EXECUTIVE SUMMARY

In few years Mutual Fund has emerged as a tool for ensuring one’s 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 Asset

Management Company (AMC), Which type of Product they prefer, Which

Option (Growth or Dividend) they prefer or Which Investment Strategy they

1
follow (Systematic Investment Plan or One time Plan). This Project as a whole

can be divided into two parts.

The first part gives an insight about Mutual Fund and its various aspects, the

Company Profile, Objectives of the study, Research Methodology. One can

have a brief knowledge about Mutual Fund and its basics through the Project.

The second part of the Project consists of data and its analysis collected

through survey done on 200 people. For the collection of Primary data I made

a questionnaire and surveyed of 200 people. This Project covers the topic

“THE MUTUAL FUND IS BETTER INVESTMENT PLAN.” The data

collected has been well organized and presented. I hope the research findings

and conclusion will be of use.

2
 CONTENTS

Acknowledgement

Declaration

Executive Summary

Chapter - 1 INTRODUCTION

Chapter - 2 LITERATURE REVIEW

Chapter - 3 COMPANY PROFILE

Chapter - 4 OBJECTIVES AND SCOPE

Chapter - 5 RESEARCH METHODOLOGY

Chapter - 6 DATA ANALYSIS AND INTERPRETATION

Chapter - 7 FINDINGS AND CONCLUSIONS

Chapter - 8 SUGGESTIONS & RECOMMENDATIONS

BIBLIOGRAPHY

3
 MUTUAL FUNDS

ALL ABOUT MUTUAL FUNDS

 WHAT IS MUTUAL FUND

 BY STRUCTURE

 BY NATURE

 EQUITY FUND

 DEBT FUNDS

 BY INVESTMENT OBJECTIVE

 OTHER SCHEMES

 PROS & CONS OF INVESTING IN MUTUAL FUNDS

 ADVANTAGES OF INVESTING MUTUAL FUNDS

 DISADVANTAGES OF INVESTING MUTUAL FUNDS

 MUTUAL FUNDS INDUSTRY IN INDIA

 MAJOR PLAYERS OF MUTUAL FUNDS IN INDIA

 HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

 CATEGORIES OF MUTUAL FUNDS

 INVESTMENT STRATEGIES

 WORKING OF A MUTUAL FUND

 GUIDELINES OF THE SEBI FOR MUTUAL FUND

 COMPANIES DISTRIBUTION CHANNELS

 DOES FUND PERFORMANCE AND RANKING

PERSIST?

 PORTFOLIO ANALYSIS TOOLS

RESEARCH REPORT

4
 OBJECTIVE OF RESEARCH

 SCOPE OF THE STUDY

 DATA SOURCES

 SAMPLING

 DATA ANALYSIS

 QUESTIONNAIRE

Chapter - 1

5
 INTRODUCTION TO MUTUAL FUND AND ITS

VARIOUS ASPECTS.

Mutual fund is a trust that pools the savings of a number of investors who

share a common financial goal. This pool of money is invested in accordance

with a stated objective. The joint ownership of the fund is thus “Mutual”, i.e.

the fund belongs to all investors. The money thus collected is then invested in

capital market instruments such as shares, debentures and other securities. The

income earned through these investments and the capital appreciations realized

are shared by its unit holders in proportion the number of units owned by

them. Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally

managed basket of securities at a relatively low cost. A Mutual Fund is an

investment tool that allows small investors access to a well-diversified

portfolio of equities, bonds and other securities. Each shareholder participates

in the gain or loss of the fund. Units are issued and can be redeemed as

needed. The funds Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of

industries and sectors and thus the risk is reduced. Diversification reduces the

risk because all stocks may not move in the same direction in the same

proportion at the same time. Mutual fund issues units to the investors in

accordance with quantum of money invested by them. Investors of mutual

funds are known as unit holders.

