dissertation report on mutual funds 2

8/2/2019 Dissertation Report on Mutual Funds 2

1/66

A

Dissertation ReportOn A STUDY

OF

MUTUAL FUNDS

IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY

DANISH KHAN

ROLL NO.

REG. NO.


2/66

DECLARATION

I DANISH KHAN hereby declare that the dissertation entitled A STUDY OF MUTUALFUNDS

submitted to the

Place:

Date: Signature of the candidate.


3/66

ABSTRACT

Indian mutual fund industry now represents perhaps the most appropriate investment

opportunity for most investors. As financial markets become more sophisticated and

complex, investors need a financial intermediary who provides the required knowledge

and professional expertise on successful investing. There are various choices available to

the investor of today. One however needs to invest carefully, and work out various

investment options and decide on how to make best of the investment in terms of monetary

benefits.

A mutual fund is a common pool of money into which investors place their contributions

that are to be invested in accordance with a stated objective. The ownership of the fund is

thus join or mutual; the fund belongs to all investors. A single investors ownership of the

fund is in the same proportion as the amount of the contribution made by him or her bears

to the total amount of fund.

A mutual fund uses the money collected from investors to buy those assets which are

specifically permitted by its stated investment objective. Thus, an equity fund would buy

mainly equity assets- ordinary shares, preference shares, warrants etc. It is these assets

which are owned by the investors in the same proportion as their contribution bears to the

total contributions of all investors put together.


4/66

CONTENTS

CERTIFICATE

DECLARATION

ACKNOWLEDGEMENTS

ABSTRACT

CHAPTER 1INTRODUCTION

1.1 INTRODUCTION TO THE CONCEPT

CHAPTER 2 - REVIEW OF LITERATURE

2.1 PURPOSE OF THE STUDY

2.2 BRIEF HISTORY OF MUTUAL FUNDS

2.3 PERFORMANCE OF MUTUAL FUNDS IN INDIA

CHAPTER 3 - PRESENT STUDY

3.1 MARKET TRENDS

3.2 BANKS V/S MUTUAL FUNDS

3.3 TYPES OF MUTUAL FUNDS

3.4 ADVANTAGES & DISADVANTAGES OF MUTUAL FUNDS

3.5 MUTUAL FUND CONSTITUENTS

3.6 CALCULATION OF NAV

3.7 MARKETING STRATEGIES ADOPTED


5/66

BY THE MUTUAL FUNDS

3.8 MARKETING OF FUNDS:

3.9 CHALLENGES AND OPPORTUNITIES

3.10 REASONS FOR BAD PERFORMANCE OF

MUTUAL FUNDS

3.11 MAJOR MUTUAL FUNDS COMPANIES IN INDIA

CAPTER 4RESEARCH METHODOLOGY

4.1 METHODS

4.2DATA ANALYSISCHAPTER 5RECOMMENDATIONS

CHAPTER 6CONCLUSION

CHAPTER 7REFRENCES

ANNEXURE


6/66

LIST OF FIGURE

S.N TITLE

1. RATE THE FAMILIARITY AND

EXPERIENCE WITH INVESTMENTS

2. POSSIBLE INVESTMENT MOTIVES

FOR PORTFOLIO.

3. CLASSIFY YOUR INVESTMENT STYLE

4. INVESTMENT VEHICLE

5. TYPE OF MUTUAL FUNDS DO PREFER6. TAX SAVING

7. AVERTISING


7/66

CHAPTER 1

INTRODUCTION


8/66

INTRODUCTION TO THE CONCEPT

WHAT IS A MUTUAL FUND?

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 invested by the fund manager in

different types of securities depending upon the objective of the scheme. These could

range from shares to debentures to money market instruments. The income earned through

these investments and the capital appreciations realized by the scheme are shared by its

unit holders in proportion to the number of units owned by them (pro rata). Thus a Mutual

Fund is the most suitable investment for the common man as it offers an opportunity to

invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody

with an inventible surplus of as little as a few thousand rupees can invest in Mutual Funds.

Each Mutual Fund scheme has a defined investment objective and strategy.

MUTUAL FUND OPERATION FLOW CHART

A mutual fund is the ideal investment vehicle for todays complex and modern financial

scenario. Markets for equity shares, bonds and other fixed income instruments, real estate,

derivatives and other assets have become mature and information driven. Price changes in

these assets are driven by global events occurring in faraway places.


9/66

CHARACTERISTICS OF A MUTUAL FUND:

Mutual funds are not guaranteed by any bank or government agency.

Mutual funds provide a rate of return, in the form of dividends, capital gains,

and changes in share value.

There is always some investment risk.

Higher rates of return usually involve higher risk.

All mutual funds have costs which lower the shareholders rate of return.

Past performance is not a guarantee of future performance.

Mutual funds can be purchased through brokers or directly from the fund

through its Transfer Agent


10/66

CHAPTER-2REVIEW OF LITERATURE


11/66

PURPOSE OF THE STUDY

Indian households started allocating more of their savings to the capital markets in 1980s,

with investments flowing into equity and debt instruments, besides the conventional modeof bank deposits.

Until 1992, primary market investors were effectively assured good returns as the issue

price of new equity issues was controlled and low. After introduction of free pricing of

shares, new issues prices were higher and with greater volatility in the stock markets,

many investors who bought highly priced shares lost money, and withdrew from the

markets altogether. Even those investors who continued as direct investors in the stock

markets realized that the key to successful investing in the capital markets lay in building a

diversified portfolio, which in turn required substantial capital. Besides, selecting

securities with growth and income potential from the capital market involved careful

research and monitoring of the market, which was not possible for all investors. Under

similar circumstances in other countries, mutual funds had emerged as professional

intermediaries. Besides providing the expertise in stock market investing, these fundsallow investing in small amounts and yet holding a diversified portfolio to limit risk, while

providing the potential for income and growth that is associated with the debt and equity

instruments. In India, Unit Trust of India occupied this place as the only capital markets

intermediary from 1964 until late 1987, when the Government started allowing other

sponsors also to set up mutual funds. With some ups and downs, this new class of

intermediary institutions has emerged, in India as elsewhere, as a good alternative to direct

investing in capital markets.

