krutika- prudent project

8/7/2019 KRUTIKA- Prudent project

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A

PROJECT REPORT

ON

SURVEY ON INVESTOR PERCEPTION WITH

RESPECT TO DIFFERENT INVESTMENT

AVENUES

(WITH REFERANCE TO PRUDENT CAS LTD.AHMEDABAD)

SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENT FOR THE MASTER OF BUSINESS

ADMINISTRATION

PREPARED BY

KRUTIKA H. RATHOD

MBA (Semester III)

ACADEMIC YEAR

2008-10

SUBMITTED TO

SHREE CHIMANBHAI PATEL INSTITUTE OF

MANAGEMENT AND RESEARCH,

GUJARAT UNIVERSITY,

AHMEDABAD.

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PREFACE

For the students of Masters of Business Administration, onlycoaching classrooms and theoretical studies are not enough to understanddifferent aspects and various critical principles of business.

As a student of M.B.A, SEM-III, preparation of the summerinternship project report of any company is an important part of practicalstudy. For this I have done the summer internship of 6 weeks in PrudentC.A.S. Ltd. and gained a lot of knowledge about different financial

products and also experienced how the market of these financial productsworks.

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ACKNOWLEDGEMENT

This report is an outcome of the project is sponsored by PrudentCorporate Advisory service.Ltd. Ahmedabad.

I am thankful to Gujarat university for making it compulsoryfor M.B.A students to under take project report in M.B.A.

I am thankful to our respected director Mr. Vidhyut Joshi forallowing us to undertake this project report. We express sense gratitude toour professors for providing necessary guidance & information duringproject. I would like to thankMr.jaydev Gadhvi sales manager, prudentc.a.s ltd., Hemali Joshi,, H R Department & all the other staff members.

Once again I am thankful to all those who have indirectly helpedus in completing this project work.

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EXECUTIVE SUMMARY

Mutual Funds pool money from many small investors withsimilar (one could say mutual) objectives, to achieve Economies of Scaleand Diversification in the investment of these funds. This can result inhigher returns at lower risk. Each mutual fund schemes has a definedinvestment objective and strategy.

I have studied the different department of HR, finance andmarketing by observation and interaction with departments personnel.

I have found out the perception about the mutual fund in theinvestors mind throughout our survey.

I had prepared the questionnaires for the (survey on investorperception with respect to different investment avenues). This tool of datacollection has provided me the different view for investing in the mutualfund that the people have no more time to spend in the stock market. Ifpeople want to invest their money without spending much time, then themutual fund is the best option for them.

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CONTENTS

SR. NO PARTICULARS PAGE

NO.

1. Company profile

Prudent C.A.S ltd. 7

Organization chart 9

Introduction to partners and managing body 10

Services provided to valuable clients 11

Company achievement 11

Working theory of company 12

Mutual fund An introduction

Definition of mutual fund 13

Mutual fund operation flow chart 15

Mutual fund structure 18

History of mutual funds in India 19

Advantages of mutual fund 21

Disadvantages of mutual fund 23

Classification of mutual fund 25

About NAV 30

Risk in mutual fund schemes 31

Other investment plans and services in mutualfunds 34

Regulation for mutual funds in India 36

Restriction on investment 38

Swot analysis of mutual fund 40

Research methodology

Objectives of study 41

Preparation of research design 42

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Sources of data 42

Research techniques 43

Sampling design 43

Limitation of study 44

Mutual fund industry profile 45

Other financial investment avenues

Fixed deposit 52

Bonds 52

Government securities 54 Public provident fund 55

Kisan vikas patra 56

National saving certificate 57

Insurance 58

Analysis and finding 59

Recommendation 67

Conclusion 68

Bibliography 69

Annexure 70

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COMPANY PROFILE

PRUDENT C.A.S LTD.

Historically known as Prudent Fund Manager established in2000 is a registered investment company offering fee-based moneymanagement, financial planning, and investment advisory services. Wehelp you build a personalized investment strategy to ensure your financialgoals are met. We focus on each client, build investment strategiestailored to specific client needs, and regularly review those strategies toincrease the likelihood of success. What are your goals and aspirations?We'd like to know. Then we can determine an investing strategy thathelps you achieve your full potential.

We Understand - The difference between selling and marketing.Prudent believes in understanding the customer needs and offering theproduct that can match his requirement (marketing) as against just sellingwhat product is already available. Owing to the inherent professionalexpertise we first study and understand the investment requirements andcircumstances. Our experts assess the investors' need and their riskprofile. Once the entire comparative analysis is done then the bestpossible option is advised to the investors. The best possible option

provides the proper asset allocation to various asset classes and also theestimated risk involved.

This helps us to provide our clients an optional basket of fundsrather than selling the typical available funds. This approach lets us setour focus on the quality work rather than the just the quantity. Here it isworth mentioning that though we are involved in wide spectrum andheavy quantum of activities but, if ever it comes to a choice Prudent CASalways prefers to be the best rather then being the biggest. Kindly visit us

at www.prudentcorporate.com site for our valued clients.

The sole business of the organization is to manage clientsinvestments and to fulfill their needs from end to end. At Prudent thepeople are education centric, the relationship managers will help you inidentifying and understanding your need and help you develop a portfolioacross different assets classes commensurate to your needs. This practiceis performed at Prudent and this is what makes it superior to othercompetition in the same field.

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http://www.prudentcorporate.com/http://www.prudentcorporate.com/


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There are well trained experts who give a feel on the variousassets classes and explain you the risk associated with each in a simpleand lucid manner to put you at calm. Once the investment is planned anddone we dont leave our client in between but we back them by periodic

valuation report and regular information through newsletters, mailer, e-mail, road shows etc.

The prime concern of the people at Prudent is to help you attainpeace of mind on the investment front.

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ORGANISATION CHART

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10

President

H.R.M.Department

\

MarketingDepartment

FinanceDepartment

OperationDepartment


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INTRODUCTION TO PARTNERS AND MANAGING

BODY

Managing Body

Managing Director: Mr. Sanjay ShahCEO: Mr. Shirish Patel

Director: Mr. Chirag Shah

HOD Details:

IT Head: Mr. Yogi KananiAccounts Head: Mr. Chirag KothariHR Head: Mr. Dashrathsinh ChundawatDirect Sales: Mr. Deven Shah (Ahmedabad & North Gujarat

Region)

Mr. Rohit Patel (Baroda )Mr. Satyesh Desai ( South Gujarat Region)Indirect Sales: Mr. Jigar Parekh ( North & West India)

Mr. Manoj Singh (Mumbai Region)Mr. Bhanu P STomar ( Pune Territory

Address of Corporate Office:-

701, Sears Tower,Gulbai Takera, Off.C.G. Road,Ahmedamad-380 006

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SERVICES PROVIDED TO OUR VALUABLE

CLIENTS

Weekly report send by e-mail

Inform about each and every new N.F.O.

Any information related with Indian Investment world

Prudent CAS Ltd. is a growing company that can be very well provedfrom the below achievements.

COMPANYS ACHIEVEMENTS

Have gained a dominant place in the Indian mutual fundsdistribution business

Certified by the Association of Mutual Funds as AMFI registeredMutual Funds advisors

Won the best broker award twice in the year 2004 and 2005 foroutstanding performance in the schemes of Birla Sun Life and State

Bank Of Indias Mutual fund.