6
When an investor subscribes for the units of a mutual fund, he becomes part

owner of the assets of the fund in the same proportion as his contribution

amount put up with the corpus (the total amount of the fund). Mutual Fund

investor is also known as a mutual fund shareholder or a unit holder.

Any change in the value of the investments made into capital market

instruments (such as shares, debentures etc) is reflected in the Net Asset Value

(NAV) of the scheme. NAV is defined as the market value of the Mutual Fund

scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing

the market value of scheme's assets by the total number of units issued to the

investors.

7
ADVANTAGES OF MUTUAL FUND

 Portfolio Diversification

 Professional management

 Reduction / Diversification of Risk

 Liquidity

 Flexibility & Convenience

 Reduction in Transaction cost

 Safety of regulated environment

 Choice of schemes

 Transparency

DISADVANTAGE OF MUTUAL FUND

 No control over Cost in the Hands of an Investor

 No tailor-made Portfolios

 Managing a Portfolio Funds

 Difficulty in selecting a Suitable Fund Scheme

8
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.

9
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.

10
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.

11
CATEGORIES OF MUTUAL FUND:

12
 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.

13
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,

14
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.

15
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.

16
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.

17
RISK V/S. RETURN:

18
 Literature Review

LITERATURE REVIEW

Literature on mutual fund performance evaluation is enormous. A few research

studies that have influenced the preparation of this paper substantially are
discussed in this section.

Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio

performance. Drawing on results obtained in the field of portfolio analysis,
economist Jack L. Treynor has suggested a new predictor of mutual fund
performance, one that differs from virtually all those used previously by
incorporating the volatility of a fund's return in a simple yet meaningful
manner.

Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio

performance (Jensen’s alpha) that estimates how much a manager’s forecasting
ability contributes to fund’s returns. As indicated by Statman (2000), the e
SDAR of a fund portfolio is the excess return of the portfolio over the return of
the benchmark index, where the portfolio is leveraged to have the benchmark
index’s standard deviation.

S.Narayan Rao , et. al., evaluated performance of Indian mutual funds in a

bear market through relative performance index, risk-return analysis, Treynor’s
ratio, Sharpe’s ratio, Sharpe’s measure , Jensen’s measure, and Fama’s
measure. The study used 269 open-ended schemes (out of total schemes of
433) for computing relative performance index. Then after excluding funds
whose returns are less than risk-free returns, 58 schemes are finally used for
further analysis. The results of performance measures suggest that most of
mutual fund schemes in the sample of 58 were able to satisfy investor’s
expectations by giving excess returns over expected returns based on both
premium for systematic risk and total risk.

Bijan Roy, et. al., conducted an empirical study on conditional performance of

Indian mutual funds. This paper uses a technique called conditional
performance evaluation on a sample of eighty-nine Indian mutual fund
schemes .This paper measures the performance of various mutual funds with
both unconditional and conditional form of CAPM, Treynor- Mazuy model
and Henriksson-Merton model. The effect of incorporating lagged information
variables into the evaluation of mutual fund managers’ performance is
examined in the Indian context. The results suggest that the use of
conditioning lagged information variables improves the performance of mutual
fund schemes, causing alphas to shift towards right and reducing the number
of negative timing coefficients.

Mishra, et al., (2002) measured mutual fund performance using lower partial
moment. In this paper, measures of evaluating portfolio performance based on

19
lower partial moment are developed. Risk from the lower partial moment is
measured by taking into account only those states in which return is below a
pre-specified “target rate” like risk-free rate.

Kshama Fernandes(2003) evaluated index fund implementation in India. In

this paper, tracking error of index funds in India is measured .The consistency
and level of tracking errors obtained by some well-run index fund suggests
that it is possible to attain low levels of tracking error under Indian conditions.
At the same time, there do seem to be periods where certain index funds
appear to depart from the discipline of indexation. K. Pendaraki et al. studied
construction of mutual fund portfolios, developed a multi-criteria methodology
and applied it to the Greek market of equity mutual funds. The methodology is
based on the combination of discrete and continuous multi-criteria decision aid
methods for mutual fund selection and composition. UTADIS multi-criteria
decision aid method is employed in order to develop mutual fund’s
performance models. Goal programming model is employed to determine
proportion of selected mutual funds in the final portfolios.