Mutual funds units are investment vehicles that help small investors to take a big ride

through capital market, which is not possible individually with small amount of

investment.


12/66


13/66

BRIEF HISTORY OF MUTUAL FUNDS

The origin of mutual fund industry in India is with the introduction of the concept of

mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from

the year 1987 when non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen dramatic improvements, both

quality wise as well as quantity wise. Before, the monopoly of the market had seen an

ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector

entry to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004;

it reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is

less than the deposits of SBI alone, constitute less than 11% of the total deposits held by

the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the

country. Large sections of Indian investors are yet to be intellectuated with the concept.

Hence, it is the prime responsibility of all mutual fund companies, to market the product

correctly abreast of selling.


14/66

The mutual fund industry can be broadly put into four phases according to the

development of the sector. Each phase is briefly described as under.

First Phase - 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. 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)

Entry of non-UTI mutual funds. SBI Mutual Fund was the first 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 in

1989 and GIC in 1990. The end of 1993 marked Rs.47, 004 as assets under management.

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


15/66

(Mutual Fund) Regulations 1996.

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, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under

management was way ahead of other mutual funds.

FourthPhase - since February 2003

This phase had bitter experience for UTI. It was bifurcated into two separate entities. One

is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (ason January 2003). 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 Ltd, 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

AUM 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.


16/66

PERFORMANCE OF MUTUAL FUNDS IN INDIA

Let us start the discussion of the performance of mutual funds in India from the day the

concept of mutual fund took birth in India. The year was 1963. Unit Trust of India invited

investors or rather to those who believed in savings, to park their money in UTI Mutual

Fund.

For 30 years it goaled without a single second player. Though the 1988 year saw some

new mutual fund companies, but UTI remained in a monopoly position.

The performance of mutual funds in India in the initial phase was not even closer to

satisfactory level. People rarely understood, and of course investing was out of question.

But yes, some 24 million shareholders was accustomed with guaranteed high returns by

the beginning of liberalization of the industry in 1992. This good record of UTI became

marketing tool for new entrants. The expectations of investors touched the sky in

profitability factor. However, people were miles away from the preparedness of risks

factor after the liberalization.

The Assets Under Management of UTI was Rs. 67bn. by the end of 1987. Let me

concentrate about the performance of mutual funds in India through figures. From Rs.

67bn. the Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure had

a three times higher performance by April 2004. It rose as high as Rs. 1,540bn.

The net asset value (NAV) of mutual funds in India declined when stock prices started

falling in the year 1992. Those days, the market regulations did not allow portfolio shifts

into alternative investments. There were rather no choices apart from holding the cash or

to further continue investing in shares. One more thing to be noted, since only closed-end


17/66

funds were floated in the market, the investors disinvested by selling at a loss in the

secondary market.

The performance of mutual funds in India suffered qualitatively. The 1992 stock market

scandal, the losses by disinvestments and of course the lack of transparent rules in the

whereabouts rocked confidence among the investors. Partly owing to a relatively weak

stock market performance, mutual funds have not yet recovered, with funds trading at an

average discount of 1020 percent of their net asset value.

The supervisory authority adopted a set of measures to create a transparent and

competitive environment in mutual funds. Some of them were like relaxing investmentrestrictions into the market, introduction of open-ended funds, and paving the gateway for

mutual funds to launch pension schemes.

The measure was taken to make mutual funds the key instrument for long-term saving.

The more the variety offered, the quantitative will be investors.

At last to mention, as long as mutual fund companies are performing with lower risks and

higher profitability within a short span of time, more and more people will be inclined to

invest until and unless they are fully educated with the dos and donts of mutual funds


18/66

CHAPTER 3

PRESENT STUDY


19/66

MARKET TRENDS

A lone UTI with just one scheme in 1964, now competes with as many as 400 odd

products and 34 players in the market. In spite of the stiff competition and losing market

share, UTI still remains a formidable force to reckon with.

Last six years have been the most turbulent as well as exiting ones for the industry. New

players have come in, while others have decided to close shop by either selling off or

merging with others. Product innovation is now pass with the game shifting to

performance delivery in fund management as well as service. Those directly associated

with the fund management industry like distributors, registrars and transfer agents, and

even the regulators have become more mature and responsible.

The industry is also having a profound impact on financial markets. While UTI has always

been a dominant player on the bourses as well as the debt markets, the new generation of

private funds which have gained substantial mass are now seen flexing their muscles. Fund

managers, by their selection criteria for stocks have forced corporate governance on the

industry. By rewarding honest and transparent management with higher valuations, a

system of risk-reward has been created where the corporate sector is more transparent then

before.

Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG

and technology sector. Funds performances are improving. Funds collection, which

averaged at less than Rs100bn per annum over five-year period spanning 1993-98 doubled

to Rs210bn in 1998-99. In the current year mobilization till now have exceeded Rs300bn

What is particularly noteworthy is that bulk of the mobilization has been by the private

sector mutual funds rather than public sector mutual funds. Indeed private MFs saw a net

inflow of Rs. 7819.34 crore during the first nine months of the year as against a net inflow

of Rs.604.40 crore in the case of public sector funds.


20/66

Mutual funds are now also competing with commercial banks in the race for retail

investors savings and corporate float money. The power shift towards mutual funds has

become obvious. Many investors are realizing that investments in savings accounts are as

good as locking up their deposits in a closet. The fund mobilization trend by mutual funds

in the current year indicates that money is going to mutual funds in a big way.

India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts

of an Asset base that is much higher than its bank deposits. In India, mutual fund assets are

not even 10% of the bank deposits, but this trend is beginning to change. Recent figures

indicate that in the first quarter of the current fiscal year mutual fund assets went up by

115% whereas bank deposits rose by only 17%. (Source: Think-tank, The Financial

Express September, 99) This is forcing a large number of banks to adopt the concept of

narrow banking wherein the deposits are kept in Gilts and some other assets which

improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and

they will not close down completely. Their role as intermediaries cannot be ignored. It is

just that Mutual Funds are going to change the way banks do business in the future.

