INTRODUCTION

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

The first part gives an insight about Mutual Fund and its various aspects, the Company Profile, Objectives of the study, Research Methodology. One can have a brief knowledge about Mutual Fund and its basics through the Project. The second part of the Project consists of data and its analysis collected through survey done on 100 people. For the collection of Primary data I made a questionnaire and surveyed of 100 people. I also taken interview of many People those who were coming at the SBI Branch where I done my Project. This Project covers the topic A DEEP STUDY OF MUTUAL FUNDS IN INDIA. The data collected has been well organized and presented. I hope the research findings and conclusion will be of use.

COMPANY PROFILE Mutual Fund Companies in India

The concept of mutual funds in India dates back to the year 1963. The era between 1963 and 1987 marked the existance of only one mutual fund company in India with Rs. 67bn assets under management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund companies in India took their position in mutual fund market.

The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund. The succeeding decade showed a new horizon in indian mutual fund industry. By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started penetrating the fund families. In the same year the first Mutual Fund Regulations came into existance with re-registering all mutual funds except UTI. The regulations were further given a revised shape in 1996.

Kothari Pioneer was the first private sector mutual fund company in India which has now merged with Franklin Templeton. Just after ten years with private sector players penetration, the total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in India.

Major Mutual Fund Companies in India

ABN AMRO Mutual Fund

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

Birla Sun Life Mutual Fund

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

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund

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

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

Prudential ICICI Mutual Fund

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

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund

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

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsorers for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country with more than Rs. 7,703 crores (as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having more than 1,99,818 investors in its various schemes. KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities.

Unit Trust of India Mutual Fund

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

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under

which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20,1999.

Franklin Templeton India Mutual Fund

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

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investmenty management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset

management services and products to governments, corporations, pension funds and non-profit organisations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the needs of Indian retail investors focussing on a long-term capital appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited.

Alliance Capital Mutual Fund

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

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company. Incorporated

on October 16, 2000 and headquartered in Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.

Canbank Mutual Fund

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

Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Government of India undertaking and the four Public Sector General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882.

What is a Mutual fund?

Mutual fund is an investment company that pools money from shareholders and invests in a variety of securities, such as stocks, bonds and money market instruments. Most open-end Mutual funds stand ready to buy back (redeem) its shares at their current net asset value, which depends on the total market value of the fund's investment portfolio at the time of redemption. Most open-end Mutual funds continuously offer new shares to investors. Also known as an openend investment company, to differentiate it from a closed-end investment company. Mutual funds invest pooled cash of many investors to meet the fund's stated investment objective. Mutual funds stand ready to sell and redeem their shares at any time at the fund's current net asset value: total fund assets divided by shares outstanding.

In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. 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 profits or losses are shared by the investors in proportion to their investments. The Mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. In India, 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. In Short, a Mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc. Mutual fund is a 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.

ADVANTAGES OF MUTUAL FUNDS

Professional Management. The major advantage of investing in a mutual fund is that you get a professional money manager to manage your investments for a small fee. You can leave the investment decisions to him and only have to monitor the performance of the fund at regular intervals.

Diversification. Considered the essential tool in risk management, mutual funds make it possible for even small investors to diversify their portfolio. A mutual fund can effectively diversify its portfolio because of the large corpus. However, a small investor cannot have a well-

diversified portfolio because it calls for large investment. For example, a modest portfolio of 10 bluechip stocks calls for a few a few thousands. Convenient Administration. Mutual funds offer tailor-made solutions like systematic investment plans and systematic withdrawal plans to investors, which is very convenient to investors. Investors also do not have to worry about investment decisions, they do not have to deal with brokerage or depository, etc. for buying or selling of securities. Mutual funds also offer specialized schemes like retirement plans, childrens plans, industry specific schemes, etc. to suit personal preference of investors. These schemes also help small investors with asset allocation of their corpus. It also saves a lot of paper work. Costs Effectiveness A small investor will find that the mutual fund route is a cost-effective method (the AMC fee is normally 2.5%) and it also saves a lot of transaction cost as mutual funds get concession from brokerages. Also, the investor gets the service of a financial professional for a very small fee. If he were to seek a financial advisor's help directly, he will end up paying significantly more for investment advice. Also, he will need to have a sizeable corpus to offer for investment management to be eligible for an investment advisers services. Liquidity. You can liquidate your investments within 3 to 5 working days (mutual funds dispatch redemption cheques speedily and also offer direct credit facility into your bank account i.e. Electronic Clearing Services).