Zakri Y.Bello (2005) matched a sample of socially responsible stock mutual

funds matched

to randomly selected conventional funds of similar net assets to investigate

differences in characteristics of assets held, degree of portfolio diversification
and variable effects of diversification on investment performance. The study
found that socially responsible funds do not differ significantly from
conventional funds in terms of any of these attributes. Moreover, the effect of
diversification on investment performance is not different between the two
groups. Both groups underperformed the

Domini 400 Social Index and S & P 500 during the study period.

20
 CHAPTER – 2

COMPANY PROFILE

Profile of SHAREKHAN LIMITED

Share khan Ltd. is one of the leading retail stock broking house of SSKI Group whichis
running successfully since 1922 in the country. It is the retail broking arm of the Mumbai-
based SSKI Group, which has over eight decades of experience in the stock broking business.
Share khan offers its customers a wide range of equity related services including trade
execution on BSE, NSE, Derivatives, depository services, online trading, investment advice
etc.

The firm’s online trading and investment site - www.sharekhan.com - was launched on Feb 8,
2000. The site gives access to superior content and transaction facility to retail customers
across the country. Known for its jargon-free, investor friendly language and high quality
research, the site has a registered base of over one lakh customers. The content-rich and
research oriented portal has stood out among its contemporaries because of its steadfast
dedication to offering customers best-of-breed technology and superior market information.
The objective has been to let customers make informed decisions and to simplify the process
of investing in stocks.

On April 17, 2002 Share khan launched Speed Trade, a net-based executable application that
emulates the broker terminals along with host of other information relevant to the Day
Traders. This was for the first time that a net-based trading station of this caliber was offered
to the traders. In the last six months Speed Trade has become a de facto standard for the Day
Trading community over the net.

Sharekhan’s ground network includes over 1288 centers in 325 cities in India which provide a
host of trading related services.

21
Sharekhan has always believed in investing in technology to build its business. The company
has used some of the best-known names in the IT industry, like Sun Microsystems, Oracle,
Microsoft, Cambridge Technologies, Nexgenix, Vignette, Verisign Financial Technologies
India Ltd, Spider Software Pvt Ltd. to build its trading

22
With a legacy of more than 80 years in the stock markets, the SSKI group ventured into
institutional broking and corporate finance 18 years ago. Presently SSKI is one of the
leading players in institutional broking and corporate finance activities. SSKI holds a
sizeable portion of the market in each of these segments. SSKI’s institutional broking arm
accounts for 7% of the market for Foreign Institutional portfolio investment and 5% of all
Domestic Institutional portfolio investment in the country. It has 60 institutional clients
spread over India, Far East, UK and US. Foreign Institutional Investors generate about
65% of the organization’s revenue, with a daily turnover of over US$ 2 million. The
Corporate Finance section has a list of very prestigious clients and has many ‘firsts’ to its
credit, in terms of the size of deal, sector tapped etc. The group has placed over US$ 1
billion in private equity deals. Some of the clients include BPL Cellular Holding, Gujarat
Pipavav, Essar, Hutchison, Planetasia, and Shopper’s Stop.

• PROFILE OF THE COMPANY

Name of the
company: Sharekhan ltd.
Year of
Establishment: 1925
Headquarter : Sharekhan SSKI
A-206 Phoenix House
Phoenix Mills Compound
Lower Parel
Mumbai - Maharashtra,
INDIA- 400013
Nature of
Business : Service Provider
Depository Services, Online
Services : Services and
Technical Research.

