Summer Training Project Report On

Study on Role of capital market in India Submitted in Partial fulfillment of requirement of award of MBA degree of

GGSIPU, New Delhi

Submitted By Name : Pra een !umar "nrolment No # $%%$&'%()$* MBA (rd Sem+ Bat,h# *%$*#$-

Northern India "ngineering .ollege

/Affiliated to GGSIPU0 1.#*', Sha2tri Par!, Delhi#$$%%&

ACKNOWL !"# NT
My Project work with Future Generally as a summer trainee has been a great learning experience. It added a great value to my overall knowledge, thinking ability and personality as a whole. I was exposed to the real market and gained irst hand invaluable experience in the insurance industry. I would like to bestow my gratitude to all who helped me during the course o the project or their inspiring guidance and kind advice throughout the project work. I am highly thank ul to the whole team o Future Generali India Insurance !o. "td., #onal o ice, $ew %elhi or providing me with the opportunity and acility o learning in their organi#ation. I would like to extend my deep gratitude to my indu$try guide and mentor #r% &ai Pal &harekhan. Ltd% or his assistance and use ul comments. I would like to thank #$% A$im Sa'aor'(sst. Pro cum )raining and Placement * icer+ and #$% !i(ya "ang)ar *+O! #,A- o $orthern India ,ngineering !ollege, GG&IP- who agreed to be my Faculty guide or her caring and supportive attitude and assistance throughout the internship in preparing this report. &he has been a constant source o knowledge, in ormation, help and motivation or me throughout this project. Finally, I would also like to thank my parents and all my dear riends or their kind cooperation, advice and encouragement during the long and arduous task o preparing this report and carrying out the project

&ignature ...................... $ame/ Pra(een kumar

3AB4" 51 .5N3"N3S
SN5 + $+ *+ ( (+ -++ &+ '+ :+ ;+ 5b7e,ti e2 of the 2tudy Introdu,tion of the to8i, 6e iew of literature .om8any Profile Data Analy2i2 9 Inter8retation 1inding of the Study .on,lu2ion2 6e,ommendation2 9 Sugge2tion2 Bibliogra8hy Anne<ur PA63I.U4A6S PAG" N5+

C+APT R . / O,& CTI0 S O1 T+ ST2!3

'0+ )o study the trend o the investor in currant scenario. '1+ )o determine the Pre erence o the investor towards the in the various alternative. '2+ )o know the awareness o the investor towards the mutual und. '3+ )o study the pre erence o the investor towards mutual und in di erent category.

C+APT R . 4 INTRO!2CTION TO T+ TOPIC ROL O1 CAPITAL #ARK T IN IN!IA

)he capital market is market where the !ompanies and governments can raise long.term unds. It is a market in which money is lent or periods longer than a year. ( nation4s capital market includes such inancial institutions as banks, insurance companies, and stock exchanges that channel long.term investment unds to commercial and industrial borrowers. -nlike the money market, on which lending is ordinarily short term, the capital market typically machinery. $ature and !onstituents/ )he capital market consists o number o individuals and institutions 'including the government+ that canali#e the supply and demand or long. term capital and claims on capital. )he stock exchange, commercial banks, co.operative banks, saving banks, development banks, insurance companies, investment trust or companies, etc., are important constituents o the capital markets. !e5t or ,ond market )he bond market 'also known as the debt, credit, or ixed income market+ is a inancial
market where participants buy and sell debt securities, usually in the orm o bonds. (s o

inances

ixed investments like those in buildings and

1556, the si#e o the worldwide bond market 'total debt outstanding+ is an estimated 781.1 trillion, o which the si#e o the outstanding -.&. bond market debt was 720.1 trillion according to 9I& 'or alternatively 723.2 trillion according to &,M(. STOCK OR 62IT3 #ARK T ( $tock market or e7uity market is a public market 'a loose network o economic transactions, not a physical acility or discrete entity+ or the trading o company stock