Transparency. Mutual funds offer daily NAVs of schemes, which help you to monitor your investments on a regular basis. They also send quarterly newsletters, which give details of the portfolio, performance of schemes against various benchmarks, etc. They are also well regulated and Sebi monitors their actions closely.

Tax benefits. You do not have to pay any taxes on dividends issued by mutual funds. You also have the advantage of capital gains taxation. Tax-saving schemes and pension schemes give you the added advantage of benefits under section 88.

Affordability Mutual funds allow you to invest small sums. For instance, if you want to buy a portfolio of blue chips of modest size, you should at least have a few lakhs of rupees. A mutual fund gives you the same portfolio for meager investment of Rs.1,000-5,000. A mutual fund can do that because it collects money from many people and it has a large corpus.

DISADVANTAGES OF MUTUAL FUNDS:

Professional Management- Did you notice how we qualified the advantage of professional management with the word "theoretically"? Many investors debate over whether or not the so-called professionals are any better than you or I at picking stocks. Management is by no means infallible, and, even if the fund loses money, the manager still takes his/her cut. We'll talk about this in detail in a later section.

Costs - Mutual funds don't exist solely to make your life easier--all funds are in it for a profit. The Mutual fund industry is masterful at burying costs under layers of jargon. These costs are so complicated that in this tutorial we have devoted an entire section to the subject.

Dilution - It's possible to have too much diversification (this is explained in our article entitled "Are You Over-Diversified?"). Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

Taxes - When making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

Equity funds, if selected in the right manner and in the right proportion, have the ability to play an important role in achieving most long-term objectives of investors in different segments. While the selection process becomes much easier if you get advice from professionals, it is

equally important to know certain aspects of equity investing yourself to do justice to your hard earned money.

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under. First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

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

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

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

CATEGORIES OF MUTUAL FUND:

Mutual funds can be classified as follow :

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

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

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

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

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

Balanced fund:

Their investment portfolio includes both debt and equity. As a result, on the risk-

return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes:

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

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

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

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

RISK V/S. RETURN:

Pointers to Measure Mutual Fund Performance

MEASURES STANDARD DEVIATION DESCRIPTION IDEAL RANGE Standard Deviation allows to evaluate the volatility of Should be near to its mean the fund. The standard deviation of a fund measures return. this risk by measuring the degree to which the fund BETA fluctuates in relation to its mean return. Beta is a fairly commonly used measure of risk. It Beta > 1 = high risky basically indicates the level of volatility associated with Beta = 1 = Avg R-SQUARE the fund as compared to the benchmark. Beta <1 = Low Risky R- square measures the correlation of a funds R-squared values range between movement to that of an index. R-squared describes the 0 and 1, where 0 represents no level of association between the fund's volatility and correlation and 1 represents full ALPHA market risk. correlation. Alpha is the difference between the returns one would Alpha is positive = returns of expect from a fund, given its beta, and the return it stock are better then market actually produces. It also measures the unsystematic returns. risk . Alpha is negative = returns of stock are worst then market. Alpha SHARPE RATIO is zero = returns are same as market. Sharpe Ratio= Fund return in excess of risk free return/ The higher the Sharpe ratio, the Standard deviation of Fund. Sharpe ratios are ideal for better a funds returns relative to comparing funds that have a mixed asset classes. the amount of risk taken.

Objectives of the Project

Main Objective
The objective of the research is to study and analyze the awareness level of investors of mutual funds.

Sub Objectives
To measure the satisfaction level of investors regarding mutual funds. An attempt has been made to measure various variables playing in the minds of investors in terms of safety, liquidity, service, returns, and tax saving. To get insight knowledge about mutual funds Understanding the different ratios & portfolios so as to tell the distributors about these terms, by this, managing the relationship with the distributors To know the mutual funds performance levels in the present market To analyze the comparative study between other leading mutual funds in the present market. To know the awareness of mutual funds among different groups of investors.

METHODOLOGY OF THE PROJECT

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

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

Sampling:
Sampling procedure:

The sample was selected from respondents irrespective of them being investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool.

Sample size:

The sample size of my project is limited to 100 people only. Sample design:

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

Research Design :
My research project has a specified framework for collecting the data in an effective manner. Such framework is called RESEARCH DESIGN. The research process which was followed by me consisted following steps.

