Mutual Funds: Final Report

A PROJECT REPORT On

Study of Mutual Funds As A Better Investment Plan

SUBMITTED TO PANJAB UNIVERSITY ,CHANDIGARH IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION (2010-2011)

SUBMITTED TO:DEPARTMENT OF BUSINESSS ADMINISTRATION POST GRADUATE GOVERNMENT COLLEGE SECTOR -11, CHANDIGARH

SUBMITTED BY :ANKITA ASTHANA B.B.A 3RD YEAR P.U.PIN-17608000826

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Mutual Funds: Final Report

DECLARATION
I, hereby declare that the project report entitled STUDY OF MUTUAL FUND AS A BETTER INVESTMENT PLAN submitted for the degree of Bachelor of Business Administration, is my original work and the project report has not formed the basis for the award of any diploma, degree, associate ship, fellowship or similar other titles. It has not been submitted to any other university or institution for the award of any degree or diploma.

Place: Chandigarh Date: 5.03.2011

ANKITA ASTHANA B.B.A 3RD YEAR ROLL NO-3420 P.U.PIN :17608000826

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Mutual Funds: Final Report

ACKNOWLEDGEMENT
There is always a sense of gratitude, which we express to others for the help and the needy services they render during the different phases of our lives. I too would like to do it as I really wish to express my gratitude toward all those who have been helpful to me directly or indirectly during the development of this project. I would like to thank my professors Mrs. Richa Rathee,Mr Rakesh Kumar.Mrs Ekta Narula and Ms Kanupriya Sharma who were always there to help and guide me when I needed help. Their perceptive criticism kept me working to make this project more full proof. I am thankful to them for encouraging and valuable support. Working under them was an extremely knowledgeable and enriching experience for me.I also owe my thanks to my H.O.D Prof. Mukesh Sharma for providing me the platform to make my project a success. No words can adequately express my overriding debt of gratitude to my parents and friends whose support helps me in all the way.

ANKITA ASTHANA Roll no-3420 P.U.PIN-17608000826 B.B.A 3RD Year

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Mutual Funds: Final Report

LIST OF CONTENTS Title page Declaration Acknowledgement List of Tables List of Figures
CHAPTER 1- INTRODUCTION TO MUTUAL FUNDS CONCEPT ORIGIN CHARACTERISTICS TYPES CLASSIFICATION FACTORS AFFECTING SELECTION OF MUTUAL FUNDS DIFFERENCE BETWEEN SHARES AND MUTUAL FUNDS RISKS ADVANTAGES & DISADVANTAGES

(i) (ii) (iii) (v) (vi)

CHAPTER 2- MUTUAL FUNDS IN INDIA CONSTITUENTS OF MUTUAL FUNDS VARIOUS INVESTMENT OPTIONS IN MUTUAL FUND OFFER FACILITIES AVAILABLE TO INVESTORS RIGHTS OF MUTUAL FUND UNITHOLDER MAJOR PLAYERS IN THE MARKET

CHAPTER 3 - RESEARCH METHODOLOGY OBJECTIVES OF THE STUDY NEED FOR THE STUDY SCOPE OF THE STUDY BASIS OF RESEARCH AND DESIGN LIMITATIONS

CHAPTER 4- ANALYSIS AND INTERPRETATION CHAPTER 5 RECOMMENDATIONS AND CONCLUSION BIBLIOGRAPHY ANNEXURE

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Mutual Funds: Final Report

LIST OF TABLES

S.NO 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

TABLE NO. TABLE NO 1.1 TABLE NO 2.1 TABLE NO 3.1 TABLE NO 4.1 TABLE NO 5.1 TABLE NO 6.1 TABLE NO 7.1 TABLE NO 8.1 TABLE NO 9.1 TABLE NO 10.1

PAGE NO. 49 50 51 52 53 54 55 56 57 58

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Mutual Funds: Final Report

LIST OF FIGURES

S.NO 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

FIGURE NO. FIGURE NO. 1 (a) FIGURE NO 2 (a) FIGURE NO 1.1( i) FIGURE NO 2.1 (i) FIGURE NO 3.1 (i) FIGURE NO 4.1 (i) FIGURE NO 5.1 (i) FIGURE NO 6.1 (i) FIGURE NO 7.1 (i) FIGURE NO 8.1(i) FIGURE NO 9.1(i) FIGURE NO 10.1(i)

PAGE NO. 26 28 49 50 51 52 53 54 55 56 57 58

CHAPTER 1

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INTRODUCTION TO MUTUAL FUNDS

INTRODUCTION

There are a lot of investment avenues available today in the financial market for an investor with an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and Bonds where there is low risk but low return. He may invest in Stock of companies where the risk is high and the returns are also proportionately high. The recent trends in the Stock Market have shown that an average retail investor always lost with periodic bearish tends. People began opting for portfolio managers with expertise in stock markets who would invest on their behalf. Thus we had wealth management services provided by many institutions. However they proved too costly for a small investor. These investors have found a good shelter with the mutual funds.

Mutual fund industry has seen a lot of changes in past few years with multinational Page 7

Mutual Funds: Final Report companies coming into the country, bringing in their professional expertise in managing funds worldwide. In the past few months there has been a consolidation phase going on in the mutual fund industry in India. Now investors have a wide range of Schemes to choose from depending on their individual profiles.

Investing in various types of assets is an interesting activity that attracts people from all walks of life irrespective of their occupation, economic status, education and family background. The investor who is having extra money could invest it in securities market or in any other asset like gold or property or could simply invest it in his bank account. The companies that have extra income may like to invest their money in the extension of the existing business or undertake new venture. All of these activities in a broader sense mean investment.

As per WARREN BUFFET, Investing is simple, but not easy. Investment is the employment of funds on assets with the aim of earning income or appreciation. There has been a significant expansion of Indian sector in terms of scope and content during the last two decades. A well-developed infrastructure, a number of financial institutions and a variety of financial instruments have been promoted to cater the needs of growing saving and expanding capital market in India. The most remarkable development during 1980s was the entry of Mutual Funds as an important linkage between saving and capital market. Mutual Funds are for everyone. Around the world millions of investors invest in mutual funds because of their safety, ease of investing and the many advantages they offer. A Mutual Fund is a professionally managed, collective investment fund formed with the objective of raising money from large number of investors. Thus a Mutual Fund is the most suitable investment

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Mutual Funds: Final Report for the common man as it offers opportunities to invest in a diversified, professionally managed basket of securities at a relatively low cost. A mutual fund is a company that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, or other securities. Legally known as an "open-end company," a mutual fund is one of three basic types of Investment Company. The two other basic types are closed-end funds and Unit Investment Trusts (UITs).