and derivatives at an agreed price: these are securities listed on a stock exchange as well as those only traded privately. India;s growth story has important implications or the capital market, which has grown sharply with respect to several parameters < amounts raised number o stock exchanges and other intermediaries, listed stocks, market capitali#ation, trading volumes and turnover, market instruments, investor population, issuer and intermediary pro iles. )he capital market consists primarily o the debt and e=uity markets. >istorically, it contributed signi icantly to mobili#ing unds to meet public and private companies; inancing re=uirements. )he introduction o exchange.traded derivative instruments such as options and utures has enabled investors to better hedge their positions and reduce risks. India;s debt and e=uity markets rose rom ?@ per cent in 066@ to 025 per cent o G%P in 155@. 9ut the growth relative to the -&, Malaysia and &outh Aorea remains low and largely skewed, indicating immense latent potential. India;s debt markets comprise government bonds and the corporate bond market 'comprising P&-s, corporates, inancial institutions and banks+. India compares well with other emerging economies in terms o sophisticated market design o e=uity spot and derivatives market, widespread retail participation and resilient li=uidity. Role of capital market during t'e pre$ent cri$i$. In addition to resource allocation, capital markets also provided a medium or risk management by allowing the diversi ication o risk in the economy. )he well. unctioning capital market improved in ormation =uality as it played a major role in encouraging the adoption o stronger corporate governance principles, thus supporting a trading environment, which is ounded on integrity. "i=uid markets make it possible to obtain inancing or capital.intensive projects with long gestation periods. For a long time, the Indian market was considered too small to warrant much attention. >owever, this view has changed rapidly as vast amounts o international investment have poured into our markets over the last decade. )he Indian market is no longer viewed as a static universe but as a constantly evolving market providing attractive opportunities to the global investing community.

C+APT R . 4 CO#PAN3 PRO1IL

SHAREKHAN OFFERS YOU THE FOLLOWING:-

CLASSIC ACCO2NT )his is an -ser Friendly Product which allows the client to trade through website www.sharekhan.com and is suitable or the retail investor who is risk.averse and hence pre ers to ivest in stocks or who do not trade too re=uently.

Features
a+ b+ c+ d+ e+ + g+ h+ i+ j+ *nline trading account or investing in ,=uity and %erivatives via www.sharekhan.com "ive )erminal and &ingle terminal or NS Ca$'8 NS 19O 9 ,S . Integration o *n.line trading, &aving 9ank and %emat (ccount. Instant cash trans er acility against purchase B sale o shares. !ompetative transaction charges. Instant order and trade con irmation by ,.mail. &treaming Cuotes '!ash B %erivatives+. Personli#ed market watch. &ingle screen inter ace or !ash and derivatives and more. Provision to enter price trigger and view the same online in market watch.

SP ! TRA! ACCO2NT )his is an internet.based so tware application, that enables you to buy and sell in an instant. It is ideal or active traders and jobbers who transact re=uently during day;s session to capitalise on intra.day price movement.

Features
a0 b0 ,0 d0 e0 f0 In2tant order "<e,ution and .onfirmation+ Single 2,reen trading terminal for NS" .a2h, NS" 195 9 BS"+ 6eal#time 2treaming quote2, ti,#by#ti, ,hart2+ Mar!et 2ummary /.o2t traded 2,ri8, highe2t ,alue et,+0 =ot !ey2 2imilar to broa!er2 terminal+ Alert2 and reminder2+

g0

Ba,!#u8 fa,ility to 8la,e trade2 on Dire,t Phone line2+

TRA! TI" R is a next generation online trading product that brings the power o broker4s terminal to customer P!. It is session to capitali#e on intraday price movement. )rade tiger is an internet.based application available on a !%, which provides everything which trader needs on one screen.
1eature$

a+ b+ c+ d+ e+ + g+ h+

( single plat orm or multiple exchange 9&, B $&, '!ash B FB*+, M!D, $!%,D, Mutual Funds, IP*s. Multiple !harts with tick by tick Intraday and at ,nd o %ay !harting powered with various studies. Instant order ,xecution and !on irmation. -ser can save his own de ined screen as well as graph ternplate, that is, saving the layout or uture use. -ser de ined alert settings on input &tock Price trigger.

!IAL:N:TRA! (long with enabling access or your trade online, the !"(&&I! and )E(%,. )IG,E (!!*-$) also gives you our %ial.ntrade serives. Fith this service, all you have to do is dial our dedicated phone lines /:;<<:44:=><<8 ?@=<:=><<.

