INTRODUCTION

1
 MUTUAL FUND:

An Introduction

A Mutual Fund is a body corporate that pools the savings of a number of investors

and invests the same in a variety of different financial instruments, or securities. The income

earned through these investments and the capital appreciation realized by the scheme is

shared by its unit holders in proportion to the number of units owned by them. Mutual funds

can thus be considered as financial intermediaries in the investment business that collect

funds from the public and invest on behalf of the investors. The losses and gains accrue to the

investors only. The Investment objectives outlined by a Mutual Fund in its prospectus are

binding on the Mutual Fund scheme. The investment objectives specify the class of securities

a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds,

debentures, commercial paper and government securities

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Working of Mutual Funds

A mutual fund is a common pool of money in to which investors with common

investment objective place their contributions that are to be invested in accordance with the

stated investment objective of the scheme. The investment manager would invest the money

collected from the investor in to assets that are defined/ permitted by the stated objective of

the scheme. For example, an equity fund would invest equity and equity related instruments

and a debt fund would invest in bonds, debentures, gilts etc.

A mutual fund is set up by a sponsor. However, the sponsor cannot run the fund

directly. He has to set up two arms: a trust and Asset Management Company. The trust is

expected to assure fair business practice, while the AMC manages the money. All mutual

funds except UTI function under SEBI (Mutual Fund) regulations 1996.

The mutual fund collects money directly or through brokers from investors. The money is

invested in various instruments depending on the objective of the scheme. The income

3
generated by selling securities or capital appreciation of these securities is passed on to the

investors in proportion to their investment in the scheme. The investments are divided into

units and the value of the units will be reflected in Net Asset Value or NAV of the unit. NAV

is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the

net asset value of the scheme divided by the number of units outstanding on the valuation

date. Mutual fund companies provide daily net asset value of their schemes to their investors.

NAV is important, as it will determine the price at which you buy or redeem the units of a

scheme. Depending on the load structure of the scheme, you have to pay entry or exit load.

Mutual Fund Business Structure

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The structure consists of Sponsor

Sponsor is the person who acting alone or in combination with another body corporate

establishes a mutual fund. Sponsor must contribute atleast 40% of the networth of the

Investment Managed and meet the eligibility criteria prescribed under the Securities and

Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible

or liable for any loss or shortfall resulting from the operation of the Schemes beyond the

initial contribution made by it towards setting up of the Mutual Fund.

Trust

The Mutual Fund is constituted as a trust in accordance with the provisions of the

Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian

Registration Act, 1908.

Trustee

Trustee is usually a company (corporate body) or a Board of Trustees (body of

individuals). The main responsibility of the Trustee is to safeguard the interest of the unit

holders and inter alia ensure that the AMC functions in the interest of investors and in

accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations,

1996, the provisions of the Trust Deed and the Offer Documents of the respective Schemes.

Atleast 2/3rd directors of the Trustee are independent directors who are not associated with

the Sponsor in any manner.

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 Asset Management Company (AMC)

The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund.

The AMC is required to be approved by the Securities and Exchange Board of India (SEBI)

to act as an asset management company of the Mutual Fund. At least 50% of the directors of

the AMC are independent directors who are not associated with the Sponsor in any manner.

The AMC must have a net worth of at least 10 crore at all times.

Registrar and Transfer Agent

The AMC if so authorised by the Trust Deed appoints the Registrar and Transfer

Agent to the Mutual Fund. The Registrar processes the application form, redemption requests

and dispatches account statements to the unit holders. The Registrar and Transfer agent also

handles communications with investors and updates investor records.

Today, there are over 8,000 different mutual funds versus over 1,000 different mutual

funds in 1985. The number of funds today is more than five times the number in 1985, but

even more astounding is that dollars invested in mutual funds today are 15 times the value of

mutual funds at the end of 1985. The increase in the number of mutual funds and the amount

of dollars invested in mutual funds have been brought about by changes in retirement

planning and changes in corporate America

Mutual Funds Regulatory Framework

The Association of Mutual Funds In India (AMFI) reassures the investors in units of

mutual funds that the mutual funds function within the strict regulatory framework. The

different entities such as the Mutual Fund, the Asset Management Company and the Custodian

operate as per the provisions of the SEBI Mutual Fund Regulation 1996 and the rules and

6
guidelines issued by SEBI. Each of these entities has independent Boards of Directors and

separate auditors.

SEBI keeps a close watch on the mutual funds through periodical reports and every

three months, each mutual fund submits to SEBI a report conforming compliance with

regulatory provisions and mutual funds are required to record their investment decisions. Any

deficiency or non-compliance is dealt with suitably by SEBI. Every year, each mutual fund is

inspected by SEBI and such inspection is both a detailed scrutiny of operations and a

rectification exercise. Thus, the mutual funds are strictly supervised and regulated entities and

the regulatory provisions match with international standards. AMFI also is engaged in

upgrading professional standards and in promoting best industry practices in diverse areas

such as valuation, disclosure, transparency etc.

Types of Mutual Fund Schemes

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According to Investment Objectives

Schemes can be classified by way of their stated investment objective such as Growth

Fund, Balanced Fund, Income Fund etc.

Equity Oriented Schemes

These schemes, also commonly called Growth Schemes, seek to invest a majority of

their funds in equities and a small portion in money market instruments. Such schemes have

the potential to deliver superior returns over the long term. However, because they invest in

equities, these schemes are exposed to fluctuations in value especially in the short term.

Equity schemes are hence not suitable for investors seeking regular income or needing

to use their investments in the short-term. They are ideal for investors who have a long-term

investment horizon. The NAV prices of equity fund fluctuates with market value of the

underlying stock which are influenced by external factors such as social, political as well as

economic.

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General Purpose

The investment objectives of general-purpose equity schemes do not restrict them to

invest in specific industries or sectors. They thus have a diversified portfolio of companies

across a large spectrum of industries. While they are exposed to equity price risks, diversified

general-purpose equity funds seek to reduce the sector or stock specific risks through

diversification. They mainly have market risk exposure

Sector Specific

These schemes restrict their investing to one or more pre-defined sectors, e.g.

technology sector. Since they depend upon the performance of select sectors only, these

schemes are inherently more risky than general-purpose schemes. They are suited for

informed investors who wish to take a view and risk on the concerned sector.

Special Schemes

Index schemes

The primary purpose of an Index is to serve as a measure of the performance of the

market as a whole, or a specific sector of the market. An Index also serves as a relevant

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benchmark to evaluate the performance of mutual funds. Some investors are interested in

investing in the market in general rather than investing in any specific fund. Such investors

are happy to receive the returns posted by the markets. As it is not practical to invest in each

and every stock in the market in proportion to its size, these investors are comfortable

investing in a fund that they believe is a good representative of the entire market. Index

Funds are launched and managed for such investors.

Tax saving schemes

Investors (individuals and Hindu Undivided Families (HUF’s)) are being encouraged

to invest in equity markets through Equity Linked Savings Scheme (“ELSS”) by offering

them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed /

switched – out until completion of 3 years from the date of allotment of the respective Units.

The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations,

1996 and the notifications issued by the Ministry of Finance (Department of Economic

Affairs), Government of India regarding ELSS. Subject to such conditions and limitations, as

prescribed under Section 88 of the Income-tax Act, 1961, subscriptions to the Units not

exceeding Rs.10, 000 would be eligible to a deduction, from income tax, of an amount equal

to 20% of the amount subscribed.

Real Estate Funds

Specialized real estate funds would invest in real estates directly, or may fund real

estate developers or lend to them directly or buy shares of housing finance companies or may

even buy their securitized assets.

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Debt Based Schemes

These schemes, also commonly called Income Schemes, invest in debt securities such

as corporate bonds, debentures and government securities. The prices of these schemes tend

to be more stable compared with equity schemes and most of the returns to the investors are

generated through dividends or steady capital appreciation. These schemes are ideal for

conservative investors or those not in a position to take higher equity risks, such as retired

individuals. However, as compared to the money market schemes they do have a higher price

fluctuation risk and compared to a Gilt fund they have a higher credit risk.

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Income Schemes

These schemes invest in money markets, bonds and debentures of corporate with

medium and long-term maturities. These schemes primarily target current income instead of

capital appreciation. They therefore distribute a substantial part of their distributable surplus

to the investor by way of dividend distribution. Such schemes usually declare quarterly

dividends and are suitable for conservative investors who have medium to long term

investment horizon and are looking for regular income through dividend or steady capital

appreciation.

Liquid Income Schemes

These schemes are similar to the Income scheme but with a shorter maturity.