CONCEPT OF MUTUAL FUND

A mutual fund is a common pool of money into which investors place their contributions that are to be invested in accordance with stated objectives. The ownership of the fund is thus joint or Mutual; the fund belong to all investors Mutual Funds means mobilizing the saving from the small and household sector, making the investment in capital and money market. Mutual Funds serve as a link between the public saving and the capital markets, as they mobilize saving from investors and bring them to borrowers in the capital markets. It works on the principle of small drops of water make a big ocean. A Mutual fund uses the money collected from investors to buy those assets which are specifically permitted by its stated investment objective. For instance, if one has Rs.1000 to invest, it may not fetch very much on its own. But when it is pooled with Rs.1000 from a lot of people, then, one could create a big fund large enough to invest in a wide variety of shares, debentures and loans on a commanding scale and thus to enjoy the economies of large-scale operations. Hence a mutual fund is nothing but a form of collective investment. It is formed together by coming of a number of investors who transfer their surplus funds to professionally qualified organization to manage it. Each investor is allocated units in Page 9

Mutual Funds: Final Report proportion to the size of his investment. Hence mutual funds enable millions of small and large investors to participate in and derive the benefit of capital market growth.

DEFINITION- Mutual Fund

In simple words Mutual Funds means a fund that is created by pooling the small savings of the investors to make investment in the securities of the different business organizations and earning return for the investors.

The Securities and Board of India (Mutual Fund) Regulations, 1993 defines a mutual fund as A fund established in the form of a trust by a sponsor, to raise money by the trustees through the sale of units to public, under on or more schemes, for investing in the securities in accordance with these regulations.

ORIGIN

The origin of the mutual funds dates back to the dawn of commercial history. As financial market become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. It is said that Egyptians and Phoenicians sold their shares in vessels caravans with a view to spread the risk attached to these risky ventures. However the real credit of introducing the modern concept of mutual fund, goes to Foreign and Colonial Government Trust of London, established in 1868. Thereafter a large number of closeended mutual funds were formed in the USA in 1930s followed by many countries in Europe, the Far East and Latin America. In the most countries both open-ended and close-

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Mutual Funds: Final Report ended types were popular. In India it gained momentum only in 1980, though it began in the year of 1964 with the Unit Trust of India launching its first fund, the Unit Scheme 1964.

Where Do Mutual Funds Invest?

Broadly, mutual funds invest basically in three types of asset classes. These classes are as follows;

Stocks: Stocks represent ownership or equity in a company, popularly known as shares. These may be in form of equity shares or preference shares. Bonds: these represent the debt from companies, financial institutions or government agencies. Money market instruments: These include short-term debt instruments such as treasury bills, certificate of deposits and inter-bank call money.

CHARACTERISTICS OF MUTUAL FUNDS

Here are some of the traditional and distinguishing characteristics of mutual funds: Investors purchase mutual fund shares from the fund itself (or through a broker for the fund), but are not able to purchase the shares from other investors on a secondary market, such as the New York Stock Exchange or Nasdaq Stock Market. The price investors pay for mutual fund shares is the funds approximate per share net asset value (NAV) plus any shareholder fees that the fund imposes at purchase (such as sales loads).

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Mutual fund shares are "redeemable." This means that when mutual fund investors want to sell their fund shares, they sell them back to the fund (or to a broker acting for the fund) at their approximate per share NAV, minus any fees the fund imposes at that time (such as deferred sales loads or redemption fees).

Mutual funds generally sell their shares on a continuous basis, although some funds will stop selling when, for example, they become too large.

The investment portfolios of mutual funds typically are managed by separate entities known as "investment advisers" that are registered with the SEC.

Mutual funds come in many varieties. For example, there are index funds, stock funds, bond funds, money market funds, and more. Each of these may have a different investment objective and strategy and a different investment portfolio. Different mutual funds may also be subject to different risks, volatility, and fees and expenses. All funds charge management fees for operating the fund. Some also charge for their distribution and service costs, commonly referred to as "12b-1" fees. Some funds may also impose sales charges or loads when you purchase or sell fund shares. In this regard, a fund may offer different "classes" of shares in the same portfolio, with certain fees and expenses varying among classes. Mutual funds are subject to SEC registration and regulation, and are subject to numerous requirements imposed for the protection of investors. Mutual funds are regulated primarily under the Investment Company Act of 1940 and the rules and registration forms adopted under that Act. Mutual funds are also subject to the Securities Act of 1933 and the Securities Exchange Act of 1934. You can find the definition of "open-end company"

Mutual funds are funds that pool the money of several investors to invest in equity or debt markets. Mutual Funds could be Equity funds, Debt funds or balanced funds. Page 12

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Funds are selected on quantitative parameters like volatality, FAMA Model, risk adjusted returns, rolling return coupled with a qualitative analysis of fund performance and investment styles through regular interactions / due diligence processes with fund managers.

TYPES OF MUTUAL FUNDS

There are many types of mutual funds available to the investors with different needs, objectives and risk taking capacities. It is completely left to the discretion of the investor to choose any one of them depending upon his requirement and risk taking capacity. These different types of funds can be grouped into certain classifications for better understanding. The main type of mutual funds are-

Open-end v/s Close-end funds: An open-end fund is that has units available for sale and repurchases at all times. An investor can buy or redeem units from the fund itself at a price based on the net asset value (NAV) per unit. NAV per unit is obtained by dividing the amount of the market value of the funds assets (plus accrued income minus the funds liabilities) by the number of units outstanding. In other words, the unit capital of an open-end mutual fund is not fixed but variable. Unlike an open-end fund, the unit capital of a closed-end fund is fixed, as it makes a one-time sale of a fixed number of units. Closed-end fund do not allow investors to buy or redeem units directly from the funds. The main objective of these funds is income generation.

Load v/s No-load funds: Page 13

Mutual Funds: Final Report Marketing of new mutual fund scheme involves initial expenses. These expenses, often called Loads, may be recovered from the investors in different ways at different times such as entry-load, exit-load and annual fixed load. Funds that charge front-end, back-end or deferred loads are called load funds. Funds that make no such charges or loads for sales expenses are called No-load funds.