AWAR!S AN! AC+I 0 # NTS

Most amongst

Eated among the top 15 wired companies along with Eeliance, >-GI, In osys etc. by H9-&I$,&& )*%(IH Ganuary 1553 edition. (warded H)op %omestic 9rokerage >ouseH our times by ,uro Money and (sai Money. Pioneers o online trading n India amongst the top 2 online trading websites rom India. pre erred inancial destination among online broking customers. India4s most pre ered brokers within @ years H(waa# !ustomers (ward 155@H )he team has completed over -& 7@ billion worth o deals in last @ years . making it the most signi icant players raising e=uity in the indian market
+

CHAPTER : 3

REVIEW OF LITERATURE

CAPITAL #ARK T
)he capital market is market where the !ompanies and governments can raise long.term unds. It is a market in which money is lent or periods longer than a year. ( nation4s capital market includes such inancial institutions as banks, insurance companies, and stock exchanges that channel long.term investment unds to commercial and industrial borrowers. -nlike the money market, on which lending is ordinarily short term, the capital market typically inances ixed investments like those in buildings and machinery. Nature and Con$tituent$/ )he capital market consists o number o individuals and institutions 'including the government+ that canali#e the supply and demand or long. term capital and claims on capital. )he stock exchange, commercial banks, co.operative banks, saving banks, development banks, insurance companies, investment trust or companies, etc., are important constituents o the capital markets. )he capital market, like the money market, has three important!omponents, namely the

suppliers o loanable unds, the borrowers and the Intermediaries who deal with the leaders on the one hand and the 9orrowers on the other. )he demand or capital comes mostly rom agriculture, industry, trade )he government. )he predominant orm o industrial organi#ation developed !apital Market becomes a necessary in rastructure or ast industriali#ation. !apital market not concerned solely with the issue o new claims on capital, 9ut also with dealing in existing claims.Image o the captial marketplace

Debt or Bond market

The bond market (also known as the debt, credit, or fixed income market) is a
financial market where participants buy and sell debt securities, usually in the form

of bonds. As of 2009, the si e of the worldwide bond market (total debt outstandin!) is an estimated "#2.2 trillion $%&, of which the si e of the outstandin! '.(. bond market debt was ")%.2 trillion accordin! to *+( (or alternati,ely ")-.) trillion accordin! to (+./A).
0early all of the "#22 billion a,era!e daily tradin! ,olume in the '.(. bond market takes place between broker1dealers and lar!e institutions in a decentrali ed, o,er1the1 counter (2T3) market. 4owe,er, a small number of bonds, primarily corporate, are listed on exchan!es.

5eferences to the 6bond market6 usually refer to the !o,ernment bond market, because of its si e, li7uidity, lack of credit risk and, therefore, sensiti,ity to interest
rates. *ecause of the in,erse relationship between bond ,aluation and interest

rates, the bond market is often used to indicate chan!es in interest rates or the shape of the yield cur,e

broader indices that can be used to measure global bond port olios, or may be urther subdivided by maturity andJor sector or managing speciali#ed port olios.

STOCK OR EQUITY MARKET

( $tock market or e7uity market is a public market 'a loose network o economic transactions, not a physical acility or discrete entity+ or the trading o company stock and deri,ati,es at an a!reed price8 these are securities listed on a stock
exchan!e as well as those only traded pri,ately. The si e of the world stock market was estimated at about ")9.9 trillion '( at the be!innin! of 2ctober 200#. The total world deri,ati,es market has been estimated at about ":9% trillion face or nominal ,alue, %% times the si e of the entire world economy. The ,alue of the deri,ati,es market, because it is stated in terms of notional ,alues, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual ,alue. /oreo,er, the ,ast ma;ority of deri,ati,es <cancel< each other out (i.e., a deri,ati,e <bet< on an e,ent occurrin! is offset by a comparable deri,ati,e <bet< on the e,ent not occurrin!). /any such relati,ely illi7uid securities are ,alued as marked to model, rather than an actual market price.