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Won many other awards and certificate for outstandingperformance in various Mutual Funds schemes.

It has acquired about 25 to 29% share of the total Mutual Fundbusiness of Gujarat.

Assets under Management (AUM) more than 1700 corers.

Prudent CAS Ltd has tie up with almost 30 AMC out of 36operating in the Mutual Fund industry.

WORKING THEORY OF PRUDENT C.A.S

LTD

To provide reliable information

To honor our service commitments

To maintain all record in privacy

To preserve client capital

To provide appropriate feedback

To guide their future investment

To restructure investment plan on demand

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Finally to provide complete solution & peace of mind on the investment

front

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What is a Mutual Fund?

Like most developed and developing countries the mutual fund cult

has been catching on in India. There are various reasons for this. Mutual

funds make it easy and less costly for investors to satisfy their need for

capital growth, income and/or income preservation.

And in addition to this a mutual fund brings the benefits of

diversification and money management to the individual investor,

providing an opportunity for financial success that was once available

only to a select few.

Understanding Mutual funds is easy as it's such a simple concept: a

mutual fund is a company that pools the money of many investors -- its

shareholders -- to invest in a variety of different securities. Investments

may be in stocks, bonds, money market securities or some combination of

these. Those securities are professionally managed on behalf of theshareholders, and each investor holds a pro rata share of the portfolio --

entitled to any profits when the securities are sold, but subject to any

losses in value as well.

A mutual fund, by its very nature, is diversified -- its assets are

invested in many different securities. Beyond that, there are many

different types of mutual funds with different objectives and levels of

growth potential, furthering your chances to diversify.

Definition of Mutual Fund

A mutual fund is a pool of assets invested on behalf of investors. Mutual

funds invest in a diversified portfolio of securities, which can include

equity securities (such as common and preferred shares), debt securities

(such as bonds and debentures) and other financial instruments issued by

corporations and governments, according to the stated investment

objectives of the funds. Individual investors own a percentage of the

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MUTUAL FUNDS: AN INTRODUCTION


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value of the fund as represented by the number of units they purchase. A

collection of money invested in a group of assets and managed by an

investment company (a mutual fund company or other). The money

comes from investors who want to buy shares in the fund. The benefits to

investors in buying shares of mutual funds come primarily from

diversification, professional money management, and capital gains and

dividend reinvestment at relatively low cost. The flow chart below

describes broadly the working of a mutual fund.

MUTUAL FUND OPERATION FLOW CHART

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Investor

Fund

ManagerReturns

Securities

Passed back

to

Invest inGenerates

Pooled their

money with

All mutual funds comprise four constituents Sponsors, Trustees,

Asset Management Company (AMC) and Custodians.

a) Sponsors:

The sponsors initiate the idea to set up a mutual fund. It could be aregistered company, scheduled bank or financial institution. A sponsor

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has to satisfy certain conditions, such as capital, record (at least five

years operation in financial services), and 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.

b) Trust/ Board of Trustees:

Trustees are like internal regulators in a mutual fund, and their job is to

protect the interest of unit holders. Sponsors appoint trustees. Trustees

float and market schemes, and secure necessary approvals. They check if

the AMCs investments are within well-defined limits, whether the funds

assets are protected, and also ensure that unit holders get their due

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.

c) Fund Managers/ AMC:

An AMC-Asset Management Company is the legal entity formed by the

sponsor to run a mutual fund. They are the ones who manage money of

the investors. There is the head of the fund house, generally referred to as

the chief executive officer (CEO). Under him comes the chief investment

officer (CIO), who shapes the funds investment philosophy, and the fund

managers, who manage its schemes. They are assisted by a team of

analysts, who track markets, sectors and companies. An AMC takesdecisions, 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 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 canpull up an AMC if it deviates from its prescribed role.

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d) Custodian:

Often an independent organisation, it takes custody of securities and other

assets of mutual fund. Its responsibilities include receipt and delivery of

securities, collecting income-distributing dividends, safekeeping of theunits and segregating assets and settlements between schemes. Their

charges range between 0.15-0.2 percent of the net value of the holding.

Custodians can service more than one fund.

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STRUCTURE OF ASSET MANAGEMENT COMPANY

(AMC)

MUTUAL FUND STRUCTURE

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SPONSORTRUSTEE

OPERATIONSAMC

MKT./ SALES

DISTRIBUTER

MKT./ SALES

FUNDMANAGER

MUTUAL FUND

SCHEMES

INVESTORS

SEBI


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HISTORY OF INDIAN MUTUAL FUND

INDUSTRY

The mutual fund industry in India started in 1963 with the

formation of Unit Trust of India, at the initiative of the Government of

India and Reserve Bank the. The history of mutual funds in India can be

broadly divided into four distinct phases.

First Phase: 1964-1987

An Act of Parliament established Unit Trust of India (UTI) on

1963. It was set up by the Reserve Bank of India and functioned under

the Regulatory and administrative control of the RBI. 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 AUM.

Second Phase: 1987-1993 (Entry of Public Sector

Funds)

In 1987 marked the entry of non- UTI, public sector mutual funds

set up by public sector banks and Life Insurance Corporation of India

(LIC) and General Insurance Corporation of India (GIC). SBI Mutual

Fund was the first non- UTI Mutual Fund established in June 1987.

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

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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 industry now functions under

the SEBI (Mutual Fund) Regulations 1996.As at the end of January 2003;

there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The

Unit Trust of India with Rs.44,541 crores of assets under management

was way ahead of other mutual funds.

Fourth Phase Since February 2003

In February 2003, following the repeal of the Unit Trust of India

Act 1963 UTI was bifurcated into two separate entities. One is the

Specified Undertaking of the Unit Trust of India with assets under

management of Rs.29, 835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and

certain other schemes.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB

and LIC. It is registered with SEBI and functions under the Mutual Fund

Regulations.

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ADVANTAGES OF MUTUAL FUND

Mutual Funds are becoming a very popular form of investment

characterized by many advantages that they share with other forms of investment

characterized by many advantages that they share with other forms of

investments and what they possess uniquely themselves. The primary objectives

of an investment proposal would fit into one or combination of the two broad

categories, i.e., Income and Capital gains. How mutual fund is expected to be

over and above an individual in achieving the two said objectives is what attracts

investors to opt for mutual funds. Mutual fund route offers several important

advantages.

1. Diversification:

A proven principle of sound investment is that of diversification which is

the idea of not putting all your eggs in one basket. By investing in many

companies the mutual funds can protect themselves from unexpected

drop in values of some shares. The small investors can achieve wide

diversification on his own because of many reasons, mainly funds at his

disposal. Mutual funds on the other hand, pool funds of lakhs of investorsand thus can participate in a large basket of shares of many different

companies. Majority of people consider diversification as the major

strength of mutual funds.

2. Professional Management :

Making investments is not a full time assignment of investors. So they

hardly have a professional attitude towards their investment. When

investors buy mutual fund scheme, an essential benefit one acquires is

expert management of the money he puts in the fund. The professional

fund managers who supervise funds portfolio take desirable decisions

viz., what scripts are to be bought, what investments are to be sold and

more appropriate decision as to timings of such buy and sell. They have

extensive research facilities at their disposal, can spend full time to

investigate and can give the fund a constant supervision. The performance

of mutual fund schemes, of course, depends on the quality of fund

managers employed.

