A PROJECT REPORT

On

MUTUAL FUND SIMPLIFIED

At

“ICICI Securities LTD”

Submitted to

LLOYD BUSINESS SCHOOL

in partial fulfilment of the requirement for the award of degree of

Master of Business Administration

Submitted by: - Supervised by:-

Prince Verma Prof. Sabeena Yousuf

Roll no. 1717270079

LLOYD INSTITUTE OF MANAGEMNT & TECHNOLOGY

GREATER NOIDA, KNOWLEDGE PARK-2

2017-2019
 DECLARATION

I ‘’PRINCE VERMA” hereby declare that the work presented herein is

genuine work done originally by me and has not published submitted
elsewhere. Any literature, data or work done by others and cited in the
report has been given due acknowledgment and listed in reference
section.

Prince verma

1717270079

I
 ACKNOWLEGMENT

I take immense pleasure in completing this project and submitting the

final project report.

The last two month with ICICI SECURITIES has full of learning and
sense of contribution towards the organisation. I would like to thank
ICICI SECURITIES giving me this opportunity for learning and
contributing. I take this opportunity to thank all those people who made
this experience a memorable one.

A successful project can never be prepared by the singular effort of the

person to whom project is assigned but, it also demanded the help and
guardianship of some conversant person who undersigned actively or
passively in the completion of a successful project.

My heartfelt thanks go to all the Employees who helped me gain

knowledge about the actual working and the processes involved in
various departments.

PRINCE VERMA

II
 EXECUTIVE SUMMARY

The project was carried out for study and analysing the investment in
mutual funds to special reference of ICICI. It was done to know the
satisfaction level of the customer.

In this project I have made an analysis that what is the investment

pattern, what is the prospect and how mutual funds have emerged a
better investment option in India Recent years giving the investor higher
returns, liquidity, safety against traditional investment avenues like Bank
FD, Post office saving, Investing in volatile Stock market Etc.

With the growth of the Indian economy due to various economic factors
including Industrialization, Growth of infrastructure and services
industries, the Indian companies have grown to become global business
Giant.

So, the market capitalization of the Indian companies has grown which
has resulting in a building of a strong capital market. People are also
now more willing to invest and are ready to take risk. All this
development has proved to be a good atmosphere for mutual funds
investment in India.

III
 TABLE OF CONTENTS

S. NO. PARTICULARS PAGE NO.

CHAPTER 1 - INTRODUCTION TO COMPANY 1-21
1.1Introduction 1-3
1.2 Company Profile 4
1.3 Objectives of ICICI Securities 5
1.4 Management Team of I- SEC 6
1 1.5 Products & Services of I-SEC 7
1.6 Competitor Analysis 10
1.7 SWOT Analysis 13
1.8 Financial Statement Analysis 14-16
1.9 Recognitions of I-Sec 21
CHAPTER 2 - INTRODUTION TO MF 22-41
2.1 A Brief Of Mutual Funds. 22-23
2.2 History of Mutual Funds 24
2.3 Key Challenges 26
2 2.4 Types of Mutual Fund Schemes 27-31
2.5 Why Mutual Fund? 32-33
2.6 How Mutual Fund Works 34-41

3 CHAPTER 3 – REVIEW OF LITERATURE 42-43

4 CHAPTER 4 - OBJECTIVES OF STUDY 44

5 CHAPTER 5 - RESEARCH METHODOLOGY 45-46

6 CHAPTER 6 – ACTUAL WORK UNDERTAKEN 47-49

7 CHAPTER 7 - DATA INTERPRETATION 49-52

IV
7 CHAPTER 7 - CONCLUSION & FINDINGS 53-55

8 REFERENCES 56

V
Chapter 1

1.1- INTRODUCTION TO COMPANY

ICICI Group offers a wide range of banking products and financial

services to corporate and retail customers through a variety of delivery
channels and through its specialised group companies and subsidiaries in
the areas of personal banking, investment banking, life and general
insurance, venture capital and asset management. With a strong
customer focus, the ICICI Group Companies have maintained and
enhanced their leadership positions in their respective sector.

ICICI Bank is India's largest private sector bank with total assets of
7,206.95 billion (US$ 109 billion) at March 31, 2016 and profit after tax
97.26 billion (US$ 1,468 million) for the year ended March 31, 2016.
ICICI Bank currently has a network of 4,450 Branches and 14,015
ATM's across India.

ICICI Prudential Life Insurance is a joint venture between

ICICI Bank, a premier financial powerhouse, and Prudentialplc, a
leading international financial services group headquartered in the
United Kingdom. ICICI Prudential Life was amongst the first private
sector insurance companies to begin operations in December 2000 after
receiving approval from Insurance Regulatory Development Authority
(IRDA). ICICI Prudential Life's capital infused stands at ₹ 48.16 billion
(as of March 31, 2015) with ICICI Bank Ltd. and Prudential plc holding
74% and 26% stake respectively. For the financial year 2015, the
company garnered a total premium of ₹ 153.07 billion. The company has
assets under management of ₹ 1001.83 billion as on March 31, 2015.

ICICI Lombard General Insurance Company is a joint

venture between ICICI Bank Limited, India's largest private sector bank
with consolidated total assets of over USD 109 billion at March 31, 2015
and Fairfax Financial Holdings Limited, a Canada based USD 30 billion

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diversified financial services company engaged in general insurance,
reinsurance, insurance claims management and investment management.
ICICI Lombard GIC Ltd. is one of the leading private sector general
insurance companies in India with a Gross Written Premium (GWP) of
Rs 69.14 billion for the year ended March 31, 2015. The company issued
over 13.87 million policies and settled over 3.41 million claims as on
March 31, 2015.

ICICI Securities Ltd is the largest integrated securities firm

covering the needs of corporate and retail customers through investment
banking, institutional broking, retail broking and financial product
distribution businesses. Among the many awards that ICICI Securities
has won, the noteworthy awards for 2012 were: Asiamoney `Best
Domestic Equity House for 2012; 'BSE IPF D&B Equity Broking
Awards 2012' under two categories:- Best Equity Broking House - Cash
Segment and Largest E-Broking House; the Chief Learning Officer
Award from World HRD Congress for Innovation in Learning category.
IDG India's CIO magazine has recognized ICICI Securities as a recipient
of CIO 100 award in 2009, 2010, 2011 and 2012. I-Sec won this awards
4 times in a row for which the CIO Hall of Fame award was additionally
conferred in 2012.

ICICI Securities Primary Dealership Limited (‘I-Sec PD’) is the largest

primary dealer in Government Securities. It is an acknowledged leader
in the Indian fixed income and money markets, with a strong franchise
across the spectrum of interest rate products and services - institutional
sales and trading, resource mobilisation, portfolio management services
and research. One of the first entities to be granted primary dealership
license by RBI, I-Sec PD has made pioneering contributions since
inception to debt market development in India. I-Sec PD is also credited
with pioneering debt market research in India. It is one of the largest
portfolio managers in the country and amongst PDs, managing the
largest AUM under discretionary portfolio management.

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I-Sec PD’s leadership position and research expertise have been
consistently recognised by domestic and international agencies. In
recognition of our performance in the Fixed Income market, we have
received the following awards:

 “Best Domestic Bond House” in India - 2007, 2005, 2004,

2002 by Asia Money
 “Best Bond House” - 2009, 2007, 2006, 2005, 2004, 2001 by
Finance Asia
 “Best Domestic Bond House” – 2009 by The Asset
Magazine’s annual Triple A Country Awards
 Ranked volume leader - by Greenwich Associates in 2010
Asian Fixed-Income Investors Study. Ranked 5th in ‘Domestic
Currency Asian Credit’ with market share of 4.5%, Only
Domestic entity to be ranked.
 “Best Debt House in India” – 2012 by EUROMONEY

ICICI Prudential Asset Management is the third largest mutual

fund with average asset under management of ₹ 688.16 billion and a
market share (mutual fund ) of 10.34% as on March 31, 2012. The
Company manages a comprehensive range of mutual fund schemes and
portfolio management services to meet the varying investment needs of
its investors through117 branches and 196 CAMS official point of
transaction acceptance spread across the country.

ICICI Ventureis one of the largest and most successful alternative

asset managers in India with funds under management of over US$ 2
billion. It has been a pioneer in the Indian alternative asset industry since
its establishment in 1988, having managed several funds across various
asset classes over multiple economic cycles. ICICI Venture is a wholly
owned subsidiary of ICICI Bank.

3
1.2- COMPANY’S PROFILE

ICICI Securities Limited provides institutional and retail broking,

merchant banking, and advisory services to corporates, financial
institutions, high net-worth individuals, and retail investors in India. It
offers equity capital market products, such as initial public offerings
(IPO), further public offerings, rights offerings, convertible offerings,
qualified institutional placements, non-convertible debentures, buyback,
delisting, and open offers and international offerings for unlisted and
listed entities. The company also provides advisory services for
acquisitions, divestitures, joint ventures, corporate restructurings,
recapitalizations, spin-offs, mergers, and exchange offers; and private
equity advisory services on various products, including mezzanine and
private equity financing, secondary sale transactions, pre-IPO deals, and
preferential allotments by listed companies.