The stocks are listed and traded on stock exchan!es which are entities of a corporation or mutual or!ani ation speciali ed in the business of brin!in! buyers and sellers of the or!ani ations to a listin! of stocks and securities to!ether. The lar!est stock market in the 'nited (tates, by market cap is the 0ew =ork (tock >xchan!e, 0=(>, while in 3anada, it is the Toronto (tock >xchan!e. /a;or >uropean examples of stock exchan!es include the

?ondon (tock >xchan!e, @aris *ourse, and the Aeutsche *Brse. Asian examples
include the Tokyo (tock >xchan!e, the 4on! Con! (tock >xchan!e, the (han!hai

(tock >xchan!e, and the *ombay (tock >xchan!e. +n ?atin America, there are such
exchan!es as the */D. *o,espa and the */E.

ROLEOFCAPITALMARKET

)he primary role o the capital market is to raise long.term unds or governments, banks, and corporations while providing a plat orm or the trading o securitie )his undraising is regulated by the per ormance o the stock and bond markets within the capital market. )he member organi#ations o the capital market may issue stocks and bonds in order to raise unds. Investors can then invest in the capital market by purchasing those stocks and bonds.
The capital market, howe,er, is not without risk. +t is important for in,estors to understand market trends before fully in,estin! in the capital market. To that end,

there are ,arious market indices a,ailable to in,estors that reflect the present performance of the market.

Regu at!on o" t#e Ca$!ta Market

>,ery capital market in the world is monitored by financial re!ulators and their respecti,e !o,ernance or!ani ation. The purpose of such re!ulation is to protect in,estors from fraud and deception. .inancial re!ulatory bodies are also char!ed with minimi in! financial losses, issuin! licenses to financial ser,ice pro,iders, and enforcin! applicable laws.

T#e Ca$!ta Market%& In" uen'e on Internat!ona Trade 3apital market in,estment is no lon!er confined to the boundaries of a sin!le nation. TodayFs corporations and indi,iduals are able, under some re!ulation, to in,est in the capital market of any country in the world. +n,estment in forei!n capital markets has caused substantial enhancement to the business of international trade. capital market with hi!h li7uidity and hi!h transparency is predicated upon a secondary market with the same 7ualities.

ROLE OF CAPITAL MARKET I( I(DIAG

+ndiaFs !rowth story has important implications for the capital market, which has !rown sharply with respect to se,eral parameters H amounts raised number of stock exchan!es and other intermediaries, listed stocks, market capitali ation, tradin! ,olumes and turno,er, market instruments, in,estor population, issuer and intermediary profiles.
The capital market consists primarily of the debt and e7uity markets. 4istorically, it

contributed si!nificantly to mobili in! funds to meet public and pri,ate companiesF financin! re7uirements. The introduction of exchan!e1traded deri,ati,e instruments such as options and futures has enabled in,estors to better hed!e their positions and reduce risks.
+ndiaFs debt and e7uity markets rose from :I per cent in %99I to %)0 per cent of JA@ in 200I. *ut the !rowth relati,e to the '(, /alaysia and (outh Corea remains low and lar!ely skewed, indicatin! immense latent potential. +ndiaFs debt markets comprise !o,ernment bonds and the corporate bond market (comprisin! @('s, corporates, financial institutions and banks).

+ndia compares well with other emer!in! economies in terms of sophisticated market desi!n of e7uity spot and deri,ati,es market, widespread retail participation and resilient li7uidity.

and .itch, the net cumulati,e portfolio flows from 200)109 (bonds and e7uities) amounted to ")I billion. The number of forei!n institutional in,estors re!istered with (>*+ rose from none in %99219) to I2# in 200010%, to about %,000 in 200910:. +ndiaFs stock market rose fi,e1fold since mid1200) and outperformed world indices with returns far outstrippin! other emer!in! markets, such as /exico (I2 per cent), *ra il (-) per cent) or J33 economies such as Cuwait (29 per cent) in .=109.
+n 2009, +ndian companies raised more than "9 billion on the *(>, 0(> and other re!ional stock exchan!es. *uoyed by internal economic factors and forei!n capital flows, +ndian markets are !lobally competiti,e, e,en in terms of pricin!, efficiency and li7uidity.