Number of Employees : Over 3500

Revenue : Data Not Available

23
 Website : www.sharekhan.com

Slogan : Your Guide to The Financial Jungle.

Vision
To be the best retail brokering Brand in the retail business of stock market.

Mission

To educate and empower the individual investor to make better investment

decisions through quality advice and superior service.

Sharekhan is infact-

• Among the top 3 branded retail service providers

• No. 1 player in online business

• Largest network of branded broking outlets in the country serving more than 7,
00,000 clients.
• REASON TO CHOOSE S HAREKHAN LIMITED
• Experience
• SSKI has more than eight decades of trust and credibility in the Indian s tock market. In
the Asia Money broker's poll held recently, SSKI won the'India's Best Broking Housefor
2004' award. Ever since it launched Sharekhan as its retail bro king division in February
2000, it has been p roviding institutional-level research and broking services to individual
investors.

• Technology
With its online trading accou nt one can buy and sell shares in an instant from any PC with
an internet connection. O ne can get access to its powerful online trading tools that will
help him take complete co ntrol over his investment in shares.

• Accessibility
Share khan provides ADVICE , EDUCATION, TOOLS AND EXECUTIO N services for
investors. These services are accessible through its centers across the c ountry over the
internet (through the website www.sharekhan.com) as well as over the Voice Tool.

24
 • Knowledge
• In a business where the right information at the right time can trans late into direct profits,
one can get access to a wide range of information on Sharekhan limited’s content-rich
portal. One can also get a useful set of knowledge-base d tools that will empower him to
take informed d decisions.

• Convenience
One can call its Dial-N-Trade number to get investment advice a nd execute his
transactions. Sharekhan ltd. have a dedicated call-centre to provide this service via a Toll
Free Number 1800-22-7500&1800-22-7050from anywhere in India.

Customer Service
Sharekhan limited’s customer service team will assist one for any help that one may
require relating to transactions, billing, demat and other queries. Its customer service can
be contacted via a toll-free number, email or live chat on www.sharekhan.com.

Investment Advice
Sharekhan has dedicated research teams of more than 30 people for fundamental and
technical researches. Its analysts constantly track the pulse of the market and provide
timely investment advice to its clients in the form of daily research emails, online chat,
printed reports and SMS on their mobile phone.

SHAREKHAN LIMITED’S MANAGEMENT TEAM

Dinesh Murikya : Owner of the company

Tarun Shah : CEO of the company

Shankar Vailaya : Director (Operations)

Jaideep Arora : Director (Products & Technology)

Pathik Gandotra : Head of Research

Rishi Kohli : Vice President of Equity Derivatives

25
 Nikhil Vora : Vice President of Research

PRODUCTS AND SERVICES OF SHAREKHAN LIMITED

The different types of products and services offered by Sharekhan Ltd. are as follows:

Equity and derivatives

trading Depository services

Online services
a. Commodities trading Dial-n-trade

b. Portfolio management Share shops

c. Fundamentalresearch
d. Technical research

TYPES OF ACCOUNT IN SHAREKHAN LIMITED

Sharekhan offers two types of trading account for its clints

 Classic Account (which include a feature known as Fast Trade Advanced Classic
Account for the online users) and

 Speed Trade Account

CLASSIC ACCOUNT

• This is a User Friendly Product which allows the client to trade through website
www.sharekhan.com and is suitable for the retail investor who is risk-averse and hence
prefers to invest in stocks or who does not trade too frequently. This account allow
26
 investors to buy and sell stocks online along with the following features like multiple
watch lists, Integrated Banking, Demat and digital contracts, Real-time portfolio tracking
with price alerts and Instant credit & transfer

This account comes with the following features:

a. Online trading account for investing in Equities and Derivatives

b. Free trading through Phone (Dial-n-Trade)

I. Two dedicated numbers(1800-22-7500 and 39707500) for placing

the orders using cell phones or landline phones
II. Automatic funds transfer with phone banking facilities (for Citibank
and HDFC bank customers)
III. Simple and Secure Interactive Voice Response based system for
authentication
IV. get the trusted, professional advice of Sharekhan limited’s Tele
Brokers

V. After hours order placement facility between 8.00 am and 9.30 am

c. Integration of: Online Trading +Saving Bank + Demat Account.

d. Instant cash transfer facility against purchase & sale of shares.

e. IPO investments.

f. Instant order and trade confirmations by e-mail.

g. Single screen interface for cash and derivatives.