Money Market Schemes

These schemes invest in short term instruments such as commercial paper (CP),

certificates of deposit (CD), treasury bills (T-Bill) and overnight money (Call). The schemes

are the least volatile of all the types of schemes because of their investments in money market

instrument with short-term maturities. These schemes have become popular with institutional

investors and high net worth individuals having short-term surplus funds.

Gilt Funds

This scheme primarily invests in Government Debt. Hence the investor usually does

not have to worry about credit risk since Government Debt is generally credit risk free.

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Hybrid Schemes

These schemes are commonly known as balanced schemes. These schemes invest in

both equities as well as debt. By investing in a mix of this nature, balanced schemes seek to

attain the objective of income and moderate capital appreciation and are ideal for investors

with a conservative, long-term orientation. HDFC Balanced Fund and HDFC Children’s Gift

Fund are examples of hybrid schemes.

According to Constitution of Mutual Fund

Schemes can be classified as Closed-ended or Open-ended depending upon whether

they give the investor the option to redeem at any time (open-ended) or whether the investor

has to wait till maturity of the scheme.

Open ended Schemes

The units offered by these schemes are available for sale and repurchase on any

business day at NAV based prices. Hence, the unit capital of the schemes keeps changing

each day. Such schemes thus offer very high liquidity to investors and are becoming

increasingly popular in India. Please note that an open-ended fund is NOT obliged to keep

selling/issuing new units at all times, and may s issuing further subscription to new

investors. On the other hand, an open-ended fund rarely denies to its investor the facility to

redeem existing units.

Closed ended Schemes

The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed

number of units. These schemes are launched with an initial public offer (IPO) with a stated

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maturity period after which the units are fully redeemed at NAV linked prices. In the interim,

investors can buy or sell units on the stock exchanges where they are listed. Unlike open-

ended schemes, the unit capital in closed-ended schemes usually remains unchanged. After an

initial closed period, the scheme may offer direct repurchase facility to the investors. Closed-

ended schemes are usually more illiquid as compared to open-ended schemes and hence trade

at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of

the scheme.

Interval Schemes

These schemes combine the features of open-ended and closed-ended schemes. They

may be traded on the stock exchange or may be open for sale or redemption during pre-

determined intervals at NAV based prices.

Benefits of Mutual Funds

There are numerous benefits of investing in mutual funds and one of the key reasons

for its phenomenal success in the developed markets like US and UK is the range of benefits

they offer, which are unmatched by most other investment avenues. We have explained the

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key benefits in this section. The benefits have been broadly split into universal benefits,

applicable to all schemes and benefits applicable specifically to open-ended schemes.

Affordability

A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon

the investment objective of the scheme. An investor can buy in to a portfolio of equities,

which would otherwise be extremely expensive. Each unit holder thus gets an exposure to

such portfolios with an investment as modest as Rs.500/-. This amount today would get you

less than quarter of an Infosys share! Thus it would be affordable for an investor to build a

portfolio of investments through a mutual fund rather than investing directly in the stock

market.

Diversification

“The nuclear weapon in your arsenal for your fight against Risk” It simply means that

you must spread your investment across different securities (stocks, bonds, money market

instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information

technology etc.). This kind of a diversification may add to the stability of your returns, for

example during one period of time equities might under perform but bonds and money

market instruments might do well enough to offset the effect of a slump in the equity

markets. Similarly the information technology sector might be faring poorly but the auto and

textile sectors might do well and may protect your principal investment as well as help you

meet your return objectives.

Variety

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 Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two

ways: first, it offers different types of schemes to investors with different needs and risk

appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of

schemes, both debt and equity. For example, an investor can invest his money in a Growth

Fund (equity scheme) and Income Fund (debt scheme) depending on his risk appetite and

thus create a balanced portfolio easily or simply just buy a Balanced Scheme.

Professional Management

Qualified investment professionals who seek to maximize returns and minimize risk

monitor investor's money. When you buy in to a mutual fund, you are handing your money to

an investment professional that has experience in making investment decisions. It is the Fund

Manager's job to (a) find the best securities for the fund, given the fund's stated investment

objectives; and (b) keep track of investments and changes in market conditions and adjust the

mix of the portfolio, as and when required.

Tax Benefits

Any income distributed after March 31, 2002 will be subject to tax in the assessment

of all Unit holders. However, as a measure of concession to Unit holders of open-ended

equity-oriented funds, income distributions for the year ending March 31, 2003, will be taxed

at a concession rate of 10.5%. In case of Individuals and Hindu Undivided Families a

deduction up to Rs. 9,000 from the Total Income will be admissible in respect of income

from investments specified in Section 80L, including income from Units of the Mutual Fund.

Units of the schemes are not subject to Wealth-Tax and Gift-Tax.

Regulations

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 Securities Exchange Board of India (SEBI), the mutual funds regulator has clearly

defined rules, which govern mutual funds. These rules relate to the formation, administration

and management of mutual funds and also prescribe disclosure and accounting requirements.

Such a high level of regulation seeks to protect the interest of investors.

Benefits of Specific type of Schemes:

Open-ended Schemes offer the following benefits

Liquidity

In open-ended mutual funds, you can redeem all or part of your units any time you

wish. Some schemes do have a lock-in period where an investor cannot return the units until

the completion of such a lock-in period.

Convenience

An investor can purchase or sell fund units directly from a fund, through a broker or a

financial planner. The investor may opt for a Systematic Investment Plan (“SIP”) or a

Systematic Withdrawal Advantage Plan (“SWAP”). In addition to this an investor receives

account statements and portfolios of the schemes.

Flexibility

Mutual Funds offering multiple schemes allow investors to switch easily between

various schemes. This flexibility gives the investor a convenient way to change the mix of his

portfolio over time.

Transparency

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 Open-ended mutual funds disclose their Net Asset Value (“NAV”) daily and the

entire portfolio monthly. This level of transparency, where the investor himself sees the

underlying assets bought with his money, is unmatched by any other financial instrument.

Thus the investor is in the know of the quality of the portfolio and can invest further or

redeem depending on the kind of the portfolio that has been constructed by the investment

manager.

Selecting a Mutual Fund

Selection parameters

Objective: The first point to note before investing in a fund is to find out whether your

objective matches with the scheme. It is necessary, as any conflict would directly affect your

prospective returns. For example, a scheme that invests heavily in mid-cap stocks is not

suited for a conservative equity investor. He should be better off in a scheme, which invests

mainly in blue chips. Similarly, you should pick schemes that meet your specific needs.

Examples: pension plans, children’s plans, sector-specific schemes, etc.

Your risk capacity and capability: this dictates the choice of schemes. Those with no risk

tolerance should go for debt schemes, as they are relatively safer. Aggressive investors can go

for equity investments. Investors that are even more aggressive can try schemes that invest in

specific industry or sectors.

Fund Manager’s and scheme track record: Since you are giving your hard earned money

to someone to manage it, it is imperative that he manages it well. It is also essential that the

fund house you choose has excellent track record. It also should be professional and maintain

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high transparency in operations. Look at the performance of the scheme against relevant

market benchmarks and its competitors. Look at the performance of a longer period, as it will

give you how the scheme fared in different market conditions.

Cost factor: Though the AMC fee is regulated, you should look at the expense ratio of the

fund before investing. This is because the money is deducted from your investments. A

higher entry load or exit load also will eat into your returns. A higher expense ratio can be

justified only by superlative returns. It is very crucial in a debt fund, as it will devour a few

percentages from your modest returns.

Purchasing mutual funds

Purchasing during IPO: Like companies, even mutual funds offer initial public offering. It

is when they launch the scheme for the first time. You can buy units at par on this occasion.

However, it is not always advantageous to buy a mutual fund during IPO. You can always

wait and see the performance before investing in it.

Purchasing existing mutual fund units: You can buy units of an open-end scheme anytime

at NAV-related price. Most mutual funds charge an entry load of up to 2%. That means you

have to pay an additional 2% of the NAV to get into the scheme. You can buy the plan

directly from the mutual fund or brokerage. You can even buy them via the Internet.

Selling mutual funds

You can sell or redeem units very easily. As per Sebi guidelines, a mutual fund unit

holder has the right to receive redemption or repurchase proceeds within 10 days of the

redemption or repurchase. Most funds do not charge an exit load these days.

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 When should you sell a mutual fund unit is a crucial question. Ideally, you should sell

it when you have met your target profit. The other reason is that you need the money or your

profile has changed due to some changes in your life. Other than this, you should sell the

units if you find that the fund has been taken over by another fund, which you do not approve

of. Any major changes in the objective of the fund or a sharp rise in expenses could also be

valid reasons to redeem units. Following a favorite fund manager is also a usual practice.

However, it need not be always rewarding.