Tax-exempt v/s Non-Tax exempt funds: Generally, when a fund invests in tax-exempt securities, it is called a tax-exempt fund. In India, after 1999 Union Budget, all of the dividend income received from any of the mutual funds is tax-free in the hands of investors. However funds other than equity funds have to pay a distribution tax, before distributing income to the investors. Thus equity fund schemes are tax-exempt investment, while other funds are taxable for the distributable income.

Money Market Funds: Money Market Funds invest in securities of a short term nature, which generally means securities of less than one-year maturity. The typical, short-term, interest-bearing instruments these funds invest in include Treasury Bills issued by governments, certificate of deposit issued by bank or commercial paper issued by companies. In India, Money Market Mutual Funds also invest in the inter-bank call money market.

Gilt Funds: Gilts are government securities with medium to long-term maturities, typically of over one year. In India, we have seen the emergence of Government Securities or Gilt Funds. These funds have little risk to default and hence offer better protection of principal. Debt Securities prices fall when interest rate level increase.

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CLASSIFICATION OF MUTUAL FUNDS

a) By nature of investment: Mutual Fund may invest in equities, bonds or other fixed income securities, or shortterm money market, so we have Equity, Bond and Money Market Funds. All of them invest in financial market.

(b) By investment objective: Investors and the mutual funds pursue different objectives while investing. Growth Funds invest for medium to long term capital appreciation. Income Funds invest to generate regular income, and less for capital appreciation. Value Funds invest in equities that are considered under-valued today, whose value will be unlocked in future.

(c) Fund Type by Risk Profile: Funds are often grouped in order of risk. Equity Funds have a greater risk of capital loss Debt Fund seeks to protect the capital while looking for income. Money Market Funds are exposed to less risk than even the Bond Funds. Page 15

Mutual Funds: Final Report

FACTORS AFFECTING SELECTION OF FUND

1. Objective of Fund - First of all investor must see the objective of the fund whether income oriented or growth. Income oriented is mainly backed by fixed interest yielding securities like debentures oriented or bonds whereas growth oriented is backed by equities. It is obvious that growth oriented schemes are more risky than income oriented schemes, and hence, the returns from such schemes are not comparable with each other. Investor's objective should coincide with the scheme, which he proposes to choose.

2. Consistency of Performance - A mutual fund is always intended to give steady long term returns, and hence, the investor should measure the performance of a fund over a period of at least three years. Investors are satisfied with a fund that shows a steady and consistent performance than a fund which performs superbly in one year and then falls in the next year. Consistency in performance is a good indicator of investment expertise.

3. Historical Background - The success of any fund depends upon the competence of the management, its integrity, periodicity and experience. The fund's integrity should be above suspicion. A good historical record could be a better horse to bet on than new funds. It is in accordance with the maxim "A known devil is better than an unknown angel."

4. Cost of Operation - Mutual funds seek to do a better job of the investible funds at a lower cost than the individuals could do for themselves. Hence, the prospective investor should scrutinize the expense ratio of the fund and compare with others. Page 16

Mutual Funds: Final Report Higher the ratio, lower will be the actual returns to the investor.

5. Capacity for Innovation - The efficiency of a fund manager can be tested by means of innovative schemes he has introduced in the market so as to meet the diverse needs of the investors. It is quite natural that investor will look for the funds, which are capable of introducing innovations in the financial market.

6. Investor Servicing - The most important factor to be considered, is prompt and efficient servicing. Services like quick response to investor queries, prompt dispatch of unit certificates, quick transfer of units, immediate encashment of units etc. will go a long way in creating the impression in the mind of the investors.

7. Market Trends - Traditionally it has been found that the stock market index and the inflation rate tend to move in the same direction whereas the interest rates and the stock market index tend to move in the opposite direction. This sets the time for the investor to enter into the fund or come out of it.

8. Transparency in Management - The success of a mutual fund depends to a large extent on the transparency of the fund management. In these days of investor awareness, it is very vital that the fund should disclose the complete details regarding the operation of the fund. It will go a long way in creating a lasting impression in 'the minds of the investors to patronize the fund for ever.

Difference between Shares and Mutual Funds

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Mutual Funds: Final Report Shares: When companies look for money for their business, they can get it in two ways either they borrow from a bank and pay interest ("debt") or they ask people like you and me to invest and give us shares ("equity"). A share is a part of a business.

To organise such buying and selling, there are commercial "stock exchanges". BSE and NSE are some of them, though there are a number of other, smaller exchanges in India. An exchange provides a common place for people to buy or sell shares, with sales happening on an auction basis - buyers bid for shares at a price they are willing to pay, and sellers "ask" for a price from buyers. Exchanges match these prices and share exchanges happen along with payments. "Brokers" facilitate these exchanges, and you pay them a fee as brokerage, part of which goes to the stock exchange as well.

Mutual funds: When a lot of shares are available on stock exchanges, you and me don't know which companies to invest in. But let us say a guy named Sandip Subherwal knows, and keeps track of the market daily. So we give him our money and he buys and sells stocks for us. This is a mutual fund - it's our money (mutual), and Sandip is a Fund Manager. There is a structure to this in India, so a fund manager is part of an "asset management company (AMC)". To protect Sandip from running away with our money, SEBI has some rules in place, and there are "trustees" for every fund. With this structure the AMC issues "units" to us for the money we have invested, and tells us how much our units are worth daily (NAV). We can then choose to exit by selling our units back to the AMC ("redemption"). Mutual funds are not just restricted to shares. They are mutual investments, therefore they can be anywhere. The common ones are equity (stocks and shares) and Debt. Debt markets are where companies borrow money, but they want to borrow huge sums of money that you and I don't have. Therefore, we pool in our money (mutual fund) and give the big whole lot Page 18

Mutual Funds: Final Report to the company at an interest. Even the government borrows, but again, only large sums of money. Mutual funds can invest there too. Debt is traditionally "safer" than equity since there is a fixed valuation and good rating mechanisms to curb risk; and in the same vein, the profits (and losses) are usually much lesser than equity. Shares are a part of a business whereas mutual funds are cumulative investment.

RISKS OF MUTUAL FUNDS

It is generally said that the investment in Mutual Funds has moderate return and moderate risk as compare to other investment avenues. The main risks to the mutual fund unitholder are;

Market Risks - In general there are certain risks associated with every kind of investment on shares. They are called market risks. These market risks can be reduced, but cannot be completely eliminated even by good investment management. The prices of shares are subject to wide fluctuations depending upon market conditions on which nobody has a control. Moreover, every economy has to pass through a cycle - Boom, Recession, Slump and Recovery. The phase of business cycle affects the market conditions to a large extent.