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3. Liquidity of Investment:

A distinct advantage of a mutual fund over other investments is that there

is always a market for its unit/ shares. Moreover, Securities and Exchange

Board of India (SEBI) requires the mutual funds in India have to ensureliquidity. Mutual funds units can either be sold in the share market as

SEBI has made it obligatory for closed-ended schemes to list themselves

on stock exchanges. For open-ended schemes investors can always

approach the fund for repurchase at net asset value (NAV) of the scheme.

Such repurchase price and NAV is advertised in newspaper for the

convenience of investors.

4. Transparency:

Regular information on the value of investment in addition to disclosure

on the specific investments made by investors, the proportion invested in

each class of assets and the fund managers investment strategy and

outlook is provided on regular basis by different fund houses.

5. Flexibility:

Through features such as regular investment plans, regular withdrawalplans and dividend reinvestment plans, investors can systematically

invest or withdraw funds according to investors needs and conveniences.

6. Reduced risks:

Risk in investment is as to recovery of the principal amount and as to

return on it. Mutual fund investments on both fronts provide a

comfortable situation for investors. The expert supervision,

diversification and liquidity of units ensured in mutual funds minimise

the

8. Tax Shelter:

Depending on the scheme of mutual funds, tax shelter is also available.

As per the union budget-99, income earned through dividends from

mutual funds is 100% tax-free to investors.

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DISADVANTAGES OF MUTUAL FUND

1. Entry and Exit costs

Mutual Funds are a victim of their own success. When a large body like

a fund invests in shares, the concentrated buying or selling often results in

adverse price movements i.e. at the time of buying, the fund ends up

paying a higher price and while selling it realizes a lower price. For

obvious reasons, this problem is even more severe for funds investing in

small capitalization stocks. However, given the large size of the debt

market, excluding UTI, most debt funds do not face this problem.

2. Waiting time before

It takes time for a Mutual Fund to invest money. Since it is difficult to

invest all funds in one day, there is dome money waiting to be invested.

Further, there may be a time lag before investment opportunities are

identified. This ensures that the fund under performs the index. For

open-ended funds, there is the added problem of perpetually keeping

some money in liquid assets to meet redemption. The problem of

impracticability of quick investments is likely to be reduced to some

extent with the introduction of index futures.

3. Fund management costs

The costs of the fund management process are deducted from the fund.

This includes marketing and initial costs deducted at the time of entry

itself, called load. Then there is the annual asset management fee andexpenses, together called the expense ratio. Usually, the Standard 2%

expense ratio means that, everything else being equal, the Fund manager

under performs the benchmark index by an equal amount.

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4. Cost of churning

The portfolio of a fund does not remain constant. The extent to which the

portfolio changes is a function of the style of the individual fund

manager. It is also dependent on the volatility of the fund size i.e.whether the fund constantly receives fresh subscriptions and redemption.

Such portfolio changes have associated costs of brokerage, custody fees,

and registration fees etc. that lowers the portfolio return commensurately.

5. Change of index composition

The indices keep changing over the world to reflect changing market

conditions. There is an inherent survivorship bias in this process, with

the bad stocks weeded out and replaced by emerging blue chips. This is a

severe problem in India with the Sensex having been changes twice in the

last five years, with each change being quite substantial. Another reasons

for change index composition is Mergers & Acquisitions. The weight age

of the shares of a particular company in the index changes if it acquires a

large company not a part of the index.

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CLASSIFICATION OF MUTUAL FUND

SCHEMES

Any mutual fund has an objective of earning income for 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 these basis the simplest way to categorise

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:

As the name implies the size of the scheme (Fund) is open i.e., not

specified or pre-determined. Entry to the fund is always open to the

investor who can subscribe at any time. Such fund stands ready to buy or

sell its securities at any time. It implies that the capitalisation of the fund

is constantly changing as investors sell or buy their shares. Further, the

shares or units are normally not traded on the stock exchange but arerepurchased by the fund at announced rates. Open-ended schemes have

comparatively better liquidity despite the fact that these are not listed.

The reason is that investor can any time approach mutual fund for sale of

such units. No intermediaries are required. Moreover, the realizable

amount is certain since repurchase is at a price based on declared net asset

value (NAV). No minute to minute fluctuations in rates haunt the

investors. The portfolio mix of such schemes has to be investments,

which are actively traded in the market. Otherwise, it will not be possibleto calculate NAV. This is the reason that generally open-ended schemes

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are equity based. Moreover, desiring frequently traded securities, open-

ended schemes hardly have in their portfolio shares of comparatively new

and smaller companies since these are not generally traded. In such funds,

option to reinvest its dividend is also available. Since there is always a

possibility of withdrawals, the management of such funds becomes more

tedious as managers have to work from crisis to crisis. Crisis may be on

two fronts, one is, that unexpected withdrawals require funds to maintain

a high level of cash available every time implying thereby idle cash. Fund

managers have to face questions like what to sell. He could very well

have to sell his most liquid assets. Second, by virtue of this situation such

funds may fail to grab favourable opportunities. Further, to match quick

cash payments, funds cannot have matching realisation from their

portfolio due to intricacies of the stock market. Thus, success of the open-

ended schemes to a great extent depends on the efficiency of the capital

market.

(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

capitalisation, i.e., their corpus normally does not change throughout itslife 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. If

one takes into account the issue expenses, conceptually close ended fund

units cannot be traded at a premium or over NAV because the price of apackage of investments, i.e., cannot exceed the sum of the prices of the

investments constituting the package. Whatever premium exists that may

exist only on account of speculative activities. In India as per SEBI (MF)

Regulations every mutual fund is free to launch any or both types of

schemes.

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B. PORTFOLIO CLASSIFICATIONOF 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) Specialised sector of investment, (d) Leverage and (e) 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.

Income Funds:

For investors who are more curious for returns, Income funds are floated.

Their objective is to maximize current income. Such funds distribute

periodically the income earned by them. These funds can further be

splitted up into categories: those that stress constant income at relatively

low risk and those that attempt to achieve maximum income possible,

even with the use of leverage. Obviously, the higher the expected returns,the higher the potential risk of the investment.

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.

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 fulfilment of the first two objectives.

Such funds which offer a blend of immediate average return andreasonable capital appreciation are known as middle of the road funds.

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Such funds divide their portfolio in common stocks and bonds in a way to

achieve the desired objectives. Such funds have been most popular and

appeal to the investors who want both growth and income.

(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.

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 ahigher degree of risk.

Debt 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.

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Balanced Fund:

The funds, which have in their portfolio a reasonable mix of equity and

debt, are known as balanced funds. Such funds will put more emphasis on

equity share investments when the Outlook is bright and will tend toswitch 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 specialising 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.

Type of Fund Characteristics

Sector Fund Concentration on specific sectors and are

designed to give diversification in

that sector.

Diversified Growth

Fund

Gives superior returns but highly volatile in the

short term. Best suited for wealth

accumulation and long term goal.

Balanced Funds Gives an optimal mix of capital appreciation

and stability of capital.

Income Funds Gives modest returns but are more stable invalue. Best suited for current

regular income.

Money Market

Funds

Provides total principal safety and more

attractive yields compared to bank

deposits. Best suited for instant

access to money.