US &ub $r!me 'r!&!&G The financial crisis facin! the Kall (treet is the worst since the Jreat Aepression

and will ha,e a ma;or impact on the '( and !lobal economy. The on!oin! !lobal financial crisis will ha,e a LdominoF effect and spill o,er all aspects of the economy. Aue to the Kestern worldFs messianic faith in the market forces and dere!ulation, the market friendly !o,ernments ha,e no choice but to step in.
The top fi,e in,estment banks in the '( ha,e ceased to exist in their pre,ious forms. *ears (tearns was taken o,er some time a!o. .annie /ae and .reddie /ac are nationalised to pre,ent their collapse. .annie and .reddie to!ether underwrite half of the home loans in the 'nited (tates, and the sum in,ol,ed is of " ) trillionHabout double the entire annual output of the *ritish economy. This is the bi!!est rescue operation since the credit crunch be!an. ?ehman *rothers, an in,estment bank with a %I# year1old history, was declared bankrupt8 /errill ?ynch, another Kall (treet icon, chose to pre1empt a similar fate by decidin! to sell to the *ank of America8 and Joldman (achs and /or!an (tanley ha,e decided to transform themsel,es into ordinary deposit banks. A+J, the worldFs lar!est insurance company, has sur,i,ed throu!h the in;ection of funds worth " #I billion from the '( Jo,ernment.

T#e )ue&t!on ar!&e&* +#, #a& t#!& #a$$ened*esides the cyclical crisis of capitalism, there are some recent factors which ha,e contributed towards this crisis. 'nder the so1called Minno,ati,eN approach, financial institutions systematically underestimated risks durin! the boom in property prices, which makes such boom more prolon!ed. This relates to the shortsi!htedness of speculators and their unrestrained !reed, and they, durin! the asset price boom, belie,ed that it would stay fore,er. This resulted in keepin! the risk aspects at a minimum and thus resortin! to more and more risk takin! financial acti,ities. ?oans were made on the basis of collateral whose ,alue was inflated by a bubble. And the collateral is now worth less than the loan. 3redit was a,ailable up to full ,alue of the property which was assessed at inflated market prices. 3redits were !i,en in anticipation that risin! property prices will continue. 'nder loomin! recession and uncertainty, to pay back their mort!a!e many of those who en!a!ed in such an exercise are forced to sell their houses, at a time when the banks are reluctant to lend and buyers would like to wait in the hope that property prices will further come

down. All these factors would lead to a further decline in property prices.

E""e't o" t#e &ub$r!me 'r!&!& on Ind!a* Jlobali ation has ensured that the +ndian economy and financial markets cannot stay insulated from the present financial crisis in the de,eloped economies. +n the li!ht of the fact that the +ndian economy is linked to !lobal markets throu!h a full float in current account ( trade and ser,ices) and partial float in capital account (debt and e7uity), we need to analy e the impact based on three critical factorsG A,ailability of !lobal li7uidity8 demand for +ndia in,estment and cost thereof and decreased consumer demand affectin! +ndian exports. +n,estment flows into +ndia are in doubt. The impact of this will be three1foldG The element of JA@ !rowth dri,en by off1 shore flows (alon! with skills and technolo!y) will be diluted8 correction in the asset prices which were hitherto pushed by forei!n in,estors and demand for domestic li7uidity puttin! pressure on interest rates . Khile the !lobal financial system takes time to Mnurse its woundsN leadin! to low demand for in,estments in emer!in! markets, the impact will be on the cost and related risk premium. The impact will be felt both in the trade and capital account.
+ndian companies which had access to cheap forei!n currency funds for financin! their import and export will be the worst hit. Also, forei!n funds (throu!h debt and e7uity) will be a,ailable at hu!e premium and would be limited to blue1chip companies.

The impact of which, a!ain, will be three1foldG 5educed capacity expansion leadin! to supply side pressure8 increased interest expenses to affect corporate

profitability and increased demand for domestic li7uidity puttin! pressure on the interest rates.
3onsumer demand in de,eloped economies is certain to be hurt by the present crisis, leadin! to lower demand for +ndian !oods and ser,ices, thus affectin! the +ndian exports.
The impact of which, once a!ain, will be three1foldG >xport1oriented units will be the worst hit impactin! employment8 reduced exports will further widen the trade !ap to put pressure on rupee exchan!e rate and inter,ention leadin! to suckin! out li7uidity and pressure on interest rates.

T#e !m$a't on t#e "!nan'!a market& +! be t#e "o o+!ngG >7uity market will continue to remain in bearish mood with reduced off1shore flows, limited domestic appetite due to li7uidity pressure and pressure on corporate earnin!s8 while the inflation would stay under control, increased demand for domestic li7uidity will push interest rates hi!her and we are likely to witness !radual rupee depreciation and depleted currency reser,es. 2,erall, while 5*+ would in;ect li7uidity throu!h

355O(?5 cuts, maintainin! !rowth beyond :P will be a stru!!le.

