Académique Documents
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NJ India Invest (formerly known as NJ Capitastocks) was started in 1994 to cater to the growing financial services sector. NJ India Invest evolved out as a client focused need based investment advisory firm. At NJ we regard mutual fund as one of the best investment avenue available to satisfy any kind of investment need. We have gained expertise in analyzing mutual fund schemes, and an indepth study on various parameters is carried out on a regular basis.
Company Division
Corporate
HNI/MNI
NJ Fund Partner
1) 2) 3)
Corporate HNI ( Hign Network Individual)/ MNI (Medium Network Individual) N. J. Fund Partner
(1) Corporate : In Corporate Division they are contact big corporate to invest there money in mutual fund through N. J. India Invest. Because here they are less interested because here t he profit margin is very less although the amount of investment is big but comparison of HNI/MNI or N. J. Fund
partner they get less amount so in this field they have less staff in comparison to others division. (2) HNI/MNI(High Network Individual / Medium Network Individual) : High Network Individual means they have contacts directly to such kind of customer who have more than 50 lakhs of assets and Medium Network Individual means the have contacts have less than 50 lakhs of assets. For example doctors, chartered accountant, business man etc. (3) N. J. Fund Partner : This is the main Division of N. J. India Invest. Because in this category they collect the fund of small investors through making agents so in this they provide all the training, scheme details, ecommerce facility, seminar of big portfolio manager etc.. So this is the main division of N. J. India Invest and most of staff working under this umbrella.
Presenting NJ India Invest (formally NJ Capitastocks), a company evolved over the past five years as a client focused need based investment advisory firm. The sole business of the organization is to manage investment to fulfil the needs of a varied client segment from cap-a-pie. Process At NJ people are education centric, the relationship managers will help you in identifying & understanding your needs and also help you develop a portfolio across different asset classes commensurate to your needs. The experts will give a feel on the various asset classes and explain you the risk associated with each in a simple and lucid manner to put you at calm. Once the investment made will
be backed by periodic valuation reports and regular relevant information through newsletters, mailers, e-mail, road shows etc.
The prime concern of the people at NJ will be to help you attain peace of mind on the investment front.
Product Rack Mutual Funds Fixed Deposits Infrastructure Bonds RBI Relief Bonds Approved Securities and Charitable Trust Insurance
Research Desk Dedicated portfolio planning & restructuring on demand The weekly performance sheet which covers performance of leading mutual fund schemes. The monthly find fact sheet which covers comprehensive analysis of various mutual fund schemes. Various subscription services via e-mail Sharing relevant information related to Indian Investment world
E-Services E-services of NJ India Invest Pvt. Ltd. Are powered by a comprehensive website httt://www.njindiainvest.com. It covers detailed information about the Indian mutual fund industry.
It posses various financial planners to satisfy investment goals like retirement planning, childs marriage planning etc. it also posses various analytical tools to measure the performance of mutual fund scheme viz. return calculator, and many others. There is a separate desk for the client to get their portfolio
Transaction summary report which include transaction in mutual funds, fixed deposits RBI bonds & others. Portfolio valuation report. Profit & Loss account Tax statement. Consolidated sector & stock profile for equity investments through mutual funds. Consolidated rating & script-profile across debt funds through mutual funds. Consolidated asset allocation report across various assets. Alert processing facility across different parameters.
Achievements Have gained a dominant place in the Indian Mutual Fund distribution business Certified by the association of mutual funds as AMFI registered mutual fund advisors. Won the pru Chairmans Award thrice in 2000, 02, & 03 for outstanding sales performance in the schemes of prudential ICICI Mutual Fund. The chairman, prudential presented the awards at London. Won many other awards and certificated for outstanding performance in various mutual funds schemes.
Commitment To provide reliable information To honor service commitment To maintain all records in privacy To preserve clients capital The entire company with total assets of Rs. 2500 crores has more than 250 employees with 61 branches in all over the India office address where the researcher conducted summer training project.