SPEED TRADE ACCOUNT

This is an internet-based software application, which enables one to buy and sell in an

27
instant. It is ideal for active traders and jobbers who transact frequently during day’s
session to capitalize on intra-day price movement.

This account comes with the following features:

a. Instant order Execution and Confirmation.
b. Single screen trading terminal for NSE Cash, NSE F&O & BSE.
c. Technical Studies.
d. Multiple Charting.
e. Real-time streaming quotes, tic-by-tic charts.
f. Market summary (Cost traded scrip, highest value etc.)
g. Hot keys similar to broker’s terminal.
h. Alerts and reminders.
i. Back-up facility to place trades on Direct Phone lines.
j. Live market debts.

CHARGE STRUCTURE
Fee structure for General Individual:

Charge Classic Account Speed Trade Account

Account Opening Rs. 750/= Rs. 1000/=

Intra-day – 0.10 % Intra-day - 0.10%

Brokerage

28
 Delivery - 0.50 % Delivery - 0.50%

Depository Charges:

29
Account Opening ChargesRs. NIL

Annual Maintenance ChargesRs. NIL first year Rs. 300/= p.a. from second calendar
year onward

30
HOW TO OPEN AN ACCOUNT WITH SHAREKHAN LIMITED?

For online trading with Sharekhan Ltd., investor has to open an account. Following are the ways to
open an account with Sharekhan Ltd.:

One need to call them at phone number provided below and asks that he want to open an
account with them.

a. One can call on the Toll Free Number: 1-800-22-7500 to speak to a Customer Service
executive
b. Or If one stays in Mumbai, he can call on 022-66621111

One can visit any one of Sharekhan Limited’s nearest branches. Sharekhan has a huge
network all over India (640 centers in 280 cities). One can also log on to
“http://sharekhan.com/Locateus.aspx” link to find out the nearest branch.

One can send them an email at info@sharekhan.com to know about their products
and services.

One can also visit the site www.sharekhan.com and click on the option “Open an Account” to fill a
small query form which will ask the individual to give details regarding his name, city he lives in, his
email address, phone number, pin code of the city, his nearest Sharekhan Ltd. shop and his
preferences regarding the type of account he wants.

These information are compiled in the headquarter of the company that is in Mumbai from where it is
distributed through out the country’s branches in the form of leads on the basis of cities and nearest
share shops. After that the executives of the respective branches contact the prospective clients over
phone or through email and give them information regarding the various types of accounts and the
documents they need to open an account and then fix appointment with the prospective clients to give
them demonstration and making them undergo the formalities to open the account.

After that the forms that has collected from the clients, is scrutinized in the branch and then it is sent
to Mumbai for further processing where after a few days the clients’ account are generated and
activated. After the accounts are activated, a Welcome Kit is dispatched from Mumbai to the clients’
address mentioned in the documents provided by them. As soon as the clients receive the Welcome
Kit, which contains the clients’ Trading ID and Trading Password, they can start trading and investing
in shares.

Photocopy of the clients’ PAN Card which should be duly attached

Photo copy of any of the following documents duly attached which will serve as
correspondence address proof:

a. Passport (valid)

b. Voter’s ID Card

c. Ration Card

d. Driving License (valid)

e. Electricity Bill (should be latest and should be in the name of the client)

f. Telephone Bill (should be latest and should be in the name of the client)

g. Flat Maintenance Bill (should be latest and should be in the name of the client)

h. Insurance Policy (should be latest and should be in the name of the client)

i. Lease or Rent Agreement.

 j. Saving Bank Statement** (should be latest)

Two cheques drawn in favour of Sharkhan Limited, one for the Account Opening Fees and
the other for the Margin Money (the minimum margin money is Rs. 5000).