Scheme Risks - There are certain inherent risks in the scheme itself. For instance, in a

pure growth scheme, risks are greater. It is obvious because if one expects more returns as in the case of growth scheme, one has to take more risk.

Investment Risk - Whether the mutual funds makes money in shares or loses depends

upon the investment expertise of the Asset management Company (AMC). If the investment Page 19

Mutual Funds: Final Report advice goes wrong, the fund has to suffer a lot. The investment expertise of various funds is different and it is reflected on the returns which they offer to investors.

Business Risks - The corpus of a mutual fund might have been invested in a

company's shares. If the business of that company suffers any set back, it cannot declare any dividend. It may even go to the extent of winding up the business. Though the mutual fund can withstand such a risk, its income paying capacity is affected.

Liquidity Risk: Liquidity risk arises when it becomes difficult to sell the securities

that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities.

Political Risks - Successive Governments bring with them fancy new economic

ideologies and policies. It is often said that many economic decisions are politically motivated. Changes in govt. bring in the risk of uncertainty which every player in the financial service industry has to face. So mutual funds are no exception to it.

ADVANTAGES OF MUTUAL FUNDS

If mutual funds are emerging as the favorite investment vehicle, it is because of many advantages they have over other forms and avenues of investing, for the investor who has limited resources available in the terms of capital. The following are the main advantages offered by mutual funds;

Portfolio diversification: - Mutual Funds normally invest in a well-diversified portfolio or securities. Each investor in a fund is a part owner of all of the funds Page 20

Mutual Funds: Final Report assets. This enables him to hold a diversified investment portfolio even with a small amount of investment.

Professional management:- The investment management skills, along with a needed research into available investment options, ensure a much better return than what an investor can manage on his own. The fund manager tries to earn maximum return from the available funds by putting his professional knowledge and skills.

Reduction/Diversification of risk: - An investor in mutual fund acquires a diversified portfolio, no matter how small his investment. Diversification reduces the risk of loss, as compare to investing directly in one or two shares or debentures or other instruments. The risk reduction is one of the most important benefits of mutual fund.

Reduction of transaction costs: - A direct investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund, he has the benefit of economies of scale; the funds pay lesser costs because of larger volumes.

Liquidity: - Investment in a mutual fund is more liquid as compare to shares or debentures. An investor can liquidate the investment, by selling the units to the fund if open-end, or selling them in the market if the fund is closed-end.

Specified investment objectives: - Mutual Funds focus their investment activities based on investment objectives such as income, growth or tax saving. An investor can choose a fund that has investment objectives in line with his objectives.

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Mutual Funds: Final Report Therefore, funds provide the investor with a vehicle to attain his objectives in a planned manner.

Keeping the Money Market active: - Individual investor cannot have any access to money market instruments since the minimum amount of investment is out of his reach. On the other hand, mutual funds keep the money market active by investing money on the money market instruments . Convenience and flexibility: - Mutual Fund management companies offer many investor services that a direct market investor cannot get. Investor can easily transfer their holdings from one scheme to the other; get updated market information, and so on.

DISADVANTAGES OF MUTUAL FUNDS

No Insurance: Mutual funds, although regulated by the government, are not insured against losses. The Federal Deposit Insurance Corporation (FDIC) only insures against certain losses at banks, credit unions, and savings and loans, not mutual funds. That means that despite the risk-reducing diversification benefits provided by mutual funds, losses can occur, and it is possible (although extremely unlikely) that you could even lose your entire investment.

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Dilution: Although diversification reduces the amount of risk involved in

investing in mutual funds, it can also be a disadvantage due to dilution. For example, if a single security held by a mutual fund doubles in value, the mutual fund itself would not double in value because that security is only one small part of the fund's holdings. By holding a large number of different investments, mutual funds tend to do neither exceptionally well nor exceptionally poorly.

Fees and expenses: 5Most mutual fund companies charge management and
operating fees that pay for management expenses (usually around 1.0% to 1. % per year). In addition, some mutual funds charge high sales commissions, 12b-1 fees, and redemption fees. And some funds buy and trade shares so often that the transaction costs add up significantly. Some of these expenses are charged on an ongoing basis, unlike stock investments, for which a commission is paid only when you buy and sell .

Poor Performance: Returns on a mutual fund are by no means guaranteed.

In fact, on average, around 75% of all mutual funds fail to beat the major market indexes, like the S&P 500, and a growing number of critics now question whether or not professional money managers have better stockpicking capabilities than the average investor.

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CHAPTER 2

MUTUAL FUNDS IN INDIA

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HISTORY OF MUTUAL FUNDS IN INDIA

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Reserve Bank and the Government of India. The objective then was to attract the small investors and introduce them to market instruments. Since then, the history of mutual funds in India can be broadly divided into four distinct phases.

Figure 1 (a)Phases of Mutual funds in India (Source-www.mutualfunds.com) Page 25

Mutual Funds: Final Report

Phase 1 1964-87 (Unit Trust of India) In the first phase, the only player was UTI. In 1963, UTI was established by an Act of parliament and given a monopoly. The first and still one of the largest schemes, launched by UTI was Unit Scheme 1964. Later in 1970s and 80s, UTI started innovating and offering different schemes to suit the needs of different classes of investors

Phase 2 1987-93 (Entry of Public Sector Funds) In 1987, with the opening up of the economy, many public sector banks and financial institutions were allowed to establish mutual funds. The State bank of India established the first non-UTI mutual fund SBI Mutual Fund in November 1987. This was followed by many other public sector mutual funds like Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, GIC Mutual Fund etc. These mutual funds helped enlarge the investor community and the investible funds.

Phase 3 1993-96 (Emergence of Private Funds) A new era in the mutual fund industry began with the permission granted for the entry of private sector funds in 1993, giving the Indian investors a broader choice of funds and increasing competition for the existing public sector funds. Foreign fund management companies were also allowed to operate mutual funds. During the year 1993-94, five private sector mutual funds launched their schemes followed by six others in 1994-95.

Phase 4 1996 (SEBI Regulation for Mutual Funds)

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Mutual Funds: Final Report The entire mutual fund industry in India has since scaled new heights in terms of mobilization of funds and number of players. Deregulation and liberalization of the Indian economy has introduced competition and provided impetus to the growth of the industry. More investor friendly regulatory measures have been taken both by SEBI to protect the investor and by the Government to enhance investors returns through tax benefits.