EXECUTIVE SUMMARY
The Indian mutual fund industry came into existence with the establishment of Unit Trust of India in 1964. Unit Trust of India was not efficient enough to expand the mutual fund market. In late 1980s nationalized bank sponsored mutual funds came into existence which helped mutual fund industry to expand its market. The private sector mutual fund entered the industry during early 1990s with greater variety of products and better services. They introduced different kinds of products satisfying the needs of the different classes of investors. The major limitation of mutual fund industry in India is the lack of awareness among the investors. Most of the investors are not at all aware about what is mutual fund? How it functions? How money collected from investors are invested, etc against which in America more than eighty million people or one half of the households invest in mutual funds. That means that, in the United States alone, trillions of dollars are invested in mutual funds. Mutual fund industry depends on gaining the trust of investors. Once the investors trust is gained it is easy to convince them to invest in mutual funds. The investors are attracted based on the performance of the mutual funds rather than winning the trust of investors. The performance of mutual funds is variable, sometimes it may go up and sometimes it may come down. It is also not sure that the past performance will be repeated in the current period. Still the investors are attracted based on the past performance of mutual funds. The Indian mutual fund industry should come out of this limitation. They should try to attract the
investors by gaining their trust rather than showing the past performance of mutual funds. Most of the investors are not aware about the professional fund managers of the mutual funds. They invest in the mutual funds based of the returns which mutual fund yields. The investors are not aware that the fund managers of mutual funds do systematic analysis of the companies in which they are going to invest; they give suggestions to the companies which are not performing well. Therefore the mutual fund industry should try to promote about their professional fund managers, which would help the industry to attract the investors and expand its market. The mutual fund industry in India is still in the developing stage. Many of the mutual fund companies are presently functioning in the urban area, but in country like India where the substantial part of total population lives in the rural area, also the mutual fund companies needs to expand their business in the unexplored rural areas which will lead to the substantial increase in the total amount which is invested in mutual funds. The basic functioning of mutual fund depends on the equity and debt market. The portfolio of different mutual funds companies constitutes of the investments in any of these markets depending upon the type and scheme of mutual fund. Whenever any of the above mentioned market goes down the respective fund is affected. For example if the market has gone down by 30% but the mutual funds NAV has gone down only by 10% than the investor should understand that the fund manager of such scheme is really efficient. But rather than having such a long view the investors thought is limited to short run and they think that the scheme in which they have invested is not good and they withdraw their money by incurring losses which is one of the major limitation of the investors investing in mutual funds, which the mutual fund company must try to overcome by
increasing the awareness regarding the basic functioning of mutual funds and making the customers aware regarding the difference between the absolute and relative returns.
RESEARCH METHODOLOGY
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, extend and cause of the issue under study. Research methodology is the process in which various steps that are generally adopted by a researcher. The various steps are as follows. 1. 2. 3. 4. 5. 6. Objective of study Preparation of the research design Source of data Technique of research Analysis and interpretation of data Developing logical conclusion
1.
Objective of study
Primary objective To aware the people about mutual fund and how many are people are not given AMFI exam. If he or she is already given the exam then convince them to do the business with N.J. So main objective is to make N. J. fund partner. Secondary Objective To aware about the orientation of the people regarding financial product To do the investment of our company.
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To find out the current market scenario and current market standing of our company. To find out how many are doing business with their own, or doing under any distributor To find out the awareness of the people regarding mutual fund
2.
3. Source of data
There are mainly two sources for collection of data is used that is primary as well as secondary sources. Primary Source Information Method of obtaining data: Questionnaire Communication method : Telephonic Organize awareness camp.
Secondary Source Information Internal: Companies internal information or database External: Books, Magazine, journals. Research technique The following research technique were used for data collection
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Questionnaire Questionnaire was containing open ended and close ended questions. It was basically prepared for Financial Agents. The main aim for this schedule was too aware th Financial Agent about the benefits of mutual funds and trying to aware them about the benefits of commission of selling the mutual fund products.
Collection of data The respondents were personally approached to explain the objective of survey. During the meeting the questionnaire were fulfilled by the respondents.
Aware about mutual funds Awareness camp was organized at the conference hall of the company. One who came to see the camp was understood by the representative of the company about various aspects of mutual funds.
4. Sample Design
Sample design refers to the technique as the procedure that a researcher would adopt in selective item for the sample. Target populations: The target populations are Financial Advisor of Ahmedabad the list of 250 peoples. Sample Size: The sample size of research study is hundred respondents. Sampling method:
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The agents had been selected on the basis of random sampling. The study is a sample survey and the size of sample is small which because we have to cover the whole Ahmedabad.
Lack of timing is one of the limitations which forced the researcher to reduce the sample size.
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This asset management company invests this investment to the different portfolio. Mostly all the mutual fund issuing firm having their own asset management company. Trust is working under custodian; custodian is just like a locker of the bank, all the units and trust are working under custodian. Trust has to register under registrar. All this mutual fund operation is monitored by Reserve Bank of India (RBI)
AMC
Savings
People
Units
Trust
Investments
Unit Holders
Registrar Trust
Custodian AMC
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Operation
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 the invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is the most suitable investment fo the common man as it offers an opportunity to invest for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of mutual fund.