In addition, it operates ICICIdirect.com, an online broking platform to

invest in equity, derivatives, currency futures, mutual funds, and other
financial products, as well as to access research information, stock picks,
and mutual fund recommendations. Further, the company operates
financial superstores that provide products, such as online trading
accounts, equities, mutual funds, IPOs, life and general insurance, fixed
deposits, and other financial products; and offers trader, equity research
and advisory, and wealth management services. The company was
incorporated in 1995 and is based in New Mumbai, India. ICICI
Securities Limited is a subsidiary of ICICI Bank Limited.

VISSION:

To be the leading provider of financial services in India and a major

global bank.

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MISSION:

To become the first choice among customers by providing world-class

services.

1.3- OBJECTIVES OF ICICI

The major objective of the ICICI was to meet the needs of the industry
for permanent and long term funds in the private sector. In general, the
major objectives of the Corporation are:

 To assist in creation, growth and modernization of business

enterprises in the non-public sector.
 To encourage and promote the involvement of internal and
external capital sources, in such enterprises.
 To motivate pvt ownership of industrial investment and to
promote and assist in the expansion of markets.

1.4- MANAGEMENT TEAM

DIRECTORS

 Ms.Chanda D. Kochhar, Chairperson

 Mr.UdayChitale, Independent Director
 Mr.Vinod Kumar Dhall, Independent Director
 Ms.ZarinDaruwala
 Ms.Shilpa Kumar
 AnupBagchi, MD & CEO
 Ajay saraf, Executive Directors
In 1984, ChandaKochhar joined the Industrial Credit and Investment
Corporation of India (ICICI) as a management trainee. In 1998, she was
promoted as the General Manager and headed ICICI Bank's major client
group, which handled relationships with ICICI's top 200 clients. In 1999,
she also handled the strategy and e-commerce divisions of ICICI Bank.

5
Under Kochhar's leadership, ICICI Bank started building the nascent
retail business in 2000 focusing largely on technology, innovation,
process engineering and expansion of distribution and scale. In 2009
Kochhar was appointed as Managing Director (MD) & Chief Executive
Officer (CEO) of the bank and since then has been responsible for the
bank’s diverse operations in India and overseas. She also chairs the
boards of most of the bank’s subsidiaries, which include India’s leading
private sector life and general insurance companies. Under Kochhar's
leadership, ICICI Bank won the "Best Retail Bank in India" award in
2001, 2003, 2004 and 2005 and "Excellence in Retail Banking Award"
in 2002; both awards was given by The Asian Banker.

AnupBagchi is the Managing Director and CEO of ICICI Securities, a leading

firm in the capital markets space in the country. Its Investment Banking team
helps raise capital for India Inc – both equity and debt – both publicly and
privately placed. In the secondary market, its broking teams cover both,
institutional and retail clients with ICICIdirect.com enjoying significant
market leadership.

Prior to this, Mr Bagchi was the Executive Director at ICICI Securities Ltd.
He was responsible for the development and business growth of the retail
broking, distribution of retail financial products, and wealth management
services.
Ajay Sarafis the Executive Director and Head of Corporate Finance and the
Institutional Equities division of ICICI Securities.
Prior to this, Ajay was Senior General Manager with ICICI Bank and led the
Corporate Banking and SME businesses. As a senior business leader, Mr Saraf
has shown the ability to drive business results and has displayed great
leadership skills during the fast growth phase in the Corporate Banking, SME
and Mid-Market segments in the industry. Ajay is a Chartered Accountant and
a Cost Accountant.
EXECUTIVES

 SubirSaha
 VaijayantiNaik

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  RajuNanwani, Company Secretary
 PrashantMohta, Chief Financial officer

AUDITORS

 S. R. Batliboi& Co. LLP Chartered Accountants

1.5- PRODUCTS AND SERVICES

A product for every need: ICICIdirect.com is the most comprehensive website,

which allows you to invest in Shares, Mutual funds, Derivatives (Futures and
Options) and other financial products. Simply put we offer you a product for
every investment need of yours.

 Trading in shares:

ICICIdirect.com offers you various options while trading in shares.

• Cash Trading

This is a delivery based trading system, which is generally done withthe

intention of taking delivery of shares or monies.

• Margin Trading

You can also do an intra-settlement trading upto 3 to 4 times your available

funds, wherein you take long buy/ short sell positions in stocks with the
intention of squaring off the position within the same day settlement cycle.

• Margin PLUS Trading

Through Margin PLUS you can do an intra-settlement trading up to 25times

your available funds, wherein you take long buy/ short sell positions in stocks
with the intention of squaring off the position within the same day settlement
cycle. Margin PLUS will give a much higher leverage in your account against
your limits.

• Spot Trading:

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This facility can be used only for selling your demat stocks which are already
existing in your demat account. When you are looking at an immediate
liquidity option, 'Cash on Spot' may work the best for you, On selling shares
through "cash on spot", money is credited to your bank a/c the same evening
& not on the exchange payout date. This money can then be withdrawn from
any of the ICICI Bank ATMs.

• BTST:

Buy Today Sell Tomorrow (BTST) is a facility that allows you to sell shares
even on 1st and 2nd day after the buy order date, without you having to wait
for the receipt of shares into your demat account.

• Call N Trade:

Call N Trade® allows you to call on a local number in your city &trade on the
telephone through our Customer Service Executives. This facility is currently
available in over 11 major states across India.

• Trading on NSE/BSE:

Through ICICIdirect.com, you can trade on NSE as well as BSE.

• Market Order:

You could trade by placing market orders during market hours that allows you
to trade at the best obtainable price in the market at the time of execution of
the order.

• Limit Order:

Allow you to place a buy/sell order at a price defined by you. The execution
can happen at a price more favourable than the price, which is defined by you,
limit orders can be placed by you during holidays & nonmarket hours too.

 Trading in mutual funds:

We can invest in various mutual fund schemes online through

ICICIdirect.com. It is very easy to purchase mutual funds and to redeem

8
mutual fund investment. Before investing in mutual funds through ICICI
direct following options are available:

• Select Funds to invest: If you are well versed or knowledgeable about

mutual funds the you can directly select the mutual fund of your AMC
choice. First select AMC name , then mutual fund category, select fund
sub-category and select the fund type.

• Quick Search: If you know the complete name of any MF scheme you
want to invest in then type the name in quick search column.

• Fund of the month: Fund of the month is a monthly recommendation of

funds based on current market scenario.

• Research recommendations: These are funds recommended on the basis

of performance of the funds and the market conditions in different asset
classes depending on different parameters like, time horizon, risk appetite
etc. You can choose to invest in top schemes recommended across different
type of funds like equity, balanced, debt, liquid, Fund of funds, MIP &
ELSS etc.

• Top Selling funds: These are the funds which have been bought most on
ICICIdirect.com in last 30 days.

 Portfolio monitoring: Investor can also monitor their funds by clicking

the portfolio tracker link. They can see whether they are in losses or in
profit.
 Capital gain: Investor can check their Capital gain tax under the capital
gain link.
 Redeem option: Investor also can redeem their funds directly through
ICICI Direct. After redeem, Total fund amount transfer to their saving
account(linked to Demat account).

The Advantages with ICICI Direct are

 3-in-1 account integrates your banking, broking and demat accounts. All
accounts are from ICICI and very well integrated. This feature makes

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 ICICI the most interesting player in online trading facility. There is
absolutely no manual interfere require. This is truly online trading
environment.
 Unlike most of the online trading companies in India which require
transferring money to the broker's pool or towards deposits, at ICICI
Direct you can manage your own demat and bank accounts through
ICICIdirect.com. Money from selling stock is available in ICICI bank
account as soon as the ICICI Direct receive it.
 Investment online in IPOs, Mutual Funds, GOI Bonds, and Postal Savings
Schemes all from one website. General Insurance is also available from
ICICI Lombard.
 Trading is available in both BSE and NSE.

The Disadvantages with ICICI Direct are

 ICICI Direct brokerage is high and not negotiable.

 ICICI Direct doesn't offer commodity trading. With ICICI Trading
account you cannot trade MCX or NCDEX.
 With ICICIdirect.com e-Invest account (3-IN-1 concept), the Demat
Account has to be opened with ICICI Bank Ltd as the Depository
Participant (DP) and the Bank Account has to be opened with ICICI Bank
Ltd. as the Banker.