RESEARCH SECTION IN SHAREKHAN LIMITED

Sharekhan Limited has its own in-house Research Organisation which is known as Valueline. It
comprises a team of experts who constantly keep an eye on the share market and do research on the
various aspects of the share market. Generally the research is based on the Fundamentals and
Technical analysis of different companies and also taking into account various factors relating to the
economy.

Sharekhan Limited’s research on the volatile market has been found accurate most of the time.
Sharekhan's trading calls in the month of November 2007 has given 89% strike rate.

Out of 37 trading calls given by Sharekhan in the month of November 2007, 33 hit the profit target.
These exclusive trading picks come only to Sharekhan Online Trading Customer and are based on in-
depth technical analysis.

As a customer of Sharekhan Limited, one receives daily 5-6 Research Reports on their emails which
they can use as tips for investing in the market. These reports are named as Pre-Market Report, Eagle
Eye, High Noon, Investors Eye, Daring Derivatives and Post-Market Report. Apart from these,
Sharekhan Limited issues a monthly subscription by the name of Valueline which is easily available
in the market.

SSKI has been voted as the Top Domestic Brokerage House in the research category, twice by
Euromoney Survey and four times by Asiamoney Survey.
Sharekhan Limited won the CNBC AWARD for the year 2004.
Organization Chart
Company services:
 Technical & Fundamental Support

 Awareness Programs

 Risk Management

 Analyst Support

 Technology Support

 Technical & Fundamental Support:

At Optimus, we believe in service and support. Analysis is said to be the Major support expected by
every trader and investor when it comes to Commodity trading. Analyses are two types, Technical and
Fundamental. We have a separate team of Analysts to support our valuable Clients. A team of fundamental
Analyst at our office observes various developments in all domestic and international commodities. They
watch the ratio of supply, demand. Weather, Government policies etc., and update the same to our clients.
The other set of Analysts observe the markets by reading Chartical representations of various commodities
and design the trading strategies to commodity with our clients throughout the day. To assist our clients in
terms of technical analysis we use various state of the art soft wares for better productivity. In other words,
every trade executed at Optimus does have logic behind it (either technical or fundamental).

 Awareness Programs:

Optimus believes that knowledge is power. Online trading in Commodity futures is

growing by leaps and bounds in India at the rate of 500% per annum. Still it is observed that only
20% of the traders and investors know about Commodity futures. Optimus is one company that stands
first in terms of creating awareness among market players.
Any prospect that walks into the Optimus will be trained and gains knowledge before they start
trading. At the same time we conduct seminars and public awareness programs to support all our
business associates.
 Risk Management:

Our operation executives from back office keep our clients updated with their account
status during the trading hours and also at the end of the day. They help our clients in terms of
calculating margins, limits and trading exposures. Since we have user friendly back offices
commodity Brooking’s, it is very clear for the clients to understand their account status on a daily
basis.

 Analyst Support:

Optimus is the first company to introduce Analyst Assisted Accounts (AAA) Service. Every
account we get is assisted by a dedicated financial Analyst. What we observe from the market is every
trader executes orders by taking different opinions from different people and finally it becomes a dish
prepared by the too many cooks. But when we trade with the support of a dedicated financial Analyst,
the result would be the different. Our F.A.’s chosen the combination of different Commodities and
prepares Strategies on intraday, short term and medium term basis.
 Chapter - 3

Objectives and scope

OBJECTIVE OF THE STUDY

1. To find out the Preferences of the investors for Asset Management Company.

2. To know the Preferences for the portfolios.

3. To know why one has invested or not invested in SBI Mutual fund

4. To find out the most preferred channel.

5. To find out what should do to boost Mutual Fund Industry.

Scope of the study

A big boom has been witnessed in Mutual Fund Industry in resent times. Many new

players have entered the market and trying to gain market share in this rapidly

improving market.