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Investor Investor (Pool (Pool their their money money with) with)
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Repurchase Price: Is the price at which open-ended scheme repurchases its units and it may include a back-end load. This is also called bid price. Redemption Price: Is the price at which open-ended schemes repurchase their units and closeended schemes redeem their units on maturity. Such prices are NAV related. Sales Load: Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called no load schemes. Repurchase Load: Is a charge collected by a scheme when it buys back the units from the unit holder.
Second Phase__1987 93 1987 marked the entry of non UTI public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General insurance Corporation of India (GIC). SBI mutual fund was the first non UTI mutual fund established in June 1987 followed by Canada bank mutual fund (Dec 87), Punjab national bank mutual fund 9Aug 89), Indian bank mutual fund (Nov 89), Bank of India (June 90), Bank of Baroda mutual fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs. 47004 crores. Third Phase__1993 03 With the entry of private sector funds in 1993, a new era started in the India mutual fund industry, giving the Indian investors a wider choice of fund families. Also 1993 was the year in which the first mutual 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 templetion) was the first private sector mutual fund registered in July 1993. The 1993 SEBI Regulation were substituted by a more comprehensive and revised mutual fund regulation in 1996. the industry now functions under the SEBI 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
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funds with total assets of Rs. 1, 21,805 crores. The UTI with Rs. 44,541 crores of assets under management was way ahead of other mutual funds. Fourth Phase - 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 (as on 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. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.
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Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
Return Potential Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
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Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. Transparency Regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook. Flexibility Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience. Affordability Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.
Choice of Schemes Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
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Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.
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7. The income levels of urban and rural middle class people are increasing and these people are saving part of their income to invest in profitable and safe avenues, since they are aware of the time benefits if they invest their money in capital market. The MFs are channelizing such savings to the needy industrial undertakings. . 8. In view of recent liberalized economic and industrial policies and concession such as excise and customs given in recent budget for the growth of industrial sector, the capital market-both primary issue market and secondary market-have been witnessing unprecedented booming trends. Hence, MFs have been able to speed their wings by spreading their funds in various industrial sectors. 9. Investors' confidence: MFs are playing significant role in mobilizing savings from public and in the process, it has provided stability to the Indian capital market. They have proved to be the mainstay in the market in times of high degree of volatility. They have garnered investors' confidence as a large section of servers are willing to put their savings in the MFs. 10. Savers' attitude: Savers are more interested in the MFs and willing to put their savings into MFs because of low risk, reasonable return, guarantee to get back their investments with adequate appreciation. 11. Income tax Relief (U/s 88): There are several Mutual Fund schemes to taxpaying class who got rebate on investment in these schemes. 12. Highly Liquidity: Whenever investor feels like withdraw the scheme can get immediately on repurchase price or NAV price.
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13. Government Control: There is a great deal of control by the government through SEBI on Mutual Fund industry for there is a vast corpus invested by house hold sector of India. 14. Good Portfolio Management: There is very possibility of expert and specialized professional managers appointed by Mutual Fund organization, good portfolio management is possible which results high benefits to Mutual fund holders. 15. Risk of loss due to ill informed and misinformed purchase/sales is reduced as the managers of MFs have better access to information. Many an investor has to come to grief by falling prey to misleading and motivated "headline" leads and lips. Risk is reduced due to diversification of portfolio in terms of companies and industries. Even a small investor of Rs. 1000 in MF gets the benefits of diversification. As the saving and investment are pooled, there are disadvantages of economies of scale. Even a small investor of Rs. 1000 can reap the benefits of large size fund of Rs. 50-100 crores. The funds are handled by professional experts who are specially trained and have considerable experience. The returns are automatically reinvested. The investor need not be bothered about paper work and the trauma associated with frequent switchover of stocks. Near iron clad safety from the wily operation. 16. Returns and capital appreciation are higher than that from bank deposits. Investors in MFs enjoy tax benefits Under Section 80 C and in some cases, 80 L, 88 of the Income-tax Act of 1961. MFs are ideally suited to a developing economy like India. this is because there is large numbers of investors, who have the ability to save and recently, they have shown their to enter the capital market. MFs are more useful kind helpful to the investors who are shy of capital market. The claim to offer professional
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management of funds to diversify and thus reduce the unsystematic risk, while offering good returns. Thus, MFs can serve the investors at large in a better way by providing them good returns. A MF is also an effective agency for the mobilization of resources for economy. It is also contended the MFs may also prove to be helpful to avert the crisis of in the capital market.