The bankin! sector will ha,e the least impact as hi!h interest rates, increased demand for rupee loans and reduced statutory reser,es will lead to impro,ed 0+/ while, on the other hand, other income from cross1border business flows and distribution of in,estment products will take a hit.

*anks with capabilities to !enerate low cost 3A(A and ero cost float funds will !ain the most as re,enues from financial intermediation will dri,e the banksF profitability.

Ji,en the dependence on forei!n funds and off1shore consumer demand for the +ndia !rowth story, +ndia cannot wish away from the ne!ati,e impact of the present !lobal financial crisis but should 7uickly focus on alternati,e remedial measures to limit dama!e and look in1wards to sustain !rowthQ Ro e o" 'a$!ta market dur!ng t#e $re&ent 'r!&!&* +n addition to resource allocation, capital markets also pro,ided a medium for risk mana!ement by allowin! the di,ersification of risk in the economy. The well1functionin! capital market impro,ed information 7uality as it played a ma;or role in encoura!in! the adoption of stron!er corporate !o,ernance principles, thus supportin! a tradin! en,ironment, which is founded on inte!rity. li7uid markets make it possible to obtain financin! for capital1intensi,e pro;ects with lon! !estation periods..
.or a lon! time, the +ndian market was considered too small to warrant much attention. 4owe,er, this ,iew has chan!ed rapidly as ,ast amounts of international in,estment ha,e poured into our markets o,er the last decade. The +ndian market is no lon!er ,iewed as a static uni,erse but as a constantly e,ol,in! market pro,idin! attracti,e opportunities to the !lobal in,estin! community. 0ow durin! the present financial crisis, we saw how capital market stood still as the symbol of better risk mana!ement practices adopted by the +ndians. Thou!h we obser,ed a hu!e fall in the

sensex and other stock market indicators but that was all due to low confidence amon! the in,estors. *ecause balance sheet of most of the +ndian companies listed in the sensex were reflectin! profit e,en then people kept on withdrawin! money. Khile there was a panic in the capital market due to withdrawal by the .++s, we saw +ndian institutional in,estors like insurance and mutual funds comin! for the rescue under (>*+ !uidelines so that the confidence of the in,estors doesnFt !o

low.
(>*+ also came up with ,arious norms includin! more liberal policies re!ardin! participatory notes, restrictin! the exit from close ended mutual funds etc. to boost the in,estment.

Fhile talking about currency crisis, the rupee kept on depreciating against the dollar mainly due to the withdrawals by FIIs. &o , the capital market tried to attract FIIs once again. &,9I came up with many revolutionary re orms to attract the oreign investors so that the depreciation o rupee could be put to haul.

#2T2AL 12N!S AS A PART O1 CAPITAL #ARK T

I(TRODUCTIO( TO MUTUAL FU(D A(D ITS .ARIOUS ASPECTS

Mutual und is a trust that pools the savings o a number o investors who share a common inancial goal. )his pool o money is invested in accordance with a stated objective. )he joint ownership o the und is thus KMutualL, i.e. the und belongs to all investors. )he money thus collected is then invested in capital market instruments such as shares, debentures and other securities. )he income earned through these investments and the capital appreciations reali#ed are shared by its unit holders in proportion the number o units owned by them. )hus a Mutual Fund is the most suitable investment or the common man as it o ers an opportunity to invest in a diversi ied, pro essionally managed basket o securities at a relatively low cost. ( Mutual Fund is an investment tool that allows small investors access to a well.diversi ied port olio o e=uities, bonds and other securities. ,ach shareholder participates in the gain or loss o the und. -nits are issued and can be redeemed as needed. )he und;s $et (sset value '$(M+ is determined each day. Investments in securities are spread across a wide cross.section o industries and sectors and thus the risk is reduced. %iversi ication reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual und issues units to the investors in accordance with =uantum o money invested by them. Investors o mutual unds are known as unit holders. Fhen an investor subscribes or the units o a mutual und, he becomes part owner o the assets o the und in the same proportion as his contribution amount put up with the corpus 'the total amount o the und+. Mutual Fund investor is also known as a mutual und shareholder or a unit holder. (ny change in the value o the investments made into capital market instruments 'such as shares, debentures etc+ is re lected in the $et (sset Malue '$(M+ o the scheme. $(M is de ined as the market value o the Mutual Fund scheme4s assets net o its liabilities. $(M o a scheme is calculated by dividing the market value o scheme4s assets by the total number o units issued to the investors.

