SUMMER INTERNSHIP PROJECT REPORT

ON Systematic Investment Plan

(The Better Way to Invest In Mutual Funds) At

EDELWEISS BROKING LIMITED Bangalore A Project Report Submitted In Partial Fulfillment of the Requirements For The Award of the POST GRADUATE DIPLOMA IN MANAGEMENT TO M.S.RAMAIAH INSTITUTE OF MANAGEMENT BY ANUBHAV SOOD Roll no: 121206 PGDM (AUTONOMOUS) 2012-2014 Under the guidance of

Dr. M Kiran Kumar

M.S.RAMAIAH INSTITUTE MANAGEMENT NEW BEL ROAD, BANGALORE-560054

CERTIFICATE

This is to certify that the Project Report at

EDELWEISS BROKING LTD

Submitted in partial fulfillment of the requirements for the award of the

POST GRADUATE DIPLOMA IN MANAGEMENT (AUTONOMOUS)

TO M.S.RAMAIAH INSTITUTE OF MANAGEMENT Is a record of bonafide Training carried out under my supervision and guidance and that no part of this report has been submitted for the award of any other degree/diploma/fellowship or similar titles or prizes. GUIDE: Dr. M Kiran Kumar

Signature:

Name: Dr. M Kiran Kumar Qualifications: Degree of Doctor of Philosophy in commerce.

DECLARATION

I hereby declare that this work entitled SYSTEMATIC INVESTMENT PLANNING A BETTER WAY TO INVEST IN MUTUAL FUNDS is my work carried out under the guidance of my faculty guide Dr. M Kiran Kumar and my company guide Rajshekhar P Gupta. This report neither full nor in past has ever been submitted for award of any other degree of either this university or any other university.

Name: Anubhav sood PGDM AUTONOMUS Roll no: 121206

ACKNOWLEDGEMENT

I extend my special gratitude to our beloved DEAN Dr. H Muralidharan, Academic Head Prof. Purnima Ramaswamy and Our Coordinator Dr. Savitha Rani for inspiring me to take up this project. I wish to acknowledge my sincere gratitude and indebtedness to my Project Guide Dr. M Kiran Kumar of M.S. RAMAIAH INSTITUTE OF MANAGEMENT Bangalore for her valuable guidance and constructive suggestions in the preparation of project report. I extend my gratitude to

EDELWEISS BROKING LIMITED

And the Company guide Mr. Rajshekhar P Gupta and all my colleagues, friends for their encouragement, support, guidance and assistance for undergoing industrial training and for preparing the project report.

Anubhav Sood Reg. No. 121206

PREFACE

The report has been conducted on TO STUDY SYSTEMATIC INVESTMENT

PLANNING AS A BETTER WAY TO INVEST IN MUTUAL FUNDS

The purpose of this work is to study about the Mutual Funds and find out about the benefits of SIP in Mutual Funds.

EXECUTIVE SUMMARY
In few years Mutual Fund has emerged as a tool for ensuring ones financial wellbeing. 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 Edelweiss Branch where I done my Project.

TABLE OF CONTENTS
Page No. 8 16 33 34 37 40 49 56

\ 1 2 3 4 5 6 7 8

Content Industry Analysis.. Company Analysis SWOT Analysis Discussion on Training.. Introduction... Classification of Mutual Funds.. Systematic Investment Plan.. Research Methodology Title of the study Duration of the project Objective of the study Simple size &method Scope of the study Limitation of the study

9 10 11 12 13 14

Analysis and Interpretation . Facts and Findings .. Conclusion .... Suggestion Annexure .. Bibliography.

61 71 72 73 74 76

CHAPTER 1
Industry Analysis

INTRODUCTION
The financial system is a set of institutional arrangements through which financial surpluses available in the economy are mobilized. A financial system, which is inherently strong, functionally diverse and displays efficiency and flexibility, is critical in creating a market-driven, productive and competitive economy. A mature financial system has to gear up and undergo varied and comprehensive changes in order to achieve rapid economic development. The financial sector reforms in India in the early nineties has resulted in explosive growth of the economy, opening up of the Indian financial market to foreign and private Indian players, large inflow of Foreign Ninth AIMS International Conference on Management Institutional Investors, increased competition and better product offerings to consumers. One of the major developments of this decade has been the take-off of mutual funds. Mutual funds have emerged as a strong financial intermediary and are the fastest growing segment of the financial services sector in India. It aims at promoting a diversified, efficient and competitive financial sector increasing the return on investment and promoting and accelerating the growth of the economy. It is a medium of investment suitable to the small investors, who are not able to invest in stock market directly. Mutual funds now play a very significant role in channelizing the savings of millions of individuals. The mutual fund industry in India over the years has seen dramatic improvements in terms of quantity as well as quality of product and service offerings in recent years. The tremendous growth of Indian Mutual Funds industry is an indicator of Indias efficient financial market and the trust which investors have on the regulatory Environment. Millions of investors rely on mutual funds as their primary investments because they offer a convenient, cost-effective and easy way to invest in the financial markets. The Securities Exchange Board of India (SEBI) regulates this fast growing industry and it is the representative body of all mutual funds in the country. Every mutual fund has a goal - either growing its assets (capital gains) and/or generating income (dividends) for its investors. Distribution in the form of capital gains (short-term and long-term) and dividends may be passed on (paid) to the shareholders as income or reinvested to purchase more shares. A mutual fund is valued daily and reports a price known as a Net Asset Value (NAV) per share. In its simplest form, a NAV is the total value of all the securities held in a fund

divided by the total number of shares owned by its shareholders. As the price of the NAV increases or decreases, the shareholder's value will increase or decrease.

Current Scenario of Mutual Funds

The global economic environment was conducive and this led to the explosive growth of mutual funds in most countries particularly since 1980s. This growth can be attributed to the strong emergence of the market economy which depends more on the growth led by the stock market. Mutual funds found increasing acceptance in the developed countries when compared to the developing countries in the early and mid 90s but gradually it found its place even in the developing countries because of its advantages. Gradually the number of mutual funds increased significantly worldwide and many developed countries started designing country specific funds to match the trend prevailing in other developed countries.

Evolution of Mutual Fund Industry in India

The mutual fund revolution that was sweeping the other countries bypassed India also. The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India. UTI commenced its operations from July 1964 and different provisions of the UTI Act laid down the structure of management, scope of business, powers and functions of the trust as well as accounting, disclosures and regulatory requirements for the trust. Even though the growth of the mutual fund industry was very slow in the beginning, it accelerated when the public sector and private sector mutual funds entered the market after the year 1987. The mobilization of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds. Investors' interests were safeguarded by SEBI and the Government offers tax benefits to the investors in order to encourage them. SEBI also introduced SEBI (Mutual Funds) Regulations, 1996 and set uniform standards for all mutual funds in India.

