 1. People in Bhilwara have a handsome earning of income from various 2. People save and invest regularly, a part of their income 3. Among the investors a large number is of Businessman. 4. People are investing into different schemes of Mutual Fund, and are increasing their investments in Mutual Funds industry. 5. The awareness about Mutual Funds & Share market. 6. Major investor in Mutual Funds are the people from middle income group. 59

60

7. People keep their money in the mutual Funds for a short period and longer period.

SUGGESTIONS:
1. The Anand Rathi Financial Service on the wide scale should conduct investor awareness programs.

2.

While the firms should conduct such programs in their locality to inform its existing customers about various mutual fund schemes.

3.

The investors should analyze and identify their objective of investment in Mutual Funds and the period.

4.

The incentives given to the brokers should be revised and enhanced to keep the staff motivated.

60

61

5.

In Bhilwara, the customers have huge money and intention to invest but they are either not fully aware of the various schemes or not happy with the service rendered.

6.

There is a huge potential in the bhosari . In order to tap the potential effective campaign should be started.

HOW LONG TO KEEP INVESTMENTS TO GET MAXIMUM RETURNS:Technically, in case of open-ended funds investor can withdraw their investments even within a week, but to get desired returns positive time frame is required.

Funds Equity Funds Balanced Funds MIPs Income Funds Liquid Funds

Time Period 3 Years (plus) 18 months to 3 Years 1 Year (plus) 6 months to 1 Year few days to 6 months

61

62

WHAT RETURNS CAN A INVESTOR EXPECT IF HE/SHE KEEP MONEY FOR SUGGESTED TIME FRAMES:-

Funds Sector funds Balance funds MIPs Pension Plans Income Funds Liquid Funds

Returns 22% to 25% p.a. 15% to 18% p.a. 12% to 15% p.a. 10% to 12% p.a. 7% to 9% p.a.

The above-mentioned returns in the table are indicative and not assured. All investments in MUTUAL FUNDS are in trade-able securities and are subject to market risk . The NAVs of the schemes may go up and down depending upon the factors and forces affecting the security market including the fluctuations in the internal rates .The past performance of the MUTUAL FUNDS is not indicative of future performance.

62

63

LIMITATIONS
Certain limitations have been encountered while doing this project due to which the information collected and conclusion that was arrived on may have some variance.

Following constraints were encountered while doing the project: Respondents were not ready to give appointments. Data had to be collected according to the convenience of the respondents and therefore time management became a major hurdle. Some of the questions were not answered properly by people because of lack of time. We were asked to target only a few area of Bhilwara, so our sample size was small. Some of them thought by filling questionnaire they will get some calls from company which is very difficult to tackle.

63

64

It was seen that sometimes the respondents postponed a meeting by extending the date even after fixing an appointment, it made things difficult.

BIBLIOGRAPHY & REFERENCES

Web sites: www.rathi.com www.moneycontrol.com www.amfi.com www.indiainfoline.com www.valueresearchonline.com www.sebi.in.gov www.bseindia.com

BOOKS : AMFI ADVISORS MODULE

Annexure (Sample Docs.)

64

65

Questionnaire

QUESTIONAIRE

Contact person:_______________________________________ Address: Contact no: _________________________________________ _______________

Q1. Do you believe in the concept of investment ?

Yes No

65

66

Q2. . Who manages your Portfolio ?

a. Help of Brokerage House b. By Yourself

Q3. Name of the tools you have invested in ?

A. Insurance B. Bank (Fixed deposit) C. Mutual Funds D. Equities & Share Market E. Post Office Savings F. Real Estate G. Gold H. Others

66

67

Q4. . What Features of a Brokerage House attract you ?

Good Services Low Brokerage Friendly Environment Expert Advice

Q5. Are you aware about mutual funds?

Yes NO

Q6. Do you know different type of mutual scheme present in the market??
Yes No

Q7. Which mode of investment have you chosen in mutual funds?

SIP Lump sum Others 67

68

Q8. Have you ever invested in mutual fund ?

Yes No

68

69

Q9. How you choose a mutual fund?

BRAND NAME HIGH NAV HIGH RETURNS ADVERTISING OTHERS

69

70

DECLARATION
I here by declare that this research project entitled INVESTMENT ANALYSIS AND PROSPECT OF MUTUAL FUND prepared by me under guidenceof Mrs. Priyanka Mam Lect. In KIIT Gurgaon. It is a original work done by me and the information provided in the studyis authenticto the best of my knowledge . This is study has not submitted to any other institution or university .

(Pawan kumar)

CERTIFICATE
70

71

Subject Certificate of project completation . This is to certify Mr. Pawan kumar being a student of M.B.A 4th Sem of KIIT has being assigned a research project titled INVESTMENT ANALYSIS AND PROSPECT OF MUTUAL FUND . I found him disciplined his conduct and totally dedicated towards the workassigned him. I wish him all success in future endeavors in his life. The work is original and authentic to the best of my knowledge. With Regards Mrs. Priyanka mam

71