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Tax Saving ELSS Special Gilt Funds Load funds Index ETFS P/E Fund Ratio
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Balanced Funds The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. Money Market or Liquid Funds These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.
GEOGRAPHICAL CLASSIFICATION
Domestic funds Funds which mobilize resource from a particular geographical locality like a country or a region are domestic funds. The market is limited and confined to the boundaries of a nation in which the fund operates. They can invest only in the securities which are issued and traded in the domestic financial markets. Offshore funds: Offshore funds attract foreign capital for investment in the country of the issuing company. They facilitate cross-border fund flow which leads to an increase in 30
foreign currency and domestic capital market to international investors. Many mutual funds in India have launched a number of offshore funds, either independently or jointly with foreign investment management companies. The first offshore fund, the India Fund, was launched by Unit Trust of India in July 1986, in collaboration with the U.S. fund manager, Merril Lynch.
Other
Sectoral These funds invest in securities of a specific industry or sector of the economy such as health care, high technology, leisure, utilities or precious metals. Because such funds invest primarily in one sector, they do not offer the element of downside risk protection found in mutual funds that invest in a broad range of industries. However, the funds do enable investors to diversify holdings among many companies within an industry, a more conservative approach than investing directly in one particular company. Sector funds offer the opportunity for sharp capital gains in cases where the fund's industry is "in favor" but also entail the risk of capital losses when the industry is out of favor.These funds are suitable for investors, who can tolerate a moderate to high degree of risk, are seeking capital appreciation and to whom dividend income is secondary in importance. And whatever the instruments, social responsibility funds apply moral and ethical as well as economic principles in the selection of securities. Gilt Fund These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.
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Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges.
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Gradually raising the bar of standards in the professional, AMFI first began with creating awareness, followed by education, then certification with the help of NSEs Capital Market Certifications Module (NCFM) as well as by conducting manual test in association with Indian Institute of capital markets and institute of banking personnel selection. As the next step to add value to the certification, AMFI introduced the process to register the intermediaries who have passed the certification test as AMFI Registered Mutual Fund Advisors (ARMFA), thus laying the foundation for an organized industry and allotting a unique code-AMFI Registration Number (ARN) along with an identity card. SEBI recognizing the importance of this initiative taken by AMFI has made registration with AMFI after passing AMFI certification test compulsory for intermediaries. Thus all AMFI certified intermediaries engaged in marking and selling of mutual fund schemes are required to be registered with AMFI after passing AMFI certification test. The mutual funds will not be able to deal with intermediaries who are not registered with AMFI.
1. Violation of the code of conduct. 2. Being indicated for serious offences by a regulatory authority. 3. Complaints of gross negligence upheld by a consumer court. AMFI will be charging nominal fees to cover administrative and publicity costs. The fees will be as under. 1. Corporate intermediaries: A registration fee of Rs. 15000/- for public limited company and Rs. 1000/- for other corporate bodies such as private companies, partnership firms, sole proprietorships firms, etc. 2. Individuals including employees of corporate the fees will be Rs. 1000/-.
Advantages of AMFI
The registration process would have following advantages AMFI Registered Mutual Fund Advisors (ARMFA) will now be distinguished and the investors will recognize and realize the importance of dealing through an ARMFA. The AMFI Guidelines and Norms for Intermediaries (AGNI) would be a tool to ensure that an ARMFA gets paid, as a professional should, for his skills. The improve knowledge requirement and censure on account of violation of AGNI would contribute to build up professional commitment to business on healthy and ethical lines. Over time, an ARMFA would have a track record and healthy business relationship. AMFI Guidelines and Norms for intermediaries (AGNI) In order to promote best practices and ethical standard in the business of sell of mutual fund schemes, AMFI has formulated broke guidelines and norms
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including the code of ethics for the intermediaries, which will be applicable to ARMFA. AMFI believes that a sincere endeavor to adhere to the guidelines and the code would help promote best an healthy practices in the area of sales and marketing which would ultimately benefit all concerned the investor, the intermediary and the industries as a whole.