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History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Though the Growth was slow, but it accelerated from the year 1987 when non-UTI players entered the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the AUM to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and 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) 11

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 can bank 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.

Major Mutual Fund Companies in India:

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Axis Asset Management Company Birla Sun Life Mutual Fund Bank of Baroda Mutual fund DBS Chola Mutual Fund Franklin Templeton India Mutual Fund HDFC Mutual fund ICICI Prudential Mutual fund ING Mutual fund JM Financial Mutual fund JP Morgan Mutual fund Kotak Mahindra Mutual fund LIC Mutual fund Reliance Mutual fund Sahara Mutual fund State Bank of India Mutual fund Standard Charted Mutual fund Sundaram BNP Paribas Mutual fund Tata Mutual fund Unit Trust of India Mutual fund

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ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI):

With the increase in mutual fund players in India, a need for mutual fund association in India was generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995. AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under the supervision and guidelines of its Board of Directors. Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders.

The objectives of Association of Mutual Funds in India:

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has certain defined objectives which supports the guidelines of its Board of Directors. The objectives are as follows: ins high professional and ethical standards in all areas of operation of the industry.

is followed by members and related people engaged in the activities of mutual fund and asset management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association.
guidelines in the mutual fund industry.

India and other related bodies on matters relating to the Mutual Fund Industry. ied and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry.

understanding of the concept and working of mutual funds.

Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.

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STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY:

Structure wise mutual fund industry can be classified into three categories;

Unit trust of India:

The Indian mutual fund industry is dominated by the unit trust of India, which has a total corpus of 51000 crore collected from over 20 million investors. The UTI has many fund/ schemes in all categories in equity, balanced, debt, money market etc. With some being open ended and some being closed ended. The unit scheme 1964 commonly referred to as US64,which is a balanced fund, is the biggest scheme with a corpus of about 10000 crore.

Public sector mutual fund:

The second largest categories of mutual funds are the ones floated by nationalized banks .can bank asset management floated by Canara bank and SBI funds. Management floated by State Bank Of India is the largest. Online trading is a great idea to reduce management expenses from the current 2% of total assets to about 0.75% of the total asset. 72% of the crore-customer base of mutual fund in the top 50-broking firms in the US is expected to trade on line by 2003

Private Sector Mutual fund:

The third largest categories of mutual funds are the ones floated by the private sector domestic mutual funds and the private sector foreign mutual funds. The largest of these in private sector domestic mutual funds are Reliance mutual fund, JM capital management company ltd. Tata mutual, Axis mutual fund, Birla sun life asset management pvt. Ltd. and in private foreign mutual funds these are alliance capital asset management private ltd, Franklin Templeton Investments, Sun F&C asset

15

Chapter 2
Company Analysis

16

ABOUT THE COMPANY

EDELWEISS GROUP started its journey in Mumbai in the year 1995, by two IIM
graduates, Mr. Rashesh Shah and Mr. Venkat Ramaswami.

Ideas create, values protect is the slogan and depict the mission statement of Edelweiss group.

Our Reputation and Image is more important than any financial reward. Reputation is hard to build and even harder to rebuild. Reputation will be impacted by our ability to think for our clients, maintain confidentiality and by our adherence to our value system.

Mr. Rashesh Shah Mr. Venkat Ramaswami

The Logo: Edelweiss, a rare flower found in Switzerland. A graphic flower that represents
ideas! Around it, the protective arms of the letter E:

Edelweiss believes ideas create wealth, but values protect it.

It is the practice of this core thought that has led to Edelweiss becoming one of the leading

financial services company in India. Its current businesses include:

Investment Banking,

17

Securities Broking, and Investment Management.

Edelweiss also provides a wide range of services to: Corporations, Institutional Investors and High Net-Worth Individuals.

Headquarter based in Mumbai, India.

Key People: Chairman & Founder: Mr. Rashesh Shah (IIM Graduate 1995 batch) and
Venkat Ramaswami.

Designated director: Naresh Kothari. Directors: Rashesh Shah, Venkat Ramaswami and Hiralal Chopra. Type of industry: investment banking, brokerage and asset management firm. Total market capitalization: About Rs. 22,877 cr. Total number of employees: 3,900

Edelweiss was previously into niche marketing only, dealing with the High Net worth Individuals (HNIs) clients only. Looking at the current market scenario, company is targeting the Retail Segment with its new Online Trading Portal.

18

The company sights the need for entering into the retail segment by seeing the saturation of the niche market and the exploration of the areas which was left untouched by the organization. The idea behind this is to Reposition the company from niche marketer to mass marketer. The brand repositioning of the company is done in order to withstand the current market scenario (Global Economic Crisis). The product or the service that the company has come up with is the Prepaid Broking Plan for both the retail as well as HNI customers. Basically every broking firm offers dematerialization and the trading account with some charges associated to it and the main source of income is the brokerage that is collected on every transaction made by the customer, which is a continues source of income. The prepaid account is like mobile cash card which has to be recharge first and then can be used for a year. The client has to pay the brokerage in advance which will be deducted on every transaction. The client can recharge the account as the balance gets over before the validity expires.

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Product and Services

Investment Banking Overview
Our Investment Banking business is dedicated to providing corporations, entrepreneurs and investors, the highest quality independent financial advice and transaction execution. Our professionals offer a full range of services and transaction expertise, including private placements of equity, capital raising services in public markets, mezzanine and convertible debt, mergers and acquisition and restructuring advisory services. We have a track record of successfully closing more than 100 transactions to date.

Offerings
Private Equity Advisory - We have been a leading Private Equity advisor for over a decade and have developed a strong expertise across industries which enable us to recognize emerging industry themes and position transactions within the context. Structured Finance Advisory - Over the years, we have built up significant expertise in Structuring appropriate financing solutions for client specific situations and identifying and Placing the transaction with institutional investors. Our portfolio of solutions comprises the following Promoters Funding and Acquisition Financing.