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ABOUT N.A.V

The net asset value, or NAV, is the current market value of a fund'sholdings, less the fund's liabilities, usually expressed as a per-shareamount. For most funds, the NAV is determined daily, after the close oftrading on some specified financial exchange, but some funds updatetheir NAV multiple times during the trading day. The public offeringprice, or POP, is the NAV plus a sales charge. Open-end funds sell sharesat the POP and redeem shares at the NAV, and so process orders onlyafter the NAV is determined. Closed-end funds (the shares of which aretraded by investors) may trade at a higher or lower price than their NAV;this is known as a premium ordiscount, respectively. If a fund is dividedinto multiple classes of shares, each class will typically have its ownNAV, reflecting differences in fees and expenses paid by the differentclasses.

Some mutual funds own securities which are not regularly traded on anyformal exchange. These may be shares in very small or bankruptcompanies; they may be derivatives; or they may be private investments

in unregistered financial instruments (such as stock in a non-publiccompany). In the absence of a public market for these securities, it is theresponsibility of the fund manager to form an estimate of their valuewhen computing the NAV. How much of a fund's assets may be investedin such securities is stated in the fund's prospectus.

Calculating Net Asset Value

Unit Capital is the investors subscriptions. In mutual funds it is not

treated as a liability.

Investments made on behalf of the investors are reflected on the assetsside of the balance sheet.

There are liabilities of short-term nature.

Funds Net Asset = Asset Liabilities

Net Asset Value = Net Assets of the scheme / No. of Outstanding Units

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RISK IN MUTUAL FUND SCHEMES

All investments involve some form of risk. Even an insured bank

account is subject to the possibility that inflation will rise faster than your

earnings, leaving you with less real purchasing power than when you

started (Rs.1000 gets you less than it got your father when he was your

age). Consider these common types of risk and evaluate them against

potential rewards when you select an investment.

Market Risk

At times the prices or yields of all the securities in a particularmarket rise or fall due to broad outside influences. When this happens,

the stock prices of both an outstanding, highly profitable company and a

fledgling corporation may be affected. This change in price is due to

Market Risk.

Inflation Risk

Sometimes referred to as Loss of Purchasing Power. Whenever

inflation sprints forward faster than the earnings on your investment, yourun the risk that youll actually be able to buy less, not more. Inflation

risk also occurs when prices rise faster than your returns.

Credit Risk

In short, how stable is the company or entity to which you lend

your money when you invest? How certain are you that it will be able to

pay the interest you are promised, or repay your principal when theinvestment matures?

Interest Rate Risk

Changing interest rates affect both equities and bonds in many

ways. Investors are reminded that predicting which way rates will go is

rarely successful. A diversified portfolio can help in offsetting these

changes.

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Employee Risk

An industries key asset is often the personnel who run the business

i.e. intellectual properties of the key employees of the respective

companies. Given the ever changing complexion of few industries and

the high obsolescence levels, availability of qualified, trained and

motivated personnel is very critical for the success of industries in few

sectors.

Exchange Risk

A number of companies generate revenues in foreign currencies

and may have investments or expenses also denominated in foreigncurrencies. Changes in exchange rates may, therefore, have a positive or

negative impact on companies which in turn would have an effect on the

investment of the fund.

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RISK AND RETURN GRAPH AS PER THE DIFFERENT

SCHEMES OFFRED BY THE MUTUAL FUND

COMPANIES

36

Investment Graph

Gilt funds

Liquid funds

Debt funds

Growth funds

Sector funds

Balancedfunds

0

1

2

3

4

5

6

7

Risk

Return

Return


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OTHER INVESTMENT PLANS AND SERVICES

IN MUTUAL FUNDS

1) SYSTEMATIC INVESTMENT PLAN

Systematic Investment Plan (SIP) is a simple, time-honored strategy

designed to help investors to accumulate wealth in a discipline manner

over the long-term and to plan a better future for them. SIP is more

suitable for a salaried employee with investable savings every month and

who wishes to generate better returns than other instruments at a low risk

of price volatility.

How do SIPs work? Instead of a lumpsum amount, you invest a pre-

specified amount in a scheme at pre-specified intervals. The number of

units that accrue to you on each periodic investment is a function of the

then prevailing net asset value (NAV) of the scheme you have opted for.

Thus irrespective of market conditions, your cost of investment will be

mostly lower than the average cost of market prices.

This disciplined approach for investing will provide the investors with the

following benefits:

1) Reduces average cost

2) Can be done regularly even for savings of Rs 1000

3) Encourages disciplined investing,

4) Eliminates the need to decide when to invest

5) Avoids the temptation to time the market.

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REGULATION FOR MUTUAL FUNDS IN

INDIA

SEBI (SECURITY EXCHANGE BOARD OF INDIA)

SEBI was established to promote the orderly and healthy development of

securities market and to provide adequate investor protection. SEBI has

an independent constituted board with regulatory powers over stock

exchange, merchant banking, brokers, registrar and transfer agents,

custodians, mutual funds and capital issues. SEBI issues guidelines for

various market players to conform with. All players need to register withSEBI and consent to comply with the regulations of SEBI. In the case of

mutual funds, the SEBI guidelines were first issued in the SEBI Mutual

Fund Regulations of 1993. In December 1996, SEBI published the

revised Mutual Fund Regulations, 1996, regulating several aspects

including management fees, expenses, and NAV calculation and

standardized reporting practices.

SCHEMES OF MUTUAL FUND

The asset management company shall launch no scheme unless the

trustees approve such scheme and a copy of the offer document has

been filed with the Board.

Every mutual fund has to pay filling fees along with the offer

document.

The offer document should contain disclosures which are adequate in

order to enable the investors to make informed investment decision

including the disclosure on maximum investments proposed to be

made by the scheme in the listed securities of the group companies of

the sponsor.

No one can issue any application form for units of mutual fund until

the memorandum containing such information is issued. With each

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application form fund house has to provide such a memorandum

providing guidelines to investors.

Each close-ended scheme should be listed on a recognized stock

exchange within six months from the closure of the subscription.

A closed-ended scheme should be fully redeemed at the end of the

maturity period. Unless a majority of the unit holders otherwise decide

for its rollover by passing a resolution.

The mutual fund and asset Management Company should be liable to

refund the application money to the applicants.

The asset management company should issue to the applicant whose

application has been accepted, unit certificates or a statement of

accounts specifying the number of units allotted to the applicant as

soon as possible within six weeks from the date of closure of the

initial subscription list and/or from the date of receipt of the request

from the unit holders in any open ended schemes.

GENERAL OBLIGATIONS

Each asset management company should keep and maintain proper

books of accounts, records and documents, for each scheme so as to

explain its transactions and to disclose at any point of time the

financial position of each scheme and in particular give a true and fair

view of the state of affairs of the mutual fund and can intimate to the

Board the place where such books of accounts, records and documents

are maintained.

The financial year for all the schemes should end as of Mach 31 st of

that year.

Each mutual fund or the asset management company should prepare

an annual report and annual statement of accounts for each scheme.

Each mutual fund should have an annual statement of accounts audited

by an auditor who is not in any way associated with the auditor of the

asset management company.