I had been sent at one of the branch of Sharekhan where I completed my Project work.

The study will help to know the preferences of the customers, which company,

portfolio, mode of investment, option for getting return and so on they prefer. This

project report may help the company to make further planning and strategy.
 Chapter – 4

RESEARCH METHODOLOGY

This report is based on primary as well secondary data, however primary data collection was given

more importance since it is overhearing factor in attitude studies. One of the most important users of

research methodology is that it helps in identifying the problem, collecting, analyzing the required

information data and providing an alternative solution to the problem. It also helps in collecting the

vital information that is required by the top management to assist them for the better decision

making both day to day decision and critical ones.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the reference.

Research has been done by primary data collection, and primary data has been collected by

interacting with various people. The secondary data has been collected through various journals and

websites.

Duration of Study:

The study was carried out for a period of two months, from 7th June to 30th July 2009.

Sampling:

 Sampling procedure:

The sample was selected of them who are the Businessman/govt. employee, 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. Out of which only 10 people had

invested in Mutual Fund. Other 90 people did not have invested in Mutual Fund.

 Sample design:

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

Limitation:

 Some of the persons were not so responsive.

 Possibility of error in data collection because many of investors may have not

given actual answers of my questionnaire.

 The sample size may not adequately represent the whole market.

 Some respondents were reluctant to divulge personal information which can affect the

validity of all responses.

 Chapter – 5

Data Analysis and Interpretation

ANALYSIS & INTERPRETATION OF THE DATA

1. On the basis of Age of the Investors:

Age <= 31-35 36-40 41-45 46-50 >50

Group 30

No. of 0 4 3 2 1 0

Investors

Interpretation:
 According to this chart out of 10 Mutual Fund investors , the most are in the age group of

31-35 yrs. i.e. 40%, the second most investors are in the age group of 36-40yrs i.e. 30%

and the least investors are in the age group of below 46-50 yrs.

2. Occupation of the investors of Aurangabad.

Occupation No. of Investors

Govt. Service 3
Pvt. Service 4
.
Business 2
Agriculture 0
Others 1

Interpretation:
In Occupation group out of 10 investors, 40% are Pvt. Employees, 20% are Businessman,

30% are Govt. Employees, 0% are in Agriculture and 10% are in others.

(3) Investors invested in different kind of investments of Aurangabad.

Priority of Investments No. of Respondents %

Saving A/C 98
Fixed deposits 50
Insurance 99
Mutual Fund 10
RD 45
Real Estate 35
Interpretation: From the above graph it can be inferred that out of 200 people, 98 %

people have invested in Saving A/c, 91.6% in Insurance, 51.6% in Fixed Deposits, 11% in

Mutual Fund, 43% in RD and 21.6% in Real Estate.

4. Educational Qualification of investors of Aurangabad.

Educational Qualification Number of Investors

Graduate/ Post Graduate 5

Under Graduate 2

Others 3

Total 120
Interpretation:
 Out of 120 Mutual Fund investors 50% of the investors in Aurangabad are

Graduate/Post Graduate, 20% are Under Graduate and 30% are others (under HSC).

1. Preference of factors while investing

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

No. of 10 31 40 19

Respondents
Interpretation:
 Out of 100 People, 40% People prefer to invest where there is High Return, 31% prefer

to invest where there is Low Risk, 10% prefer easy Liquidity and 19% prefer Trust

2. Awareness about Mutual Fund and its Operations

Response Yes No
No. of Respondents 35 55
 Interpretation:

From the above chart it is inferred that 39% People are aware of Mutual Fund and its

operations and 61% are not aware of Mutual Fund and its operations.