Mergers and Acquisitions Advisory - Edelweiss M&A team provides insights into how companies can grow and enhance their value. The M&A team are engaged in turnkey transaction management and advise a diverse range of clients in medium to large transactions. Our key strengths include independent advice, deep sector knowledge backed by professionals with a range of training and experience that spans across multiple cross-border deals and our relationships with large corporate. Real Estate Advisory - Our advisory solutions are primarily focused on capital rising and cover the optimal financing mix, project valuation, investment structuring and accomplishing capital raising at either the enterprise level or the asset level. We manage Real Estate IPOs, QIPs, advise enterprise level private equity financings, and enterprise level mezzanine financing and structured debt. We have completed over $ 700 million in capital rising in the last 18 months across multiple formats. Equity Capital Markets - We are in the vanguard of equity capital markets having brought to the market a large number of successful and path breaking transactions. We advise leading Indian companies, banks, institutions and businesses which are seeking to mobilize capital from investors in India and overseas. Within the practice, we provide opportunities for clients to raise funds through the following Initial Public Offering (IPOs) Follow-on Public Offerings(POs) Qualified Institutional Placements(QIP) Rights Issues Preferential Allotments Foreign Currency Convertible Bonds(FCCBs) Global Depository Receipts(GDRs)

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Infrastructure Advisory - A critical ingredient for sustainable development in India is the

pressing need for Infrastructure creation on a commercially viable basis. This signifies immense opportunities and challenges for the sector. Recognizing this, Edelweiss new Infrastructure practice has been formed to provide innovative solutions tailored to the unique financing and advisory requirements of Indian infrastructure projects and developers. Our team has a dedicated focus on the infrastructure sector, with considerable experience, a deep understanding and a vast network of key relationships. We provide Infrastructure project companies and developers the full range of capital and advisory services.
Debt Restructuring Advisory - At Edelweiss we have a very competent team offering comprehensive debt restructuring solutions, both under the formal Corporate Debt Restructuring (CDR) mechanism as well as negotiations with lender/consortium of lenders. Our team of senior ex-bankers and restructuring specialists have unparalleled experience of restructuring debts worth over Rs. 75,000 crores, and an ability to provide complete solutions and support to the Corporate.

Institutional Equities Edelweiss Capitals Institutional Equities Business (IE) has become one of the top five domestic Brokerage houses and top three derivatives desks. It is the only brokerage on the Street with a quant desk that provides a wide product range, servicing all investor categories. The innovative mind set, unparalleled research, agile sales teams, and intensive execution systems have enabled us to relentlessly service our clients in different ways. It caters to a wide clientele comprising leading domestic and international institutional investors, including Pension Funds, Hedge Funds, and Mutual Funds, insurance Companies and banks. Asset Management Overview Edelweiss Asset Management offers a range of investment products and advisory services across the risk return spectrum to individual and institutional investors. Our close focus on client requirements is our inspiration in designing products which offer the best opportunity for asset growth with a constant focus on risk and preservation of capital. Offerings Portfolio Management - Edelweiss offers the discerning investor an opportunity to access its asset management expertise through its portfolio management service (PMS). The basic objective of this product is to provide unbiased investment management strategy based on rigorous fundamental analysis while taking cognizance of market conditions and movements. Mutual Funds - Edelweiss Asset Management Limited follows a research based and process oriented investment approach. Edelweiss Asset Management Limited is committed to observe the highest ethical standards while deploying investors monies, servicing investors and dealing with business partners.

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Wealth Management Overview It is a specialized profession where our experts combine their efforts to meet the wealth planning, investment, and financial management needs of individuals, families, family offices, or corporate. Edelweiss Wealth Management takes one step closer to you, by providing an "all-inone approach. Advice on asset allocation and thereby creating customized financial solutions for HNWIs, NRIs, Trusts and Corporate. We offer advisory services on Structured Products, Portfolio Management, Mutual Funds, Insurance, Derivative Strategies, Direct Equity, IPOs, Real Estate Funds and Art Funds. Private Client Brokerage Overview The Private Client Services Group at Edelweiss is focused on providing products, strategies and services to High Net worth Individuals and Corporate Clients. We have geographic reach through our Branches, Channel Partners & Investment Consultants in over 19 locations in India. The PCG team has highly trained equity professionals, who act as your Equity Advisor. Our ESL Equity Advisor proactively helps you take informed investment decisions and build a healthy portfolio. We draw on our strong presence and industry leadership to develop a portfolio of offerings designed to serve the spectrum of financial needs. Our main objective is to provide clients with all the tools and services they need to reduce the administrative burdens of managing money and focus on what you do best - maximizing your trading performance, building your business, and attracting new sources of capital. Offerings Cash Equity - Providing research based advice on select stocks from across sectors to meet clients investment requirement ranging from positional trading to long term investment goals. For our clients I provide ongoing portfolio consultation with a dedicated relationship manager as one point contact for all day-to-day execution of trades and other service requirements such as advisory on investments. Derivatives - Edelweiss being a pioneer in Quantitative & Alternative Research, I leverage this strength for our derivatives strategies focused towards short-term / medium investments of clients in PCG. Derivative Strategy group, through its dedicated research team provides seamless execution for its clients with trading view. The stock ideas generated are enhanced by combination of technical view and derivative strategy along with the statistical data. Based on the Quantitative Research products such as Pair Trades & Alpha Trades are also initiated whenever I identify the opportunity. Financing - I offer various products and services to individuals and corporates with a close focus on client requirements while designing our products. Over a period of time I have been offering short term loans against securities and/or to buy new securities. I also provide finance for investment in primary market issues. I help promoters by financing against their share holding to meet their business requirements, expansion of businesses and diversification of the lines of business. I possess expertise in financing short and long term loan facility, risk analysis, transfer and assessment besides a broad spectrum of services.

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Financing Overview Edelweiss Housing Finance Limited (EHFL) is a Housing Finance Company incorporated under the aegis of the National Housing Bank (NHB). It is part of the Edelweiss Group of Companies. EHFL has an array of loan solutions which can be tailored to your requirements. If youre looking for a Home Loan, do apply to EHFL for the highest loan amount in the shortest time. Offerings Home Loans Loan against property 25 year loan - The Newly launched 25 year Home loans help you purchase a property and repay in lower / easily manageable installments Refinancing - If you have already purchased a property and used your own funds or borrowed from friends or relatives for the same, I could re-finance the same. Balance transfer & top up - If you already have a Home loan or a Loan against Property running with any Bank or other financier, you could move the same to EHFL a better rate of interest and a longer tenor, giving you the advantage of a lower EMI. You can also avail of an additional ("Top-Up") loan against same property.
1.