A!0ANTA" S O1 #2T2AL 12N!

Port olio %iversi ication Pro essional management Eeduction J %iversi ication o Eisk "i=uidity Flexibility B !onvenience Eeduction in )ransaction cost &a ety o regulated environment !hoice o schemes )ransparency

DISAD.A(TA/E OF MUTUAL FU(D

0o control o,er 3ost in the 4ands of an +n,estor 0o tailor1made @ortfolios /ana!in! a @ortfolio .unds Aifficulty in selectin! a (uitable .und (chem

/utual funds can be classified as follow G

Ba&ed on t#e!r &tru'ture*

2pen1ended fundsG +n,estors can buy and sell the units from the fund, at

an, $o!nt o" t!me0

3lose1ended fundsG These funds raise money from in,estors only once.
Therefore, after the offer period, fresh in,estments can not be made into the fund. +f the fund is listed on a stocks exchan!e the units can be traded like stocks (>.!., /or!an (tanley Jrowth .und). 5ecently, most of the 0ew .und 2ffers of close1ended funds pro,ided li7uidity window on a periodic basis such as monthly or weekly. 5edemption of units can be made durin! specified inter,als. Therefore, such funds ha,e relati,ely low li7uidity.

Ba&ed on t#e!r !n1e&tment ob2e't!1e* E)u!t, "und&G These funds in,est in e7uities and e7uity related instruments.
Kith fluctuatin! share prices, such funds show ,olatile performance, e,en losses. 4owe,er, short term fluctuations in the market, !enerally smoothens out in the lon! term, thereby offerin! hi!her returns at relati,ely lower ,olatility. At the same time, such funds can yield !reat capital appreciation as, historically, e7uities ha,e outperformed all asset classes in the lon! term. 4ence, in,estment in e7uity funds should be considered for a period of at least )1I years. +t can be further classified asG

!3 Inde4 "und&1 +n this case a key stock market index, like *(> (ensex or 0ifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition and indi,idual stock wei!hta!es.
!!3 E)u!t, d!1er&!"!ed "und&5 %00P of the capital is in,ested in e7uities spreadin!

across different sectors and stocks.

!!!63 D!1!dend ,!e d "und&5 it is similar to the e7uity di,ersified funds except that

they in,est in companies offerin! hi!h di,idend yields. i,) T#emat!' "und&5 +n,est %00P of the assets in sectors which are related throu!h some theme.
e.!. 1An infrastructure fund in,ests in power, construction, cements sectors etc.

,) Se'tor "und&5 +n,est %00P of the capital in a specific sector. e.!. 1 A bankin! sector fund will in,est in bankin! stocks.
,i) ELSS1 >7uity ?inked (a,in! (cheme pro,ides tax benefit to the in,estors.

Ba an'ed "und*

Their in,estment portfolio includes both debt and e7uity. As a result,

on the risk1return ladder, they fall between e7uity and debt funds. *alanced funds are the ideal mutual funds ,ehicle for in,estors who prefer spreadin! their risk across ,arious instruments. .ollowin! are balanced funds classesG

i) Debt5or!ented "und& 5+n,estment below 9IP in e7uities.

ii) E)u!t,5or!ented "und& 5+n,est at least 9IP in e7uities, remainin! in debt. Debt "und* They in,est only in debt instruments, and are a !ood option for

in,estors a,erse to idea of takin! risk associated with e7uities. Therefore, they in,est exclusi,ely in fixed1income instruments like bonds, debentures, Jo,ernment of +ndia securities8 and money market instruments such as

certificates of deposit (3A), commercial paper (3@) and call money. @ut your money into any of these debt funds dependin! on your in,estment hori on and needs. i) L!)u!d "und&5 These funds in,est %00P in money market instruments, a lar!e portion bein! in,ested in call money market. ii) /! t "und& ST5 They in,est %00P of their portfolio in !o,ernment securities of and T1bills. iii) F oat!ng rate "und& 5 +n,est in short1term debt papers. .loaters in,est in debt instruments which ha,e ,ariable coupon rate.
i,) Arb!trage "und5 They !enerate income throu!h arbitra!e opportunities due to mis1 pricin! between cash market and deri,ati,es market. .unds are allocated to e7uities, deri,ati,es and money markets. 4i!her proportion (around :IP) is put in money markets, in the absence of arbitra!e opportunities.