Procedure for obtaining registration AMFI has currently authorized M/S Computer age management services pvt. Ltd. To act as processing agent on its behalf. computer age management services Pvt. Ltd. Intermediaries are requested to apply in the prescribe form, which can be obtain from the office of AMFI or may office of M/S computer age management services Pvt. Ltd. And obtained the application form by post. Application forms can be submitted at the office of AMFI or M/S computer age management services Pvt. Ltd. And can be send by post to office of AMFI or M/S computer age management services Pvt. Ltd Individual Applicant 1. An individual must complete the appropriate form and enclose two photographs of the size define in the application form. 2. Senior Citizens: All agents / distributors who were above the age of 50 and had experience of at list five years as on September 30, 2003 are exempted from passing the AMFI certification test. For registration they are require to submit duly field in application form along with the following documents Proof of age AMFI may , from time to time, authorized other organization to undertake the task currently assign only to M/S
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Recommendation from a member AMC certifying that he / she has work for 5 years as mutual fund adviser / distributors.
3. The prescribe fees can be paid only by a demand draft in favor of the AMFI payable at the location of the M / S Computer Age Management Services Pvt. Ltd. Office to which the form is submitted the prescribe fees are as mention, for individual intermediaries as well as for each employee of a corporate intermediary, the prescribe fees are Rs. 1000/-. This fees has to be paid every time the individual renews his /her registration. Non Individual Applicant 1. Non individual applicants shall submit the form duly completed along with memorandum and articles of association in case of companies, partnership deed in the case of partnership firms, society registration documents in the case of societies and trust deed in the case of trust. The list of authorized signatories shall also be submitted. 2. The prescribe fees in case of public limited companies are Rs. 15000/- in case of corporate bodies in other forms such as private companies, partnership firms, sole proprietorship firms etc., the fees are Rs. 1000/-. The non individual applicant must however ensure that all there employees engaged in sales or marketing of units of MF are registered with AMFI and obtained card. The documents shall be scrutinized and it found in order and if the prescribe fees have been realized, a certificate of recognization or photo identity card as applicable shale be issued. These will be mailed directly to the applicant.
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MARKETING FUND
OF
MUTUAL
In today's competitive world Mutual Funds have to be marketed at two different levels. Initially at the first level mutual fund is competing with several other investment options. The investors had a misconception about MF in early 90's. Morgan Stanley was able to set up operation in India with just Rs.5 crore and garner Rs.980 crore, making money from the very first day. The Morgan Stanley episode resulted into an immediate need to make the investors aware about the concept of the mutual fund. Several private sectors took up this task. Tempelton had spent immensely on the prospectus and promotional campaign. Now the marketing of mutual fund has become more professional. In concept and product; the promotion and distribution; service and pricing; packaging and perspective. The new breed of marketers has tried to position the fund not as investment instruments but as a means of financial planning. Private sector mutual funds are steeping up their marketing efforts to mop up the untapped resources of potential but vary investors. Tempelton India for example, is spreading its marketing activity across eight metros, splashing front-page advertisements in main line newspaper almost on a daily basis. This is in addition to other 'educational activity' by the company. Tempelton is going ahead with its promotional campaign aimed at promoting the industry rather than focusing on its product. It has adopted about the line advertising as their strategy, not really product specific. At Sun F & C, believe that a hybrid of third party distribution supported by a direct marketing initiative is a appropriate solution for the Indian condition. Birla Capital spends more than 50 % of its advertisement budgets in "connecting directly with 38
people". The mutual funds are classifying their huge advertisement budgets under business development expenses", the pay back for which is 5 to 10 years or even more. Distribution is the key for bringing the Indian Mutual Fund industry in line with the huge success and popularity that the industry enjoys in developed markets. Educating the brokers was also an important task for the industry. For effective marketing the distribution network is being widened; effective marketing tools are adopted to create awareness of the benefits of the mutual fund products. There is a move to create a specialized financial advertises cadre who will make the intricacies and advantage of the mutual fund product effectively understood by the investors through the newly developed marketing and distribution channels. It is heartening to note that there are a number of specialized intermediaries who are undertaking not only distribution activity but also making them effective marketing activity to specialize in the mutual fund product. This new trend will definitely bring more and more investors to invest in mutual fund. The need for a prompt, courteous and efficient after sales service to the investor has been recognized due to increasing competitiveness in the industry. The investor today gets efficient and prompt service through the adoption of new technologies in servicing him by many of the fund. The competition is making the after sales services as a more and more vital thrust for attracting the investors to the mutual fund industry. This is particularly so in case of new mutual funds who have entered the market since 1994 onwards. The positive effect of this is that all mutual funds will have to give lot of attention towards two areas- increasing transparency and improving after sales services to the investor.