Position of the Edelweiss broking ltd CORPORATE STRUCTURE

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Board of Directors

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Financial Performance at a Glance:

Financial Highlights

I. Consolidated Financial Information:

(Rs in million)

2011-12

2010-11

Total Income

16,706.87

14,290.12

Total Expenditure

14,719.90

10,790.00

Profit Before Tax

1,986.97

3,500.12

Provision for Tax

680.86

1,030.97

Profit After Tax

1,306.11

2,469.15

Less: Share of Minority Interest

28.68

138.99

Profit for the year after Minority interest

1,277.43

2,330.16

Add: Surplus brought forward from previous year

7,716.86

6,407.19

Profit available for appropriation:

8,994.29

8,737.35

Less: Appropriations

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Interim Dividend

226.99

187.98

Proposed Dividend

227.34

263.24

Transfer to Reserves

272.22

493.69

Dividend Distribution Tax

85.24

75.58

Surplus carried to the Balance Sheet

8,182.50

7,716.86

Earnings per equity share (Face Value - Rs 1/-)

(Rs in million)

2011-12

2010-11

Basic (Rs)

1.69

3.10

Diluted (Rs)

1.66

3.00

Total Income

2,072.91

4,395.55

Total Expenditure

1,313.13

3,771.84

Profit Before Tax

759.78

623.71

Provision for Tax

73.44

36.46

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Profit After Tax

686.34

587.25

Add: Surplus brought forward from previous year

106.23

42.76

Profit available for appropriation:

792.57

630.01

Less: Appropriations

Interim Dividend

226.99

187.98

Proposed Dividend

227.34

263.24

Transfer to Reserves

68.63

58.73

Dividend Distribution Tax

(13.83)

13.83

Surplus carried to the Balance Sheet

283.44

106.23

Earnings per equity share (Face Value - Rs 1/-)

Basic (Rs)

0.91

0.78

Diluted (Rs)

0.89

0.76

Dividend

Edelweiss over the past years has delivered strong operating and financial performance since its inception. It has consistently demonstrated a strong track record of high growth and profitability. Its Revenues and PAT have grown at an 11-year CAGR of 80% and 75% respectively till FY10.

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As on 30th September 2010 Edelweiss Groups Net worth after minority interest stood at over ` 23.35 billion (` 28.09 billion including minority interest), indicating a strong balance sheet. Equity capital is the primary source of funding for the group besides debt. The leverage as on 30th September 10 is 2.17 times including the Minority Interest indicating a healthy position whereby the balance sheet can be further levered easily.

Consolidated Financial Performance of Edelweiss Capital Limited:

Edelweiss benefits from a strong and liquid balance sheet with a low leverage. A strong capital base and adequate profitability year after year allows Edelweiss to constantly invest in new businesses with an eye on future growth while scaling up the existing businesses. A large capital base also allows it to transact larger volumes of broking and trading in the markets giving it a leadership position in Institutional Equities business. It also enables the group to add debt capital as and when required at reasonable rates. Its market capitalization as on 30th September 10 was over ` 41 billion and places the company among top 5 brokerage houses in the country by market cap. Highest ShortTerm Credit Ratings Edelweiss Capital Limited and three other group companies enjoy highest short term rating as under: (As on 30th September 10) Rating Agency Rating Entity Edelweiss Capital Limited Long-Term Debt Programme ICRA LAA-/LAApn/ LAApp/Stable Short-Term Debt Programme CRISIL P1+ Edelweiss Securities Limited Short-Term Debt Programme CRISIL P1+ ECL Finance Limited Short-Term Debt Programme ICRA A1+ Long Term Debt Programme ICRA LAA- pp (SO)/Stable Long Term Debt Programme CRISIL AA-/Stable Short-Term Debt Programme CRISIL P1+ Edelweiss Commodities Ltd. (formerly ECAL Advisors Ltd.) Short Term Debt Programme CRISIL P1+

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Edelweiss Strengths 1. Brand: Edelweiss the brand, today is a strong franchise in the capital markets backed by a consistent focus on execution and innovation. It constantly emphasizes innovation which is reflected in leadership in new products and asset classes and new client segments. 2. Edelweiss Core Strategic Approach to business is founded on growth with profitability backed by synergistic diversification across the businesses; Control and flexibility of cost, capital and balance sheet, diversified revenue streams, strong risk management and organization build up by developing leadership in bench and investing in culture which rewards thinking about long-term in a partnership cohesive approach. It believes in growth through adjacent markets, adjacent asset classes, adjacent product classes and adjacent client segments. 3. Integrated & Diversified Business Model: Edelweiss derives its strength from a distinct but complementary set of diversified businesses which also protect the Group from any downward cyclical pressures. To this end, Edelweiss continues to look to invest in long term business opportunities in financial services. Its core business diversification approach is based on growth through adjacent markets and through widening the product mix in existing businesses. The synergistic diversification ensures three broad streams of revenue, viz. Agency fee & commission, Treasury operations income and Interest income contribute approximately one-third each of the total revenues. 4. Balance Sheet: Edelweiss benefits from a strong and liquid balance sheet with a low leverage. Its focus while managing the Balance Sheet is on strong risk management and capital preservation. A strong capital base of ` 28.09 billion and adequate profitability year after year allows Edelweiss to constantly invest in new businesses with an eye on future growth while scaling up the existing businesses. Edelweiss is also shielded from any adverse asset liability mismatch as its asset-side duration is less than 9 months whereas its liabilities have duration of about 120 months. Low leverage on the balance sheet and highest short term credit ratings allow it ample leeway to lever the balance sheet further. The flexibility in the cost structure enables it to protect the margins, strong risk management focuses on preservation of capital and the group maintains adequate liquidity cushion to ensure smooth business operations across cycles. 5. Edelweiss Business Model is to be able to adjust to downturn in markets with inherent cost flexibility and be able to quickly convert growth opportunities into business when they reappear. Our business growth perspective is aligned to the medium term of 3 to 5 years. 6. Board level Commitment: A board comprising of three independent and one non-independent non-executive director out of a total of six directors, all of whom play a governing role and provide expertise and insight into building Edelweiss into one of the most reputable organizations with an admirable compliance and corporate governance ethos. 7. Management: Edelweiss has an experienced and stable senior management team. We also have a strong middle management team, which comprises of a 50 member Senior Leadership Group and an 80 member Leadership Group forming the bench strength. The four tier leadership pool thus covers over 5% of the total employee strength of the group. Edelweiss constantly

29

emphasizes training and developing leadership and its 100 seater Training Centre at Alibaug (near Mumbai) is now operational. 8. Employee Ownership: Edelweiss has a widely distributed employee ownership and was among the pioneers in the financial services industry in instituting an employee stock option scheme. It now has one of the largest ESOP pool in the financial services space in India and over 600 employees are covered through ESOPs. The employees including key management own over 50% of the company. 9. ISO Certification: Edelweiss has now been certified as ISO 9001:2000 compliant. This is an organisation wide certification, which covers all lines of businesses and support functions. It ensures that Quality Management System (QMS) of Edelweiss complies with International Standards.