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RESTICTION ON INVESTMENTS

A mutual fund can not invest more than 15% of its NAV in debt

instruments issued by a single issuer, which are rated not below

investment grade by a credit rating agency authorized to carry out

such activity under the Act. Such investment limit may be extended to

20% of the NAV of the scheme with the prior approval of the Board of

Trustee and the Board of Asset Management Company.

A mutual fund scheme can not invest more than 10% of NAV in

unrated debt instruments issued by a single issuer and the total

investment in such instruments should not exceed 25% of the NAV of

the scheme. All such investments should be made with prior approval

of the Board of Trustee and the Board of Asset Management

Company.

No mutual fund should own more than 10% of any companys paid up

capital carrying voting rights under all its schemes.

Transfers of investments from one scheme to another (switch over) in

the same mutual fund should be allowed if-

a. Such transfer is done at the prevailing market price for quoted

instruments on spot basis.

b. The securities so transferred should be in conformity with his

investment objective of the scheme to which such transfer is beingdone.

I.Transfer of investment may be done in another scheme of the

same asset management company or any other without

charging any fees.

II. The initial issue expenses in respect of any scheme may not

exceed six per cent of the funds raised under the scheme.

III.Each mutual fund should get the securities purchased ortransferred in the name of the mutual fund on account of the

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concerned scheme, wherever investments are intended to be of

long-term nature.

IV. Each mutual fund can diversify its portfolio of each

scheme as per market condition and this should be published

by that fund in the monthly fact sheets issued to investors.

V. No mutual fund scheme should make any investment in;

1) Any unlisted security of an associate or group company of the sponsor,

or

2) Any security issued by way of private placement by an associate or

group company of the sponsor, or

3) The listed securities of group companies of the sponsor, which are in

excess of 30% of the net asset of all the schemes of a mutual fund.

No mutual fund scheme should invest more than 10% of its NAV in

the equity shares or equity related instruments of any company. This

limit of 10% is not applicable to index fund and sector specific scheme

A mutual fund scheme can not invest more than 5% of its NAV in the

equity shares or equity related investments in case of open-endedscheme and 10% in case of close-ended scheme.

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THE SWOT ANALYSIS OF MUTUAL FUNDS

IN INDIA

STRENGTHS

o Professional managemento Diversified portfolioo Liquidityo Tax reliefo Safe and convenient administrationo Low Costso Transparency

o Affordabilityo Well Regulated

WEAKNESS

o No assured returnso No protection of capitalo Everything is dependent on Fund Manager.

OPPURTUNITY

o A goose lying golden eggo When the returns comes out its too much

THREAT

o lack of management information

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o Poor investment performance

RESEARCH

METHODOLOGY

This study aims to delineate the

methodology, employed to undertake this study.

Research is a common parlance, which refers to

a search for knowledge. One can define research

as scientific and systematic search for pertinent.

Research is of a great importance to find out the

nature, extent and cause of the research issue

under study. Research Methodology is the

process in which various steps that are generally

adopted by a research are outlined.

The various steps provide useful

guidelines regarding the research process are:

1. Objectives of study.

2. Preparation of the research design.

3. Source of data.

4. Technique of research.

5. Sampling design.

6. Limitation of the study.

1. Objectives of Study :

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Primary Objectives :

(1) To aware about the orientation

of the people regarding financialproducts.

(2) To aware the people about

mutual funds & Amfi exam.

Secondary Objectives :

(1) To find out the current market

scenario & current market standing of our

company.

(2) To provide the Suggestion &

Recommendations to the company.

(3)To find out the awareness of the people

regarding mutual funds.

2. Preparation of the research

design :

A research design is the arrangement ofconditions for collection and analysis of data.Actually, it is the blue print of research project.

The research design can be divided following:

A. Exploratory Research

I. Search of secondary data.

II. Survey of Insurance & Post

agents.

B. Conclusive Research

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I. Descriptive Research

a. Survey Method

b. TelephoneAdministrative

c. Questionnaire Method

II. Experimentation

3. Source of Data :

Sound marketing research depends upon

the existence of facts or directly related toproblem studied. To fulfill a foresaid objectiveof study, the information was gathered fromprimary as well as secondary sources.

A. Primary Source Information :

I. Method of obtaining data :

Questionnaire

II. Communication method :

Personal meeting

B. Secondary Source Information :

I. Internal : Company internal

information

II. External : Books,

magazines journals

In my study I have used secondary as

well as primary data. For this research purpose

all primary & secondary data were collected.

4. Research Technique :

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The following research techniques were usedfor data collection:

(A)Questionnaire :

Questionnaire was structured to get it filled

by investors as well as insurance and post

agents.

(B) Collection of Information :

The respondents were personally approached

to explain the objective of survey. During the

meeting the questionnaire was fulfilled by the

respondents.

5. Sample Design:

Sample design refers to the technique asthe procedure that a researcher would adopt inselective item for the sample.

(A) Target Population or Sampling Unit :

The universe of the study are Insurance& Post agents as well as investors.

(B) Sample Size :

The sample size taken for the study is 200

respondents.

(C) Sampling Method :

The agents and investors had beenselected on the basis of random sampling. Thestudy is sample survey consisting of small sizedsample of agents who had not much awareness

of Mutual funds and AMFI examination.

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6. Limitation of the study :

Every research have its own limitationand present research work is no exception tothis general rule the inherent limitation of thestudy are as under:

1 ) Interview method, which was

followed in the present research work,

is relatively more time consuming. In

addition to this it is very expensive

method, especially when spread

geographical sample is taken.

2 ) Questionnaire method, can be used

only when respondents are literate and

co-operative.

3 ) The success of questionnaire method

lies more on the quality of

questionnaire itself.

4 ) In the present work, the sample size is

very small. Research is mainly based

on the survey of investors andinsurance and post agents which may

not be true representative of whole

market scenario.

5 ) Few agents refuse to give answer.

6 ) Lack of time.

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MUTUAL FUND INDUSTRY

PROFILE

The Indian mutual fund industry is mainlydivided into three kinds of categories. These

categories include public sector players,nationalized banks and private sector and foreignplayers. UTI Mutual Fund was one of theleading Mutual Fund companies in India till May2006 with a corpus of more than Rs.31, 000Crore and it is the public sector mutual fund.Now Reliance Mutual fund became the Topmutual fund holding largest AUM.

Bank of Baroda, Punjab National Bank,Can Bank and SBI are the major nationalizedbanks mutual fund. At present mutual fundindustry is mainly dominated by private andforeign sector players which include majorplayers like Prudential ICICI Mutual Fund,HDFC Mutual Fund, Reliance Mutual Fund etc.are private sector mutual funds players whileFranklin Templeton etc. are major Foreignmutual fund players. At present there are morethan 33 players operating in Indian. The briefintroduction of major players is given as follows.

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April15, 2004 with ABN AMRO Trustee (India) Pvt.Ltd. as the Trustee Company. The AMC, ABN

AMRO Asset Management (India) Ltd. wasincorporated on November 4, 2003. Deutsche

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Bank A G is the custodian of ABN AMROMutual Fund.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint ventureof Aditya Birla Group and Sun Life Financial.Sun Life Financial is a global organizationevolved in 1871 and is being represented inCanada, the US, the Philippines, Japan,Indonesia and Bermuda apart from India. BirlaSun Life Mutual Fund follows a conservativelong-term approach to investment. Recently it

crossed AUM of Rs. 10,000 Crore.