BANKS MUTUAL FUND

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

Guarantee Maximum Rs.1 lakh on deposits None


21/66

BANKS VS MUTUAL FUNDS

TYPES OF MUTUAL FUNDS

Any mutual fund has an objective of earning income for the investors and/ or getting

increased value of their investments. To achieve these objectives mutual funds adopt

different strategies and accordingly offer different schemes of investments. On this basis

the simplest way to categorize schemes would be to group these into two broad

classifications: Operational Classification and Portfolio Classification.

Operational classification highlights the two main types of schemes, i.e., open-ended and

close-ended which are offered by the mutual funds.

Portfolio classification projects the combination of investment instruments and investment

avenues available to mutual funds to manage their funds. Any portfolio scheme can be

either open ended or close ended.

A. OPERATIONAL CLASSIFICATION

(a) Open Ended Schemes: An open-ended Mutual fund is one that is available for

subscription and repurchase on a continuous basis. These Funds do not have a

fixed maturity period. Investors can conveniently buy and sell units at Net Asset

Value (NAV) related prices which are declared on a daily basis. The key feature

of open-end schemes is liquidity.

(b) Close Ended Schemes: Such schemes have a definite period after which their

shares/ units are redeemed. Unlike open-ended funds, these funds have fixed

capitalization, i.e., their corpus normally does not change throughout its life


22/66

period. Close ended fund units trade among the investors in the secondary market

since these are to be quoted on the stock exchanges. Their price is determined on

the basis of demand and supply in the market. Their liquidity depends on the

efficiency and understanding of the engaged broker. Their price is free to deviate

from NAV, i.e., there is every possibility that the market price may be above or

below its NAV. In India as per SEBI (MF) Regulations every mutual fund is free

to launch any or both types of schemes.

B. PORTFOLIO CLASSIFICATION OF FUNDS: Following are the portfolio

classification of funds, which may be offered. This classification may be on the basis of

(a) Return,

(b)Investment Pattern,

(c) Specialized sector of investment,

(d)Others

(A) RETURN BASED CLASSIFICATION: To meet the diversified needs of the

investors, the mutual fund schemes are made to enjoy a good return. Returns expected are

in form of regular dividends or capital appreciation or a combination of these two.

i. Income Funds: The aim of income funds is to provide regular and steady

income to investors. Such schemes generally invest in fixed income securities such as

bonds, corporate debentures, Government securities and money market instruments. Such

funds are less risky compared to equity schemes. These funds are not affected because of

fluctuations in equity markets. However, opportunities of capital appreciation are also

limited in such funds. The NAVs of such funds are affected because of change in interest


23/66

rates in the country. If the interest rates fall, Navs of such funds are likely to increase in

the short run and vice versa. However, long term investors may not bother about these

fluctuations

ii. Growth Funds: Such funds aim to achieve increase in the value of the

underlying investments through capital appreciation. Such funds invest in growth oriented

securities which can appreciate through the expansion production facilities in long run. An

investor who selects such funds should be able to assume a higher than normal degree of

risk.

iii. Conservative Funds:The fund with a philosophy of all things to all issue

offer document announcing objectives as: (i) To provide a reasonable rate of return, (ii) To

protect the value of investment and, (iii) To achieve capital appreciation consistent with

the fulfillment of the first two objectives. Such funds which offer a blend of immediate

average return and reasonable capital appreciation are known as middle of the road

funds.

(B) INVESTMENT BASED CLASSIFICATION: Mutual funds may also be

classified on the basis of securities in which they invest. Basically, it is renaming the

subcategories of return based classification.

i. Equity Fund: Such funds, as the name implies, invest most of their investible

shares in equity shares of companies and undertake the risk associated with the investment

in equity shares. Such funds are clearly expected to outdo other funds in rising market,

because these have almost all their capital in equity. Equity funds again can be of different

categories varying from those that invest exclusively in high quality blue chip companies

to those that invest solely in the new, unestablished companies. The strength of these funds

is the expected capital appreciation. Naturally, they have a higher degree of risk.


24/66

ii. Bond Funds: such funds have their portfolio consisted of bonds, debentures,

etc. this type of fund is expected to be very secure with a steady income and little or no

chance of capital appreciation. Obviously risk is low in such funds. In this category we

may come across the funds called Liquid Funds which specialize in investing short-term

money market instruments. The emphasis is on liquidity and is associated with lower risks

and low returns.

iii. Balanced Fund: The funds, which have in their portfolio a reasonable mix of

equity and bonds, are known as balanced funds. Such funds will put more emphasis on

equity share investments when the outlook is bright and will tend to switch to debentures

when the future is expected to be poor for shares.

(c) SECTOR BASED FUNDS: There are number of funds that invest in a specified

sector of economy. While such funds do have the disadvantage of low diversification by

putting all their all eggs in one basket, the policy of specializing has the advantage of

developing in the fund managers an intensive knowledge of the specific sector in which

they are investing. Sector based funds are aggressive growth funds which make

investments on the basis of assessed bright future for a particular sector. These funds are

characterized by high viability, hence more risky.


25/66

ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a Mutual Fund are:

Diversification: The best mutual funds design their portfolios so individual

investments will react differently to the same economic conditions. For example,

economic conditions like a rise in interest rates may cause certain securities in a

diversified portfolio to decrease in value. Other securities in the portfolio will

respond to the same economic conditions by increasing in value.

Professional Management: Most mutual funds pay topflight professionals to

manage their investments. These managers decide what securities the fund will buy

and sell.

Regulatory oversight: Mutual funds are subject to many government regulations

that protect investors from fraud.

Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a

call, and you've got the cash.

Convenience: You can usually buy mutual fund shares by mail, phone, or over the

Internet.