30

COMPETITORS

31

Edelweiss VS Competitors

32

SWOT ANALYSIS

STRENGTH

WEAKNESS No access to rural market. No direct link between investors and AMC.

well-known

name

in

financial companies. Wide experience in this field. Dedicated employees. Ever growing distribution

network. Good Research team. Easy access to branch.

Opportunities Positive outlook of People toward mutual funds. Untapped market.

THREATS Highly market. Large number of financial giants present in this market volatile and uncertain

33

CHAPTER 3
Discussion on Training

34

Roles and Responsibilities

My scope of work during internship was to generate business for the company by way of opening demats account and persuading peoples to invest in mutual funds. I was given intensive training during the starting of our internship about the product and the details about it like the different brokerage plans, various value added services provided by the company, extensive research done by the company to provide the customers with accurate information and provide the customers with opportunities to earn handsome returns on their investments. During my internship I was given the task of calling customers and trying to convince, them to open demat account and investing in the stock market and mutual funds. I also have the task of convince the customers that investing in the stock market and mutual funds is a better option than investing money in FD, Post office schemes etc. The average return from the stock market during the past five years is about 15% p.a. Once I had convinced the client over the phone then the next task was to ask for a meeting where I would clear any remaining doubts that the client may have and do the necessary paper work that is required to open an demat account. Apart from tele calling other ways of generating leads for the company was by way of talking to people in the market and getting them to invest in the stock market. Taking to them about ways by which they could start investment in the stock market. Our task was to interact with people and provide them with basic knowledge about investment opportunities in the stock market. Our primary goal was to generate leads for the company and getting people to invest in the mutual funds and clear there misconception that investment in the mutual funds is risky and they would suffer losses.

35

Challenges Faced:
The challenges that I faced during our SIP was from two different sets of people, first sets of people where those who have very little or no knowledge of the stock markets and how it works, the second set of people where those who are already active in the stock markets and are not ready to switch to a different company. I had to tackle these two different sets of people very differently; our approach would have to very different in these two cases. The main challenge that I faced was to convince new people to invest and get involved in the stock market. In India only a very small percentage of the population invest in the stock markets. There is very little awareness about investment opportunities that exists. I had to start from the scratch in order for them to understand how the stock markets works and that there investment are absolutely safe and secure. People also have the preconceived opinion that investment in the stock markets is a risky business, they are happy to invest in various other sources like banks, property, jewelry etc. They are of the opinion that once you have invested your money in the stock markets it will never come back. Also they are not ready to trust a private company that would manage their investments. They prefer to invest in public sector banks and other govt. companies. They are not at all comfortable with the idea of investment in the stock markets even if it could earn them better returns. They are comfortable with whatever they are earnings are not ready to explore new areas. To get people who are already active in the stock markets to switch to a new company was equally challenging if not more. Here the problem was to convince people to try out our company and how I would offer products and services to them than they are already getting form their existing broking company. It would take a lot of persuasion and convincing, many round of meeting where I would present our products and let them compare with their existing products. Also there would be lots of negotiation about the different brokerage plans and brokerage rates. I would have to offer the clients very low brokerage rates and multiple benefits to get them to switch. They would demand very low brokerage rates and various other facilities some of those would not be possible for us to give. My seniors provided me with guidance and motivation that helped me in my interaction with the clients and clearing their doubts. They explained to me in detail the various benefits of the product and how the customer would benefit from it.

36

INTRODUCTION
Mutual Fund
A mutual fund is an instrument that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings A mutual fund is a professionally managed investment product that sells shares to investors and pools the capital it raises to purchase investments A fund typically buys a diversified portfolio of stock, bonds, and money market securities, or a combination of stock and bonds, depending on the investment objectives of the fund. Mutual funds may also hold other investments, such as derivatives. A fund that makes a continuous offering of its shares to the public and will buy any shares an investor wishes to redeem, or sell back, is known as an openend fund. An open-end fund trades at net asset value (NAV). An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

37

Advantages of Mut1ual Funds

Diversification Professional Management Regulatory oversight Liquidity Convenience Low cost Transparency Flexibility Choice of schemes Tax benefits Well regulated

Working of Mutual Funds:

The following figure explains the working of Mutual funds

38

The important terms of the figure are explained as follows:

Fund Sponsor:
The sponsor is the company which sets up the mutual fund. It means anybody corporate acting alone or in combination with another body corporate established a mutual fund after initiating and completing the formalities

Trust:
MF or trust can either be managed by the Board of Trustees, which is a body of individuals, or by a Trust Company, which is a corporate body. Most of the funds in India are managed by Board of Trustees. The trustee being the primary guardian of the unit holders funds and assets has to be a person of high repute and integrity. The trustees, however, do not directly manage the portfolio securities. The portfolio is managed by the AMC as per the defined objectives, accordance with Trust Deed and SEBI (Mutual Funds) Regulations.

Asset
(AMC):

Management

Company

The AMC, which is appointed by the sponsor or the trustees and approved by SEBI, acts like the investment manager of the trust. The AMC functions under the supervision of its own Board of Directors, and also under the direction of the trustees and SEBI. AMC, in the name of the trust, floats and manages the different investment schemes as per the SEBI Regulations and as per the Investment Management Agreement signed with the Trustees.

Other
Apart from these, the MF has some other fund constituents, such as custodians and depositories, banks, transfer agents and distributors. The custodian is appointed for safe keeping of securities and participating in the clearing system through approved depository. The bankers handle the financial dealings of the fund. Transfer agents are responsible for issue and redemption of units of MF.

39

RiskReturnMatrix: The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vice versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investor opts for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases. Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesnt mean mutual fund investments are risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns. Mutual funds can be classified as follow:

40

 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 cannot 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 weight ages.

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.

41

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.

42

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.

IV) Arbitrage fund- They generate income through arbitrage opportunities due to mispricing
between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government
Securities.

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 postdated 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)

43

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.

Options Available To Investors:

Each plan of every mutual fund has three options Growth, Dividend and dividend reinvestment. Separate NAV are calculated for each scheme.

Dividend Option

Under the dividend plan dividend are usually declared on quarterly or annual basis. Mutual fund reserves the right to change the frequency of dividend declared.

Dividend reinvestment option

Instead of remittances of units through payouts, Units holder may choose to invest the entire dividend in additional units of the scheme at NAV related prices of the next working day after the record date. No sales or entry load is levied on dividend reinvest.

Growth Option

Under this, plan returns accrue to the investor in the form of capital appreciation as reflected in the NAV. The scheme will not declare the dividend under the Growth plan and investors who opt for this plan will not receive any income from the scheme. Instead of income earned on their units will remain invested within the scheme and will be reflected in the NAV.