Bank of Baroda Mutual Fund

Bank of Baroda Mutual Fund or BOB Mutual

Fund was setup on October 30, 1992 under thesponsorship of Bank of Baroda. BOB AssetManagement Company Limited is the AMC ofBOB Mutual Fund and was incorporated onNovember 5, 1992. Deutsche Bank AG is thecustodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000with two sponsor namely Housing DevelopmentFinance Corporation Limited and Standard LifeInvestments Limited.

HSBC Mutual Fund

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

(India) Private Limited as the sponsor. Board of

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Trustees, HSBC Mutual Fund acts as the TrusteeCompany of HSBC Mutual Fund.

ING Vyasya Mutual Fund

ING Vyasya Mutual Fund was setup onFebruary 11, 1999 with the same named TrusteeCompany. It is a joint venture of Vysya andING. The AMC, ING Investment Management(India) Pvt. Ltd. was incorporated on April 6,1998.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture withPrudential PLC of America; one of the largestlife insurance companies in the US of A.Prudential ICICI Mutual Fund was setup on 13thof October 1993 with two sponsors, PrudentialPLC. And ICICI Ltd. The Trustee Companyformed is Prudential ICICI Trust Ltd. and theAMC is Prudential ICICI Asset ManagementCompany 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 asthe sponsor. Sahara Asset ManagementCompany Private Limited incorporated onAugust 31, 1995 works as the AMC of SaharaMutual Fund. The paid-up capital of the AMCstands at Rs 25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the firstBank sponsored Mutual Fund to launch offshore

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fund, the India Magnum Fund with a corpus ofRs. 225 cr. approximately. Today it is the largestBank sponsored Mutual Fund in India. Theyhave already launched 35 Schemes out of which

15 have already yielded handsome returns toinvestors. State Bank of India Mutual Fund hasmore than Rs. 5,500 Crore as AUM. Now it hasan investor base of over 8 Lakhs spread over 18schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the

Indian Trust Act, 1882. The sponsor for TataMutual Fund is Tata Sons Ltd., and TataInvestment Corporation Ltd. The investmentmanager is Tata Asset Management Limited andits Tata Trustee Company Pvt. Limited. TataAsset Management Limited's is one of the fastestin the country with more than Rs. 10000 Crore(as on April 30, 2007) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company(KMAMC) is a subsidiary of KMBL. It ispresently having more than 1,99,818 investors inits various schemes. KMAMC started itsoperations in December 1998. Kotak MahindraMutual Fund offers schemes catering toinvestors with varying risk - return profiles. Itwas the first company to launch dedicated gilt

scheme investing only in government securities.

Reliance Mutual Fund

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Reliance Mutual Fund (RMF) was established astrust under Indian Trusts Act, 1882. The sponsorof RMF is Reliance Capital Limited andReliance Capital Trustee Co. Limited is the

Trustee. It was registered on June 30, 1995 asReliance Capital Mutual Fund, which waschanged on March 11, 2004. Reliance MutualFund was formed for launching of variousschemes under which units are issued to thePublic with a view to contribute to the capitalmarket and to provide investors the opportunitiesto make investments in diversified securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up onMarch 13, 2000 sponsored by StandardChartered Bank. The Trustee is StandardChartered Trustee Company Pvt. Ltd. StandardChartered Asset Management Company Pvt.Ltd. is the AMC which was incorporated withSEBI on December 20,1999.

Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is aCalifornia (USA) based company with a globalAUM of US$ 409.2 bn. (as of April 30, 2005). Itis one of the largest financial services groups inthe world. Investors can buy or sell the MutualFund through their financial advisor or throughmail or through their website. They have Open

end Diversified Equity schemes, Open endSector Equity schemes, Open end Hybridschemes, Open end Tax Saving schemes, Openend Income and Liquid schemes, Closed endIncome schemes and Open end Fund of Fundsschemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financialservices company and its leading in the market

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in securities, investment management and creditservices. Morgan Stanley InvestmentManagement (MISM) was established in theyear 1975. It provides customized asset

management services and products togovernments, corporations, pension funds andnon-profit organizations. Its services are alsoextended to high net worth individuals and retailinvestors. In India it is known as Morgan StanleyInvestment Management Private Limited (MSIMIndia) and its AMC is Morgan Stanley MutualFund (MSMF). This is the first close enddiversified equity scheme serving the needs of

Indian retail investors focusing on a long-termcapital appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15,1996 with Escorts Finance Limited as itssponsor. The Trustee Company is EscortsInvestment Trust Limited. Its AMC wasincorporated on December 1, 1995 with the

name Escorts Asset Management Limited.

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup onDecember 30, 1994 with Alliance CapitalManagement Corp. of Delaware (USA) assponsor. The Trustee is ACAM Trust CompanyPvt. Ltd. and AMC, the Alliance Capital Asset

Management India (Pvt) Ltd. with the corporateoffice in Mumbai.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12,2001 with Niche Financial Services Pvt. Ltd. asthe sponsor and Benchmark Trustee CompanyPvt. Ltd. as the Trustee Company. Incorporated

on October 16, 2000 and headquartered in

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Mumbai, Benchmark Asset ManagementCompany Pvt. Ltd. is the AMC.

Can bank Mutual Fund

Can bank Mutual Fund was setup on December19, 1987 with Canara Bank acting as thesponsor. Can bank Investment ManagementServices Ltd. incorporated on March 2, 1993 isthe AMC. The Corporate Office of the AMC isin Mumbai.

Chola Mutual Fund

Chola Mutual Fund under the sponsorship ofCholamandalam Investment & FinanceCompany Ltd. was setup on January 3, 1997.Cholamandalam Trustee Co. Ltd. is the TrusteeCompany and AMC is Cholamandalam AMCLimited.

LIC Mutual Fund

Life Insurance Corporation of India set up LICMutual Fund on 19th June 1989. It contributedRs. 2 Crore towards the corpus of the Fund. LICMutual Fund was constituted as a Trust inaccordance with the provisions of the IndianTrust Act, 1882. . The Company started itsbusiness on 29th April 1994. The Trustees of

LIC Mutual Fund have appointed Jeevan BimaSahayog Asset Management Company Ltd as theInvestment Managers for LIC Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by GeneralInsurance Corporation of India (GIC), aGovernment of India undertaking and the four

Public Sector General Insurance Companies, viz.National Insurance Co. Ltd (NIC), The New

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India Assurance Co. Ltd. (NIA), The OrientalInsurance Co. Ltd (OIC) and United IndiaInsurance Co. Ltd. (UII) and is constituted as aTrust in accordance with the provisions of the

Indian Trusts Act, 1882.

ASSET UNDER MANAGEMENT

56

Asset Under Managemen

4%

4%

18%

5%

4%

7%

8% 12%

12%

12%

14% UTI MF

Pru ICICI MF

Franklin Templeton Investment

HDFC MF

Birla Sunlife MF

Standard Chartered MF

Reliance Capital MF

SBI MF

DSP ML MF

Kotak Mahindra MF

Others


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Bonds are debt instruments that are issuedby companies, municipalities and governmentsto raise funds for financing their capitalexpenditure. By purchasing a bond, an investor

loans money for a fixed period of time at apredetermined interest rate. While the interest ispaid to the bond holder at regular intervals, theprincipal amount is repaid at a later date, knownas the maturity date. While both bonds andstocks are securities, the principle differencebetween the two is that bond holders are lenders,while stockholders are the owners of theorganization.