Income from mutual funds: The options

Mutual funds distribute their income as dividend. An investor has the option of receiving the

dividend or opting for the dividend reinvestment. If an investor needs the income, he can opt

for dividend payout option. However, if you do not need the money, he can opt for dividend

reinvestment. Another choice before him is the growth or cumulative option. Here the income

generated from sale of securities or capital appreciation is automatically reinvested.

Speedy investment, redemption and income receipts

Thanks to the Electronic Clearing Services (ECS), mutual fund investor now has the option

of automatic credit of dividends and redemptions into bank account. This will save a lot of

paperwork, for both you and the fund. You can also instruct your bank to automatically

withdraw a certain sum towards systematic investment plan. Alternatively, you can also

directly receive systematic withdrawal proceeds in your bank account

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Tracking mutual funds’ performance

Objective parameters: A mutual fund is valued daily and reports a price known as a net

asset value

Net Asset Value:

NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund

net of its liabilities. NAV per unit is simply the net value of assets divided by the number of

units outstanding. Buying and selling into funds is done on the basis of NAV-related prices.

NAV is calculated as follows:

Market value of the fund’s investments + Receivables + Accrued Income –

Liabilities – Accrued Expenses

NAV= _________________________________________________________________

Number of Outstanding units

Method of NAV Declaration

The NAV of a scheme has to be declared at least once a week. However many Mutual

Fund declare NAV for their schemes on a daily basis. As per SEBI Regulations, the NAV of

a scheme shall be calculated and published at least in two daily newspapers at intervals not

exceeding one week. However, NAV of a close-ended scheme targeted to a specific segment

or any monthly income schemes (which are not mandatory required to be listed on a stock

exchange) may be published at monthly or quarterly intervals.

The NAV of the scheme will reflect the performance of the scheme. The fund will

also give you returns for various periods such as one month, three months, six months, one

year, three years, since inception, etc. This will give you an idea about the performance of the

21
fund. Funds also provide comparison with relevant benchmarks. This should tell you whether

the fund manager has performed better than the benchmark. However, financial experts

believe that these returns do not give the complete picture. They believe that the return should

be risk-adjusted. Various publications and Internet sites provide such returns. The

computation is complicated and they use various formulas for this purpose.

Subjective parameters

The performance alone does not make a fund house a winner. Equally important is the

service standards and transparency in actions. It is also essential that the fund offer speedy

solutions to grievances of investors. The reputation of the fund house among its investors and

public at large indicates how well the fund scores on this front.

Information sources

Every financial daily offers daily NAV of all mutual fund schemes. Magazines also

come out with annual survey of mutual funds. There are even magazines dedicated entirely

towards mutual fund industry. Internet is also a great place for information. There are

dedicated sites as well as financial sites, which offer information on mutual funds.

Association of Mutual Funds of India (AMFI) home page is also a great place for

information.

Resolving grievances

Mutual funds are regulated by Sebi (mutual fund) regulation 1996. Therefore, an

investor always has the recourse to approach the watchdog. Various investor forums also take

up the case of individual investors. You can also turn to judiciary as a last resort.

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 BANKS V/S MUTUAL FUNDS: A brief comparison

PARAMETERS BANKS MUTUAL FUNDS

Returns Low Better
Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Minimum balance between 10th.
Interest calculation Everyday
& 30th. Of every month
Guarantee Maximum Rs.1 lakh on deposits None

SCOPS AND IMPORTENCE

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OBJECTIVES OF THE STUDY

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 1. Market position of Fair-weather Securities and customer preference towards

companies’ offerings.

2. Comparison of various mutual fund companies on the basis of customer

perspective

3. Understand the investment opportunities and strategy of various mutual fund schemes

4. To Study and understand Mutual fund industry in India.

5. To study the working and performance of various Asset Management

Company.

6. Overall perception of investors about mutual funds.

7. Acceptance of mutual funds in India & its scope in future.

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INDUSTRY PROFILE

26
 INDUSTRY PROFILE

Inception

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. Today, 32 mutual funds collectively manage Rs 6713575.19 cr under hundreds of

schemes.

History of the Indian Mutual Fund Industry

1964 1987 1993 2004

Phase 1 Phase 2 phase 3

UTI-The only Public/ Bank Entry of Private

player Funds & Foreign FUTURE
established Players

The Evolution

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 The formation of Unit Trust of India marked the evolution of the Indian mutual fund

industry in the year 1963. The primary objective at that time was to attract the small investors

and it was made possible through the collective efforts of the Government of India and the

Reserve Bank of India. The history of mutual fund industry in India can be better understood

divided into following phases:

Phase 1. Establishment and Growth of Unit Trust of India - 1964-87

Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by

an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate

under the regulatory control of the RBI until the two were de-linked in 1978 and the entire

control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI

launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the

largest number of investors in any single investment scheme over the years.

UTI launched more innovative schemes in 1970s and 80s to suit the needs of different

investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift

Growth Fund and India Fund (India's first offshore fund) in 1986, Master share (India’s first

equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns)

during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700

crores.

Phase II. Entry of Public Sector Funds - 1987-1993

The Indian mutual fund industry witnessed a number of public sector players entering the

market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India

became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Can

28
bank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund,

GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the

industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader

with about 80% market share.

Amo Assets Mobilisation as

unt Under % of gross

1992-93
Mobi Manage Domestic

lised ment Savings

11,05
UTI 38,247 5.2%
7

Public Sector 1,964 8,757 0.9%

13,02
Total 47,004 6.1%
1

Phase III. Emergence of Private Sector Funds - 1993-96

The permission given to private sector funds including foreign fund management companies

(most of them entering through joint ventures with Indian promoters) to enter the mutual fund

industry in 1993, provided a wide range of choice to investors and more competition in the

industry. Private funds introduced innovative products, investment techniques and investor-

servicing technology. By 1994-95, about 11 private sector funds had launched their schemes.

Phase IV. Growth and SEBI Regulation - 1996-2004

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The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after

the year 1996. The mobilisation of funds and the number of players operating in the industry

reached new heights as investors started showing more interest in mutual funds.

Investors' interests were safeguarded by SEBI and the Government offered tax benefits to the

investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was

introduced by SEBI that set uniform standards for all mutual funds in India. The Union

Budget in 1999 exempted all dividend incomes in the hands of investors from income tax.

Various Investor Awareness Programmers were launched during this phase, both by SEBI

and AMFI, with an objective to educate investors and make them informed about the mutual

fund industry. In February 2003, the UTI Act was repealed and UTI was stripped of its

Special legal status as a trust formed by an Act of Parliament. The primary objective behind

this was to bring all mutual fund players on the same level. UTI was re-organized into two

parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund

Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past

schemes (like US-64, Assured Return Schemes) are being gradually wound up. However,

UTI Mutual Fund is still the largest player in the industry. In 1999, there was a significant

growth in mobilisation of funds from investors and assets under management which is

supported by the following data:

GROSS FUND MOBILISATION (RS. CRORES)

FROM TO U PU PRI TOT

T BLI VAT AL

I C E

30
 SE
SEC
CT
TOR
OR

1
31-
, 1,73 21,37
01-April-98 March- 7,966
6 2 7
99
7

3
31-
, 4,03 42,17 59,74
01-April-99 March-
5 9 3 8
00
3

2
31-
, 6,19 74,35 92,95
01-April-00 March-
4 2 2 7
01
1

01-April-01 31- 4 13,6 1,46, 1,64,5

March- , 13 267 23

02 6

31
 3

,
31-Jan- 22,9 2,20, 2,48,9
01-April-02 5
03 23 551 79
0

31-
7,25 58,43 65,69
01-Feb.-03 March- *
9* 5 4
03

31-
68,5 5,21, 5,90,1
01-April-03 March- -
58 632 90
04

31-
1,03 7,36, 8,39,6
01-April-04 March- -
,246 416 62
05

31-
1,83 9,14, 10,98,
01-April-05 March- -
,446 712 158
06

31-
2,55 11,35 13,22,
01-April-06 March- -
,450 ,655 206
07

31-
3,20 13,96 15,85,
01-April-07 March- -
,927 ,254 798
08

32
 31-
5,65 17,25 19,98,
01-April-08 March-
,254 ,857 253
09

ASSETS UNDER MANAGEMENT (RS. CRORES)

PU
PRI
BL T
VA
U IC O
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68
8,2 6,86
31-March-99 53,320 ,4
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72
Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of which

are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual

Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international

mutual fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc.

There were 29 funds as at the end of March 2006. This is a continuing phase of growth of the

industry through consolidation and entry of new international and private sector players.

33
Asset Management Company

An Asset Management Company (AMC) is a highly regulated organization that pools money

from investors and invests the same in a portfolio. They charge a small management fee,

which is normally 1.5 per cent of the total funds managed.