44

Risk Return Hierarchy of Different Funds

BANKS V/S MUTUAL FUNDS:

Mutual Funds are now also competing with commercial banks in the race for retail investors savings and corporate float money. The power shift towards mutual funds has become obvious. The coming few years will show that the traditional saving avenues are losing out in the current scenario. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The fund mobilization trend by mutual funds indicates that money is going to mutual fund in a big way.

45

CATEGORY Returns Administrative exp. Risk Investment options Network Liquidity Quality of assets Interest calculation

BANKS Low High Low Less High penetration At a cost Not transparent Minimum balance between 10th & 30th of every month Maximum deposits Rs.1 lakh on

MUTUAL FUNDS High Low Moderate More Low but improving Better Transparent Everyday

Guarantee

None

MUTUAL F U N D S STRUCTURE
The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund established in the form of a trust by a sponsor to raise monies by the Trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations. These regulations have since been replaced by the SEBI (Mutual Funds) Regulations, 1996. The structure indicated by the new regulations is indicated as under. A mutual fund comprises four separate entities, namely sponsor, mutual fund trust, AMC and custodian. The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be in the form of a deed registered under the provisions of the Indian Registration Act, 1908.

46

The Custodian maintains the custody of the securities in which the scheme invests. It also keeps a tab on corporate actions such as rights, bonus and dividends declared by the companies in which the fund has invested. The Custodian is appointed by the Board of Trustees. The Custodian also participates in a clearing and settlement system through approved depository companies on behalf of mutual funds, in case of dematerialized securities. The sponsor is required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the asset management company. The board of trustees manages the MF and the sponsor executes the trust deeds in favor of the trustees. It is the job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guidelines

47

Taxation of Mutual Funds and Investor

Finance Act 1999 radically changed taxation of Dividends received by investors in Mutual Funds. Mutual Fund as an entity is not taxed since it is a Pass through entity. Section 10(23d) of the IT Act. Finance Act 1999 made income (dividend) from UNITS totally exempt from tax u/s 10(33) in the hands of investors. Income (dividends) distributed by a debt fund was made liable to Dividend Distribution Tax at applicable rate. Open ended funds with more than 50% invested in equity do not pay any DDT (since changed to 65% in FY 06-07. Individuals 14.02% , Companies 22.44%. Security Transaction Tax (STT) is charged as applicable. 80 C benefits under ELSS up to Rs 1 lack.

Types of Investment in Mutual Fund

Lump Sum Systematic Investment Plan

48

Lump Sum Payment

A lump sum is a single payment of money, as opposed to a series of payments made over time (such as an annuity) This means investing the entire sum of money at one go. For instance, if you have Rs 1 lakh which you are willing to fully invest in stocks or MFs, it is a lump-sum investment.

Systematic Investment Plan

A Systematic Investment Plan (SIP) is a vehicle offered by mutual funds to help investors save regularly. It is just like a recurring deposit with the post office or bank where you put in a small amount every month, except the amount is invested in a mutual fund. The minimum amount to be invested can be as small as 100 (100 Indian Rupees) and the frequency of investment is usually monthly or quarterly.

49

What is Systematic Investment Plan?

Systematic Investment Plan (SIP) is a smart financial planning tool that helps you to create wealth, by investing small sums of money every month, over a period of time. Systematic Investment Plan (SIP) is a planned approach to investments and an investment technique that allows you to provide for the future by investing small amounts of money in Mutual Fund schemes of your choice.

A SIP is a method of investing in mutual funds, by investing a fixed sum at a regular frequency, to buy units of a mutual fund schemes. It is quite similar to a recurring deposit of a bank or post office. For the convenience, an investor could start a SIP with as low as Rs 500; however this amount may differ from one fund house to other. The SIP provides them a way to invest in the fund of their choice in installments.

How to invest in SIP?

The SIP option is available with all types of funds like equity, income or gift. An investor can avail the SIP option by giving post-dated cheques of Rs.500 or Rs.1000 according to the funds policy. If an investor wants to put more than Rs.500 or Rs.1000 in any given month he will have to fill in a new form for SIP intimating the fund that he is changing his SIP structure. Also he will be allowed to change the SIP structure only in the multiples of the SIP amount. If an investor is investing in two different schemes of the same fund he can fill in a common SIP form for all the schemes. However, if the first holders in those schemes are different then they will have to fill different SIP forms, as the first holder has to sign on the form. The investor can get out of the fund i.e. redeem his units any time irrespective of whether he has completed his minimum investment in that scheme. In that case, his post-dated cheques will be returned back to him.

50

Here is an illustration using hypothetical figures indicating how the SIP can work for investors :
Suppose an investor would like to invest Rs.4, 000 under the Systematic Investment Plan on quarterly basis.

Invested Premium (Rs) 7th April10 7th May10 7th June10 7th July10 7th August10 7th Sept10 7th Oct10 7th Nov10 7th Dec10 7th Jan11 7th Feb11 7th March11 4000 4000 4000 4000 4000

NAV of Maxi miser Units allocated Fund (Rs per unit) 11.34 11.01 12.05 13.13 13.67 352.73 363.31 331.95 304.65 292.61

4000 4000 4000 4000 4000 4000 4000

15.81 16.78 18.28 18.71 21.48 21.49 21.98

253.00 238.38 218.82 213.79 186.22 186.13 181.98

Total

48000

51

Actual

average

NAV=

(11.34+11.01+12.05+13.13+13.67+15.81+16.78+18.28+18.71+21.48+21.49+21.98) / 12 = 16.29 NAV for Mr. X (4,000 * 12) / (352.73+ 363.31 + 331.95 + 304.65 + 292.61 + 253.00+

238.38 + 218.82 + 213.79 + 186.22 + 186.13+ 183.74) = Rs.15.36

Based on the historical analysis for BSE Sensex for last 10 to 12 years (i.e.1-Jan-1998 to 1-Janhave 2010) we find that if an individual had invested Rs. 1000 ever year (SIP) he would by earned a return of 9% vis--vis 5% earned an individual who had invested Rs. 1000 at the beginning of 10 year period. Similarly over a five-year period (1-Jan-1994 to 1-Jan-1999) SIP investment return would have been 16.52% compared to 14.09% for a one-time investment at the beginning of the period. Using the SIP strategy the investor can reduce his average cost per unit. The investor gets the advantage of getting more units when the market is turned down.

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Benefits of SIP

Benefit 1 Become a Disciplined Investor

Being disciplined - Its the key to investing success. With the Systematic Investment Plan you commit an amount of your choice (minimum of Rs. 500 and in multiples of Rs. 100 thereof*) to be invested every month in one of our schemes. Think of each SIP payment as laying a brick. One by one, youll see them transform into a building. Youll see your investments accrue month after month. Its as simple as giving at least 6 postdated monthly cheques to us for a fixed amount in a scheme of your choice. Its the perfect solution for irregular investors.