CONSTITUENTS OF MUTUAL FUND IN INDIA

Like other countries, India has a legal framework within which mutual funds must be constituted. In India, open and close end funds operate under the same regulatory structure A mutual fund in India is allowed to issue open-end and closed-end schemes under the common legal structure. The structure which is required to be followed by mutual funds in India is laid down under SEBI (Mutual Fund) Regulation, 1996. As per SEBI, following are the main constituents of mutual fund,

Figure 2(a) Constituents of Mutual Fund industry in India (Source-www.amfiindia.com) Page 27

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(a) The Fund Sponsor Sponsor is defined under SEBI regulations as any person who, acting alone or in combination with another body corporate, establishes mutual fund. The sponsor will form a trust and appoint a board of trustees. The sponsor will also appoint an asset management company as fund managers and a custodian to hold the fund assets. All these appointments are made in accordance with SEBI Regulations.

(b) Mutual Fund as Trusts A mutual fund in India is constituted in the form of a Public Trust created under the Indian Trusts act, 1882. The fund sponsor acts as the settler of the Trust. A mutual fund is just a pass-through vehicle. Under the Indian Trust Act, the Trust or the fund has no independent legal capacity itself and therefore all acts in relation to the trust are taken on its behalf by the Trustees. Being Public Trusts, mutual funds can invite any number of investors as beneficial owners in their investment schemes.

(c) Trustees It is created by sponsor under Indian Trust Act, 1882. A trustee holds the property of the mutual fund in the trust for the benefit of the unit holders. Trustee may be individuals comprising a board or a trustee company but generally Trustee Company is preferred because of limited liability of board of directors. Some of the duties performed by the trustees are, To manage the mutual fund in accordance with the laws, regulations, directions and guidelines issued by SEBI They must insure that the funds transactions are in accordance with the Trust Deed. Page 28

Mutual Funds: Final Report The Trustees must ensure due diligence on the part of the AMC for the empanelment of brokers. The trustees must furnish to SEBI on a half-yearly basis, a report on the funds activities. To act in the best interest of the unit holders. To maintain and defend the mutual fund property against any legal proceedings.

(d) Asset Management Company Asset Management Company is a body that acts as the investment Manager of the Trust. The sponsors or trustees appoint the AMC to manage the affairs of the mutual fund. It should have a minimum net worth of Rs 10 crores at all times. At least fifty percent of the directors of the AMC should be independent of sponsors or trustees. The AMC can not act as a trustee of any other mutual fund. Some of the obligations of AMC are; Investment of funds is in accordance with SEBI Regulation and Trust Deed. To submit regular returns to the trustees regularly. They do not undertake any other activity conflicting with managing the fund. To appoint custodian, registrar and share transfer agents. Each days NAV is updated on AMFIs website by 8.00 p.m. of the relevant day.

(e) Custodians The custodian is appointed by the Board of Trustees for safekeeping of physical securities or participating in any clearing system through approved depository companies on the behalf of mutual fund in case of dematerialized securities. SEBI requires that each mutual fund shall have custodian who is independent. Custodian should be an agency which is registered with SEBI under SEBI Regulation Act, 1996. A mutual funds dematerialized Page 29

Mutual Funds: Final Report securities holding will be held by a Depository through a Depository participant. A funds physical securities will continue to be held by Custodian. Thus, deliveries of a funds securities are given or received by a custodian or a depository participant, at the instruction of AMC.

VARIOUS INVESTMENT OPTIONS IN MUTUAL FUNDS OFFER

To cater to different investment needs, Mutual Funds offer various investment options. Some of the important investment options include:

Growth Option:

Dividend is not paid-out under a Growth Option and the investor realises only the capital appreciation on the investment (by an increase in NAV).

Dividend Payout Option:

Dividends are paid-out to investors under the Dividend Payout Option. However, the NAV of the mutual fund scheme falls to the extent of the dividend payout.

Dividend Re-investment Option:

Here the dividend accrued on mutual funds is automatically re-invested in purchasing additional units in open-ended funds. In most cases mutual funds offer the investor an Page 30

Mutual Funds: Final Report option of collecting dividends or re-investing the same.

Retirement Pension Option:

Some schemes are linked with retirement pension. Individuals participate in these options for themselves, and corporates participate for their employees.

Insurance Option:

Certain Mutual Funds offer schemes that provide insurance cover to investors as an added benefit.

Systematic Investment Plan (SIP):

Here the investor is given the option of preparing a pre-determined number of post-dated cheques in favour of the fund. The investor is allotted units on a predetermined date specified in the offer document at the applicable NAV.

Systematic Withdrawal Plan (SWP):

As opposed to the Systematic Investment Plan, the Systematic Withdrawal Plan allows the investor the facility to withdraw a pre-determined amount / units from his fund at a predetermined interval. The investor's units will be redeemed at the applicable NAV as on

FACILITIES AVAILABLE TO INVESTORS Page 31

Mutual Funds: Final Report

There are some facilities provided by the Mutual Fund Companies to their customers. These facilities are;

Re-purchase Facility - The units of closed ended schemes must be compulsorily listed in recognized stock exchanges. Such units can be sold or bought at market prices. But, units of open ended schemes are not at all listed and hence they have to be bought only from the fund. So, the fund receives the right to buy back the units from its members. This process of buying back the units from the investors by the fund is called repurchase facility. This is available in both schemes so as to provide liquidity to investors. The price fixed for this purpose is called repurchase price.

Re-issue Facility - In the case of open ended schemes, units can be bought only from the fund and not in the open market. The units bought from the investors are again reissued to those who are interested in purchasing them. The price fixed for this purpose is called reissue price.

Roll Over Facility - At the time of redemption, the investor is given an option to reinvest his entire investment once again for another term. An investor can overcome an adverse market condition prevailing at the time of redemption by resorting to this Roll over facility. This is applicable in the case of closed ended fund.

Lateral Shifting Facility - Some mutual funds permit the investors to shift from one scheme to another on the basis of Net Asset Value with a view to provide total flexibility in their operation. This is done without any discount on the fund and without

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Mutual Funds: Final Report any additional charges. This is a great privilege given to the investors. This shifting is called 'lateral shifting'.

RIGHTS OF A MUTUAL FUND UNITHOLDER

The offer document of a scheme lays down the investors rights. Investors are the owner of the schemes assets and it is imperative that they are aware of their rights. The important rights of the unit-holders are outlined below:

Right of Proportionate Beneficial Ownership:- Unit-holders have the right to beneficial ownership of the schemes assets. They have right t any dividend or income declared under the scheme.