1.6- COMPETITORS
ICICI Securities is providing share trading facilities. The ICICI was the 1st
in India to introduce concept of online share trading. Now in the market
there are few competitors who are providing the share trading facilities.
Some of them are mentioned below who are providing some competition
in the market.
 HDFC Securities:
HDFC bank is also one of the growing bank in India. It has also given new
definition to banking services with providing extra services than the
traditional banking services. HDFC was in housing finance initially but in
last few years it has widen its scope of working area. It has entered in

10
almost all the sectors in which ICICI is dealing. HDFC is providing the
demat account to its customers. The HDFC is not providing the online
share trading like ICICI. Here it stays slightly behind the ICICI bank.
 Kotak Street:
Kotak Street is also emerging as a good competitor to all the share trading
service providing company. It is also entering in the all the financial
services like the ICICI and HDFC bank. The Kotak Street is relatively new
compared to ICICI and HDFC in the field of share trading. Initially when
the Kotak group had not entered in banking field it had collaboration with
HDFC for the saving accounts of the customers who had or wanted to
open the share trading account with the Kotak street. But now as the Kotak
group has its own bank, all the saving accounts are opened in the Kotak
bank. The Kotak group has also entered in the field of insurance with name
:-OM KOTAK MAHINDRA LIFE INSURANCE‖. The Kotak group has
also entered
in the MUTUAL FUND sector also.
 India bulls:
India bulls are also one of the companies which are providing the share
trading facility. It is a company which is providing the share trading
facility only. It does not provide any saving account facility to its
customer.
 MotilalOswal:
MotilalOswal is also one of the competitors of icici direct.com. This
Company is also providing online trading facilities with which customer
can save their time and they will operate the program on their computer.
 Marwadi:
This unit has paved their feet in each and every town because of the
cheaper rate of its brokerage. They are not providing unlimited facility for
trading.
 5paisa.com:
5Paisa is the trade mane of India Info line Securities Private Limited
(5paisa), member of National Stock Exchange and The Stock Exchange,
Mumbai. 5paisa is a wholly owned subsidiary of India Info line Ltd.

11
India‘s leading and most popular finance and investment portal. 5paisa has
emerged as one of leading players in e-broking space in India.
 Sharekhan:
Sharekhan, India‘s leading stock broker is the retail arm of SSKI, and
offers you depository services and trade execution facilities for equities,
derivatives and commodities backed with investment advice tempered by
decades of broking experience.

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 1.7- SWOT ANALYSIS

STRENGTHS
1. India's one of leading broking firm. WEAKNESS

2. Strong brand name.

1. High charges compared to other
3. Paperless work.
companies
4. High profitability and revenue.
2.Legal issues.
5. Employs over 65,000 people.
3. Irregular contact by relationship
6. 3 in 1 account facility so all work done
manager with customers.
at one place.

OPPORTUNITIES THREATS

1. Increasing customer base. 1.Government regulations

2. Growing middle class.
2.High Competition
3. Reduced rates in FDs through banks. 3.Environmental laws
4. Strong Growth of economy in long 4.Economic instability
run.
5. Technological changes increased Govt.
Spending.

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1.8- FINANCIAL STATEMENT ANALYSIS

Main source of finance:

 Brokerage – the major sources of finance of ICICI Securities is the

brokerage on the turnover being generated.

The charges on various parameters are as:

Equity Delivery Brokerage – 0.55%

Equity Intraday Brokerage – 0.278%

Equity Futures Brokerage –0.05% to 0.03%

Equity Options Brokerage – Rs 100 per lot

Currency Futures Trading Brokerage – 0.050% to 0.030%

Currency Options Trading – Rs 65 to 95 per lot

Minimum Brokerage Charges – Rs. 35 per trade

Equity Futures – 0.00185%

Equity Options – 0.05% on premium.

 Interest and dividend income

 Profit (loss) on securities.

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 BALANCE SHEET:

LIQUIDITY RATIOS:
Liquidity ratios measure a company's ability to pay debt obligations and its margin of
safety through the calculation of metrics including the current ratio, quick ratio and
operating cash flow ratio. Current liabilities are analyzed in relation to liquid assets to
evaluate the coverage of short-term debts in an emergency. Bankruptcy analysts and
mortgage originators use liquidity ratios to evaluate going concern issues, as liquidity
measurement ratios indicate cash flow positioning.

As here we can see that most of the liquidity ratios are increasing and hence we can
conclude that it provides a good indication of a company's ability to cover its short-
term liabilities.

LIQUIDITY RATIOS As on 31st march

2017 2016 2015

 Current ratio 1.29 1.25 1.05

 Quick ratio 1.16 1.09 1.03

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  Cash ratio 0.60 0.68 0.46
 Working capital 2749.9 2281 706.6

OPERATING RATIO:
This ratio is used to measure the operational efficiency of the management. It shows
whether the cost component in the sales figure is within normal range. A low operating
ratio means high net profit ratio i.e., more operating profit.

We can see that the operating ratio is decreasing and hence we can conclude that low
operating ratio means high net profit ratio ,means operating profit is increasing.

OPERATING RATIOS As on 31st march

2017 2016 2015

Operating ratio 10.327 10.428 14.815

LEVERAGE RATIO:
Companies rely on a mixture of owners' equity and debt to finance their operations. A
leverage ratio is any one of several financial measurements that look at how much
capital comes in the form of debt (loans), or assesses the ability of a company to meet
financial obligations.

We can see that Debt ratio is increasing ,from that we can conclude that the company
has a lot of debt relative to its assets. In same perspective Debt To Equity Ratio is
increasing , from this we can conclude that a high debt-to-equity ratio indicates that a
company may not be able to generate enough cash to satisfy its debt obligations.

LEVERAGE RATIOS As on 31st march

2017 2016 2015
 Debt Ratio 0.762 0.716 0.987
 Debt To Equity Ratio 3.206 2.530 8.200
 Interest Coverage Ratio 3.925 3.809 2.467
 Equity Ratio 0.237 0.283 0.223

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  Debt To Total Capital Ratio 0.722 0.549 0.331

PROFITABILITY RATIO:
Profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earnings compared to its expenses and other relevant costs incurred
during a specific period of time. For most of these ratios, having a higher value
relative to a competitor's ratio or relative to the same ratio from a previous period
indicates that the company is doing well.

PROFITABILITY RATIOS As on 31st march

2017 2016 2015
 Gross Margin Ratio 3.710 3.023 5.534
 Profit Margin ratio 24.048 20.981 9.232
 Return On Assets 0.330 0.338 0.112
 Return On Capital Employed 0.866 0.768 1.012

1.9- RECOGNITION

RETAIL

 ICICI Securities won the Award for Outstanding Social Impacts at the
Global Sustainability Leadership Awards 2014 These awards recognize
institutions for their contribution to the society in their domain as well as
businesses that deliver products and services in ways that takes full account of
their responsibility towards the communities they touch
 "MOST Admired Service Provider In Financial Sector? At The Banking
Financial Services & Insurance Awards 2014 presented by ABP News

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 ICICIdirect.com, won the Outlook Money ' Best e- Brokerage Award'
ninth time in a row. Previously, the firm won the award in 2004, 2005, 2007,
2008, 2009, 2010, 2011, and 2012
 ICICIdirect.com won the Mobbys award for the "Best Mobile application
in Mobile Trading"
 ICICI Securities Business Partners has been conferred the Franchise India
Awards 2013, for being the 'Franchisor of the year' in the Financial
Services category
 ICICIdirect.com, won the award for Innovation at Banking Frontiers
Finnoviti Awards 2013. The award was conferred on ICICIDirect' for its
`Valid Till Cancel Order' (VTC) facility, which was awarded amongst the top
3 innovations in BFSI industry by 'Peer Voting'
 ICICI Securities won the Outlook Smart use Technology eRetailer of the
year 2013 conferred by FIHL in association with HomeShop18.com
 ICICIdirect.com won theStock Broker of the Year' award at the Money
Today FPCIL Awards 2012
 ICICI Securities Business Partners (Sub Broker channel) won the Franchisor
of the Year' at the Franchise Awards 2012 for the fourth time in a row
 ICICI Securities won the BSE IPF D&B Equity Broking Awards
2012 under two categories:
 Best Equity Broking House - Cash Segment
 Largest E-Broking House
 ICICI Securities won the Chief Learning Officer Award from World HRD
Congress for Innovation in Learning category
 ICICI Securities won the Grand Jury Award for Commendable performance
by National Financial Advisor (Retail) - Online at the CNBC TV 18 -
Financial Advisor Awards 2011. The awards recognises India's best Financial
Advisors
 ICICI Securities Business Partners (Sub Broker channel) won the 'Franchisor
of the Year at the Franchise Awards 2011', third time in a row