3. Channel Preferred by the Investors for Mutual Fund Investment

Channel Financial Advisor Bank AMC

No. of Respondents 6 1 3

Interpretation:

Out of 10 Investors 60% preferred to invest through Financial Advisors, 30% through

AMC and 10% through Bank.

4. Preference of Investors for future investment in Mutual Fund

Name of AMC No. of Investors

SBIMF 30
UTI 14
HDFC 10
Reliance 20
ICICI Prudential 16
Kotak 6
Others 4

Interpretation:

Out of 100 investors, 20% prefer to invest in Reliance, 16% in ICICI Prudential, 30%

in SBIMF, 4% in Others, 6% in Kotak, 16% in UTI and 10% in HDFC Mutual Fund.
5. Source of information for customers about Mutual Fund

Source of information No. of Respondents

Advertisement 13
Peer Group 25
Bank 30
Financial Advisors 42

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 100 Respondents, 42% know about Mutual fund Through

Financial Advisor, 30 % through Bank, 25% through Peer Group

and 13% through Advertisement.

 Chapter – 6

Findings and Conclusion

Findings

 Age Group of 36-40 years were more in numbers.

 The second most Investors were in the age group of 41-45 years and the least were

in the age group of below 45-50 years.

 In Occupation group most of the Investors were Private employees., the second

most Investors were Govt. employees

 About all the Respondents had a Saving A/c in Bank, 98% Invested in Fixed

Deposits,50% Invested in insurance, Only 99% Respondents invested in Mutual

fund 10%.

 Among 100 Respondents only 10% had invested in Mutual Fund.

 Out of 90 Respondents 61% were not aware of Mutual Fund, 39% told there is not

any specific reason for not invested in Mutual Fund.

 For Future investment the maximum Respondents preferred SBI Mutual Fund, the

second most preferred Reliance , ICICI Prudential has been preferred after them.

 Mostly Respondents preferred High Return while investment, the second most

preferred Low Risk then trust and the least preferred Liquidity.
 Only 61% Respondents were aware about Mutual fund and its operations and

39% were not.

 Among 100 Respondents only 10% had invested in Mutual Fund and 40% did

not have invested in Mutual fund.

 Most of the Investors had invested in SBI or Reliance Mutual Fund, ICICI

Prudential has also good Brand Position among investors.

 60% Investors preferred to Invest through Financial Advisors, 30% through AMC

(means Direct Investment) and 10% through Bank.

 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, 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.
 Chapter – 7

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. Though most of the prospects

and potential investors are not aware about the SIP. There is a large

scope for the companies to tap the salaried persons.

 BIBLIOGRAPHY

 NEWS PAPERS

 OUTLOOK MONEY

 TELEVISION CHANNEL (CNBC AAWAJ)

 MUTUAL FUND HAND BOOK

 FACT SHEET AND STATEMENT

 WWW.SBIMF.COM

 WWW.MONEYCONTROL.COM

 WWW.AMFIINDIA.COM

 WWW.ONLINERESEARCHONLINE.COM

 WWW. MUTUALFUNDSINDIA.COM
 QUESTIONNAIRE

A study of preferences of the investors for investment in mutual funds.

1. Personal Details:

(a). Name:-

(b). Add: - Phone:-

(c). Age:-
(d). Qualification:-

Graduation/PG Under Graduate Others

(e).
Occupation. Pl tick (√)

Govt. Ser Pvt. Ser Business Agriculture Others

(g). What is your monthly family income approximately? Pl tick (√).

Up to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001 and

Rs.10,000 15000 20,000 30,000 above

2. What kind of investments you have made so far? Pl tick (√). All applicable.

a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund

e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver 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

6. Have you ever invested in Mutual Fund? Pl tick (√). Yes No

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 b. Having debt & equity c. Only equity portfolio.
portfolio 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