Right to timely service: - Unit-holders are entitled to receive dividend warrants within 30 days of dividend declaration. Unit-holders have the right to payment of interest at 15% per annum in the vent of failure on the part of mutual fund to dispatch the redemption or repurchase proceeds within 10 working days.

Right to Information: - Unit-holders have the right to obtain from the trustees any information that may have an adverse bearing on their investments. They also have the right to inspect major documents of the fund. Each unit-holder has the right to receive a copy of the annual financial statements. Page 33

Mutual Funds: Final Report

Right to wind up a scheme: - Investors can demand the trustees to wind up a scheme prior to its earlier fixed duration and repay the investors, if 75% of the investors pass a resolution to this effect. This right applies to both closed-end funds and closed-end or open-end fixed term plan series.

Right to Terminate the AMC: - The appointment of an AMC of a fund can be terminated by 75% of the unit-holders of the scheme with the prior approval of SEBI.

MAJOR PLAYERS IN THE MUTUAL FUND MARKET

1) 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.

2) Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a golbal organisation evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach

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Mutual Funds: Final Report to investment. Recently it crossed AUM of Rs. 10,000 crores.

3) 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. 4) HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing Development Finance Corporation Limited and Standard Life Investments Limited. 5) 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. 6) 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.

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Mutual Funds: Final Report 7) Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsorers, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993. 8) 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. 9) State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshor fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18 schemes. 10) Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The Page 36

Mutual Funds: Final Report sponsorers for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country with more than Rs. 7,703 crores (as on April 30, 2005) of AUM. 11) 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. 12) Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Privete Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds. 13) Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, Page 37

Mutual Funds: Final Report 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. 14) 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. 15) Franklin Templeton India Mutual Fund

The group, Frnaklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer. 16) Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the Page 38

Mutual Funds: Final Report market in securities, investmenty management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset management services and products to governments, corporations, pension funds and non-profit organisations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the needs of Indian retail investors focussing on a long-term capital appreciation. 17) 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. 18) LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. . 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. 19) GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Page 39

Mutual Funds: Final Report Government of India undertaking and the four Public Sector General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is constituted as a Trust .

CHAPTER 3

RESEARCH METHODOLOGY

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Mutual Funds: Final Report

BASIS OF RESEARCH AND DESIGN

The Research Methodology includes the various methods and techniques for conducting a Research. Marketing Research is the systematic design, collection, analysis and reporting of data and finding relevant solution to a specific marketing situation or problem". D. Slesinger and M. Stephenson in the encyclopedia of Social Sciences define Research as "the manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the practice of an art".

Research is, thus, an original stock of knowledge making for its advancement. The purpose of Research is to discover answers to the Questions through the application of scientific procedures. My project has a specified framework for collecting data in an effective manner. Such framework is called "Research Design". The research process followed by me consists of following steps:

Defining the problems and research objective

It is said, "A problem well defined is half solved". The step is to define the project under study and deciding the research objective. Page 41

Mutual Funds: Final Report A. Developing the research plan; The second stage of this study consists of developing the most efficient plan for gathering the relevant data. The method for carrying out study is followed by: -

Sampling Plan - Sampling can be defined as the section of some part of an aggregate or totality on the basis of which judgment or an inference about aggregate or totality is made. Universe - Universe refers to the total of the items or units in a field of inquiry. Universe for my Project will be Chandigarh .

Sampling units - It will be the general public.

Sample size - Sample size refers to the total numbers of respondents about whom the information is desired. The sample size for my study is 50 respondents.

Sampling procedure - It is a way through which sampling is done. According to my project, I was supposed to collect the primary data, which was to be used by the company. There are various methods available for collecting primary data i.e.

1. Observation Method.

2. Questionnaire Method.

3. Interview Method.

4. Schedule Method.

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Mutual Funds: Final Report In my project, I used Questionnaire Method for collecting the data. With the help of this method of collecting data I did a Sample Survey. Sample Survey is that type of survey in which specified number of units of the universe of the research is questioned.

B. Data Collection The facts and figures were collected through primary as well as secondary data.

Primary sources - Primary data are those, which are collected afresh and for the

first time, and thus happen to be original in character. I have collected Primary Data by conducting surveys through Questionnaire.

Secondary sources: - Secondary data , which are already searched, collected and

used by someone else such as books, magazines, news papers, research reports etc. I have also used secondary data in preparing this research report.

c. Analysis of Data and Interpretations: After collecting the data, tabulation of data was done wherein classified data put in the forms of tables. After tabulation, the analysis work of my project was carried out by the use of various techniques.

Although Questionnaire is simpler and effective method, popularly used to gain maximum information with minimum effort, time and cost, but it must never be ignored that, the success of the questionnaire depends on the organization of the questions. The questions added must be such, which includes itself to the respondent to reply decently without biasness. It should not be such, which may create confusion or may hurt the emotions of the respondents.

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Mutual Funds: Final Report So I will try my best to prepare a suitable and genuine set of questions which will be implied just to gain knowledge related to topic and not to go for an in depth personal investigation of the respondent.

OBJECTIVES OF THE STUDY

The main objectives of conducting this research are as follows,

To know the investment preferences of the investor regarding various investment schemes.

To study the investors awareness and confidence towards Mutual Funds.

To compare the various Income, Growth & Balanced Schemes and Monthly Income plans offered by various Mutual Funds companies in India.

To study the satisfaction level of the investors from the investment through Mutual Funds.

To know the problems faced by investors by investing through Mutual Funds . To study the investors awareness about various Mutual Funds Institution.

To analyze mutual funds as a better investment option. Page 44

Mutual Funds: Final Report

NEED FOR THE STUDY

The main purpose of doing this project was to know about mutual fund and its functioning. This helps to know in details about mutual fund industry right from its inception stage, growth and future prospects. It also helps in understanding different schemes of mutual funds. Because my study depends upon prominent funds in India and their schemes like equity, income, balance as well as the returns associated with those schemes. The project study was done to ascertain the asset allocation, entry load, exit load, associated with the mutual funds. Ultimately this would help in understanding the benefits of mutual funds to investors and whether mutual funds offer a better investment option to the customer.

SCOPE OF THE STUDY

In this project the scope is limited to some prominent mutual funds in the mutual fund industry.The funds were analyzed depending on their schemes like equity, income, balance and growth. This study is mainly concentrated on various schemes of major mutual fund companies Page 45

Mutual Funds: Final Report operating in India, their current market standing , consumer preferences regarding investment in mutual funds and its overall effectiveness as a better investment option.