Mutual Fund Companies

Birla Sun Life Mutual Fund

A joint venture between Sun Life Assurance Company, the Canada-based financial

service
34
organization and the Indian industrial house of Aditya Birla, this AMC was launched in the

mid-90 s.

Both the partners are well known in all areas that they operate in. While Aditya Birla is a

household name in India and has renowned brands in businesses spread across industries as

wide ranging as Aluminum (Hindalco), Textiles (Grasim), Fertilizers (Indo-Gulf), Finance

(Birla Global Finance Ltd.) and Rayon (India Rayon), Sun Life is a leading financial service

organization in North America. Sun Life provides services related to risk management,

money management and wealth management across globe. Having established itself at

Toronto in 1871, it has now spread its wings across Asia Pacific, U.S.A. and U.K. It also has

a significant presence through MFS Investment Management in U.S. and Spectrum United

Mutual Funds in Canada.

The major strengths of the group are its expertise drawn from managing assets over the globe,

a big agent network and an ability to cater to the need of people. Drawing on the expertise of

a worldwide staff of over 10,000 people and a network of more than 65,000 agents and

distributors, Sun Life is committed to providing not just products and services, but solutions

for clients financial and risk management needs.

Birla Sunlife Mutual Fund is one of India's leading mutual funds with assets of over

Rs.17,098 crore under management as of Aug 2006. Birla Sun Life Asset Management

Company Limited, the investment manager of Birla Sunlife Mutual Fund, is a joint venture

between the Aditya Birla Group and Sun Life Financial Services, leading international

financial services organization.

Established in 1994, Birla Sunlife AMC provides investors a range of 18 investment options,

which include diversified and sector specific equity schemes, a wide range of debt and

35
treasury products, and two offshore funds. Both the sponsors have equal stakes in the AMC.

In recognition to its high quality investment products, Birla Sun Life AMC became India's

first asset management company to be awarded the coveted ISO 9001:2000 certification by

DNV Netherlands.

Here is a list of mutual funds of Birla Sunlife which includes Equity, Debt Schemes, Hybrid

Schemes and Offshore Schemes.

DSP Merrill Lynch Fund Managers

DSP Merrill Lynch Asset Management (India) Ltd., has been set up by DSPML and MLAM,

to act as the Asset Management Company (AMC) to the Fund. The AMC has been appointed

as the Investment Manager to the fund, MLAM holds 40% of the paid up share capital of the

AMC, while the balance 60% (approximately), is held by DSPML. DSP Merrill Lynch,

originally called DSP Financial Consultants Ltd., traces its origins to DS Purbhoodas & Co.,

a securities and brokerage firm with over 130 years of experience in the Indian market. After

a decade long association, DSP Merrill Lynch & Co. Inc. took up a 40% stake in DSPFC and

the name was changed to DSPML Ltd. DSPML is a full fledged financial services

organization with a broad employee base and offices in Mumbai, New Delhi, Calcutta,

Chennai, Bangalore, Hyderabad and Cochin. MLAM is a unit of Merrill Lynch Asset

Management Group, the money management arm of ML & Co. It is based in Princeton, N.J.,

USA and offers a wide range of investment products in virtually all U.S. domestic and

36
international asset classes and in major capital markets of the world. Merrill Lynch

Investment Managers investment philosophy is designed to seek consistent, long-term

strategic performance results. Its disciplined value oriented approach to managing its clients

portfolios has been with the primary objective of seeking consistent returns over a long

period. The name of DSP Merrill Lynch Asset Management (India) Ltd. has been changed to

DSP Merrill Lynch Investment Managers Ltd. w.e.f 20th July, 2000

DSP Merrill Lynch mutual fund is one of the top-notch mutual funds in India with assets of

over Rs.10,980 crore under its management as of Aug 2006. The sponsor of the fund is DSP

Merrill Lynch Limited, one of India's largest investment bankers.

DSP Merrill Lynch is a joint venture between securities and brokerage firm D. S. Purbhoodas

& CO. and investment bank Merrill Lynch. Merrill Lynch is one of the world's leading

wealth management, capital markets and advisory companies, with offices in 36 countries

and total client assets of approximately $1.8 trillion. Merrill Lynch holds 40 per cent stake in

the joint venture.

DSP Merrill Lynch Fund Managers, a subsidiary of DSP Merrill Lynch, is the investment

manager to DSP Merrill Lynch Mutual Fund. The AMC has Hemendra Kothari, David

Graham of Merrill Lynch, Omkar Goswami and Piyush Mankad, former union finance

secretary among its directors. The fund management team is headed by S Naganath, chief

investment officer.

Here is a list of mutual funds of DSP Merrill Lynch which includes Fixed Income Fund,

Hybrid Funds and Equity Funds.

37
HDFC Mutual Fund

HDFC Asset Management Company Limited (AMC) was incorporated under the Companies

Act, 1956, on December 10, 1999, and was approved to act as an Asset Management

Company for the Mutual Fund by SEBI on June 30, 2000. The sponsor HDFC was

incorporated in 1977 as first specialized housing finance institution in India. HDFC provides

financial assistance to individuals, corporate and developers for the purchase and construction

of residential housing. It also provides property-related services, training and consultancy. In

the mutual fund venture, HDFC has tied up with Standard Life, one of the leading Insurance

companies in the United Kingdom, having vast experience in management of funds. HDFC

has developed a strong and dedicated team of agents that market its fixed deposit products.

These key partners would constitute the backbone of the marketing and distribution network

of Mutual Fund and will remain a central theme of the organizational framework in times to

come.

HDFC Mutual Fund has been one of the best performing mutual funds in the last few years.

HDFC Asset Management Company Limited (AMC) functions as an Asset Management

Company for the HDFC Mutual Fund.

AMC is a joint venture between housing finance giant HDFC and British investment firm

Standard Life Investments Limited. It conducts the operations of the Mutual Fund and

manages assets of the schemes, including the schemes launched from time to time. As of Aug

2006, the fund has assets of Rs.25,892 crores under management.

IN 2003, following a decision by the Zurich Insurance Company (ZIC), the Sponsor of

Zurich India Mutual Fund, to divest its asset management business in India, AMC had

entered into an agreement with ZIC to acquire the asset management business. Consequently,

all the schemes of Zurich Mutual Fund in India had been transferred to HDFC Mutual Fund

38
and renamed as HDFC schemes.

Here is a list of mutual funds of HDFC which includes Equity Funds, Balanced Funds and

Debt Funds.

Prudential ICICI Mutual Fund

Prudential ICICI Asset Management Company Limited is an investment management

company and a 55:45 joint venture between Prudential Corporation plc, UK, and ICICI Ltd.,

India. Both companies are financial giants, and each is a major player in its field. Prudential

Corporation plc, UK was incorporated in 1848, as a provider of insurance products. Through

its investments, it controls approximately 4% of all the listed shares on the second largest

stock exchange in the world, the London Stock Exchange, making it one of the largest

institutional investors in the UK. ICICI Ltd. was established in 1955 by the World Bank, the

Government of India and representatives of Indian industry, to promote the industrial

development of India by providing project and corporate finance to Indian industry.

Prudential ICICI Asset Management Company Limited has been incorporated with a capital

of Rs 65 crore. This investment - way above the stipulated norm of Rs 10 crore, represents a

strategic long-term commitment, on the part of both partners, to the rapidly expanding

financial services sector in India. In a short span of 14 months, Prudential ICICIs product

39
portfolio has grown from 2 closed ended funds to 8 open ended funds and 2 closed ended

funds.

Prudential ICICI Mutual Fund is the largest private sector mutual fund in India with assets of

over Rs.34,119 crore under management as of Aug 2006. The asset management company,

Prudential ICICI Asset Management Company Limited, is a joint venture between Prudential

Plc, Europe's leading insurance company and ICICI Bank, India's premier financial

institution.

Prudential Plc holds 55 per cent of the asset management company and the balance by ICICI

Bank. In a span of just over six years, Prudential ICICI Asset Management Company has

emerged as one of the largest asset management companies in the country.

The Company manages a comprehensive range of schemes to meet the varying investment

needs of its investors spread across 68 cities in the country. The management is headed by

Pankaj Razdan, managing director and the fund management team is headed by Nilesh Shah,

chief investment officer.

Here is a list of mutual funds of Prudential ICICI which includes Equity Funds, Balanced

Funds and Debt Funds.

SBI Mutual Fund

SBI Funds Management Ltd. is the investment manager of SBI Mutual Fund. SBI Mutual

Fund has been constituted as a trust, sponsored by State Bank India. Today the Fund has an

investor base of over 2.8 million spread over 23 schemes. With a large network of collecting

branches and investor service centers, SBI Mutual Fund constantly endeavors to get closer to

40
its growing family of investors. SBI is the largest public sector Bank in India with 8,836

branches all over India. SBI is the leader in providing loans to trade & industry. It also

provides related services, which generate significant fee-based income. It has also identified

project finance and consumer banking as key areas.