Benefit 2 Reach Your Financial Goal

Imagine you want to buy a car a year from now, but you dont know where the down -payment will come from. SIP is a perfect tool for people who have a specific, future financial requirement. By investing an amount of your choice every month, you can plan for and meet

53

financial goals, like funds for a childs education, a marriage in the family or a comfortable postretirement life.

Benefit 3 Take Advantage of Rupee Cost Averaging

Most investors want to buy stocks when the prices are low and sell them when prices are high. But timing the market is time-consuming and risky. A more successful investment strategy is to adopt the method called Rupee Cost Averaging. We can reap this benefit by investing the amounts through a SIP.

Benefit 4 Grow Your Investment with Compounded Benefits

It is far better to invest a small amount of money regularly, rather than save up to make one large investment. This is because while you are saving the lump sum, your savings may not earn much interest. With HDFC MF SIP, each amount you invest grows through compounding benefits as well. That is, the interest earned on your investment also earns interest. The following example illustrates this. Imagine Neha is 20 years old when she starts working. Every month she saves and invests Rs. 5,000 till she is 25 years old. The total investment made by her over 5 years is Rs. 3 lakhs. Arjun also starts working when he is 20 years old. But he doesnt invest monthly. He gets a large bonus of Rs. 3 lakhs at 25 and decides to invest the entire amount. Both of them decide not to withdraw these investments till they turn 50. At 50, Nehas Investments have grown to Rs. 46, 68,273* whereas Arjuns investments have grown to Rs. 36,

54

17,084*. Nehas small contributions to a SIP and her decision to start investing earlier than Arjun have made her wealthier by over Rs. 10 lakhs.

*Figures based on 10% p.a. interest compounded monthly.

Benefit 5 Do All This Effortlessly

Investing with SIP is easy. Simply give us post-dated cheques or opt for an Auto Debit from your bank account for an amount of your choice (minimum of Rs. 500 and in multiples of Rs. 100 thereof*) and well invest the money every month in a fund of your choice. The plans are completely flexible. You can invest for a minimum of six months, or for as long as you want. You can also decide to invest quarterly and will need to invest for a minimum of two quarters.

OTHER BENEFITS
1. SIP can be started with a minimum investment of Rs. 500/- per month or Rs. 1000/- per month. 2. It is good and effective way of creating wealth for long term. 3. ECS facility is available in case of Investment through SIP. 4. A small withdrawal from the account doesnt affect the bank balance of an individual as compared to a hefty withdrawal. 5. It can be for a year, two years, three years etc. if a person at any point of time couldnt be able to continue its SIP, he may give instructions at least 25 days before to the fund house. His SIP is discontinued. 6. All type of funds except Liquid funds, cash funds and other funds who invest in very short fixed return investments offers the facility of SIP. 7. Capital gains, if applicable, are taxed on a first-in first-out basis. 8. As the investment made through SIP are not at one time. Some units bought at high price and some at low price, so chances of making gain through SIP is higher than the one time investment. In short, SIP is a simple and effective way to create wealth but to create such wealth, one should think about the investment in SIP for a period of at least for time frame of three years because it pays to invest in a longer run.

55

Chapter 4
Research Methodology

56

Research Methodology
Title of the study
Systematic Investment Plan (The Better Way to Invest In Mutual Funds)

Duration of the Project The duration of the project is 60 days

Objective of the study

The purpose of choosing the project is to know: Investors option for entry into mutual fund LUMPSUM or SIP Comparative analysis between Lump Sum and SIP Investors Delight when investment is through SIP

Research Type
Conclusive and explorative approach has been adopted in the study. As here the topic of research problem has been explored so that hidden facts can come into the light and then the maximum allocation criteria in SIP are Rs. 1000-3000 i.e. the final conclusion is given 45%

SAMPLE SIZE
A sample size of 50 investors was chosen to meet the earlier mentioned objectives. The selection of sample was based on the following criteria: People belonging to different state of society. Servicemen working in government organization & private organization. Professionals who includes doctors, lawyers, teachers etc

57

 Research Design
This research is Explorative and conclusive in nature because it aims to collect the data about the behavior of investors in which way they invest in Mutual Funds. The research approach used is survey based and the analysis is largely based on the primary data.

Research Instrument
Structured questionnaire: open- ended and close- ended.

Contact Method
Personal interview

Research Approach
Any methodology includes the overall research design, the sampling procedure and data collection method. The methodology adopted by me for purpose of finding the investment behavior of investors was DIRECT SURVEY METHOD Population BANGALORE CITY

Study scope
BANGALORE This project will help existing/prospective investor to understand what the various mode of investment in Mutual Fund are and why Systematic Investment Plan gives better returns than Lump sum. So that investors can do better use of their hard earned money to earn more profit.

Types of data
1. Primary Data 2. Secondary Data

58

Primary Data is that data which is collected by the researcher as per his/her needs Secondary Data is that data which is collected through references as websites, journals, books, magazines, etc. LIMITATIONS TO THE SURVEY Though research based decision-making is now considered but still there is a gap between the understanding of researcher and users. Research is there to help in decision-making, not a substitute of decision-making. Some of the following limitations have restricts the scope of survey to some extent :

Some respondents gave vague information and were not serious while responding. Some respondents were hesitant to reveal information about their finances because of income tax queries. It was difficult to find whether respondents actually participate in their financial planning. Research can provide number of facts but it does not provide actionable results. It cannot provide answer to any problem but can only provide a set of guidelines. Management rely more on the intuitions and judgments rather than research. Area of research was restricted to some location of the city and state.

59

Analysis and Interpretation

Q 1: In which Financial Instrument do you invest into? Ans: Financial Instruments Mutual Bond Online Trading Derivatives Investment in % 76 15 07 02

Interpretation: From above pie chart, it has been analyzed that 76% of investors invest in the analysis is done on the basis of the response of respondents, which is collected through the questions present in questionnaire.

60

Q 2: By structure in which type of schemes have you invested? Ans: Types of schemes on the basis of structure Open ended funds Close ended funds Intervals funds Investment in % 66 22 12

Interpretation: The above pie chart depicts that 66% investors invest in Open-ended funds,
22% in Close-ended funds and 12% in Interval funds.

61

Q. 3: By investment objective In which type of schemes have you invested? Ans: Types of Investment on the basis of objective Growth Schemes Income Schemes Balances Schemes Investment in % 55 13 32

Interpretation: From the above pie chart, I conclude that there are 55 % investors who invest
in Growth Schemes, 13% investor invest in Income Schemes, and 32% investors invest in Balanced Funds.