A. PROBLEM: The problem at hand was to study and measure the awareness level of people regarding mutual funds in the city. B. DEVELOPING THE RESEARCH PLAN : The development of Research Plan has the following Steps: 1. DATA SOURCES: Two types of data were taken into consideration i.e. Secondary data & primary data. My major emphasis was on gathering the primary data. The secondary data has been used to make things more clear. (i) Primary Data: Direct collection of data from the source of information, technology including personal interviewing, survey etc.

(ii)

Secondary Data: Indirect collection of data from sources containing past or recent past information like Banks Brochures, Annual publications, Books, Fact sheets of mutual funds, Newspaper & Magazines etc.

2. RESEARCH INSTRUMENT A close friend questionnaire was constructed for my survey. Questionnaire consisting of a set of questions made to be filled by various respondents.

3. SAMPLING PLAN The sampling plan calls for three decisions. a) Sampling Unit: I have completed my survey in Sitapur. b) Sample Size: The sample consisted of 120 respondents. c) Contact Methods I have contacted the respondents through personal interviews.

C. COLLECTING THE INFORMATION After this, I have collected the information from the respondents with the help of questionnaire

D. ANALYZE THE INFORMATION The next step is to extract the pertinent findings from the collected data. I have tabulated the collected data & developed frequency distributions. Thus the whole data was grouped aspect

wise and was presented in tabular form. Thus, frequencies & percentages were prepared to render impact of the study.

E. PRESENTATIONS OF FINDINGS This was the last step of the survey.

ANALYSIS & INTERPRETATION OF THE DATA

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

Age Group No. of Investors

<= 30 12

31-35 18

36-40 30

41-45 24

46-50 20

>50 16

Investors invested in Mutual Fund

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

Interpretation:
According to this chart out of 100 Mutual Fund investors of Sitapur the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs.

(b). Educational Qualification of investors of Sitapur

Educational Qualification Graduate/ Post Graduate Under Graduate Others Total

Number of Investors 88 25 7 120

6% 23%

71%

Graduate/Post Graduate

Under Graduate

Others

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

c). Occupation of the investors of Sitapur

Occupation
Govt. Service Pvt. Service Business Agriculture Others .

No. of Investors
30 45 35 4 6

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

Occupation of the customers

Interpretation:
In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.

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

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

No. of Investors
5

12 28 43 32

No. of Investors

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

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

Interpretation:
In the Income Group of the investors of Sitapur, out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000

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

Saving A/C

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

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

K inds of Investm ent

Gold/S ilver Pos t Office(NS C ) Ins urance S aving A/c 0

65 30 50 75

120

15 2 148

195 200 250

50

100

150

No.of R es pondents

Interpretation: From the above graph it can be inferred that out of 200 people, 97.5% people
have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate.

3. Preference of factors while investing

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

No. of Respondents

40

60

64

36

18%

20%

32%

30%

Liquidity

Low R is k

H ig hR eturn

Trus t

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

4. Awareness about Mutual Fund and its Operations

Response No. of Respondents

Yes 135

No 65

33%

67%

Y es

No

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

5. Source of information for customers about Mutual Fund

Source of information Advertisement Peer Group Bank Financial Advisors

No. of Respondents 18 25 30 62

7 0 6 0 5 0 4 0 3 0 2 0 2 5 1 0 1 8 0 Advertisem ent Peer Group

No. of R espondents

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

S ource of Inform a tion

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

6. Investors invested in Mutual Fund

Response YES NO Total No. of Respondents 120 80 200

No 40%

Yes 60%

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

7. Reason for not invested in Mutual Fund

Reason Not Aware Higher Risk Not any Specific Reason No. of Respondents

65 5 10

13%

6%

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

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

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

SBIMF UTI HDFC Reliance ICICI Prudential Kotak

No. of Investors 55 75 30 75 56 45

Others

70

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

70

75 75 80

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

9. Preference of Investors for future investment in Mutual Fund Name of AMC

SBIMF UTI HDFC Reliance ICICI Prudential

No. of Investors 76 45 35 82 80

Kotak Others

60 75

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

75

80 82

76 40 60 80 100

No. of Inves tors

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

10. Channel Preferred by the Investors for Mutual Fund Investment

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

25%

15%
F ina ncia l Advisor B a nk AMC

60%

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

11. Mode of Investment Preferred by the Investors

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

35%

65%

One tim e Inves tm ent

S IP

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

12. Preferred Portfolios by the Investors Portfolio

Equity

No. of Investors
56

Debt Balanced

20 44

37%

46%

17%

Equity

D ebt

Balance

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

13. Option for getting Return Preferred by the Investors

Option Dividend Payout Dividend Reinvestment Growth

No. of Respondents

25

10

85

21%

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

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

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

21%

79%

Y es

No

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

Findings
In Sitapur in the Age Group of 36-40 years were more in numbers. The second most Investors were in the age group of 41-45 years and the least were in the age group of below 30 years.