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DISTRIBUTION NETWORK
Unlike banks, mutual funds do not have a strong distribution network. Apart from few mutual funds like JM and DSP who have established brokerage houses, most have to depend on broker networks, which have their limitations. Even internationally, among the top mutual funds, only. Fidelity has its own distribution network. The main deterrent to setting up such a network is the high cost of maintenance. Most funds in India prefer to concentrate on more than 260 towns with a population of 5 lakh and above. Maintenance costs for a network is very high. It is better to use somebody elses network. In any case, only one percent of the urban population is tapped, thus there is a lot of potential in this area. With several private sector mutual funds concentrating on urban markets, market analysts feel that Unit Trust of India (UTI) will lose its urban market clout and come to depend entirely on its rural market strengths. A good network is that of banks. Banks, especially in the private sector, have started to market mutual funds, benefiting both parties. But as a long-term strategy this practice of marketing others mutual funds is questionable. Many believe that mutual funds cannot depend on banks as it is quite possible that banks may concentrate on their own mutual funds; or if they are not into this activity, banks may foray into this business in future. With the spread of the Internet widening, and whispers of e-commerce making the rounds, it will not be long before mutual funds use them to target new customers. Technology researchers feel that the Internet will have major consequences on mutual funds the most striking being lower transactions costs. Hence, those who fall to innovate will end up as laggards.
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TARGET CUSTOMER
Servicing the retail investor is very costly. Funds prefer a wholesale customer. Most mutual funds have fixed their minimum investments at Rs. 2500. Though this is considered to be an optimum figure by many, there are many investors whose minimum investment range varies from Rs.1000 to Rs.100000. The favorite investor will be the one who has a minimum of Rs.10000 to spare and has long-term goals. The ultimate goal of all mutual funds is to attract a long-term retail investor. The tax incentives offered for investing in mutual funds for the next three years show that the taxpayer has become the prime target. Funds, in general, and private sector funds, in particular, are not looking at the rural sector. Rural investors can only come into the picture only of the cost of setting up distribution and servicing infrastructure is justified by generating funds in this market. While looking at the target customers, one important factor to be considered in this industry is the investment habits of investors. The whole exercise is to know what kind of investors are present in a particular market and then, design a product that appeals to the general public of that region. For example, research shows that the southern and eastern markets are averse to equity. Investors prefer investing in debt and want to satisfy long-term goals. Against this, the northerner loves equity, as does the westerner. Interestingly, the share of Mumbai in the mutual fund industrys total asset base is also depleting with time. Over the years, mutual funds have targeted new areas. Many in the US had earlier wondered whether mutual fund investing is a shortterm strategy or a long-term one. Today, the US can boast of an asset base of around $ 5 trillion, almost half the size of the entire mutual fund industry in the world. Here it must be noted that the US is a country of reluctant savers. It has targeted the population and made the mutual fund industry into a monolith.
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Product Planning
Mutual Fund has to be designed as per the requirements of the investors, taking into consideration their different needs.
Branding
It is very necessary for the mutual fund to have a good brand name which the investor can directly correlate with his investment objective. E.g. Alliance Tax Relief for relief from taxes.
Pricing
Cowell(1984) states that the price of a service should be related to the achieving of marketing and organizational goals. The price of the mutual funds products is extricably linked with return
Distribution
Distribution of mutual funds is a challenge in India specially in the rural areas. Inventors have to be educated as to working and benefits of investing in mutual Funds.
Promotion
Promotional Measures such as use of lotteries, agency commission to individual for becoming investors and also promoting investments
Servicing
Prompt & timely issuance of Certificates & attending to the problems of the customers would do the best. Mutual Funds need to develop in-house expertise to render after sales service more promptly & cost effectively.
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Findings
1. Suggestion for Invstment Sr. No.
1 2 3 4 5 6 7 8
Particulars
Stocks Insurance Fixed Deposits Government Securities KVP NSC PPF Mutual Fund Suggestion for Investment
60 50 Respondent 40 30 20 10 0 1 2 3 4 5 6 7 8 Type of Investment
No. of Respondent
34 56 22 10 23 23 40 33
No. of Respondent
This table and graph shows that out of 105 agent 34 respondent suggest for stocks, 37 agents suggest for insurance, 22 agents suggest for fixed deposits, 10 suggests for Government Securities, 23 suggest for KVP, 23 suggest for NSC, 40 suggests for PPF and 33 suggests for MF. Results:
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Response goes high for Stock and PPF so most of the agents suggests their clients Stock and PPF the main reason behind this is security and get good return.