Low cost: Mutual fund expenses are often no more than 1.5 percent of your

investment. Expenses for Index Funds are less than that, because index funds are not

actively managed. Instead, they automatically buy stock in companies that are listed

on a specific index

Transparency

Choice of schemes

Tax benefits


26/66

DRAWBACKS OF MUTUAL FUNDS:

Mutual funds have their drawbacks and may not be for everyone:

No Guarantees: No investment is risk free. If the entire stock market declines in

value, the value of mutual fund shares will go down as well, no matter how balanced

the portfolio. Investors encounter fewer risks when they invest in mutual funds than

when they buy and sell stocks on their own. However, anyone who invests through a

mutual fund runs the risk of losing money.

Fees and commissions: All funds charge administrative fees to cover their day-to-

day expenses. Some funds also charge sales commissions or "loads" to compensate

brokers, financial consultants, or financial planners. Even if you don't use a broker

or other financial adviser, you will pay a sales commission if you buy shares in a

Load Fund.

Taxes: During a typical year, most actively managed mutual funds sell anywhere

from 20 to 70 percent of the securities in their portfolios. If your fund makes a profiton its sales, you will pay taxes on the income you receive, even if you reinvest the

money you made.

Management risk: When you invest in a mutual fund, you depend on the fund's

manager to make the right decisions regarding the fund's portfolio. If the manager

does not perform as well as you had hoped, you might not make as much money on

your investment as you expected. Of course, if you invest in Index Funds, youforego management risk, because these funds do not employ managers.


27/66

MUTUAL FUND CONSTITUENTS

All mutual funds comprise four constituents

Sponsors,

Trustees,

Asset Management Company (AMC)

Sponsors: The sponsors initiate the idea to set up a mutual fund. It could be a registered

company, scheduled bank or financial institution. A sponsor has to satisfy certainconditions, such as capital, record (at least five years operation in financial services) , de-

fault free dealings and general reputation of fairness. The sponsors appoint the Trustee,

AMC and Custodian. Once the AMC is formed, the sponsor is just a stakeholder.

Trust/ Board of Trustees: Trustees hold a fiduciary responsibility towards unit holders by

protecting their interests. Trustees float and market schemes, and secure necessary

approvals. They check if the AMCs investments are within well-defined limits, whetherthe funds assets are protected, and also ensure that unit holders get theirdue returns. They

also review any due diligence by the AMC. For major decisions concerning the fund, they

have to take the unit holders consent. They submit reports every six months to SEBI;

investors get an annual report. Trustees are paid annually out of the funds assets 0.5

percent of the weekly net asset value.

Fund Managers/ AMC: They are the ones who manage money of the investors. An AMC

takes decisions, compensates investors through dividends, maintains proper accounting

and information for pricing of units, calculates the NAV, and provides information on

listed schemes. It also exercises due diligence on investments, and submits quarterly

reports to the trustees. A funds AMC can neither act for any other fund nor undertake any


28/66

business other than asset management. Its net worth should not fall below Rs. 10 crore.

And, its fee should not exceed 1.25 percent if collections are below Rs. 100 crore and 1

percent if collections are above Rs. 100 crore. SEBI can pull up an AMC if it deviates

from its prescribed role.

CALCULATION OF NAV

The net asset value of the fund is the cumulative market value of the assets fund net of its

liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets

in the fund, this is the amount that the shareholders would collectively own. This gives rise

to the concept of net asset value per unit, which is the value, represented by the ownership

of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by

the number of units.

The most important part of the calculation is the valuation of the assets owned by the fund.

Once it is calculated, the NAV is simply the net value of assets divided by the number of

units outstanding. The detailed methodology for the calculation of the asset value is given

below.

Asset value is equal to Sum of market value of shares/debentures

+ Liquid assets/cash held, if any

+ Dividends/interest accrued

Amount due on unpaid assets

Expenses accrued but not paid


29/66

MARKETING STRATEGIES ADOPTED BY THE MUTUAL FUNDS

The present marketing strategies of mutual funds can be divided into three main headings:

Direct marketing

Joint Calls

Holding and Banners

Direct Marketing: This constitutes 20 percent of the total sales of mutual funds. Some of

the important tools used in this type of selling are:

Personal Selling: In this case the customer support officer of the fund at a particular branch

takes appointment from the potential prospect. Once the appointment is fixed, the branchofficer also called Business Development Associate (BDA) in some funds then meets the

prospect and gives him all details about the various schemes being offered by his fund.

The conversion rate in this mode of selling is in between 30% - 40%.

Telemarketing: In this case the emphasis is to inform the people about the fund. The names

and phone numbers of the people are picked at random from telephone directory.

Sometimes people belonging to a particular profession are also contacted through phone

and are then informed about the fund. Generally the conversion rate in this form of

marketing is 15% - 20%.

Direct mail: This one of the most common method followed by all mutual funds.

Addresses of people are picked at random from telephone directory. The customer support

officer (CSO) then mails the literature of the schemes offered by the fund. The follow upstarts after 3 4 days of mailing the literature. The CSO calls on the people to whom the

literature was mailed. Answers their queries and is generally successful in taking

appointments with those people. Advertisements in newspapers and magazines: The funds

regularly advertise in business newspapers and magazines besides in leading national


30/66


31/66

MARKETING OF FUNDS: CHALLENGES AND OPPORTUNITIES

When we consider marketing, we have to see the issues in totality. When we say

marketing of mutual funds, it means, includes and encompasses the following aspects:

Assessing of investors needs and market research;

Responding to investors needs;

Product designing;

Studying the macro environment;

Timing of the launch of the product;

Choosing the distribution network;

Finalizing strategies for publicity and advertisement;

Preparing offer documents and other literature;

Getting feedback about sales;

Studying performance indicators about fund performance like NAV;

Sending certificates in time and other after sales activities;

Honoring the commitments made for redemptions and repurchase;

Paying dividends and other entitlements;

Creating positive image about the fund and changing the nature of the market itself.