SBI Mutual Fund, India's largest bank sponsored mutual fund, is a joint venture between the

State Bank of India and Societe Generale Asset Management, one of the world's top-notch

fund management companies. Over the years, SBI Mutual Fund has carved a niche for itself

through prudent investment decisions and consistent wealth creation.

Since its inception, SBI Funds Management Private Ltd. has launched thirty-two schemes and

successfully redeemed fifteen of them. Throughout this journey, SBI Mutual Fund has

profusely rewarded the 20,00,000 investors who have reposed their faith in it.

Today, the SBI fund boasts of an expertise of managing assets over Rs. 13,000 crores and has

a diverse profile of investors actively parking their investments across 28 active schemes. A

vast network of 82 collection branches, 26 investor service centres, 21 investor service desks

and 21 district organizers helps the SBI Mutual Fund to reach out to their investors.

Here is a list of Mutual Funds of SBI which includes Equity Funds, Debt Funds and Balanced

Funds.

TATA Mutual Fund

Tata TD Waterhouse Asset Management Private Limited is a Joint Venture between Tata

group and Canadian Major TD Waterhouse. TD Waterhouse is known as one of the best asset

managers, managing assets over $ 100 Bn. Tata Asset Management is a part of the Tata

41
group. The Shareholders of TAM are Tata Sons Limited, Tata Investment Corporation

Limited and Tata Finance Limited. Tata Investment Corporation Ltd. (TICL) was promoted

by Tata Sons Limited (TSL) in 1937, with the main objective of being an investment

company. Tata Sons Limited (TSL) is the principal investment holding company of TATAs.

Through its operating consultancy divisions Tata Consultancy Services, Tata Consulting

Engineers, Tata Economic Consultancy Services and Tata Financial Services, it provides a

wide range of services in the areas of information technology, engineering, and financial

services.

Tata mutual fund, set up in 1995, is one of the leading private sector funds in the country and

is promoted by the Tata group. The sponsors of the fund are Tata Sons Limited and Tata

Investment Corporation Limited.

Tata Asset Management Limited is the investment manager of the mutual fund and has F K

Karavana of Tata Sons as its chairman. The management of the AMC is headed by Ved

Prakash Chaturvedi, managing director. Tata Sons holds a majority stake in the AMC with

the balance being held by Tata Investment Corporation.

Tata Mutual Fund offers a wide range of investment products for institutional and individual

investors and as of August 31, 2006, has assets of Rs. 12562.65 crores under management.

Here is a list of mutual funds of Tata which includes Equity Products, Balanced Products and

Debt Fund.

42
Standard Chartered Mutual Fund

The fund was established on March 13, 2000. Now the management of the fund has been

taken over by Standard Chartered Bank, the UK based banking conglomerate. The name of

the AMC too has been changed from ANZ AMC. Previously sponsored by ANZ Banking

Group, Australia, this fund has just set up its operations in the year 2000. Australia and New

Zealand Banking Group Limited, the previous sponsor of the fund, is a leading international

bank and is also one of the "Big Four" Australian commercial banks providing a full range of

banking and financial services with total assets of US $ 97.35 billion as on 30th Sept, 1999.

ANZ Funds Management is a core business unit of the group and is one of Australia s large

fund managers. It has a full range of investment products and services managing more than

AUD $ 13267.7 million in customer funds on 30th Sept., 1999. ANZ Banking Group has

significant presence in 35 nations from the Middle East through South Asia and East Asia to

the Pacific.

Standard Chartered mutual fund is promoted by banking giant Standard Chartered and

exclusively focuses on debt schemes. The fund started as ANZ Grindlays Mutual Fund and

was later renamed as Standard Chartered Mutual Fund after the takeover of Grindlays Bank

by Standard Chartered.

Standard Chartered Bank is a truly global bank with employees representing 80 nationalities.

The bank has a strong brand presence in India and is well entrenched in developing markets

of Asia Pacific region.

43
The sponsor of the fund is Standard Chartered Bank. The AMC of the fund is Standard

Chartered Asset Management Company Private Limited. The sponsor holds a 75 per cent

stake in the company and the balance is held by Atul Choksey of Apcotex. As of Aug 2006,

the fund has assets of over Rs.15,551 crore under management.

Here is a list of mutual funds of Standard Chartered which includes Equity and Debt.

Escorts Mutual Fund

Escorts Mutual Fund is promoted by the business conglomerate Escorts group. Escorts Asset

Management Limited acts as the AMC to the mutual fund. Escorts Mutual Fund usually

offers open ended schemes and the fund category is Equity- balanced fund. The fund is a

member of the Escort Group of Companies, which deals with a number of high growth

industries like construction and material handling equipment, farm machinery, two wheelers,

auto ancillary products and financial Services.

Balanced Fund, Growth Plan and Floating Rate Fund are some popular open ended plans of

Escorts Mutual Fund. Balanced Fund aims to generate long term capital appreciation and

current income from a well diversified portfolio of equity shares and fixed income securities.

Floats Rates objective is to make regular income through investment in a portfolio

comprising substantially of Floating Rate Debt Securities. Growth Plan generates capital

44
appreciation by investing mainly in a well diversified portfolio of equity shares with growth

potential.

Kotak Mutual Fund

Kotak Mahindra Asset Management Company Limited is a wholly owned subsidiary of

Kotak Mahindra Finance Ltd. Kotak Mahindra Finance Limited (KMFL) was set up in 1985

with a capital base of Rs. 3 million and a single product. From those beginnings, KMFL has

grown over the last decade into a highly diversified financial services company with a net

worth of over Rs. 3 billion and more than 250,000 share, debenture and fixed deposit holders.

The Group currently offers financial services of every kind, including loans, lease and hire

purchase, consumer finance, car finance, investment banking, stock broking and primary

market distribution of equity and debt products, business information services and more. The

Group has offices in 30 Indian cities as well as in Dubai, Mauritius and London. Kotak

Mahindra (UK) Ltd, a subsidiary of KMFL, is the first company owned from India to be

registered with the Securities and Futures Authority in London.

Kotak Mahindra mutual fund is one of the leading mutual funds in the country with assets of

over Rs.12,530 crore under management as of Aug 2006. The fund is promoted by Kotak

Mahindra Bank, one of India's leading financial institutions that offer financial solutions

ranging from commercial banking, stock broking, life insurance and investment banking.

Kotak Mahindra Asset Management Company Limited, a wholly owned subsidiary of Kotak

Mahindra Bank, is the asset manager for Kotak Mahindra mutual fund. The company is

45
headed by Uday Kotak of Kotak Bank as chairman and the fund management function is

headed by Sandesh Kirkire, chief executive officer.

Kotak Mahindra mutual fund launched its schemes in December 1998 and today manages

assets of 4,34,504 investors in various schemes. Kotak Mahindra mutual fund was the first

fund house in the country to launch a dedicated gilt scheme investing only in government

securities.

Here is a list of mutual funds of Kotak Mahindra which includes Debt Funds, Balance Funds,

Fund of Funds and Equity Funds.

Principal PNB Mutual Fund

IDBI-PRINCIPAL Asset Management Company (IPAMCO) is the Asset Management

Company for the Fund. IPAMCO is a 50:50 joint venture between IDBI and Principal

Financial Services Inc., US and is registered under the Companies Act, 1956. Industrial

Development Bank of India (IDBI) was established by the Govt. of India under the IDBI Act.

46
As India s premier development financial institution and one of the largest development

banks in the world, IDBI has an asset base of over Rs. 72000 crores (US$ 16 billion) and a

net worth exceeding Rs. 9000 crores (US$ 2 billion). With a current investor base of around

3.3 million customers, IDBI continues to play a major role in institution building by setting

up various specialized institutions to cater to the ever-changing needs of the Indian industry

and its capital markets.

The principal Group has operations outside United States in Asia, Europe and Latin America.

Established in 1879 and a member of the Fortune 500, The Principal Group is a leading

provider of a wide range of financial products and services to businesses and individuals

including retirement services and asset management, life and health insurance and mortgage

banking. In India, Principal Financial Group and its member companies have 11 Foreign

Institutional Investors licenses. One of the first FIIs to establish a relationship in the country -

BT Funds Management, is a member company of the Principal Financial Group and one of

the largest fund management companies in Asia.