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Sr. No.
1 2 3 4 5
Particulars
Safety Liquidity Return Tax Benefits Maturity
No. of Respondent
43 21 19 9 8
This table and graph shows that out of 100 respondent 43% prefer safety as first parameter, 21% suggest liquidity first, 19% consider high return first, 9% suggest tax benefits as first criteria, and 8% consider maturity as first parameter.
Result: Most of the agents suggest safety first then high return and so on.
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Sr. No.
1 2 3 4 5
Particulars
Pre Investment Advisory Service Post Investment Advisory Service Doorstep Collection Sharing of Brokerage Online Valuation
No. of Respondent
85 56 42 5 8
Respondent
No. of Respondent
This table and graph shows that out of 100 respondents 85 provide pre investment advisory service, 56 provide post investment advisory service, 42 provide door step collection service, and 9 share the brokerage with their customer and 8 provide online valuation service.
Result : Maximum Financial Advisor are providing Pre Investment service first to their client and minimum providing service to their clients. Door step collection means
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payments and all the documents you have to collect from the convenient place of your customers.
Sr. No.
1 2 3 4 5
Particular
Service Business man Professional Retired Student
No. of Respondent 100 90 80 70 60 50 40 30 20 10 0 1 2 3 4 5
No. of Respondent
88 78 73 79 9
No. of Respondent
This above graph and table shows that 88 clients are in service sector, and 78 clients are in Business and 9 clients are students. This survey is necessary because its helpful to find out the client profession,
Result :
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So the results say mostly clients are in service, businessman, Professional or terired type of clients.
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Particular
Yes No
No. of Respondent
83 17
17 Yes No 83
Above graph and table shows that 83% people suggesting mutual fund to their clients while other 17% not suggesting mutual fund. Result: The reasons behind suggesting mutual fund by Financial Advisor is Low risk, Professional management and tax benefits. While 17% who are not suggesting mutual fund they were thinking about poor performance about mutual fund so, they dont want to take risk those who are aware about mutual fund recent performance ( most of young age people) suggesting mutual fund to their clients.
49
49
51
Yes No
Above graph shows that 49% agents want to know about mutual funds. 51% which are still not suggesting their clients about mutual funds. But, they are convinced by researcher and want to know more about mutual funds. Results Still researcher got minor success about convincing insurance agents for taking knowledge about mutual funds.
50
7.
48
52
Yes No
Above graph shows that 48% of agents want to meet representative, those who are existing mutual fund suggesting advisors also want to meet the representative sent by N.J., because they knew that N.J. is having good name as mutual fund distribution firm. Result: Researcher got little higher success for convincing insurance agents about mutual fund work have been doing by N.J. India Invest Pvt. Ltd.
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50 45 40 35 30 25 20 15 10 5 0
48
21
No. of Respondent
Yes
No
Response of Customers
Above graph shows that 21% of agents are providing online valuation report to their clients Result: Only 21% agents are using new technology of online valuation. This online valuation report is the speciality of N.J. people. So, researcher may get higher success of convincing agent in this area.
52
46
Yes
54
No
This figure shows that 54% of agents want to provide online valuation report to their clients. Results: In previous survey 97% of agents are not providing online valuation report to their client, among these 54% are convinced for providing online valuation report to their clients.
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Yes 15%
No 85%
Above figure shows that 15 agents are interested to attend the business opportunity program organized by N.J. Result: In previous survey we show that 48 agents are ready to meet representative sent by N.J. For knowing more about mutual fund out of this 48, 15 are only ready to attend the business opportunity program.
54
11.
34
Pass
66
Fail
Figure shows that 66% of agents have already cleared AMFI examination, and they have already started business of mutual funds. Results So, the main of researcher is to convince the 66% respondent about clearing AMFI exam and start selling of mutual funds.
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BANKS Returns Administrative exp. Risk Investment options Network Liquidity High penetration At a cost Low Less Low High Better Low
MUTUAL FUNDS
Moderate More
Quality of assets Not transparent Interest calculation Guarantee Minimum balance between 10th. & 30th. Of every month Maximum Rs.1 lakh on deposits
None
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Conclusion
The Indian mutual fund industry is beginning to blossom and with the recent relaxations it is evident that the industry will rise to the international standard. India as a country holds great potential and the rise in income and savings levels signify the tremendous growth opportunity that lies ahead. The very presence of most significant international player in India demonstrates that they cannot afford to ignore the Indian market if they want to maintain their positions internationally. Also, Indian market has provided to be a good investment destination, which has attracted foreign players to invest in Indian securities. Relaxation in exchange controls and consultative approach to formation of regulatory framework has given several international mutual fund players a comfort in the Indian economy, which is driving their desire to set-up operations in India. Indian mutual fund industry can look forward to exciting times ahead and the current consolidation phase will result in only the serious players a long term commitment to India exist.