LIMITATIONS

Although since every effort has been made to collect maximum information from the respondents even then, the study is subjected to the following limitations and problems. 1. Owing to the paucity of time and resources, research would be concentrated on a relatively small sample size, limited primarily to the city Chandigarh. 2. The study covers only income, Growth, Balanced and Monthly Income Schemes. 3. The information provided by the respondents may be biased and incorrect. 4. The sample may not represent the whole population 5. Most of this study is restricted to Internet and published data because of the non availability of primary data.

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Mutual Funds: Final Report

CHAPTER 4

ANALYSIS & INTERPRETATION

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Mutual Funds: Final Report

STATEMENT 1- To know the percentage of respondents making investments.

Table 1.1 OPTIONS YES NO NO OF RESPONDENTS 36 14 %AGE 72 28

28% Yes No 72%

Fig.1.1(i)

INTERPRETATION: The above data shows that 72% respondents do make investments whereas 28%people do not make any type of investment. Page 48

Mutual Funds: Final Report

STATEMENT 2- To know the percentage of the Monthly Income, invested by the investors.

Table-2.1 MONTHLY INVESTMENT 0-5% 5%-10% 10%-20% Above 20% Total NO. OF RESPONDENTS 18 20 9 3 50 %AGE 36% 40% 18% 6% 100%

18%

6% 36%

0-5% 5%-10% 10%-20% Above 20%

40%

Fig 2.1(i)

INTERPRETATION: The above data shows that the majority of the respondents invest 5%-10% of their monthly income, followed by 0-5% monthly investment. This shows that the Indian investors spent their most of the part of their monthly income on consumption. Page 49

Mutual Funds: Final Report

STATEMENT 3- To know the Investment Preference of the Investors Table 3.1 NO. OF ITEMS Gold Mutual Funds Property Bank Deposits Post Office Schemes Insurance Securities TOTAL RESPONDENTS 1 7 4 14 7 5 12 50 %AGE 2% 14% 8% 28% 14% 10% 24% 100%

Gld o Mt a Fn s uu l u d 1% 4 1% 0 2 % 1% 4 8 % Bn Dp s a k e o its 2% 4 2% 8 Ps O e o t fic f Sh ms ce e I s r ne n ua c Sc r s e uitie P pr r ety o

Fig 3.1(i) INTERPRETATION: The above data shows that Bank Deposits and Securities are the most preferable investment alternatives with 28% and 24% respondents in favor of both respectively Traditional investment alternatives i.e. Gold and Post Office Schemes are loosing investors attention because of falling rate of return from these investment alternatives. STATEMENT 4 To know the awareness level about Mutual Funds.

TABLE 4.1 Page 50

Mutual Funds: Final Report NO. OF RESPONSE Yes No Total RESPONDENTS 38 12 50 %age 76% 24% 100%

24% Y es No 76%

Fig 4.1(i)

INTERPRETATION:

The above data shows that 76% respondents are aware of Mutual Funds. The awareness level so high because of Mutual Fund advertisements in Newspapers & TV, also because many of the public and private sector banks are providing Mutual Fund Services.

STATEMENT 5- To know the awareness about Mutual Fund Institutions. Table-5.1

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Mutual Funds: Final Report

M.F. INSTITUTIONS ICICI HDFC Kotak Mahindra UTI Sundram Reliance Franklin Templeton SBI Birla Sunlife Standard Charted PNB Total

NO. OF RESPONSES 16 33 16 38 7 18

24 11 20 22 9 214(50)

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BIRLA , 20 S.B.I, 11 FRANKLIN, 24

PNB, 22

ICICI, 16 HDFC, 33 KOTAK, 16

RELIANCE, 18

SUNDARA M, 7

U.T.I, 38

Fig5.1(i)

INTERPRETATION: From the above data it can be easily interpreted that UTI is still the most popular Mutual Fund Institution as all the respondents feel its presence in the Mutual Fund sector followed by HDFC, ICICI & Standard Charted among private financial institutions. Major public and private sector banks and foreign mutual funds may be the leaders all over India but in this region they are still to build a reputation.

STATEMENT 6 To know the number of respondents who have invested in Mutual Funds. Table 6.1

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Mutual Funds: Final Report NO. OF RESPONSE Yes No Total RESPONDENTS 24 26 50 %age 48% 52% 100%

48% Yes No 56%

Fig 6.1(i)

INTERPRETATION: Above table and graph shows that 48% of the respondents have invested in Mutual Funds. It means that investors are building their confidence in Mutual Funds because of attractive returns as compare to other forms of investment.

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Mutual Funds: Final Report STATEMENT 7 To know the Mutual Fund Institutions, in which respondents have invested. Table 7.1 M.F. INSTITUTION UTI HDFC Stanchart Kotak Mahindra SBI Birla Sunlife ICICI Reliance Total NO. OF RESPONDENTS 5 4 3 1 3 2 4 2 24 %age 20% 17% 13% 4% 13% 8% 17% 8% 100%

UTI HDFC 17% 8% 13% 4% 13% 8% 20% Stanchart Kotak Mahindra 17% SBI Birla Sunlife ICICI Reliance

Fig 7.1(i) INTERPRETATION: The above data shows that UTI is the market leader with 20% investors. This is because UTI, being the oldest Mutual Fund institution, has a good reputation. ICICI and HDFC have also reasonable share with 17% investors.

STATEMENT 8 To know the schemes, in which respondents have invested.

Table-8.1

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Mutual Funds: Final Report SCHEME Income Scheme Growth Scheme Balanced Scheme Monthly Income plan Total NO. OF RESPONDENTS 8 11 4 1 24 %age 33% 46% 17% 4% 100%

Incom e Schem e 17% 4% 33% Growth Scheme Balanced Schem e 46% Monthly Incom e plan

Fig 8.1(i)

INTERPRETATION: The above data shows that maximum investors i.e. 46% are investing in growth schemes. This is because investors want to yield maximum return by taking benefit of the present share market boom. Income schemes are also very popular among the old age investors and the risk averters. STATEMENT 9 To know factors that influence the investment decision of respondents for mutual funds. Table 9.1

FACTORS High and Regular income Company's Name

NO. OF RESPONSES 13 17 Page 56

%age 23% 30%

Mutual Funds: Final Report Past Returns Recommendations Total 24 2 56 (24) 43% 4% 100%

4% 43%

High and Regular income 23% Company's Name Past Returns 30% Recommendation s

Fig 9.1(i)

INTERPRETATION: The above data shows that investors give maximum importance to Past Returns or Track Record of the company, while making investment in Mutual Funds. High & Regular Income and Companys Name also influences the investment decision of the respondents. Very few respondents consider the Recommendations of others, while making investment in Mutual Fund.