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 ICICI Securities was the winner of the'Smart use Technology eRetailer of
the year' 2012 award conferred by Franchise India in association with UTV
Bloomberg for the first time
 ICICIdirect.com, won the Outlook Money ' Best e- Brokerage
Award' seventh time in a row. Previously, the firm won the award in 2004,
2005, 2007, 2008, 2009 and 2010
 ICICI Securities' Business Partners (Sub Broker channel) won the 'Franchisor
of the Year 2011' for the third consecutive year
 AnupBagchi, MD & CEO has been honoured with the Zee Business 'Industry
Newsmaker Award 2010' for his tremendous and unmatched contribution in
the field of Finance
 PankajPandey, Head- Research - ICICIdirect has won the Zee Business Best
Market Analyst 2010 award in the Equities Fundamental Category
 CMO Asia Awards for Excellence in Branding and Marketing 2010:
I. Brand Leadership Award (overall)
II. Campaign of the Year' for the Trade Racer Campaign
III. Brand Excellence in Banking and Financial Services for the store
format
IV. Award for Brand Excellence in the Internet Business
 Franchisor of the year award 2009
 Retail concept of the year awards 2009
 Frost and Sullivan 2009 Award for Customer Service Leadership
 ICICIdirect, the neighbourhood financial superstore won the
prestigious Franchise India `Service Retailer of the Year 2008 award
 ICICIdirect has also won the CNBC AWAAZ 2007 Consumer Award for
the Most Preferred Brand of Financial Advisory Services
 Best Broker - Web 18 Genius of the Web Awards 2007

INSTITUTIONAL

 ICICI Securities awarded the Asiamoney `Best Domestic Equity House' for
2012

19
 VikashMantri tops The Wall Street Journal's Asia's Best Analysts survey
in the media sector for 2010
 ICICI Securities has awarded as the Best Investment Bank 2008 by Global
Finance Magazine
 The Corporate Finance group also was awarded a runner-up Best Merchant
Banker by Outlook Money in 2007
 ICICI Securities topped the Prime Database League Tables 2007 for money
raised through IPOs/FPOs
 The equities team was adjudged the 'Best Indian Brokerage House-2003' by
Asia money.

TECHNOLOGY

 ICICI Securities recently won the Innovation Award for Oracle Fusion
Middleware. ICICI Securities has consistently demonstrated the best usage of
Oracle Tuxedo as an OLTP engine. These Asia-Pacific awards honour
customers for their optimum and innovative solutions using Oracle Fusion
Middleware
 Fairfax Business Media has recognized ICICI Securities as a recipient of CIO
100 Asia award in 2013
 ICICI Securities has been awarded the NASSCOM IT Innovation Awards
2013
 CIO Masters for Collaboration and Cloud was awarded by Biztech2 (Network
18) in 2013
 ICICI Securities has been conferred by Dataquest in 2012
 Business Technology Excellence award
 Business Technology Innovation award
 IDG India has recognized ICICI Securities as a recipient of CIO 100 award
in 2009, 2010, 2011 and 2012, four times in a row
 IDG India has conferred the CIO Hall of Fame award in 2012
 EMC Transformers Award was presented for best use of IT to transform
business in 2012

20
 CIO Masters for Virtualization was awarded by Biztech2 (Network 18) in
2012
 ICICI Securities was the Bloomberg UTV CXO Awards Finalist for Best
Utilization of IT to Transform Business in 2011
 ICICI Securities was conferred the Gold CIO award jointly by CIOL and
Dataquest at the Enterprise Awards 2010
 ICICI Securities was the NASSCOM CNBC IT User Awards Finalist in
2009 and 2010
 Indian Bank's Association Business Technology Awards was presented
for Best Online Trading Platform in 2006 and 2007

21
 Chapter -2

2.1- INTRODUCTION TO PROJECT

Definition

A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in
capital market instruments such as equities, debentures and other securities.
The income earned through these investments and the capital appreciation
realized (after deducting the expenses and profits of mutual fund managers) is
shared by its unit holders in proportion to the number of units owned by them.
Thus a Mutual Fund strives to meet the investment needs of the common man
by offering him or her opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost. The small savings of all
the investors are put together to increase the buying power and hire a
professional manager to invest and monitor the money. Anybody with an
surplus of as little as a few thousand rupees can invest in Mutual Funds.

Mutual funds play vital role in resource mobilization and their efficient
allocation in a transitional economy like India. Economic transition is usually
marked by changes in the financial mechanism, institutional integration,
market regulation, re-allocation of savings and investments, and changes in the
inter-sector relationships. These changes often imply negativity which shakes
investor’s confidence in the capital market. Mutual funds perform a crucial
task as efficient alligators of resources in such a transitional period.

According to The SEBI (Mutual funds) Regulations 1993 “ 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 the regulations”.

Advantages of Mutual funds:

 VARIETY-
Mutual funds can be an excellent vehicle to carry out a well-conceived

22
 investment plan. Once an investor has a disciplined, well thought out strategy,
there are many choices available in the mutual fund universe to execute the
investment plan with reasonable costs.
 DIVERSIFICATION-
Mutual funds can provide a high degree of security of principal and income
through diversification of securities. Few individuals could afford to buy as
many different types of stocks as the typical mutual fund holds. This spreading
of risk makes it unlikely that poor performance by any one security will result
in financial disaster.
 PROFESSIONAL INVESTMENT MANAGEMENT-
The purchase of shares in a mutual fund allows an investor to hire top notch
investment management expertise, thus freeing the investor from the
responsibility of managing the portfolio of securities on a day-to-day basis.
 LIQUIDITY-
Most mutual funds “maintain a market” in their own shares. Such funds are
referred to as “open-end” investment companies. This means that the mutual
fund company has obligated itself to buy back its shares from investors. An
investor can require the fund to redeem its shares at any time. This
requirement provides the purchaser of fund shares with a high degree of
liquidity.
 LOW COST-
Several large discount brokerage firms have created “fund supermarkets”
where an investor can have a wide mix of funds, from hundreds of separate
fund groups, all in one brokerage account. This makes it easy for an investor
to put together a diversified portfolio of funds from different fund families,
with top-notch management and low costs.
 CONVENIENCE & FLEXIBILITY-
Under the “family of funds” concept, a company will sponsor a number of
funds with different investment objectives and underlying assets. The investor
can decide to switch assets back and forth from one fund to another. The
advantage is that the investor can quickly, conveniently (and without any
additional sales charges) move assets into one or more funds that better meet
his investment needs or desires.

23
 Disadvantages of Mutual funds:

 HIGH LOAD-
Purchasing shares from many mutual funds involves payment of a sales
charge, commonly called a “load.” This charge covers the cost of marketing
the fund through brokerage firms and certain other fees. Sales charges can be
as high as 8.5% of the original investment, but this is very unusual. Market
forces have reduced the typical front end load down to an average of about
4.75% for bond funds and 5.75% for stock funds. There are now many share
classes, There are many “no-load” funds that market their products directly to
the public by mail and through newspaper advertising. These funds do not
charge a sales fee.
 REDUCED RETURNS-
Annual management fees and administrative charges can reduce the overall
return on the investment. Management fees can range from 0.5% to 3% or
more of the value of the investment. Administrative charges may be imposed
in addition to management fees and frequently cost from $5 to $25 annually
per account. These small administrative charges are frequently waived for
accounts that reach a minimum balance. These fees can eat up a significant
portion of the return to an investor. For example, a bond fund earning 5% on
Treasury notes with a 2% expense ratio will only return 3% to the investor.
The expenses are eating up 40% of the returns.
 NO PERSONAL INVOLVEMENT-
While professional management relieves the investor of certain obligations
and responsibilities, it also eliminates his personal involvement in the
management of the fund. The purchaser of a mutual fund cannot control the
selection of specific assets or the timing of purchases and sales. Unlike the
investor who buys stock directly and who can select the time to sell and
recognize a gain or loss, the mutual fund shareholder has no choice. He cannot
control the amount of any capital gain distribution, or when it must be
reported. Capital gain distributions are paid annually and must be reported
each year on the shareholder’s tax return.
2.2- HISTORY OF MUTUAL FUNDS

24
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
of India. The history of mutual funds in India can be broadly divided into four
distinct phases.
• First Phase 1964-1987
Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It
was set up by the Reserve Bank of India and functioned under the Regulatory
and administrative control of the Reserve Bank of India. In 1978 UTI was de-
linked from the RBI and the Industrial Development Bank of India (IDBI)
took over the regulatory and administrative control in place of RBI. The first
scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had
Rs. 6,700 crores of assets under management.
• Second Phase 1987-1993 (Entry of public sector funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual Fund was the first non-UTI
Mutual Fund established in June 1987 followed by Canbank Mutual Fund
(Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual
Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct
92). LIC established its mutual fund in June 1989 while GIC had set up its
mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of
Rs. 47,004 crores.
• Third Phase 1993-2003 (Entry of Private sector funds)
With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund
families. Also, 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.