The above are the aspects of marketing of mutual funds, in totality. Even if there is a

single weak-link among the factors which are mentioned above, no mutual fund cansuccessfully market its funds.


32/66

WIDENING, BROADENING AND DEEPENING THE MARKETS

There are certain issues that are directly linked with the marketing of mutual funds, the

first of which is widening, broadening and deepening of the market for the mutual fund

products. Consider the geographical spread of the investors in the mutual fund industry.. In

fact there are only around 35 centers in the country, which account for almost 95% of the

funds mobilized. Considering the vast nature of this country, the first priority is that the

geographic spread has to be widened and the market has to be deepened. Secondly, the

mutual funds must try to spread their wings not only within the country, but also outside

the country.

A. Markets in Rural and Semi-Urban Areas

There exists a large investor base in rural and semi-urban areas, having a population of

about one lakh, which normally has access to only post office savings and bank deposits.

This is the single largest untapped market for mutual funds in India.

Rural marketing, unlike the marketing of mutual funds in the metros and urban areas,

would require a completely different strategy, and different means of communication to

the target customer. Typically, investors in the rural and semi-urban areas are not well

educated and are inadequately exposed to the capital market mechanisms. Therefore, more

emphasis has to be given to the electronic media and other forms of publicity such as wall

paintings, hoardings, and educational films. It is also important to utilize the services of

local intermediaries like gram sevaks, postmasters, school teachers, agricultural co-

operative societies and rural banks. It would therefore be more expensive to market mutual

funds in such markets than marketing in the cities.

The mutual fund industry can collectively undertake this job of creating awareness among

the rural population about the mutual funds as a new form of savings; translate that

awareness into increased fund mobilsation.


33/66

B. Overseas Markets

The second aspect with respect to the widening and deepening the market is expanding the

overseas investor base. A target group with large potential, which can be tapped is non-

resident Indians. If offered after sales services of international standard, reasonable return

and easy access to information, NRIs are willing to invest in Indian mutual funds. The

expansion of the distribution network and quick dissemination of information, coupled

with prompt and timely service, efficient collection and remittance mechanism, will play

an important role in mobilizing and retaining these funds. NRIs will also require a

continuous presence in their market, because that generates trust and confidence, which

translates into sustained mobilization of funds.

PRODUCT INNOVATION AND VARIETY

A. Investor Preferences

The challenge for the mutual funds is in the tailoring the right products that will help

mobilizing savings by targeting investors needs. It is necessary that the common investor

understands very clearly and loudly the salient features of funds, and distinguishes one

fund from another. The Indian investor is essentially risk averse and is more passive than

active. He is not interested in frequently changing his portfolio, but is satisfied with safety

and reasonable returns. Importantly, he understands more by emotions and sentiments

rather than a quantitative comparison of funds performance with respect to an index. Mere

growth prospects, in an uncertain market, are not attractive to him. The investor is ready to

invest his money over a long period, provided there is a purpose attached to it which is

linked to his social needs and therefore appeals to his sentiments and emotions. That

purpose may be his childs education and career development, medical expenses, health

care after retirement, or the need for steady and sure income after retirement.


34/66

B. Product Innovations

With the debt market now getting developed, mutual funds are tapping the investors who

require steady income with safety, by floating funds that are designed to primarily have

debt instruments in their portfolio. The other area where mutual funds are concentrating is

the money market mutual funds, sectoral funds, index funds, gilt funds besides equity

funds.

The industry can also design separate funds to attract semi-urban and rural investors,

keeping their seasonal requirements in mind for harvest seasons, festival seasons, sowing

seasons, etc.

DISTRIBUTION NETWORK

Among the competitors to the mutual fund industry, Life Insurance Corporation with its

dedicated sales force is offering insurance products; banks with their friendly

neighborhood presence offer the advantage of extensive network; finance companies with

their hefty upfront incentives offer higher returns; shares provided the market is moving

favorably also attract direct investments from retail investors. It is against thisbackground that the merits and demerits of the alternative methods of distribution have to

be studied.

Retail through agents

The alternative distribution channels that are available are selling, or using lead managers

and brokers along with sub-brokers, for selling units. The experience of UTI has been that,

if necessary motivation and incentive is provided to the retailer agents, they are likely to bemore successful than the lead managers. This is because, there is a sense of loyalty

amongst agents, in anticipation of getting continuous business throughout the year, and the

trust and credibility that has been generated or will be generated by being loyal to one

institution. Savings in advertisement and publicity expenses is also affected, as the target


35/66

of communication is restricted to a few group of individuals, since the agent will function

as a facilitator, informer and educator. The reduced cost benefit will ultimately accrue to

the investor in the form of higher returns.

ADVERTISING AND SALES PROMOTION

By their very nature, mutual funds require higher advertisement and sales promotion

expenses than any consumer product offering measurable performance. Different kinds of

advertising and sales promotion exercises are required to serve the needs of different

classes of investors. For instance, an aggressive push marketing strategy is required for

retail markets, where investors are not adequately aware of the product and do not have

specialized skill in financial market, in contrast with pull marketing strategies for the

wholesale market.

There are certain issues with reference to advertisement, publicity literature and offer

documents, which deserve attention. Most of the mutual fund advertisements look similar,

focusing on scheme features, returns and incentives. An investor exposed to the increasing

number of mutual fund products finds that all the available brands are rather identical, and

cannot appreciate any distinction.

The present form of application, brochures and other literature is generally lengthy,

cumbersome and at times complicated leading to higher emphasis on advertisement. One

of the limiting factors is the regulatory framework governing advertisements of mutual

fund products. For instance, in the offer documents, mutual funds are required to mention

the fund objectives in clear terms. Immediately thereafter, the first risk factor that has to be

mentioned is that there is no certainty whether the objectives of the fund will be achieved

or not. Some more relaxation in these may facilitate bringing more novelty in

advertisements, within a broad framework, without luring investors through false

promises, and will certainly improve the situation.