Indian Mutual Funds have remained centered around a limited product rangebasically income, income cum growth and tax saving schemes. Efforts to develop the market through innovative products have been negligible.
The absence of product diversification and a confused market situation has been made worse by the absence of an innovative marketing network of mutual funds. The agent oriented network has largely been a failure because most of the agents have not been specifically trained to sell mutual products. The success of mutual funds marketing depends to a great extent on institutionalized efforts.
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The fund management strategy in India should change from passive to active, based on trained analytical and forecasting ability to identify fundamental changes in the macro-environment and market environment.
The performance evaluation of mutual funds is a widely debated issue in finance. The findings of our studies suggest that a number of funds have been successful in generating returns. Some funds have been unsuccessful in this venture. The analysis that we had conducted were done through measurements of the risks through different techniques. Thus we have analyzed the returns of different schemes of last one year for calculation of their risks. We have come to a conclusion that in all the portfolios that are efficiently managed get better returns.
The recent reforms and globalization process have offered tremendous opportunities to Indian mutual funds. In a global capital market environment, Indian Mutual Funds industry can emerge as one of strongest players by absorbing investment technology and modified managerial practices in the regional context, while thinking and acting with a global vision.
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Recommendations
With penetration levels at close to 6% great scope exists for the growth of mutual funds in India. Mutual funds have to compete with bank deposits and government securities for a share of consumer savings, this requires the regular and the AMC to increase the credibility of MFs and develop a trust among the average retail investors. We recommend the following steps on part of SEBI and AMCs
This will reduce the regulatory burden on SEBI. Most of the developed countries have SROs that publish monthly disclosures of important MF related figures, and enforce a model code of conduct. Though similar experiments have been unsuccessful in western countries we propose a slightly modified role of AMFI. AMFI will work towards increasing investor awareness through the publication of documents, organizing seminars etc. 59
Also AMFI serve as a regulator of distributors because mutual funds complain of poor distributor regulation as the biggest challenge to the industry. Regulating Corporate Investments Regulatory requirements that require mutual funds to segregate large and small investors. This would enable retail investors to pay expenses that are relevant to their investments and turnover rates. Investor Education Programs As the principal regulator of financial services in the country SEBI should invest in programs that give investor knowledge about financial products in the country. Investors should be able to make informed decision after knowing how MFs can be used for financial planning. This could be done in conjunction with AMCs , AMFI and other participants in the financial sector.
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Annexure
Name: ____________________________________________________________ Address: ____________________________________________________________ Contact No. ____________________________________________________________
1.
Are you doing the business of financial advisor or not ? a. Yes____________ b No____________
2.
What investment option do you suggest to your clients? Stock Insurance Fixed Deposit KVP NSC PPF Mutual fund ( ) ( ) ( ) ( ) ( ) ( ) ( )
Government Securities ( )
3.
Rank the parameters given below according to your clients preference? Safety ( ) Liquidity ( )
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Returns Maturity
( ) ( )
Tax Benefits
( )
4.
Customer don there their investment for their own knowledge or you will guide to do the investment Guide ( ) No Guide ( ) Combine ( )
5.
The service you provide to your clients are Pre investment advisory service Post investment advisory service Door step collection service Sharing of Brokerage Online Valuation services ( ) ( ) ( ) ( ) ( )
6.
7.
In which Asset management company do you generally recommend your clients to invest ________________________________________________________ ________________________________________________________ ________________________________________________________
8.
9.
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________________________________________________________ ________________________________________________________
10.
11.
12.
Are you interested in providing online valuation report to your clients? Yes ( ) No ( )
13.
Would you like to attend business opportunity program arranged by N. J. India Invest? Yes ( ) No ( )
14.
Can we send representative from N. J. Investment for more information about mutual funds for you? Yes ( ) No ( )
15.
16.
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BIBLIOGRAPHY
News Papers
Business Stardard Economic Times
Website
www.google.com www.amfiindia.com www.mutualfundsindia.com www.sebi.com www.njindiainvest.com
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