62

Q.4. Ans:

In which type of fund you want to invest?

TYPES OF FUNDS

INVESTMENT IN %

Index Fund Tax Saver Fund Sectorial fund

41 15 44

Interpretation: The above chart depicts that the maximum numbers of investor.i.e.41% investors invest in Sectorial Funds, 44% in Index Funds and 15% in Tax Saver Funds.

63

Q.5 Do you repeat your investment after initial investment? Ans : Repetition investment Yes No 68 32 of Investors in %

Interpretation: The above pie chart depicts that 68% of investors invest again after the initial investment

64

Q.6 what percentage of your earnings do you invest in Mutual Funds? Ans: % of earnings Upto 10% Upto 25% Upto 50% Above 50% Investors in % 43 32 15 10

Interpretation: The above chart depicts that 43% investor invest that up to 10% of their earning in Mutual Fund.

65

Q.7 :How many investors invested in SIP , Lump sum or both? Ans : Type of investment SIP Lump sum Both Investment in % 55 10 35

Interpretation: From above chart it has been analyzed that 55% investors have invested SIP, 10% in lump sum and 35% in both the category.

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Q.8 what is an allocation criteria of an investor in SIP? Ans :

Allocation criteria (in Rs) Less than 1000 1000-3000 3000-5000 More than 5000

Investment in % 9 45 36 10

50 45 40 35 30 25 20 15 10 5 0 less than 1000

Allocation criteria (in Rs)

investment in %

1000-3000

3000-5000

more than 5000

Interpretation: From above chart it has been analyzed that the allocation criteria of investment is 45% in the range Rs1000 to Rs 3000.

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Q.9 what is the time duration of investment? Ans :

Time duration Less than or equal to 5 years Less than or equal to 4 years Less than or equal to 3 years Less than or equal to 2 years Less than or equal to 1 year

Investment in % 25 8 34 25 8

Interpretation: The above bar chart depicts that most of the investors (i.e. 33.33%) invest in less than 3 years.

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Q.10 which has given more profit to investors? Ans : Investment in Lump sum SIP Profit in % 16 84

Interpretation: The above Pie chart depicts that 84% of investors have got more profit in Systematic Investment Plan.

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Facts and Findings

The analysis is done based on the structured questions and we got following points:

People still invest less part of their income in mutual funds i.e. about 10% 55% investor invests in SIP mode. 84% got more profit in SIP The maximum duration of investment in SIP is 3 years i.e. 34%. Less than or equal to 5 years Less than or equal to 4 years Less than or equal to 3 years Less than or equal to 2 years Less than or equal to 1 year 25 8 34 25 8

The maximum allocation criteria in SIP are 1000-3000 i.e. 45% Less than 1000 1000-3000 3000-5000 More than 5000 9 45 36 10

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Conclusion:
Findings:
Our findings during the training with Edelweiss Broking Limited, Bangalore was good on the following grounds: Edelweiss is a high ranked company listed with NSDL and CDSL; provide trading through both NSE and BSE. Provides excellent research base to its customers. Provides fast and easy to use trading platform. SIP provides a better platform for investments in Mutual Funds as it attracts a large number of small investors as well.

There are some more points: Mutual fund advisors give emphasis on mutual funds than other investment options.

The awareness level of investor is low as advisors are interested in dealing in mutual funds.

Very less advisors are knowing about services provided by Edelweiss (Mutual Fund)

Mutual funds have given a new direction to the flow of personal saving and enable small and medium investors in remote rural and semi urban areas to reap the benefits of the stock market investments. Indian mutual funds are thus playing a very important role in allocation of scarce resources in the emerging economy.

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RECOMMENDATION AND SUGGESTIONS

Though the Edelweiss have a very good ascribed plan with exclusive band of opportunities but as nothing is free from the hurdles therefore there are few shortcomings which I felt makes Edelweiss fail to achieve its target : There is high potential market for mutual fund advisors in Bangalore city but this market needs to be explored as investors are still hesitated to invest their money in mutual fund. In Bangalore investors have inadequate knowledge about mutual fund, so proper marketing of various schemes is required. Company should arrange more and more seminars on mutual funds. Awareness of mutual fund services among the investors are very low so Asset Management Company needs proper marketing of their all services by advertising , distribution of pamphlet , arranging seminars etc. Most advisors are not interested in dealing of mutual funds because they get very low commission. Company should also provide knowledge about the growth rate and expected growth rate of mutual fund industry in India. Most people are aware of Life Insurance , NSC and PPF for tax saving so company should market various tax saving scheme of mutual fund and their benefits.

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ANNEXURE
QUESTIONNAIRE

(Hello, I am Anubhav Sood. I need your spare time to fill up the questionnaire, as this is the part of my Summer Internship Training under PGDM curriculum) NAME: ______________________________________ __________________ AGE 0-18_____ GENDER: Female OCCUPATION: Businessman Govt. Employee Student [ ] [ ] [ ] Pvt. Employee [ ] [ ] 18-36_____ Male 36-54_____ 54-72______ 72 ABOVE______

Professional

other (specify):________

CONTACT NO: __________________________________ Q1. In which of these Financial Instruments do you invest into? Mutual Funds [ ] Derivatives [ ] Bonds [ ] Online trading [ ]

Q2 .By structure in which type of schemes did you invested? Open Ended Fund Close Ended Fund Interval Schemes [ ] [ ] [ ]

Q3.By investment objective in which type of schemes have you invested?

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Growth Schemes Income Schemes

[ ] [ ] Balanced Schemes [ ]

Q4.In which type of funds you want to invest? Tax Saver Funds Index Funds Sectorial Funds [ ] [ ] [ ]

Q5. Did you repeat your investment after your initial investments? Yes [ ] No [ ]

Q6. What percentage of your earnings do you invest in Mutual Funds? Up to 10% Up to 25% Up to 50% Above 50%

Q7. In which you have invested? SIP [ ] Lump Sum [ ] Both [ ]

Q8. What is your allocation criterion? <1000b [ ] 1000-3000 [ ] 3000-5000 [ ] >5000b [ ]

Q9. For what time period you have invested? <= 1 yr. [ ] <= 2 yr. [ ] <= 3 yr. [ ] <= 4 yr. [ ] <= 5 yr. [ ]

Q10. Which has given you more profit? SIP [ ] Lump Sum [ ]

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Bibliography

1. Internet 2. Magazines and journal of the company 3. Book of financial Management 4. Website:-

www.edelweiss.in www.wikipedia.com www.moneycontrol.com www.valueresearch.com www.google.com www.mutaulfundsindia.com www.investopedia.com

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