STATEMENT 10 To know the satisfaction level of the investors.

Table 10.1

RESPONSE Satisfied Not Satisfied Total

NO.OF RESPONDENTS 46 4 50

%age 92% 8% 100%

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8% Satisfied Not Satisfied 92%

Fig 10.1 (i)

INTERPRETATION:

The above data shows that 92% respondents are satisfied from their investments and 8% respondents are still dissatisfied from their investments. It implies that the majority of respondents expectations are being met.

CHAPTER 5

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RECOMMENDATIONS & CONCLUSION

RECOMMENDATIONS TO INVESTORS 1) Assess Yourself - Self-assessment of one's needs; expectations and risk profile is of prime importance, failing which, one will make more mistakes in putting money in right places than otherwise. One should identify his degree of risk bearing capacity and also clearly state the expectations from the investments. Irrational expectations will only bring pain. Page 59

Mutual Funds: Final Report 2) Try to understand where the money is going - It is important to identify the nature of investment. One can lose substantially if one picks the wrong kind of mutual fund. In order to avoid any confusion, it is better to go through literature such as offer document and fact sheets that mutual fund companies provide on their funds. 3) Don't rush in picking funds, think first - Firstly one has to decide, what the purpose of his investment is and then purpose should be guiding light for all investments. It is thus important to assess the risks in various schemes. 4) Invest, don't speculate - A common investor is limited in the degree of risk that he is willing to take. One should abstain from speculating i.e. getting out of one fund and investing in other with the intention of making quick money.

5) Don't put all the eggs in one basket - No matter what the risk profile of a person
is, it is always advisable to diversify the risks associated. So putting one's money in different asset classes is generally the best option as it averages the risks in each category.

6) Be regular - Investing should be a habit and not an exercise undertaken at one's

wishes, if one has to really take benefit from them. Since it is extremely difficult to know when to enter or exit the market, it is important to beat the market by being systematic.

7) Keep Track of your investments - Finding the right fund is important but even
more important is to keep track of the way they are performing in the market. If the market is beginning to enter a bearish phase, then investors of equity will benefit by switching to debt funds as the losses can be minimized. One can

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Mutual Funds: Final Report always switch back to the equity when the market shows some boom.

RECOMMENDATIONS TO MUTUAL FUND PROVIDERS Chandigarh is quite active in making investments and the awareness of people regarding various schemes being launched by different AMCs is good..But still a lot has to be done to make the people more responsive towards mutual fund investment opportunities .Following are a few suggestions:

1) Regular visits should be made by the executives so as to remain in touch with the agents and various investing authorities so that the channel remains strong. 2) Application process for mutual fund should be made more easier for the investors and it should be hassle free. 3) Schemes launched by various banks should provide all the knowledge to the investors regarding their benefits. 4) More marketing activities like newspaper advertisements,radio and t.v advertisements ,pamphlets ,brochures etc should be employed by banks . 5) Fund managers should act towards gaining faith of investors .

CONCLUSION
Mutual Funds now represent perhaps the most appropriate investment opportunity for most investors. As financial markets become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on Page 61

Mutual Funds: Final Report successful investing. As the investors always try to maximize the returns and minimize the risk, mutual funds satisfy these requirements by providing attractive returns with affordable risk.With the emergence of tough competition in this sector, Mutual Funds are launching a variety of schemes which caters to the requirements of a particular class of investors. Risk-takers, for getting capital appreciation should invest in growth/equity schemes. Investors who are in need of regular income should invest in Income Plans.

The major drawbacks in Mutual Funds are that, in an attempt to generate maximum returns from a scheme, investment managers divert the funds into more risky instruments such as equity. Another main disadvantage of mutual funds is that an investor in a mutual fund has no control over the overall cost of investing. He pays investment fees as he remains with the fund. Investors who invest on their own can build their own portfolio of shares, bonds and other securities. Investing through funds means he delegates this decision to the fund managers. But still these drawbacks are over-shadowed by the advantages that Mutual Funds provide. So they are becoming popular and investors are switching from other investment alternatives to earn maximum.

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Mutual Funds: Final Report

BIBLIOGRAPHY

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Mutual Funds: Final Report BIBLIOGRAPHY

BOOKS

AUTHORS

AMFI MUTUAL FUNDS

- D.C.ANJARIA - DR.UMA SHASHIKANT

REFERENCES BUSINESS WORLD BUSINESS TODAY

WEBLIOGRAPHY 1) www.mutualfunds.com 2) www.sbimf.com 3) www.amfiindia.com 4)www.google.com 5)www.moneycontrol.com 6)www.indiainfoline.com

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Mutual Funds: Final Report

ANNEXURE

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Mutual Funds: Final Report

QUESTIONNAIRE
Name:-.. Age:-... Sex:-........ Qualification:- Monthly family income:-. Email Id:-.. Phone Number:-

1). Do you invest money? o Yes o No

2) If Yes, in which avenues you invest? o Mutual Fund o Banks o Share Market o Post Office o Others

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Mutual Funds: Final Report 3) If in mutual funds then what are the reasons for which you invest there o High and regular income o Past returns o Companys name o Recommendations

4).What is the percentage of monthly income invested by you in various investments channels.? o 0-5% o 5-10% o 10-20% o Above 20%

5).Do you know about mutual funds? o Yes o No

6)Have you invested in any mutual fund? o Yes o No

7)What are the various mutual fund institutions you know of? o U.T.I Page 67

Mutual Funds: Final Report o SBI o PNB o Standard Chartered o Frankfin Templeton o Reliance o Kotak Mahindra o Sundaram

8)Which mutual fund scheme do you prefer the most? o Income scheme o Growth scheme o Balanced scheme o Monthly Income plan

9)Which AMC do you prefer the most? o ICICI o SBI o Kotak Mahindra o HDFC o Standard Chartered o Franklin Templeton o U.T.I

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Mutual Funds: Final Report o PNB o Birla Sunlife o Reliance

10)Did you face any problem when you invested in mutual funds? o Yes o No

11)Are you satisfied with your mutual fund investment plan? o Yes o No

12)Do you think mutual fund investment is a better investment option than others? o Yes o No

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