Advantages of investing in bonds:

Bonds are predictable. You know howmuch interest you can expect to receive, howoften you'll receive it, and when yourprincipal (the bond's face value) will berepaid (maturity date).

Bonds are steadier then stocks (which canfluctuate wildly short-term). Nervousinvestors usually sleep better by buyingbonds instead of equity investments.

People on a fixed income and/or inretirement will receive a predictable amountof regular income from bonds.

The interest rates paid by bonds typicallyexceed those paid by banks on savingsaccounts, especially short-term bonds.

Disadvantages of bonds:

Companies and municipalities can and dogo bankrupt, and if they do, your bonds willlose value and possibly even become

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worthless.

Long-term bonds will have your moneytied up in low yielding bonds should interest

rates go up.Unlike stocks, bonds don't offer the possibility

of high long-term returns. Younger investors and

those with several years to go until retirement

would be better served by limiting their bond

purchases and opting for equity buys instead.

3. GOVERNMENT SECURITIES

Government securities(G-secs) are

sovereign securities which are issued by theReserve Bank of India on behalf of Governmentof India,in lieu of the Central Government'smarket borrowing programme.

The term Government Securities includes:

1. Central government securities2. State government securities

3. Treasury bills

The Central Government borrows funds tofinance its 'fiscal deficit'. The market borrowingof the Central Government is raised through theissue of dated securities and 364 days treasurybills either by auction or by floatation of loans.

In addition to the above, treasury bills of91 days are issued for managing the temporary

cash mismatches of the Government.

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Benefits of Investing in

Government Securities:

Additional Income Tax benefit u/s 80L of

the Income Tax Act for Individuals

Qualifies for SLR purpose

Zero default risk being sovereign paper

Highly liquid.

Transparency in transactions and

simplified settlement procedures through

CSGL/NSDL.

4. PUBLIC PROVIDENT FUND (PPF)

The Public Provident Fund Scheme is astatutory scheme of the CentralGovernment of India.

The Scheme is for 15 years.

The rate of interest is 8% compoundedannually. The minimum deposit is 500/- and

maximum is Rs. 70,000/- in a financialyear.

One deposit with a minimum amount ofRs.500/- is mandatory in each financialyear.

The deposit can be in lumpsum or inconvenient installments, not more than 12Installments in a year or two installments

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in a month subject to total deposit ofRs.70,000/-.

It is not necessary to make a deposit inevery month of the year. The amount of

deposit can be varied to suit theconvenience of the account holders.

The account in which deposits are notmade for any reasons is treated asdiscontinued account and such accountcan not be closed before maturity.

The discontinued account can be activatedby payment of minimum deposit ofRs.500/- with default fee of Rs.50/- for

each defaulted year. Joint account is not permissible. Those who are contributing to GPF Fund

or EDF account can also open a PPFaccount.

A Power of attorney holder can neitheropen or operate a PPF account.

The grand father/mother cannot open aPPF behalf of their minorgrand son/daughter.

The deposits shall be in multiple of Rs.5/-subject to minimum amount of Rs.500/-.

The deposit in a minor account is clubbedwith the deposit of the account of theGuardian for the limit of Rs.70,000/-.

No age is prescribed for opening a PPFaccount.

Interest is not contractual but rate isnotified by Ministry of Finance, Govt. of

India, at the end of each year. The facility of first withdrawal in the 7th

year of the account subject to a limit of50% of the amount at credit precedingthree year balance. Thereafter oneWithdrawal in every year is permissible.

5. KISAN VIKAS PATRA (KVP)

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Minimum Investment Rs. 500/- Nomaximum limit.

Rate of interest 8.40% compoundedannually.

Money doubles in 8 years and 7 months. Two adults, Individuals and minor

through guardian can purchase. Companies, Trusts, Societies and any

other Institution not eligible to purchase. Non-Resident Indian/HUF are not eligible

to purchase. Facility of encashment from 2 years. Maturity proceeds not drawn are eligible

to Post office Savings account interest foramaximum period of two years.

Facility of reinvestment on maturity. Patras can be pledged as security against a

loan to Banks/Govt. Institutions. Patras are encashable at any Post office

before maturity by way of transfer todesiredPost office.

Patras are transferable to any Post officein India.

Patras are transferable from one person toanother person before maturity

Duplicate can be issued for lost, stolen,destroyed, mutilated and defaced patras.

Nomination facility available. Facility of purchase/payment of Kisan

vikas Patras to the holder of Power of

attorney. Rebate under section 80 C not admissible. Interest income taxable but no TDS

Deposits are exempt from Wealth tax.

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6. NATIONAL SAVINGCERTIFICATE (NSC)

Minimum investment Rs. 500/- Nomaximum limit.

Rate of interest 8% compounded halfyearly.

Rs. 1000/- grow to Rs. 1601/- in six years. Two adults, Individuals, and minor

through guardian can purchase. Companies, Trusts, Societies and any

other Institutions not eligible to purchase. Non-resident Indian/HUF can not

purchase. No pre-mature encashment. Annual interest earned is deemed to be

reinvested and qualifies for tax rebate for

first 5 years under section 80 C of IncomeTax Act.

Maturity proceeds not drawn are eligibleto Post Office Savings account interest fora maximum period of two years.

Facility of reinvestment on maturity. Certificate can be pledged as security

against a loan to banks/ Govt. Institutions. Facility of encashment of certificates

through banks. Certificates are encashable any Post office

in India before maturity by way of transferto desired post office.

Certificates are transferable from one Postoffice to any Post office.

Certificates are transferable from oneperson to another person before maturity.

Duplicate Certificate can be issued for

lost, stolen, destroyed, mutilated ordefaced certificate.

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Nomination facility available. Facility of purchase/payment to the holder

of Power of attorney. Tax Saving instrument - Rebate

admissible under section 80 C of IncomeTax Act.

Interest income is taxable but no TDS.

7. INSURANCE

Agreed, insurance may not be the bestplace to invest your hard-earned money. Butthere are sufficient reasons for one to believe

that it can be a highly lucrative avenue tofacilitate savings. People often talk about yieldon investment and tend to compare their valueswith those available on various insuranceschemes. This is particularly typical within theIndian sub-continent where one convenientlyforgets the element of risk covered by lifeinsurance.

It is extremely unfair to compare the

performance of insurance against otherinvestments without considering the corefeatures of insurance. The very essence ofinsurance is to protect your family from theuncertainty of your life. Hence it proves verylogical to evaluate the costs involved towardsthis feature. Ask yourself this question

When you pay insurance premium for

your car, do you get anything if fortunately no

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mishap happens? This means that you spent theamount to secure a valuable property.

Hence you must accept that out of the

total amount paid by you for your life insurance,a certain amount is used for providing the riskcover and only the balance can be utilised assavings.

In other words, the total premium you payminus the amount evaluated as the cost ofinsurance must be considered as the amountinvested to get the maturity amount. If youcalculate the yield from returns, you will be in

for a surprise.

Secondly, we tend to think veryunrealistically about our life. We often comparethe results after say 10 years from an investmentscheme, for instance PPF. And then we try toconvince ourselves that PPF is providing a betteryield than an insurance policy.