The Board of Trustees of IDBI Mutual Fund has appointed IPAMCO as the Asset

Management Company (the AMC) for the Mutual Fund as per Securities and Exchange

Board of India (Mutual Funds) Regulations, 1993. An Investment Management Agreement

has been signed between the Trustees and the AMC on November 25, 1994 whereby the

AMC is empowered to manage the affairs of IDBI Mutual Fund and operate its schemes.

47
HSBC Mutual Fund

HSBC Asset Management (India) Private Limited is the Investment Manager to HSBC

Mutual Fund, set up locally by the HSBC Group. The business is working on ambitious plans

to position itself as one of the leading Private Sector Fund Managers in the Indian financial

market - one of the most promising markets in Asia. It also aims to expand its customer base

by extending its product range to include a wide variety of investment products and enhance

its reputation in India of being a provider of international quality investment products and

services.

HSBC is one of the world's leading banking giants and boasts of a 140-year history in

banking services. HSBC operates in more than 70 countries across the globe and has assets of

over $1.2 trillion on the consolidated group balance sheet. The investment banking and fund

management businesses of the group is handled by HSBC Investments.

HSBC Asset Management India Private Limited acts as the Asset Management Company to

the HSBC Mutual Fund. HSBC Securities and Capital Markets India Private Limited, an

affiliate of the HSBC group, is the sponsor of the fund and owns 75 percent stake in the

AMC.

The AMC is headed by its chairman Niall S Booker, who is also the head of HSBC Bank in

India. The operations of the AMC are headed by Sanjay Prakash, director and CEO. As of

Aug 2006, the fund has assets of over Rs.10,684 crore under management.

Here is a list of mutual funds of HSBC which includes Equity Fund, Debt Fund and Liquid

Fund.

48
Fund List
Fund Name

ABN Amro Mutual Fund

AIG Mutual Fund

Benchmark Mutual Funds

Birla Sun Life Mutual Fund

BOB Mutual Fund

Canara Robeco Mutual Fund

DBS Chola Mutual Fund

Deutsche Mutual Fund

DSP Merill Lynch Mutual Fund

Fidelity Mutual Fund

Franklin Templeton Mutual Fund

HDFC Mutual Fund

HSBC Mutual Fund

ICICI Prudential Mutual Fund

IDFC Mutual Fund

ING Mutual Fund

J P Morgan Mutual Fund

JM Financial Mutual Fund

LIC Mutual Fund

Lotus India Mutual Fund

Mirae Asset Mutual Fund

Morgan Stanley Mutual Fund

49
Principal PNB Mutual Fund

Quantum Mutual Fund

Fairwealth Securities

Sahara Mutual Fund

SBI Mutual Fund

Sundaram BNP Paribas Mutual Fund

Tata Mutual Fund

Taurus Mutual Fund

UTI Mutual Fund

COMPANY PROFILE

50
 Fair-wealth Securities Limited

Fair-wealth Securities Ltd. is a financial services company which has emerged as a

one-stop investment solutions provider. It was founded in 2005 by two visionary entrepreneur

brothers, Mr. Dhirender Gaba and Mr. Naveen Gaba, who possess expertise in the

field of Finance. The company is headquartered in New Delhi, and has its Corporate

office in Gurgaon.

Today Fairwealth Securities is a well established and dynamic broking house in India.

Known for it's state-of-the-art systems and innovative processes, Fair-wealth offers a single

window advantage for all capital and money market related activities to over 20000 clients

across 12 states through its network of over 200 branches.

Fair-wealth Securities is a professionally managed company, lead by a team with outstanding

managerial acumen. The company is supported by more than 200 professionals keeping an

eye on the intricate financial needs of its clients and caters to both their short term and long

term financial needs through a comprehensive bouquet of investment services.

51
 Our services range from offline & online trading in equity, commodities, and currency

derivatives. Company is also soon planning to launch its Portfolio Management Services.

The company has a sizable presence in the distribution of 3rd party financial products

like mutual funds, and insurance products. It also provides expert Advisory on Life

Insurance, General Insurance, Mutual Funds and IPO’s. The distribution network is backed

by in-house back office support to provide prompt and efficient customer service.

Company has established and expanded its research wing through which we cater to need of

our Equity and Commodity clients. Our clients have been able to make sober investment

decisions and make profit from our advice.

The Equity broking arm – Fairwealth Securities Ltd offers personalized premium

services on the NSE, BSE & Derivatives market-Equity and Currency Markets .

The Commodity broking arm Fairwealth Commodities Broking Ltd offers services in

Commodity trading on NCDEX and MCX.

Our Promoters.

Mr. Dhirender Gaba, the main promoter/director of the Company is a Science Graduate

having almost 16 years of share market experience is actively associated with the Stock

market operations since 1991. His vision, focus and dedication have been the driving force

for the company’s success.

Mr. Naveen Gaba another promoter of the Company is an Art Graduate and younger brother

of Mr. Dhirender Gaba, having almost 14 years of experience, joined the business as a

Director of Fairwealth Securities Ltd. to take charge of the entire marketing and customer

support division of the company.

OUR OFFERINGS

52
 • Equity and Derivatives Broking (Retail and Institutional)

• Commodities Broking

• Currency Derivatives Broking

• IBT - Online Internet Based Trading

• Equity Research

• Commodities Research

• Depository Services

• Portfolio Management Services

• Mutual Fund Distribution

• Insurance Broking

• IPO

• Wealth Management (Coming Soon)

Vision

In our Endeavour to serve more customers across geographies Fairwealth Securities Ltd plans

to be a leading stock and commodity broker and a distribution proving a bouquet of services.

We want to be known to our customers for our excellent customer service, our research

advice and putting our client’s priority at the top.

Mission :

We aim to provide wealth maximization solution for our clients and guide our clients in

talking sober investment decisions.

• Broking with Human touch

• State of the art IT infrastructure, choice of connectivity available

• Quality Research – Empowering the client

53
• Decentralized operations

54
1.EquityTrading

The best way to amass wealth is by investing in the stock market. However, it can be a risky

proposition considering the high risk-return trade off prevalent in the stock market. Therefore

before investing, the clients should know how to go about it. By opening an account with

Fair-Wealth, an investor can avail additional benefits like access to various intraday and

fundamental calls.

2. Commodity Broking

Investment in commodities is advisable in the portfolio, as it is generally considered as

defensive because stocks and bonds witnesses adverse performance during times of inflation.

We offer our advisory services with enhanced research and knowledge aims to capitalize the

immense potential of the commodities market

3. DerivativesTrading

We, at Fair-Wealth Securities, have endeavoured to make trading in derivatives simpler. We

strive to educate new entrants in the derivatives trading market so that they are more

equipped with knowledge and techniques.

4. Portfolio Management Services

55
Our Portfolio Management Service is well suited for high-net worth customers who want to

invest in Indian Equities and desire to create wealth over longer period After understanding

varied risk appetites and financial goals of individuals FairWealth has created an Investment

Strategy called Wealth- MAX Strategy

5.Research

FairWealth carries out extensive research in equity and commodity

Equity Research: We have a dedicated research team which is engaged in analyzing the

Indian economy and corporate sectors to identify multi-bagger stocks. We provide Weekly

Techno Funda Calls based on the weekly outlook. The team also provides positional and

medium term calls. Our technical team provides various intraday, BTST and Weekly Calls

based on their analysis. It also comes out with a report called ‘Market Pulse’ on a daily basis.

Daily Market Outlook which is a daily newsletter is well-known among the industry. Besides

this, we are also into Derivative research which covers Call-Put Strategy and Covered Call

strategy.

Commodity Research: The commodity research team enables the investors to tap

appropriate opportunities in the commodity market.

56
6 .Risk Management through Life and General Insurance

We have a sizable presence in the distribution of 3rd party financial products like Life

Insurance and General Insurance Products. We provide expert Advisory on Life Insurance

and General Insurance. The distribution network is backed by in-house back office support to

provide prompt and efficient customer service.

7. Depository Participant

Fairwealth Securities Limited is a depository participant with the Central Depository Services

(India) Limited for trading and settlement of dematerialized shares. The company as a

depository participant offers De-materialization, Re-materialization, Pledge & transfer of

shares. SMS Alert Facility for debits and IPO credits in demat account are also available. We

ensure safe and secure custody of the customers account as every debit instruction is executed

after authentication for the same is established. We offer depository accounts to individual

investor’s as well as corporate houses which enable them to trade in the dematerialized

environments.

8. Back Office

Fairwealth provides online back-office services to its clients for transparency of their

statements and provides the link to view the details of the account online. The account

statement that are available includes Financial Ledger, Net Position for the day etc.

57
Management of the company

58
 Mr. Dhirendra Gaba

Managing Director

Mr. Dhirendra Gaba, Founder and Managing director, could

forsee the opportunities offered by the stock market and thus

FairWealth Securities was evolved in 2005. Mr Gaba, a law

graduate, has a vast experience of 15 years in the stock

market. He has been actively associated with the stock

market’s operations since 1995.