36/66

QUALITY OF SERVICE

This industry primarily sells quality of services, given that the performance cannot be

promised. It is with this attribute along with procedural simplicity, that the fund gradually

builds its brand and its class of loyal investors. The qualities of services are broadly

categorized as:

Timely services after the sale of the units; and

Continuous reporting of investment performance.

Mutual fund managers must give due attention and evaluate their performance on each

front. They may also consider an option of conducting a service audit for controlling and

improving the quality of service.

MARKET RESEARCH

Investment in mutual fund is not a one-time activity. It is a continuous activity. The same

investor, if satisfied, will come to the fund again and again. When the investor sends his

application, it is not only an application, but it also contains vital information. Most of this

information if tabulated and analyzed, would provide important insights into investor

needs, preferences and behavior and enables us to target customers need more accurately,

to achieve better penetration, deeper loyalty and reduced costs. It is in this context that

direct marketing will assume increased importance. Knowing the customer thoroughly is

of utmost importance. Unlike the consumer goods industry, it is not possible for mutual

fund industry to test market and have pilot projects before launch. At the same time,

focusing and concentrating on a particular geographic area where the fund has a strong

presence and proven marketing network, can help reduce network, can help reduce issue

expenses and ultimately translate into higher returns for the investor.


37/66

MARKET SEGMENTATION

1) Retail Segment

This segment characterizes large number of participants but low individual volumes. It

consists of individuals, Hindu Undivided Families, and firms. It may be further sub-divided into:

i. Salaried class people;

ii. Retired people;

iii. Businessmen and firms having occasional surpluses;

iv. HUFs for long term investment purpose.

These may be further classified on the basis of their income levels. It has been observed

that prospects in different classes of income levels have different patterns of preferences of

investment. Similarly, the investment preferences for urban and rural prospects would

differ and therefore the strategies for tapping this segment would differ on the basis of

differential life style, value and ethics, social environment, media habits, and nature of

work. The marketing strategy involving indirect selling through agency network and

creating awareness through appropriate media would be more effective in this segment.

2) Institutional Segment

This segment characterizes less number of participants, and large individual volumes. It

consists of banks, public sector units, financial institutions, foreign institutional investors,

insurance corporations, provident and pension funds. This class normally looks for more

specialized professional investment skills of the fund managers and expects a structured

product than a ready-made product. The tax features and regulatory restrictions are the

vital considerations in their investment decisions. Each class of participants, such as banks,

provides a niche to the fund managers in this segment. It requires more of a personalized

and direct marketing to sustain and increase volumes.


38/66

3) Trusts

This is a highly regulated, high volumes segment. It consists of various types of trusts,

namely, charitable trusts, religious trust, educational trust, family trust, social trust, etc.

each with different objectives. Its basic investment need would be safety of the principal,

regular income and hedge against inflation rather than liquidity and capital appreciation.

This class offers vast potential to the fund managers, if the regulators relax guidelines and

allow the trusts to invest freely in mutual funds.

4) Non-Resident Indians

This segment consists of very risk sensitive participants, at times referred as fair weatherfriends. They need the highest cover against political and exchange risk. They normally

prefer easy exit with repatriation of income and principal. They also hold a strategic

importance as they bring in crucial foreign exchange a crucial input for developing

country like ours. Marketing to this segment requires special kind of products for groups

of foreign countries depending upon the provisions of tax treaties. The range of suitable

products is required to design to divert the funds flowing into bank accounts.

5) Corporate

Generally, the investment need of this segment is to park their occasional surplus funds

that earn return more than what they have to pay on account of holding them.

Alternatively, they also get surplus fund due to the seasonality of the business, which

typically become due for the payment within a year or quarter or even a month. They needshort term parking place for their fund. This segment offers a vast potential to specialized

money market managers. Given the relaxation in the regulatory guidelines, fund managers

are expected design products to this segment.


39/66

REASONS FOR BAD PERFORMANCE OF MUTUAL FUNDS

Most investors associate mutual funds with Master gain, Monthly Equity Plans of SBI

Mutual Fund, UTI and Canbank Mutual Fund and of course Morgan Stanley Growth Fund.

This is so because these funds truly had participation from masses, with a fund likeMorgan Stanley having more than 1 million investors. Investors feel that after 5 years,

Morgan Stanley Growth Fund units still trade below the original IPO price of Rs 10.

It is incorrect to think that all mutual funds have performed poorly. If one looks at some

income funds, they have come with reasonable returns. It is only the performance of equity

funds, which has been poor. Their poor performance has been amplified by the closed end

discounts i.e. units of these funds quoting at sharp discounts to their NAV resulting in an

even poorer return to the investor.

One must remember that a Mutual Fund does not provide assured returns and neither can it

"manufacture" returns out of thin air. Returns provided by mutual funds are a function of

the returns in the underlying asset class in which the fund invests. Good funds can beat

returns in their asset class to some extent but thats all. One more issue is that the fund

managers in many funds were not "professionally qualified and experienced". This is

especially true of some of the funds floated by nationalized banks. Some of these

individuals were transferred from the parent organization and did not really know much

about investment management.

Lastly, investors would do well to have a look at the investments, which they made on

their own. In most cases, they would have done much worse than the mutual funds. We

have received numerous requests for advice from individual investors on what to do about

their own investments. If that were any indicator, investors would have done really badly.


40/66

MAJOR MUTUAL FUNDS COMPANIES IN INDIA

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life

Financial is a global organization evolved in 1871 and is being represented in Canada, the US, the

Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a

conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship

of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was

incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing Development

Finance Corporation Limited and Standard Life Investments Limited.

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India)

Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of

HSBC Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a

oint venture of Vysya and ING. The AMC, ING Investment Management (India) Pvt. Ltd. was

incorporated on April 6, 1998.


41/66

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life

insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993

with two sponsorers, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI

Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd

of June, 1993.

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the

sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works asthe AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund, the

India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored

Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded

handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM.

Now it has an investor base of over 8 Lakhs spread over 18 schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsorers for Tata Mutual

Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset

Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is

one of the fastest in the country with more than Rs. 7,703 crores (as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund


42/66

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having

more than 1,99,818 investors in its various schemes. KMAMC started its operations in December 1998.

Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It

was the first company to launch dedicated gilt scheme investing only in government securities.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual

Fund with the support of UTI Trustee Company Privete Limited. UTI Asset Management Company

presently manages a corpus of over Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of

Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation

of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset ManagementFunds, Index Funds, Equity Funds and Balance Funds.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF

is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on

June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual

Fund was formed for launching of various schemes under which units are issued to the Public with a view

to contribute to the capital market and to provide investors the opportunities to make investments in

diversified securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank.

The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management

Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20,1999.

Franklin Templeton India Mutual Fund


43/66

The group, Franklin Templeton Investments is a California (USA) based company with a global AUM of

US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world.

Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their

website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end

Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end

Income schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the market in securities,

investmenty management and credit services. Morgan Stanley Investment Management (MISM) was

established in the year 1975. It provides customized asset management services and products togovernments, corporations, pension funds and non-profit organisations. Its services are also extended to

high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment

Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This

is the first close end diversified equity scheme serving the needs of Indian retail investors focussing on a

long-term capital appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as its sponsor. The

Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995

with the name Escorts Asset Management Limited.

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital Management Corp.

of Delaware (USA) as sponsored. The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance

Capital Asset Management India (Pvt) Ltd. with the corporate office in Mumbai.


44/66

Canbank Mutual Fund

Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the sponsor. Canbank

Investment Management Services Ltd. incorporated on March 2, 1993 is the AMC. The Corporate Office

of the AMC is in Mumbai.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2

Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the

provisions of the Indian Trust Act, 1882. . The Company started its business on 29th April 1994. The

Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as

the Investment Managers for LIC Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Government of India

undertaking and the four Public Sector General Insurance Companies, viz. National Insurance Co. Ltd

(NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United IndiaInsurance Co. Ltd. (UII) and is constituted as a Trust in accordance with the provisions of the Indian

Trusts Act, 1882.


45/66

CHAPTER-4

RESEARCH METHODOLOGY


46/66

RESEARCH METHODOLOGY

Investment in mutual fund is not a one-time activity. It is a continuous activity. The same

investor, if satisfied, will come to the fund again and again. When the investor sends his

application, it is not only an application, but it also contains vital information. Most of this

information if tabulated and analyzed would provide important insights into investor

needs, preferences and behavior and enables us to target customers need more accurately,

to achieve better penetration, deeper loyalty and reduced costs. It is in this context that

direct marketing will assume increased importance. Knowing the customer thoroughly is

of utmost importance. Unlike the consumer goods industry, it is not possible for mutual

fund industry to test market and have pilot projects before launch. At the same time,

focusing and concentrating on a particular geographic area where the fund has a strong

presence and proven marketing network, can help reduce network, can help reduce issue

expenses and ultimately translate into higher returns for the investor. Very little research

on investor preference is available, but the industry can collectively have a data bank, and

share the information for appropriate use.

This study on Mutual funds in India has been based on primary as well as secondary data

sources.

The primary data is collected by the getting the questionnaire filled from the

common investor above the age of 25.

For this research, I have made use of a questionnaire for ascertaining the investment

pattern of a common investor.

The questionnaire consisted of 13 questions in total, each question having various

multiple choices. Depending upon the choice selected by the respondent, each


47/66

respondent gets a total score which represents his degree of favorability towards the

kind of investment he makes and his knowledge about the investments.

The main aim of conducting the survey using a questionnaire was to understand the

perception of small investors, who are the most exploited in Indian capital Market, analyze

the type of funds available for the investor and understand the investment pattern of a

common investor, importance of marketing Strategies in mutual funds.

This was done by ascertaining the average response of all the samples for the total 13

questions asked in the questionnaire. The results for the 13 questions asked were further

graphically represented, showing the favorability towards different parameters.

The secondary resources used in the study are:

Books

Journals

Magazine Articles

Internet Websites.


48/66

DATA SOURCE:

Both primary and secondary data are collected for the study, both play vital role at the

time of analysis. To give a suitable recommendation to the existing problems, primary data

played a major role; also secondary data is necessary to give proper support to the primary

data.

SAMPLE SIZE-50

Primary data: has been collected from the agra region with the help of questionnaire.

Secondary data: has been collected from the internet, print media& investor.

METHOD OF DATA COLLECTION:

Several alternative media are available for obtaining information from respondent through

communication .respondent may be interviewed in person or interviewed by telephone, or

they may be mailed a questionnaire to which they are asked to respond.

Primary data has been collected by personal interview of investor. in few cases the

concerned person refused to give an appointment and has to collect information through

phone


49/66

DATA ANALYSIS

1. Rate the familiarity and experience with investments

a) Familiar and experienced

b) Familiar but not experienced

c) Not familiar and inexperienced

2. What is your anticipated Investment time frame?

a) Long term - more than 7 years

b) Medium term - 4 to 7 years

c) Short-medium term - 1 to 3 years

d) Short term - less than 1 year

A

15%

B

28%

C

7%

6%

15%

20%

9%

A B C D


50/66

3. Which of the following are possible investment motives for you with regard to a

portfolio?

a) Keeping aside money generated from business / profession, to specifically generate

alternate source of income / wealth

b) Preserving wealth, after accounting for inflation and taxes

c) Regular income to meet present commitments and expenses

d) Building a corpus to meet specific future requirements

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

A C D E

18%

9%

13%

10%


51/66

4. How would you like to classify your investment style?

a) Conservative

b) Moderate

c) Aggressive

0%

5%

10%

15%

20%

25%

30%

A B C

15%

29%

6%


52/66

5. Assume that you have invested Rs. 10,000 in a mutual fund and the value of the

investment dropped to Rs. 8,500 after six months. What would you be most likely to do?

a) I would move the money to a bank fixed deposit.

b) I would wait till the value reached 10,000 and then move to another fund.

c) I would not do anything.