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ANALYSIS AND FINDINGS

1. General Investment

Preference by people:

66

69%

32.50%

43%

6%

20.50% 21%

94.50%

11.50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

BankD

eposit

N.S.E.

Equity

Market

Debent

ures

Govt.

Securit

ies

TaxSa

vingB

onds

Mutua

lFunds

Others


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Interpretation:

The above graph indicates the generalinvestor perception about people. This shows

that the majority of people prefer to invest theirmoney in mutual funds and the least peopleprefer to invest their money in debentures. Thisshows that the people trust mutual funds andbelieve that it will give higher returns for theirinvestments.

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2. Reasons for investing in

mutual funds and different

financial products:

68

Tax Benefits, 51%

Min. Investment,

26%

Liquidity, 42%

Speedy

ransaction, 27%

Transparency,

34.50%

High Returns,

78.50%

Tax Benefits

High Returns

Liquidity

Min. Investment

Speedy Transaction

Transparency


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Interpretation:

The above pie-chart shows why peopleinvest in mutual funds or other financial

products. This chart indicates that the majority ofpeople invest their money to get higher returnson their investment. The other reasons forinvesting their money are transparency, speedytransaction, minimum investment, liquidity andtax benefits.

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3. Preferred type of Mutual

Funds Investment among the

Investors:

70

Equity Fund

60.50%

Debt Fund

12.50%

Gilt Fund

9.50%

Balance Fund

36% Equity Fund

Debt Fund

Gilt Fund

Balance Fund


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Interpretation:

The above pie-chart indicates in whichtype of mutual fund the majority of people invest

their money. The data in the graph shows that asper our survey 60.50% of people invest in equityfunds. The reason for this may be the growthoption in equity funds. And the least peopleinvest their money in gilt funds.

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4. Sources Of Information Behind

Different Investment Avenues

72

23%

35%

50%

36%

23%

selfaware

brokers

financ

ial

advisor

med

ia

othe

rs


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Interpretation:

The above graph shows the informationsource behind the investment. This graph shows

that the most people like to invest their moneyafter taking advice of any financial advisorbefore making an investment in any investmentavenue. And the least people invest their moneywith self awareness or with reference to othersources.

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RECOMMENDATION

I am not so much expert to recommendto the highly qualified people. But form deepanalysis of the whole study I came to know someconclusion and I would like to stretch thecompanys attention to these points.

Some of the recommendations are as follows;

1. Prudent CAS Ltd. has to give moreadvertisement for mutual fund awareness in themind of people who are living small town orrural area.

2. Provide more AMFI test so that Recruitmentof Experienced employees of mutual fund field

can be done, so that the knowledge of the expertsis used by the organization. And companyincreases its workforce by recruiting moreadvisors.

3. Firm think about increase its offices in all thecities and big villages also. Because ourcountrys number of villages is more than citiesand more people leave in it. So if we cover all

the market than started ruler marketing also.

4. Prudent CAS Ltd. should gives rates of all thefunds in all the news paper so that, an ordinaryperson also think about it.

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CONCLUSION

Up till now sought after investmentavenues like bank deposits, real estate, gold,provident fund etc. especially due to fall in

interest rates coupled with the rising inflation,and Mutual Fund obviously become a viablealternative.

Mutual Funds are in the business ofmanaging trust. If Mutual Funds gain investorstrust, money will follow. It is important to gainmind-share rather than wallet share of theinvestors.

Currently industry is gradually growingphase and Indian Mutual Fund industry has beendefinitely maturing over the last few years andthe level of awareness today is much more thanwhat it was in the past. But the level ofawareness has not yet reached the rural and othersmaller towns and it is more of a smaller townsand it is more of an urban phenomenon. What isneeded is the spread of awareness beyond

regional limits. Mutual Fund as a concept is wellknown, but the target audience still needs to gainmore awareness.

The future is very bright. This industryis very important role to play in providingalternative avenues to the entire gamut ofinvestors in a scientific and professional manner.

Mutual Fund industry has been evolvingvery well for an important reason that, today we

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have the best system and procedure, goodregulatory mechanism, use of technology,transparency and sharing of details anddissemination of information at an improved

level.

BIBLIOGRAPHY

Books:

1. Bodie, Kane, Marcus Security Analysis andPortfolio Management, 5th edition Tata Mc

Graw hill publications.

2. Mutual Fund testing program Book AMFI

Publication.

3. Association of Mutual Fund in India work

book.

Websites:

www.amfi.com

www.mutualfundresearchonline.com

www.mutualfundsindia.com

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Magazine & Newspaper:

Business World

The Economic Times

The financial express

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ANNEXUE

Questionnaire

Dear Respondent,I am, Krutika Rathod, as a

student of SHREE CHIMANBHAI PATELINSTITUTE OF MANAGEMENT ANDRESEARCH, I am undertaking a survey onINVESTOR PERCEPTION WITHRESPECT TO DIFFERENT INVETSMENT

AVENUES. The Information provided by youwill be used for academic purpose only. Thankyou for your co-operation.

1. Name:____________________________________________

2. Address:_________________________________

__________________________________________________________________

_________________________________

___________________________

3. contact no: _____________

4. Occupation:Service (____) Business

(____)Agriculture (____) Profession

(____)Housewife (____) Others

(____)

5. Annual income:Below 1 lakh (____) 1 to 2.5

lakh (____)

2.5 to 5 lakh (____) Above 5lakh (____)

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6. Do you invest in mutual fund or other

financial products?

Yes (____)No (____)

7. In which financial product will you doinvestment?

Mutual fund (____) goldand silver (____)Govt. security (____) Bank

deposit (____)Insurance (____)

Debentures (____)N.S.C (____) Others

(____)

8. Which criteria will you prefer before

investing in mutual fund or otherfinancial products?

Risk (____) HighReturn (____)Safety (____) Speedytransaction (____)Liquidity (____) Min.investment (____)Transparency (____) Tax

planning (____)

9. Which type of fund you prefer in mutualfund?

Equity (____) Debt(____)

Balance (____) Giltfund (____)

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10. How long you stay invested in mutualfund or other financial products?Less than 1 year (____) 1 to 3

year (____)

3 to 5 year (____) morethan 5 year (____)

11. What percentage of return you got foryour investment?

Less than 10% (____) 10% to15% (____)

15% to 25% (____) more than25% (____)

12.In which security you find higher risk?Mutual fund (____) Govt.

security (____)Insurance (____) other

security (____)Post office savings (____) Bank

deposit (____)

13. State the information source behind

your investment?Self awareness (____)

Brokers (____)Financial advisors (____)

Friends (____)Media (____) Others

(____)

14. According to you, which is betterproduct for investment? Mutual fund orother financial products? Why? Giveyour suggestion.

______________________________________________________________________________

__________

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____________________________________________

OVERALL EXPERIENCE

Before entering in Prudent C.A.S Ltd. as

an intern, I was aware only about a few financialproducts and their bookish knowledge. I lacked

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the practical market knowledge about theseproducts. But from Prudent C.A.S. Ltd. I cameto know about various financial products, theirfeatures, advantages, disadvantages and how

their market works. So I have gained a lot ofpractical as well as theoretical knowledge fromPrudent C.A.S. Ltd.

krutika- prudent project

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