He is a reputed and well-known personality in the financial

services domain

Mr. Naveen Gaba

Director- Sales & Marketing

Mr. Naveen Gaba, co-promoter of the Company, is an Art Graduate.

He has a wide experience of 15 years. He joined the business as a

Director of FairWealth and took charge of the entire marketing and

customer support division of the company.

Under his dynamic leadership and experience, FairWealth has

59
opened 40 branches all over India.
 RESEARCH METHODOLOGY

Introduction to the Problem:

• To classify the investors on their risk and return profile.

• To find out the awareness of mutual funds among investors.

• To find out the expected rate of return of the investors.

Research Design

Research design is simply the framework or plan for a study, used as a guide in collecting and

analyzing data. There are three types of Research Design:-

• Exploratory Research Design:- The major emphasis in exploratory

Research design is on discovery of ideas and insights.

• Descriptive Research Design:- The Descriptive Research Design

Study is typically concerned with determining the frequency with which something

occurs or the relationship between two variables.

60
 • Casual Research Design:- A Casual Research Design is concerned

with determining cause and effect relationship.

For the study, exploratory Research Design was undertaken to classify the investors on their

risk and return profile.

Sampling Design

(a) Population:

Element: Businessmen and Servicemen in Moradabad city

Extent: Fairwealth Securities, Moradabad.

Time: 15th May to 30th June

(b)Sampling Unit: -Businessmen and Servicemen in Moradabad city

(d) Sample Size:- 100

(e) Sampling Method:-

There are two methods of sampling:-

1. Probability Sampling: It is based on the concept of random selection of a controlled

procedure that assures that each Population element is gives a non-zero chance of selection.

Probability Sampling is of following types:

1. Simple Random

2. Systematic

3. Cluster

4. Stratified

5. Double

61
 2. Non-Probability Sampling: Non probability sampling is non-random and subjective. That

is each member does not have a known non zero chance of being included. Types of Non-

Probability Sampling

1. Convenience

2. Judgement

3. Quota

Researcher selects the sample as per their convenience.

For this research work I have chosen Non- Probability Convenience Sampling because time

limit for the completion of the work is limited and also managers and employees are not

available all the time.

Area of Study - Moradabad.

Duration - 6 weeks

Data Collection Method

Data for the present study is collected from two sources:

 Primary sources:

The data are collected directly from the universe by conducting interviews, etc. these are

the original sources from which the researcher directly gathers data which are not

previously referred.

 Secondary sources:

The data are collected from the secondary sources such as magazines, journals, etc. These

sources consist of already variable data in the form of statements, and reports, which may

62
 include sensory reports, financial statements of the company, reports of governments

departments, etc.

I used both Primary and Secondary sources of data collection.

For primary source I have used Questionnaire. For secondary source I have used Internet,

Magazines, and Newspaper etc.

2- Data Approach- There are several Approach of data collection. The primary sources of

data collection are done through –

o Observation

o Interviewing

o Stimulation

o Mail survey

o Projective techniques

o Questionnaire

Observation:

Observation is a mode of primary data collection through which we directly get the data from

a universe and based on that data one can carry on the research.

Interviewing:

Interviewing is another mode of direct data collection, which provides complete information

about the universe.

63
Stimulation:

Stimulation is a technique of performing experiments on the model of a particular system.

The experiment is done on the model and not on the real system because the latter will be

inconvenience and expansive.

Mail survey:

Through Mail survey, we can get direct data from the universe, the responds and the feedback

based on which the research can be carried out.

Projective techniques: Projective techniques are based on the theory that the description are

the vague objects and requires interpretation, and this interpretation can be based on the

individual own background, attitudes, and values.

Questionnaire:

Questionnaire is the method of data collection, which is very much popular, particularly in

big cities. Different modes of questions are put up on the paper and the particular universe, on

which the research is conducted, are asked to fill their responses.

64
FINDING AND ANALYSIS

65
1. Are you aware of Mutual Funds?

Yes( ) No( )

YES 77%

NO 23%

66
INTERPRETATION

The purpose of this question is to know the number of people who are aware of the

mutual funds. The findings show that 77% of the people aware about the mutual

funds and only 23% are not aware about the mutual funds.

67
2. Are you aware of the followings in relation to mutual funds?

Different types of schemes ( )

Net Asset Value (NAV) ( )

Sponsor ( )

Association of Mutual Funds of India (AMFI) ( )

Different types of schemes 35%

Sponsor 10%
NAV 35%
AMFI 20%

Awareness in relation to mutual funds

20%

AMFI
35%

NAV
10%

Sponsor
Different types of
35%

schemes
0
10 20 30 40

Awareness in relation to mutual funds

INTERPRETATION

The purpose of this question is to know that whether investors are aware about various

relations in mutual funds. The findings show that 35% of people are aware about different

types of schemes and about 35% for NAV. 20% people are aware about AMFI and only 10%

are aware about the sponsors.

68
3. How did you come to know about Mutual fund investment schemes?

Reference groups ( ) Intenet/Mail ( )

Financial Magazine/Newspaper ( ) Television ( )

Broker / Agent ( )

Reference groups 12%

Intenet/Mail 15%
Financial

Magazine/Newspaper 25%
Television 8%
Broker&Agents 40%

Influencial factor Reference

groups 12%
Broker &Age
nts 40% Intenet /Mail
15%

Television Financial
8% Magazine /N
ewspaper
25%
Reference groups
Intenet/Mail
Financial Magazine/Newspaper
Television
Broker&Agents

INTERPRETATION

The purpose of this question is to know how people know about mutual fund schemes.The

findings show that majority i.e. 40% of people come to know through

brokers&agents.Second best is newspaper & Financial magazine having a stake of 25%.

4. Which all mutual fund you have invested in?

69
 Fairwealth Securities ( ), ICICI Prudential Mutual Fund (

S.B.I. Mutual Fund ( ), Any other specify ………

Fairwealth Securities 55%

ICICI Mutual Fund 23%
S.B.I. Mutual Fund 12%
Any other specify ……… 10%

preferred mutual fund company

60%

40%

20%

0%
Reliance ICICI S.B.I. Any
Series1 55% 23% 12% 10%

INTERPRETATION

The purpose of this question is to know that in what all mutual funds investment is being

made by investors.The findings show that 55% of people invest in Fairwealth Securities and

about 23% invest in ICICI.

It means Fairwealth Securities has the more brand equity as compare to the

other Mutual Fund available in the market.

5. Do you view following factors/ source of information important while investing in

mutual fund?

70
 Safety ( ) Liquidity ( )

Return earned ( ) Tax saving ( )

All of the above ( )

Safety 8%
Liquidity 6%
Return earned 6%
Tax saving 5%
All the above 75%

Factor affecting investment in mutual funds

Safety
8% Liquidity
6%
Return earned Safety
6%
Tax saving Liquidity
5%
Return earned

Tax saving

All the above All the above

75%

INTERPRETATION

The purpose of this question is to know what factors are important while investing in mutual

fund. The findings show that nearly all the factors i.e. safety, liquidity, returned earned and

tax saving are important and considered while making investment in mutual funds. However,

75% investors consider nearly all the factors.

6. Do you find following source of information relevant to analyze the performance of

your investment?

71
Monthly updates ( ), Quarterly Results ( )

Half yearly Reports ( ), Annual Reports ( )

Newspapers ( ) , Websites of respective mutual funds ( )

AMFI website ( )

Monthly updates 10%

Quarterly Results 12%
Half yearly Reports 10%
Annual Reports 20%
Newspapers 30%
Websites of respective mutual

funds 9%
AMFI website 9%

72
 Information relevant to analyseperformance of investment

30%

25%

20%

15%

10%

5%

0%
Monthly Quarterl Half Annual Newspa Websit AMFI
updates y yearly Reports pers es of website
Series1 10% 12% 10% 20% 30% 9% 9%

INTERPRETATION

The purpose of this question is to know various sources of information important to

analyse the performance of investment made in mutual funds.The result shows that

majority is occupied by newspaper having 30%.20% by annual reports,10% each for

monthly and halfyearly updates while 9% each by websites of respective mutual funds

and AMFI website.

73
7.Do you seriously go through the Annual report of your scheme to evaluate the

performance of your scheme?

Yes No (If no, skip to Q No. 8)

Yes 60%

No 40%

Considertion of Annual Reports

No
40% Yes
Yes No
60%

INTERPRETATION

74
From the above it can be easily depicted that 60% of people seriously go through Annual

reports of the scheme while 40% does not.

8.Do you find following contents of the annual report of scheme relevant?