25
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were 33
mutual funds with total assets of Rs. 1,21,805crores. The Unit Trust of India
with Rs. 44,541 crores of assets under management was way ahead of other
mutual funds.
• Fourth Phase Since Feb 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 Specified
Undertaking of Unit Trust of India, functioning under an administrator and
under the rules framed by Government of India and does not come under the
purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC.
It is registered with SEBI and functions under the Mutual Fund Regulations.
With the bifurcation of the erstwhile UTI which had in March 2000 more than
Rs. 76,000 crores of assets under management and with the setting up of a UTI
Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with
recent mergers taking place among different private sector funds, the mutual
fund industry has entered its current phase of consolidation and growth.
Now the size of Mutual funds around 12 lakh crore. 90% of total mutual funds
are in debt segment and 10% in Equity segment.
2.3- KEY CHALLENGES
• Lack of financial education and awareness-Financial literacy is one of the
most fundamental factors impeding the growth of penetration of any financial
products in the smaller cities and towns. Investors need to be made aware of
their financial goals and the means to achieve the same. AMFI and SEBI along
with the Industry are making efforts for investor awareness campaign. Fund
houses are also mandated by regulation to invest 2 bps from scheme expenses
towards, investor education and awareness campaigns but India has a long
way to go.

26
 • Limited Distribution network- The second critical issue for fund houses to
distribute their products in smaller cities is the availability of quality
distribution infrastructure. Fund houses need infrastructure like branches,
adequate number of relationship managers and sales service staff in these
locations to be able to increase their sales volume coming from these
geographies
• Distribution cost- Cost of establishing a distribution network in B-15 cities
is quite high. It is the cost per transaction or the low sales volume that makes
the pursuit economically unviable or at the least challenging. Although,
additional TER can be levied to extend of inflows from these cities (up to 30
bps); entering these markets have a long gestation period and requires a capital
investment for distributors.
• Cultural bias towards physical assets-As of FY13, 46 per cent of total
individual wealth in India is invested in physical assets (gold and real estate)
Although, in the past few decades, the investors have increasingly relied on
financial assets to invest their savings; the contribution of MFs in the asset
portfolio is very low. Insurance products constitute 17 per cent of the
individual savings in financial assets, whereas the share of mutual funds is
much lower at 3.2 per cent.

2.4- TYPES OF MUTUAL FUND SCHEMES

The objectives of mutual funds are to provide continuous liquidity and higher
yields with high degree of safety to investors. Based on these objectives,
different types of mutual fund schemes have evolved.

FUNCTIONAL PORTFOLIO OTHERS

Open ended scheme Income funds Sectorial specific

Close ended scheme Growth funds Tax saving

Interval scheme Balanced funds Equity linked saving

scheme (ELSS)

27
 Money market mutual Special scheme
funds

Guilt funds

Index funds

Load funds

Arbitrage funds

Thematic funds

Exchange traded funds

Fund of fund scheme

FUNCTIONAL MUTUAL FUNDS:

 OPEN-ENDED SCHEME: In case of open-ended schemes, the mutual

fund continuously offers to sell and repurchase its units at net asset value
(NAV) or NAV-related prices. Unlike close-ended schemes, open-ended ones
do not have to be listed on the stock exchange and can also offer repurchase
soon after allotment. Investors can enter and exit the scheme any time during
the life of the fund. Open-ended schemes do not have a fixed corpus. The
corpus of fund increases or decreases, depending on the purchase or
redemption of units by investors. The key feature of open-ended funds is
liquidity. They increase liquidity of the investors as the units can be
continuously bought and sold. The investors can develop their income or
saving plan due to free entry and exit frame of funds. Open-ended schemes
usually come as a family of schemes which enable the investors to switch
over from one scheme to another of same family.
 CLOSE-ENDED SCHEME: Close-ended schemes have a fixed corpus
and a stipulated maturity period ranging between 2 to 5 years. Investors can
invest in the scheme when it is launched. The scheme remains open for a
period not exceeding 45 days. Investors in close-ended schemes can buy units

28
only from the market, once initial subscriptions are over and thereafter the
units are listed on the stock exchanges where they dm be bought and sold.
The fund has no interaction with investors till redemption except for paying
dividend/bonus. In order to provide an alternate exit route to the investors,
some close-ended funds give an option of selling back the units to the mutual
fund through periodic repurchase at NAV related prices. If an investor sells
units directly to the fund, he cannot enter the fund again, as units bought back
by the fund cannot be reissued. The close-ended scheme can be converted into
an open-ended one. The units can be rolled over by the passing of a resolution
by a majority of the unit--holders.
 INTERVAL SCHEME: Interval scheme combines the features of open-
ended and close-ended schemes. They are open for sale or redemption during
predetermined intervals at NAV related prices.

PORTFOLIO:
 INCOME FUNDS: The aim of income funds is to provide safety of
investments and regular income to investors. Such schemes invest
predominantly in income-bearing instruments like bonds, debentures,
government securities, and commercial paper. The return as well as the risk is
lower in income funds as compared to growth funds.
 GROWTH FUNDS: The main objective of growth funds is capital
appreciation over the medium-to-long- term. They invest most of the corpus
in equity shares with significant growth potential and they offer higher return
to investors in the long-term. They assume the risks associated with equity
investments. There is no guarantee or assurance of returns. These schemes are
usually close-ended and listed on stock exchanges.
 BALANCED FUNDS: The aim of balanced scheme is to provide both
capital appreciation and regular income. They divide their investment
between equity shares and fixed nice bearing instruments in such a proportion
that, the portfolio is balanced. The portfolio of such funds usually comprises
of companies with good profit and dividend track records. Their exposure to
risk is moderate and they offer a reasonable rate of return.

29
 MONEY MARKET MUTUAL FUNDS: They specialize in investing
in short-term money market instruments like treasury bills, and certificate of
deposits. The objective of such funds is high liquidity with low rate of return.

OTHERS:
 SECTORAL: These funds invest in specific core sectors like energy,
telecommunications, IT, construction, transportation, and financial services.
Some of these newly opened-up sectors offer good investment potential.
 TAX SAVING SCHEME: Tax-saving schemes are designed on the basis
of tax policy with special tax incentives to investors. Mutual funds have
introduced a number of tax saving schemes. These are close--ended schemes
and investments are made for ten years, although investors can avail of
encashment facilities after 3 years. These schemes contain various options
like income, growth or capital application. The latest scheme offered is the
Systematic Withdrawal Plan (SWP) which enables investors to reduce their
tax incidence on dividends from as high as 30% to as low as 3 to 4%.
 EQUITY LINKED SAVING SCHEME (ELSS): In order to encourage
investors to invest in equity market, the government has given tax-
concessions through special schemes. Investment in these schemes entitles the
investor to claim an income tax rebate, but these schemes carry a lock-in
period before the end of which funds cannot be withdrawn.
 SPECIAL SCHEMES: Mutual funds have launched special schemes to
cater to the special needs of investors. UTI has launched special schemes such
as Children’s Gift Growth Fund, 1986, Housing Unit Scheme, 1992, and
Venture Capital Funds.
 GILT FUNDS: Mutual funds which deal exclusively in gilts are called
gilt funds. With a view to creating a wider investor base for government
securities, the Reserve Bank of India encouraged setting up of gilt funds.
These funds are provided liquidity support by the Reserve Bank.
 LOAD FUNDS: Mutual funds incur certain expenses such as brokerage,
marketing expenses, and communication expenses. These expenses are
known as ‘load’ and are recovered by the fund when it sells the units to
investors or repurchases the units from withholders. In other words, load is a

30
sales charge, or commission, assessed by certain mutual funds to cover their
selling costs. Loads can be of two types-Front-end-load and back-end load.
Front-end-load, or sale load, is a charge collected at the time when an investor
enters into the scheme. Back-end, or repurchase, load is a charge collected
when the investor gets out of the scheme. Schemes that do not charge a load
are called ‘No load’ schemes.
 INDEX FUNDS: An index fund is a mutual fund which invests in
securities in the index i.e. Sensex or Nifty. It invests only in those shares
which comprise the market index and in exactly the same proportion as the
companies/weightage in the index so that the value of such index funds varies
with the market index. An index fund follows a passive investment strategy as
no effort is made by the fund manager to identify stocks for investment/dis-
investment.
 EXCHANGE TRADED FUNDS: Exchange Traded Funds (ETFs) are a
hybrid of open-ended mutual funds and listed individual stocks. They are
listed on stock exchanges and trade like individual stocks on the stock
exchange. However, trading at the stock exchanges does not affect their
portfolio. ETFs do not sell their shares directly to investors for cash. The
shares are offered to investors over the stock exchange.
 ARBITRAGE FUNDS: Arbitrage funds are those funds in which
investor try to gain from the price differences on different stock exchanges. It
is a trade that profits by exploiting price differences of identical or similar
financial instruments, on different markets or in different forms. But Given
the advancement in technology it has become extremely difficult to profit
from mispricing in the market. This fund is considered as the most safest fund
to invest.
 THEMATIC FUNDS: This fund is based on some particular theme and
investors invest their money in that particular scheme. For e.g. Infrastructure
theme in which investors invest only in infrastructure sector. This fund is
considered as the most risky fund.