d) I would invest more in the fund to bring down my average cost of acquisition

6%

16%

12%

16%

A B C D


53/66

6. Your key objective when considering an investment vehicle is?

a) Income only

b) Income and some Capital Growth

c) Balance of Capital Growth and Income

d) Capital Growth and some Income

10%

14%

9%

18%

A B C D


54/66

7. You would like to invest in?

a) Bank accounts, Debt and Debt Mutual Funds

b) Equities and Mutual Funds

c) Real Estate and Real Estate Funds

d) Commodities and Commodity Funds

0%

2%

4%

6%

8%

10%

12%

14%

16%

A B C D

15%

12%

16%

7%


55/66

8. Which type of mutual funds do you prefer?

a) By Structure:

i. Open-ended Funds

ii. Closed-ended Funds

b) By Investment Objective:

i. Growth Funds

ii. Income Funds

iii. Balanced Funds

iv. Money Market Funds

c) Other Schemes:

i. Tax Saving Schemes

ii. Industry Specific Schemes

iii. Index Schemes

iv. Sectoral Schemes

17%

21%

12%

A B C


56/66

9. Are you aware of the tax saving benefits available in investment of mutual funds?

a) Yes b) No

10. Do you think that advertising plays an important role in spreading the awareness

amongst investors for investing in mutual funds?

a) Yes b) No

Slice 1

36%%

Slice 2

14%%

Yes

40%%

No

10%


57/66

CHAPTER-5

RECOMMENDATION


58/66

RECOMMENDATIONS

More awareness is required regarding the differences in various schemes.

Insider trading should be prohibited.

Promote distributor for expansion of the Industry

Less government involvement as far as management is concerned.

Schemes to be made more investor friendly.

Fund houses should increase tie ups with more banks for direct credit facility of the

dividends.

commission should be distributed properly(with in the time)

more schemes should be added

services should be improved for the investor protection

locking problem should be changed

there should more tie-ups with other bank

Edge over the competitors in terms of product and services.


59/66

CHAPTER-6

CONCLUSION


60/66

CONCLUSION

The Indian corporate scene is gradually transforming to cope with globalization and

liberalization of the Indian economy. Indian shareholders are getting restless to prevent

corporate board from offering them inferior deals. Mutual funds need to devise different

strategies for companies with different types of ownerships. In an effort to realign

ownership with control, the company should not develop a too comfortable relationship

with the stakeholders. This may also work against the interests of the minority

shareholders.

Mutual funds will have to do what the market fails to do- take initiative to make the

market for corporate control more efficient to counter the abuse of the separation of

ownership from control and the lack of contestability in the corporate boards, which are

the root causes of existing corporate governance practices.

The initiatives as suggested will help mutual funds not only release value for the

shareholders in many inefficient companies but also in the process promote better

corporate governance practices in the Indian corporate sector.


61/66

CHAPTER-7

REFERENCES


62/66

REFERENCES

BOOKS

AMFI workbook

SEBI note on investor Grievances- Rights & Remedies

Shanbhag. A.N. - Annual Investment Planner-

Nandagopal . P. -Investors Handbook

Pozen . Robert C. -Mutual Fund Business

WEBSITES

www.amfiindia.com www.moneycontrol.com

www.indiainfoline.com

www.equitymaster.com

www.google.com

www.nse-india.com
http://www.amfiindia.com/http://www.moneycontrol.com/http://www.indiainfoline.com/http://www.equitymaster.com/http://www.google.com/http://www.nse-india.com/http://www.nse-india.com/http://www.nse-india.com/http://www.google.com/http://www.equitymaster.com/http://www.indiainfoline.com/http://www.moneycontrol.com/http://www.amfiindia.com/


63/66

APPENDIXS

QUESTIONNAIRE

Q1. How would you rate your familiarity and experience with investments?

a) Familiar and experienced

b) Familiar but not experienced

c) Not familiar and inexperienced

Q2. What is your anticipated Investment time frame?

a) Long term - more than 7 yearsb) Medium term - 4 to 7 years

c) Short-medium term - 1 to 3 years

d) Short term - less than 1 year

Q3. Which of the following are possible investment motives for you with regard to

a portfolio?

a) Keeping aside money generated from business / profession, to specifically generate

alternate source of income / wealth

b) Wealth creation, with no alternative uses for the money in the foreseeable future

c) Preserving wealth, after accounting for inflation and taxes

d) Building a corpus to meet specific future requirements

Q4. How would you like to classify your investment style?

a) Conservative

b) Moderate

c) Aggressive


64/66

Q5. Assume that you have invested Rs. 10,000 in a mutual fund and the value of the

investment dropped to Rs. 8,500 after six months. What would you be most likely to do?

a) I would move the money to a bank fixed deposit.

b) I would wait till the value reached 10,000 and then move to another fund.

c) I would not do anything.

d) I would invest more in the fund to bring down my average cost of acquisition

Q6. Your key objective when considering an investment vehicle is?

a) Income only

b) Income and some Capital Growth

c) Balance of Capital Growth and Income

d) Capital Growth and some Income

e) Capital Growth Only

Q7 You would like to invest in?

a) Bank accounts, Debt and Debt Mutual Funds

b) Equities and Mutual Funds

c) Real Estate and Real Estate Funds

d) Commodities and Commodity Funds

Q8. Which type of mutual funds do you prefer?

a) By Structure:

i. Open-ended Funds

ii. Closed-ended Funds


65/66

b) By Investment Objective:

i. Growth Funds

ii. Income Funds

iii. Balanced Funds

iv. Money Market Funds

c) Other Schemes:

i. Tax Saving Schemes

ii. Industry Specific Schemes

iii. Index Schemes

iv. Sectoral Schemes

Q9. Are you aware of the tax saving benefits available in investment of mutual funds?

a) Yes b) No

Q10. Do you think that advertising plays an important role in spreading the awarenessamongst investors for investing in mutual funds?

a) Yes b) No

Other Information:

Name: ____________________

Age: ______________________

Occupation: ________________

Gender: ___________________


66/66

dissertation report on mutual funds 2

Documents