Growth in NAV ( ) Management fee ( )

Total expenses ( ) Balance sheet ( )

Growth in NAV 30%

Management fee 20%
Total expenses 25%
Balance sheet 25%

Contents of Annual Report

30%
25% 25%
30% 20%
25%
20%
15%
10%
5%
0%
Grow th in Management Total Balance
NA V fee expenses sheet

Series1

75
INTERPRETATION

The purpose of this question is to know what all contents of annual report are relevant.The

findings show that Growth in NAV is most relevant and occupies 30% in all.25% each of

Total expenses &Balanced sheet.While just 20%for management fees. This shows that NAV

is important and relevant .

9. How much % of risk is bearable?

0-5% ( ) 5-10% ( ) 10-15% ( ) above 15% ( )

0-5% 20%
5-10% 55%
10-15% 15%
above 15% 10%

Risk Bearable by investors

60%
55%

40%

20% 20%
15%
10%
0%
0-5% 5-10% 10-15% above 15%
Series1 20% 55% 15% 10%

Series1

76
 INTERPRETATION

From the findings it can be said that majority of the investors like to bear 5-10% risk

in a year.

10. How much do you save annually (in Rs. Approx)

Less than Rs 50,000 ( ) ,Rs 50,001 to Rs 1,00,000 ( )

Above Rs 1,00,000 ( )

Less than Rs 50,000 25%

Rs 50,001 to Rs 1,00,000 55%

Above Rs 1,00,000 20%

77
 Annual Savings

60%
55%
40%
25%
20% 20%

0%
Less than Rs Rs 50,001 to Rs Above Rs 1,00,000
Series1 25% 55% 20%

Series1

INTERPRETATION

The purpose of this question is to know how much savings are done annually by

investor in mutual funds. The result shows that 55% of people save about Rs.

50,001to Rs. 1,00,000

11.Do you prefer investment in Mutual funds to other savings avenue in future?

Yes ( ), No ( ) , Not sure ( )

Yes 60%
No 15%
Not sure 25%
78
 Future investment in mutual funds

80%

60% 60%

40%
25%
20% 15%
0%
Yes No Not sure
Series2 60% 15% 25%

Series2

INTERPRETATION

The purpose of this question is to know the investor preference in mutual funds

to other saving avenue in future.The findings show that 60% prefer investing in

mutual funds.15% says no while 25% are not sure about this.This means that mutual

funds are mostly preferred.

12. Indicate your perception on the given scale with regard to the following. (Tick the

relevant column).

a).Investors receives good quality advice from distributor ( )

b).Advertising and performance portrayal is often misleading ( )

79
 c).There is need to simplify the information provided to unitholders ( )

d).Attending investor educational programme is beneficial ( )

good quality 30
misleading performance portrayal 12
simplification of information 23
educational programme 35

Perception of investor
educational good quality
programme 30%
35% good quality

misleading performance
portrayal
simplification of
misleading information
simplification performance educational programme
of information portrayal
23% 12%

INTERPRETATION

The situation says that 35% of investors says that attending investor educational programme

is beneficial.30% of investors receive good quality advice from distributor. 23% agree

regarding simplifation of the information provided to unitholders while 12% says that

advertising and performance portrayal is often misleading .

CONCLUSION

80
The project is to do analysis of mutual fund and define customers perception towards mutual

Funds. The study was very fruitful, it yielded the desired results, helped me understand the

process of Mutual Funds better. The study also yielded what are the factors that people are

looking forward to in the case of Mutual Funds.

The study also shows that a large number of investors prefer mutual funds to other

avenues in future.

On the basis of research I can say that most of the investors expect good return 15% to

25% from the equity scheme. As far as risk bearing ability is concerned out of the study it

was found that most of the investors are comfortable with the risk of 5% to 10% , being the

investors of Equity schemes. Very few investors’ prefer the above 15%. Their expected

return is also exceptionally high.

Fair wealth LTD. has a great opportunity to increase their market potential especially in this

market situation. Most of the branded broking agencies are coped by security exchange board

of India due to their illegal works.

Fair wealth LTD has a unique brand name who assures to people about the transparent work

and obtaining their belief. Brand Equity of Fair wealth is very high just, go & hit the market.

Suggestions & Recommendations

For the Investors

(1) The investor should read offer document before investing.

81
(2) Every Investor should read all the instruction carefully related to the fund in which

he/she wants to invest.

(3) Investor should check the status of his investment time to time.

(4) If the investors expect high return on their investments then it is better to invest in

the Equity Fund, but it also includes high risk

(5) If the investor do not want high risk then it is better to invest in the Debt Fund.

For the AMC’s

(1) Mutual Fund industries try to make aware the people towards the mutual fund.

(2) Mutual Fund industries should launch some fixed return plans.

(3) Mutual Fund industries also should launch some pension plan with guaranteed

return for the senior citizens.

(4) Mutual fund industries should conduct some awareness program for the investors.

(5) Mutual Fund industry should provide better after sales services to the investors.

Limitations

1. Faced little bit of difficulty in collecting the required data because many of the

people were found unaware of investment opportunities.

82
2. Some of the respondents were not ready to fill the respondent’s profile.

3. Some of the respondents were not ready to fill up the Questionnaire due to

lack of time.

4. Good time, efforts and money was spent in contacting the respondent to get

the questionnaire filled.

5. Problem is faced with preparing the questions due to non-technical

background and inexperience.

BIBLIOGRAPHY

Books

83
 i. Khan and Jain “Financial Management”(2007) New Delhi Tata

McGraw Hill Publishing company Ltd.

ii. Kothari C.R. “Research Methodology’’(2007) New Delhi: Wishwa

Prakashan Pvt Ltd..

iii. http://www.fairwealthsecurities.com/OurSchemes/Content.aspx?

ArticleID=499ED382-BF36-4869-B878-3C3FDD9B32B4 dated 24.06.09, time

21:00 (India)

iv. http://www.financialsolutions.in/mutual_funds/mutual_funds.html dated

28.06.09, time 21:30 (India)

v. http://www.valueresearchonline.com/story/h2_storyView.asp?str=215 dated

02.07.09, time 22:30 (India)

vi. http://www.investopedia.com/articles/mutualfund/05/MFhistory.asp dated

07.07.09, time 21:30 (India)

QUESTIONNAIRE

84
Dear Sir / Madam, I am conducting a survey to understand consumer behavior on

investment pattern Please spare your precious time and furnish your views by

completing this questionnaire. Your views will be extremely valuable input for my

research work. The information furnished by you shall be used exclusively for

academic purpose without compromising your identity.

Q1. Are you aware of Mutual Funds?

Yes( ) No( )

Q2. Are you aware of the followings in relation to mutual funds?

Different types of schemes ( )

Net Asset Value (NAV) ( )

Sponsor ( )

Association of Mutual Funds of India (AMFI) ( )

Q3.How did you come to know about Mutual fund investment schemes?

Reference groups ( ) Intenet/Mail ( )

Financial Magazine/Newspaper ( ) Television ( )

Broker / Agent ( )

Q4. Which all mutual fund you have invested in?

Fairwealth Securities ( ), ICICI Prudential Mutual Fund ( )

S.B.I. Mutual Fund ( ), Any other specify ………

85
Q5.Do you view following factors/ source of information important while

investing in mutual fund?

Safety ( ) Liquidity ( )

Return earned ( ) Tax saving ( )

All of the above ( )

Q6. Do you find following source of information relevant to analyze the

performance of your investment?

Monthly updates ( ), Quarterly Results

( )

Half yearly Reports ( ), Annual Reports

( )

Newspapers ( ), Websites of respective mutual funds

( )

AMFI website ( )

Q7.Do you seriously go through the Annual report of your scheme to evaluate

the performance of your scheme?

Yes No (If no, skip to Q No. 8)

86
Q8.Do you find following contents of the annual report of scheme relevant?

Growth in NAV ( ) Management fee ( )

Total expenses ( ) Balance sheet ( )

Q9. How much % of risk is bearable?

0-5% ( ) 5-10% ( ) 10-15% ( ) above

15% ( )

Q10. How much do you save annually (in Rs. Approx)

Less than Rs 50,000 ( ) ,Rs 50,001 to Rs 1,00,000

( )

Above Rs 1,00,000 ( )

Q11.Do you prefer investment in Mutual funds to other savings avenue in

future?

Yes ( ), No ( ) , Not sure

( )

87
Q12. Indicate your perception on the given scale with regard to the following.

(Tick the relevant column).

a).Investors receives good quality advice from distributor ( )

b).Advertising and performance portrayal is often misleading ( )

c).There is need to simplify the information provided to unitholders ( )

d).Attending investor educational programme is beneficial ( )

88