2.5- WHY MUTUAL FUNDS

31
So why should investors consider mutual funds over others to achieve
their investment goals?
Mutual funds allow investors to pool in their money for a diversified selection
of securities, managed by a professional fund manager. It offers an array of
innovative products like fund of funds, exchange-traded funds, Fixed
Maturity Plans, Sectorial Funds and many more.
Whether the objective is financial gains or convenience, mutual funds offer
many benefits to-its-investors.
Beat Inflation- Mutual Funds help investors generate better inflation-
adjusted returns, without spending a lot of time and energy on it.While most
people consider letting their savings 'grow' in a bank, they don't consider that
inflation may be nibbling away its value.
Suppose you have Rs. 100 as savings in your bank today. These can buy
about 10 bottles of water. Your bank offers 5% interest per annum, so by next
year you will have Rs. 105 in your-bank

32
However, inflation that year rose by 10%. Therefore, one bottle of water costs
Rs. 11. By the end of the year, with Rs. 105, you will not be able to afford 10
bottles of water anymore.
Mutual Funds provide an ideal investment option to place your savings for a
long-term inflation adjusted growth, so that the purchasing power of your
hard earned money does not-plume.
Expert Manager- Backed by a dedicated research team, investors are
provided with the services of an experienced fund manager who handles the
financial decisions based on the performance and prospects available in the
market to achieve the objectives of the mutual fund scheme.
Convenience- Mutual funds are an ideal investment option when you are
looking at convenience and timesaving opportunity. With low investment
amount alternatives, the ability to buy or sell them on any business day and a
multitude of choices based on an individual's goal and investment need,
investors are free to pursue their course of life while their investments earn.
Low cost- Probably the biggest advantage for any investor is the low cost of
investment that mutual funds offer, as compared to investing directly in
capital markets. Most stock options require significant capital, which may not
be possible for young investors who are just starting out.
Mutual funds, on the other hand, are relatively less expensive. The benefit of
scale in brokerage and fees translates to lower costs for investors. One can
start with as low as Rs. 500 and get the advantage of long term equity
investment.
Diversification- Going by the adage, 'Do not put all your eggs in one basket',
mutual funds help mitigate risks to a large extent by distributing your
investment across a diverse range of assets. Mutual funds offer a great
investment opportunity to investors who have a limited investment.
Liquidity- Investors have the advantage of getting their money back
promptly, in case of open-ended schemes based on the Net Asset Value
(NAV) at that time. In case your investment is close-ended, it can be traded in
the stock exchange, as offered by some schemes.
High Return potential- Based on medium or long-term investment, mutual
funds have the potential to generate a higher return, as you can invest on a
diverse range of sectors and industries.

33
Safety and Transparency- Fund managers provide regular information about
the current value of the investment, along with their strategy and outlook, to
give a clear picture of how your investments are doing. Moreover, since every
mutual fund is regulated by SEBI, you can be assured that your investments
are managed in a disciplined and regulated manner and are in safe hands.
Every form of investment involves risk. However, skilful management,
selection of fundamentally sound securities and diversification can help
reduce the risk, while increasing the chances of higher returns over time.

2.6- HOW MUTUAL FUNDS WORKS

A mutual fund is a collection of investments, such as stocks, bonds and other

funds owned by a group of investors and managed by a professional money
manager. The investment objective of the mutual fund determines what types
of securities it buys. A mutual fund can focus on specific types of investments.
For example, a fund may invest mainly in government bonds, stocks from
large companies, or stocks from certain countries. Or, it may invest in a
variety of investments.

When you buy a mutual fund, you're pooling your money along with other
investors. You put money into a mutual fund by buying units or shares of the
fund. As more people invest, the fund issues new units or shares.

The investments in a mutual fund are managed by a portfolio manager. They

manage the fund on a day-to-day basis, deciding when to buy and sell
investments according to the investment objectives of the fund.

Four things to know

i. Risk – The level of risk and return depends on what the fund invests
in. Mutual funds are not guaranteed or insured by the Canada Deposit
Insurance Corporation (CDIC) or any other government agency – even
if you buy through a bank and the fund carries the bank's name. You
can lose money investing in mutual funds.

34
 ii. Past performance – How a fund has performed in the past can’t tell
you how it will perform in the future. But past performance can help
you determine how volatile or risky the fund’s returns may be.
iii. Price to buy and sell – You buy mutual funds at the fund's net asset
value (NAV) plus any sales charges. Mutual funds are redeemable –
you can sell your mutual funds at the current NAV less any fees and
charges for redemption.
iv. Fees – All mutual funds have fees and expenses that reduce your
investment return.

Net asset value (NAV)

When you purchase or redeem securities of a mutual fund, you pay or receive
what is known as the net asset value (NAV) of the security at the time of
purchase, switch or redemption. Most mutual funds report their NAV daily in
the business section of many newspapers, or on the fund manager’s website.
NAV represents the mutual fund’s assets less its liabilities. NAV will fluctuate
with changes in the market value of the mutual fund’s particular investments.

EFFECT OF DEMONITISATION

35
1.Mutual fund industry expects higher investment flow after demonetisation
The mutual fund industry is likely to be a beneficiary of the demonetisation of Rs 500
and Rs 1,000 notes as the funds thus unlocked may find way to their schemes, said a
top official of PPFAS Mutual Fund.

"In the long-term, demonetisation will help the mutual fund industry. The banks will
reduce their fixed deposit interest rates further. So people will start looking at mutual
funds to park their surplus funds to earn inflation beating returns," Neil Parag Parikh,
Chief Executiv Officer told IANS over phone from Mumbai on Tuesday.

The central government demonetised Rs 500 and Rs 1,000 bank notes on November 8
and said people can deposit or exchange the old notes from banks or post offices till
December 30.

According to Union Finance Minister Arun Jaitley, over Rs 200,000 lakh crore was
deposited in banks till November 12 afternoon.

With crores of rupees worth of fresh deposits, the banks are flush with cash now.

On Nov 8, 2016, the Indian government declared that all the 500 and 1000 rs notes
will cease to be legal tender from next day. The bold step, meant to remove the fake
currency and clean up the black money, had many expected and unexpected effects on
the overall economy. These economical developments can be observed to predict the
impact of demonetization on mutual funds in India.

 Banks got 11.5 lakh crore deposited within 4 weeks.

 Most of the banks reduced FD interest rates by 25-50 basis points

 Overall liquidity got reduced by 7.5 lakh crore

 Retailers who were accepting the old currency saw a surge in sales whereas
the ones who are not accepting saw a sharp decline

 Business activity across country slowed down

What is expected to happen as a result –

36
  Interest rates are expected to lower down by 1-2% in next 3-12 months

 Inflation is expected to go down by almost 2% in next 1 year

 Growth rate is expected to go down to 5-6% from current ~7.5%

The impact of demonetization on the overall economy is well summarized here. At a

sector level, the demonetization impact is expected to be

Negative imapact of demonetization

 Housing-dependent sectors – Traditionally Indians buy-sell real estate with

two kinds of money – 1. white that is declared and is according to the
government approved rates and 2. black – that is undeclared and is paid in
cash. Due to demonetization, the black or cash economy has taken a hard hit.
Therefore it’s expected that the real estate buy-sell, construction, furnishing
etc sectors will see a slowdown.

 NBFCs – The demonetization has resulted in the removal of cash in hand and
a drastic reduction in cash transactions. This may result in the bad quality
assets for the finance companies. They may see more defaults than usual
because of the incapability of borrowers.

 Jewelry – Majority of jewelry and other luxury products are bought in cash in
India. As a result of demonetization, the cash in hand has wiped out
temporarily. Therefore it’s expected that such sectors will see a downward
sales numbers for next few quarters.

Positive impact of demonetization

 IT – Demonetization impact on IT may not be as direct as other sectors. But

there are two factors that may result in positive results for this sector. First,
these companies are likely to get more clients because now businesses in India
would have to adopt key transaction related technologies. Second, most of the
IT companies (TCS, HCL, Infosys etc.) do a lot of exports. Due to the
demonetization, it’s expected to have a lower yield (interest rates) in India. As
a result, most of the institutes will take out the money and invest in USD.
Hence the USD will appreciate further. We have already observed this trend in

37
 past 3 weeks. USD appreciation is a good news for the export-dominant
sectors.

 Banking – While people are managing their cash in every unique way, banks
are seeing a lot more new accounts being opened and tons of money coming
in. Although the loan rates are expected to go down, but NIM is going to
remain same for the banks. With more customers and money, Banks are in
good situation.

Demonetization impact on mutual funds

Let’s see how demonetization is likely to impact the growth of the various categories
of Mutual Funds.

Large Cap Funds

Portfolio – invests in a diversified basket of equity stocks of companies whose market

capitalization is at least equal to or more than the least market capitalized stock of
BSE 100 Index.

Expected impact: Slightly Negative in short term, but positive in long term

Since the growth rate is expected to come down for next 1-2 years, this would reflect
in the overall performance of Large Cap stocks. In long term, the demonetization
impact on India growth story is very positive.