 In Sitapur most of the Investors were Graduate or Post Graduate and below HSC there were very few in numbers. In Occupation group most of the Investors were Govt. employees, the second most Investors were Private employees and the least were associated with Agriculture. In family Income group, between Rs. 20,001- 30,000 were more in numbers, the second most were in the Income group of more than Rs.30,000 and the least were in the group of below Rs. 10,000. About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits, Only 60% Respondents invested in Mutual fund. Mostly Respondents preferred High Return while investment, the second most preferred Low Risk then liquidity and the least preferred Trust. Only 67% Respondents were aware about Mutual fund and its operations and 33% were not. Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not have invested in Mutual fund. Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is not any specific reason for not invested in Mutual Fund and 6% told there is likely to be higher risk in Mutual Fund. Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI Prudential has also good Brand Position among investors, SBIMF places after ICICI Prudential according to the Respondents. Out of 55 investors of SBIMF 64% have invested due to its association with the Brand SBI, 27% Invested because of Advisors Advice and 9% due to better return.

 Most of the investors who did not invested in SBIMF due to not Aware of SBIMF, the second most due to Agents advice and rest due to Less Return. For Future investment the maximum Respondents preferred Reliance Mutual Fund, the second most preferred ICICI Prudential, SBIMF has been preferred after them. 60% Investors preferred to Invest through Financial Advisors, 25% through AMC (means Direct Investment) and 15% through Bank. 65% preferred Investment. The most preferred Portfolio was Equity, the second most was Balance (mixture of both equity and debt), and the least preferred Portfolio was Debt portfolio. Maximum Number of Investors Preferred Growth Option for returns, the second most preferred Dividend Payout and then Dividend Reinvestment. Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted to invest in Sectoral Fund. One Time Investment and 35% preferred SIP out of both type of Mode of

Conclusion
Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt

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

LIMITATIONS OF THE STUDY:

The major constraint faced by me in making the project was time. The time was not enough to know in detail about the factors, to major the performance of all mutual funds companies in the industry and to what extent each factor is responsible for the same.

Also in some cases the respondents, were not willing to provide adequate information about the Mutual funds schemes they like , this constraint led to inability to cover the whole data. Which could give us clearer picture of the subject.

Most of the data about the companies are collected from the concerned Companies Website or directly through the Concerned Companies, which can be manipulated or exaggerated by the company (Window dressing).

However, inspite of all these limitations and constraint, a humble attempt to present useful information and format with an analytical picture of the study with suggestions has been made.

Suggestions and Recommendations

The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing. Mutual funds offer a lot of benefit which no other single option could offer. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. Mutual Fund Company needs to give the training of the Individual Financial Advisors about the Fund/Scheme and its objective, because they are the main source to influence the investors. Before making any investment Financial Advisors should first enquire about the risk tolerance of the investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration. Younger people aged under 35 will be a key new customer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off. Customers with graduate level education are easier to sell to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality.

Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI.

BIBLIOGRAPHY
Books
David F, Swensen. 2005. Unconventional Success. A fundamental Approach to Personal Investment Free Press 416 D.C. Anjaria. Dhaivat Anjaria. 2001 AMFIs Mutual Fund Testing Programme.

Websites
WWW.GOOGLE.COM WWW.YAHOO.COM WWW.WIKIPEDIA.COM WWW.INDIAINFOLINE.COM WWW.AMFIINDIA.COM WWW.MONEYCONTROL.COM WWW.5PAISA.COM WWW.SHAREMARKETBASICS.COM WWW.SHAREMARKET.COM

QUESTIONNAIRE
A study of preferences of the investors for investment in mutual funds.
1. Personal Details: (a). Name:(b). Add: (c). Age:(d). Qualification:Graduation/PG Under Graduate Others Phone:-

(e). Occupation. Pl tick () Govt. Ser Pvt. Ser Business Agriculture Others

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

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

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

(d) Trust

4. Are you aware about Mutual Funds and their operations? Pl tick ().

Yes

No

5. If yes, how did you know about Mutual Fund? a. Advertisement b. Peer Group c. Banks d. Financial Advisors Yes No

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

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

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

f. ICICI

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

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

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

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

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