MUTUAL FUNDS IN INDIA – ISSUES, OPPORTUNITIES AND

CHALLENGES

The Indian mutual fund industry is one of the fastest growing sectors in the Indian
capital and financial markets. The mutual fund industry in India has seen dramatic
improvements in quantity as well as quality of product and service offerings in
recent years. The concept of mutual funds was introduced in India with the
formation of Unit Trust of India in 1963. The first scheme launched by UTI was
the now infamous Unit Scheme 64 in 1964. UTI continued to be the sole mutual
fund until 1987, when some public sector banks and Life Insurance Corporation
of India and General Insurance Corporation of India set up mutual funds. It was
only in 1993 that private players were allowed to open shops in the country.

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Today, 32 mutual funds collectively manage Rs 6713575.19 cr under hundreds of
schemes. The industry has steadily grown over the decade. For example, before
the public sector mutual funds entry, UTI was managing around Rs 6,700 crore on
its own. Public sector mutual funds also helped accelerate the growth of Assets
Under Management. UTI and its public sector counterparts were managing
around Rs 47,000 crore when Kothari Pioneer, the first private sector mutual
fund, set up shop in 1993. Before the US 64 fiasco, there were 33 mutual funds
with total assets of Rs 1, 21,805 crore as on January 2003. The UTI was way
ahead of other mutual funds with Rs 44,541 crore assets under management. The
industry overall has performed well over the years. Of course, there were a few
funds houses, which disappointed investors. However, overall performance has
been good. However, lack of awareness still impedes the growth of the mutual
fund industry. Unlike developed countries, most of the household savings still go
to bank deposits in India. In the year 2004, the mutual fund industry in India was
worth Rs 1,50,537 crores. The mutual fund industry is expected to grow at a rate
of 13.4% over the next 10 years. Mutual funds assets under management grew by
96% between the end of 1997 and June 2003 and as a result it rose from 8% of
GDP to 15%. The industry has grown in size and manages total assets of more
than $30351 million. Of the various sectors, the private sector accounts for nearly
91% of the resources mobilized showing their overwhelming dominance. in the
market. Individuals constitute 98.04% of the total number of investors and
contribute US $12062 million, which is 55.16% of the net assets under
management.

FUTURE AND GROWTH OF MUTUAL FUNDS IN INDIA:-

There is a huge scope in the future for the expansion of the mutual funds industry.

A number of foreign based assets management companies are venturing into

Indian markets.

The Securities Exchange Board of India has allowed the introduction of

commodity mutual funds.

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The emphasis is being given on the effective corporate governance of Mutual
Funds.

The Mutual funds in India has the scope of penetrating into the rural and semi
urban areas.

Financial planners are introduced into the market, which would provide the
people with better financial planning.

OPPORTUNITIES OF MUTUAL FUND INDUSTRY:-

In any industry, innovation and improvements happen when the rules are
changed. Large-scale environmental changes such as those that have taken place
in the last three years must lead to innovation and evolution.

Newer leaner operating structures will have to evolve which will entail the use
of technology that helps an AMC (Asset Management Company) reach the
retail end user with solutions that enable transactions via platforms such as mobile
or online platforms. This will not only give greater direct access but will also help
AMCs to better understand investor behavior and create the appropriate
environment and products to move towards long and healthy relationships with
the investors.

As the industry evolves, outsourcing an increasing number of functions to reduce

the head-count and increase efficiency might be the norm. All aspects of
operating costs must be examined for efficiencies.

A rational look at schemes of an AMC by their management teams is needed to

better understand the mix, the cost and the benefits – to the investors as well as
to the AMCs.

MUTUAL FUND- EMERGING CHALLENGES:-

 GROWTH VERSUS GOVERNANCE – A RIGHT MIX

 ADMINISTRATION AND DISTRIBUTION

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  INVESTOR EDUCATION- A DRIVING FORCE ON FINANCIAL
PLANNING
 THE TECHNOLOGICAL BACKBONE
 DIMINISHING TALENT POOL
 PRESSURES ON MARGINS
 CONSOLIDATION IN THE INDUSTRY
 INNOVATION AND PRODUCT DIFFERENTIATION
 INCREASING TREND ON OUTSOURCING

PROBLEMS FACED

Problems are nothing but challenges faced by me while doing research.

These are the challenges faced by me to arrive at final solution.

These problems/challenges kept me moving ahead in order to arrive at

my desired result.

Following are few challenges faced by me during my project. They are:

1. Validity of the numbers provided by ICICI Securities: many numbers

were wrong numbers or used by third party or invalid, which restricted
me to reach to those clients.
2. Getting appointments: This was one of the great challenges faced by
me. Making people understand the purpose of my call and convincing
them to give appointment was great challenge for me.
3. Adjusting the time: after getting 2 or more appointments for the same
day, the next challenge was to adjust the timings of meetings that it
should not clash.

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Chapter -3

Review of literature

Mutual fund- Data interpretation and analysis (1997)

A research was conducted by Sahadevan and Theiripalraju(1997) to find out

the performance of private sector funds. A research paper titled “Mutual fund-
Data interpretation and analysis (1997)” was analysed in this regard in which
the monthly average return and standard deviation of 10 selected private sector
funds was compiled and studied. It revealed that 5 funds viz. Alliance 95,
ICICI power, Kothari prima, Kothari pioneer blue chip and Morgan Stanley
growth fund performed quite well during the period of comparison in term of
the rate of return. Another important conclusion was that in most of the cases,
the size of the institution does not affect the performance of fund.

Investment performance of mutual fund

A research was done Gupta &Sehgal(1998) to find out the investment

performance of various scheme managed by mutual funds in both public as
well as private sector. A research paper titled “Investment performance of
mutual fund”. The Indian experience (1998) was compiled and analysed. In
the research paper 80 schemes managed by 25 mutual funds, 15 in private
sector and 10 in public sector for the time of June (1992- 1996) was analysed.
It examined the performance in terms of fund diversification and consistency
of performance. It was concluded that mutual fund industry’s portfolio
diversification has performed well. In addition, it supported the consistency of
performance.

Conditional performance of Indian mutual fund

An empirical study was conducted by Bijan Roy on conditional performance

of Indian mutual fund. A research paper in this regard is made which uses a
technique called conditional performance which evalued sample of 89 Indian
mutual fund schemes. This paper used both unconditional and conditional
form of CAPM, Treynor- Mazuy model and Henriksson-Merton model to

42
measure the performance of various mutual funds. It also examined the effects
of incorporating lagged info variables into the evaluation of mutual fund
managers’ performance in the Indian context. The result revealed that use of
condition lagged info variables improves the performance of mutual fund
scheme. It also revealed that the concerned variables caused alphas to shift
towards right and they reduced the number of negative timing coefficients.

Investment Behaviour of Individual Investor

(Mar 06,2014)
 Investment behavior of individual investor is studied in terms of four
broad behavioral dimensions of overconfidence, investor involvement,
optimism and risk attitude that are measured in terms of different
factors.
 Investors believe that they have better stock picking ability better than
other investors.
 Some investors want to keep their investments in the stock markets
only because the stock prices have declined and they do not want to
sell their stocks at losses.
 Investors having short term profit seeking objectives are found to have
greater level of involvement as compared to those with long term
investment objectives as they have greater tendency to make quick
money in short time periods.
 Three possible ways of reaching an investment decisions that are opted
by the investors. These three techniques are: technical analysis,
fundamental analysis and market sentiments.

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 Chapter -4

OBJEVTIVES OF STUDY

The main objectives of the study are as follows:-

 Create Awareness-The main objective of the study is to create awareness of

mutual fund by giving online demonstration of mutual funds and also to know
the investors awareness about the investment in mutual fund on ICICI direct.
Mostly people are not aware of mutual fund and their benefits.
 Reason for not investing-This study helps us to know why the investors are
not interested to invest in mutual funds. Many of investors have freeze account
in ICICI direct andthey are not operating it from the past many years.
 Investors Queries-It helpsus to know the queries or any difficulty face by
investors in investing through ICICI direct and forward it to the seniors and
get them solved.
 People perception- This research is to study the people perception towards
mutual funds. Some people think that mutual funds are highly risky
instruments to invest.
 Reason for investing through other distributors- It also helps us to know
why the investors are investing in mutual funds through others distributors
rather than to invest through ICICI direct.

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Chapter -5

RESEARCH METHODOLOGY
NEED OF THE STUDY:
The need of the study is to determine how customers are investing their funds
in the different investments like equity market, fixed deposit, insurance etc.
and thereafter to know how the customer investing online of offline mode and
what is the reasons for not investing through ICICIDirect.com. The study
suffers from certain limitations, although the researcher will make every
possible for comprehensive study of investment pattern degree of risk and
returns to investors. Yet, non-availability of adequate information may be key
limitation in few cases. The present study is confined only the area of tri city
(Chandigarh, Panchkula and Mohali). Thus the findings can be generalized
only to certain extent.
SCOPE OF THE PROJECT:
The scope of the project is to Demonstrate ICICI Direct’s online platform,
Mutual fund investment and seeks customer’s insight on their savings pattern.
ICICI Direct has taken an initiative to aware their customers about the mutual
funds and its benefits also how customer can do investment with just few
clicks. So basically for this I have to call the clients mapped to me and fix
appointment to meet in their respective places but before the meeting I have to
define the purpose which is to get a feedback on the demo shown by me on
mutual funds and the usage of ICICI online portal to them and show that
questionnaire and make it fill by the client. Thus, that feedback which I’m
taking is by primary method.
RESEARCH METHODOLOGY ADOPTED:
This study focused on clients in tri city. In this I have covered many places of
tri city. Being constraints by data availability (both primary and secondary)
and time and improper response from the respondents I have covered the
regions during my summer training programmed viz in Chandigarh.

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DATA COLLECTION TECHNIQUES:
1. Survey methods
This method was adopted because it helps to procuring data and detail
information from the respondents. Here I collected data by filling
questionnaires, directly talking to the respondents.
2. Secondary data:
I have also used the secondary data which includes various written documents
and other related information about Mutual Fund industry in India.
SAMPLING DESIGN:
The sample comprised 109 respondents from tri city itself. All the respondents
were first surveyed, interviewed and asked various questions regarding the
three broad objectives of my research work and then their feedbacks were
recorded.

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 Chapter -6
Actual work undertaken
1. I worked with ICICI securities for a period of 2 months. The topic under
which I worked was “mutual fund simplified”
2. The main key area under which I worked are:-
3. Understanding deeply about Mutual Funds – Mutual fund was the core
area of my internship process . Before proceeding to the actual work, we were
given 2 days training. In this these 2 days training programme we were made
well aware about mutual funds, how it works, various types of mutual funds ,
how to give understanding to customer about it. The process was probably a
learning a way in practical world.
4. MAIN KEY AREAS I WORKED UNDER:-Giving customers insight to
new features of ICICI introduced in mutual fund :-
5. SYSTEMATIC INVESTMENT PLAN:-SIP is the pay-as-you go scheme of
mutual funds. Systematic investing helps those who do not have one time
lump sum to invest in a choosen investment, but have the regular income to
spare a certain sum every month so he decide to invest a fixed amount on
monthly basis for a fixed period in the scheme of his choice. He can start with
an amount as low as Rs 500 a month. More units are purchased when a
scheme’s NAV is low(during market low) and fewer units when the NAV is
higher (during market up). In case of SIP, each of your instalments come at the
prevailing NAV. Therefore , the average cost for an SIP investor over a longer
period of time will be effectively lower. The concept is commonly referred to
as rupee cost averaging. The longer the time frame, the larger are the benefits
of averaging.
6. Another main feature of SIP is Pause System :- Under this system a
customer can pause his SIP for maximum 3 months and minimum 1 month.
After a period of 3 months customer has to re start his SIP policy for at least a
month and maximum upto customer wish to. But if customer wants to again
pause the policy he can pause it again for maximum 3 months and can pause
this policy N no of times. This is how SIP works. I being a trainee opened SIP
of various customers although my job was just to aware customers about this

47
 policy. So I gave benefit to the company on this part and gave investment of
about 1,00,000.
7. One Click Investment:- Another main feature was ONE CLICK
INVESTMENT .It offers you the convenience of investing a basket of Mutual
Fund schemes at one go. These schemes have proven track record, and are
hand-picked by our own award-winning research team after due diligence.Not
only does it free you from the challenge of selecting the right schemes,
but the feature also makes it extremely convenient for you to track the
performance,map goals against each basket, vary the amount of investment
across schemes and invest additional amounts. We urge you to try out this
feature and begin your journey to long term wealth creation. In this feature
also I opened account for 200000.
8. Contacting customer:- First and foremost task given to us after training was
contacting people for which we were given database. Meeting them and giving
them awareness about new features of mutual funds through a live video and
getting their feedback is the main purpose of whole internship process.
9. Meeting customers :- Further as per the timing given by the customers for
meeting , we have to visit there place or if they can come to the office. I
interact with them and tell them the features ,during interaction we try to ask
the experience and further what they are expecting there investment to be
invested where, that it might give the direction to us so we are able the give
the feedback to his/her relationship manager.
10. Giving awareness about mutual funds:- As most of the times customer are
not aware of the mutual funds scheme, how it works or how to invest it. We
made customer aware about it and introduced them the new features of mutual
fund..At times customer wishes to invest in mutual funds as they find our
ideas pretty good which definitely gives business to the company.
11. Giving insights to business:- As I was given work task complete 35 demos
and get feedback about customer, where as I was able to do so more than that.
I completed with 109 demos and with which I was able tp give business to
company and opening mutual fund accounts
12. Opening mutual fund a/c’s:- Despite from giving customer information
about mutual fund I opened various accounts for trade in mutual funds which
gave benefit to the company.

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13. Complaint handling :- As working with ICICI securities I have to give
information to customers about mutual funds .Sometimes bad past experience
are faced by customers, due to that they do complaints so it becomes our duty
to listen them and note that complaint . After that these problem are dicussed
with branch manager for which he gives the best way out. This also increased
the knowledge and we learnt way to take complaints.
14. Representing organization:- We represented a company which is no. 1 with
highest market share .We represented ICICI organization in front of
customer. When we go to meet customers at different sites ,all we were known
with brand ICICI.

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Chapter -7
DATA ANALYSIS AND INTERPRETATION
After a thorough study and analysis of the questionnaires of my customer
survey I have come across some important and useful findings. These findings
have helped me in a great way to come to the conclusion part of my project
report.
The following are the findings of my customer survey done in tri city:
Customer Survey Result:

Wrong No.

Not Reachable/Out Of
Coverage
Not In City

Not Interested

Met

Account Closed

No. Of Customers Mapped 800

No. Of Customers Contacted 600
Wrong No. 200
Not Reachable/Out Of Coverage 80
Not In City 35
Not Interested 161
Met 109
Account Closed 15

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Feedback Questionnaire:
1- Rate the demo on the 1 to 5 (5 being highest score)

Ratings
45
40
35
30
25
Ratings
20
15
10
5
0
1 2 3 4 5

2- Are you planning to invest in Mutual funds?

YES
NO

Descriptions:
Above data shows that 63% of the people are not interested to invest in mutual
funds because of the lack of knowledge or have bad experience in past.

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3- Do you invest in Mutual funds through others distributors?

YES
NO

Descriptions:
The above data shows that 30% of the customers invest through other
distributors because ICICI Securities have high brokerages rates as compare to
others.

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Chapter -8
CONCLUSION AND SUGGESTION
Findings:
 Most of the customers are not interested to give an appointment for the
information regarding mutual funds.
 Some of the clients are not happy with services provided by ICICI
securities.
 Some of the people don’t have knowledge about the mutual funds and
that’s why they are not interested to invest in mutual funds.
 Most of the clients just invest in Equities not in mutual funds.
 Many of the clients just want to invest themselves, they don’t want to
need any guidance by their RMs (Relationship Managers).
 Some of the clients are happy to invest in FDs because of risk
involvement in mutual funds.
 Most of the clients had bad experience in investing mutual funds
during the period of US crises in 2008. They didn’t even get their
principal amount back so they decided to not to invest in mutual funds
in near future.
 Some of the clients are shown their interest to invest in mutual funds
after the demo given.
 Some of the clients invest through others distributors because of high
brokerages in ICICI Securities as compare to others.
 Proper time to time guidance was not provided to clients and follow up
was not there by RMs.
 Most of the businessman and professionals have knowledge about
mutual funds and they invest in mutual funds very frequently.

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Recommendations:

Followings are some of the recommendations of the study:-

 Most of the people don’t have knowledge about mutual funds, so

company should aware them by doing advertising in televisions,
business magazines, newspapers, etc.
 The company have very high brokerages rates, so that they should
decrease it.
 Provide proper guidance to clients regarding mutual funds and
schedule follow up will be there by RMs.
 The company should also focus on lower or middle class people by
showing them benefits of mutual funds, so that they can also invest in
this.
 RMs should focus on building strong relationship with clients rather
than just creating business.
 The company should organise free seminars to give information about
mutual funds and provide every details of mutual fund to every
customer.
 The company should provide information regarding tax benefits in
investing in mutual funds.
 The company should provide proper trainings to RMs, so that they can
share accurate knowledge with clients.

Limitations:

Followings are some of the limitations of the study:-

 Most of the customers are not so interested to fill up the questionnaire

that can be the major limitations of study.
 It took too much time to go different places for fill up questionnaire.
 Some of data which provided to us was wrong or incomplete.

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 The information can be biased due to use of questionnaire.
 Lack of knowledge of financial instruments in people can be a major
limitation.

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References:

Websites:

 https://en.wikipedia.org/wiki/Mutual_fund
 https://en.wikipedia.org/wiki/Financial_institution
 http://www.investopedia.com/terms/f/financialinstitution.asp
 http://business.mapsofindia.com/finance/top-10-financial-services-companies-in-
india.html
 http://www.icicisecurities.com/
 http://content.icicidirect.com/newsiteContent/ProductService/Overview.asp
 http://www.amfiindia.com/

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