,) /! t "und& LT5 They in,est %00P of their portfolio in lon!1term !o,ernment securities. ,i) In'ome "und& LT5 Typically, such funds in,est a ma;or portion of the portfolio in lon!1term debt papers. ,ii) MIP&5 /onthly +ncome @lans ha,e an exposure of :0P190P to debt and an

exposure of %0P1)0P to e7uities.

,iii) 1!!!3 FMP&5 fixed monthly plans in,est in debt papers whose maturity is in line

with that of the fund.

RESEARC7 MET7ODOLO/Y

5esearch /ethodolo!y
This report is based on primary as well secondary data, howe,er primary data collection was !i,en more importance since it is o,erhearin! factor in attitude studies. 2ne of the

most important users of research methodolo!y is that it helps in identifyin! the problem, collectin!, analy in! the re7uired information data and pro,idin! an alternati,e solution to the problem .+t also helps in collectin! the ,ital information that is re7uired by the top mana!ement to assist them for the better decision makin! both day to day decision and critical ones.

Data &our'e&*
5esearch is totally based on primary data. (econdary data can be used only for the reference. 5esearch has been done by primary data collection, and primary data has been collected by interactin! with ,arious people. The secondary data has been collected throu!h ,arious ;ournals and websites.

Durat!on o" Stud,*

The study was carried out for a period of two months, from % st Ruly to %)th Ruly 20%0.

Sam$ !ng*
Sam$ !ng $ro'edure* The sample was selected of them who are the
customersO,isitors of (tate *ank if +ndia, *orin! 3anal 5oad *ranch, irrespecti,e of them bein! in,estors or not or a,ailin! the ser,ices or not. +t was also collected throu!h personal ,isits to persons, by formal and informal talks and throu!h fillin! up the 7uestionnaire prepared. The data has been analy ed by usin! mathematicalO(tatistical tool.

Sam$ e &!8e* The sample si e of my pro;ect is limited to 200 people only. 2ut of which only %20 people had in,ested in /utual .und. 2ther 90 people did not ha,e in,ested in /utual .und. Sam$ e In&trument
Aata has been presented with the help of bar !raph, pie charts, line !raphs etc.

Sample Tool
Suestioner

L!m!tat!on
(ome of the persons were not so responsi,e. @ossibility of error in data collection because many of in,estors may ha,e not !i,en actual answers of my 7uestionnaire (ample si e is limited to 200 ,isitors of reliance mutual funds *ranch, Aelhi out of these only %20 had in,ested in /utual .und. The sample. (i e may not ade7uately represent the whole market.(ome respondents were reluctant to di,ul!e personal information which can affect the ,alidity of all responses. The research is confined to a certain part of Aelhi D 0oida.

ANAL3SIS 9 INT RPR TATION O1 T+ !ATA

A(ALYSIS 9 I(TERPRETATIO( OF T7E DATA

:;30 Edu'at!ona Qua !"!'at!on o" !n1e&tor& o" De #! 0

"du,ational >ualifi,ation Graduate?8o2t Graduate Under Graduate 5ther 3otal

Number of In e2tor2 ;; *& : $*%

Inter$retat!on*2ut of %20 /utual .und in,estors :%P of the in,estors

in ?udhiana are JraduateO@ost Jraduate, 2)P are 'nder Jraduate and 9P

are others (under 4(3).

:<30 O''u$at!on o" t#e !n1e&tor& o" De #!0

O''u$at!on
Jo,t. (er,ice @,t. (er,ice *usiness A!riculture 2thers .

(o0 o" In1e&tor&

)0 -I )I 9

Inter$retat!on*
+n 2ccupation !roup out of %20 in,estors, )#P are @,t. >mployees, 2IP are *usinessman, 29P are Jo,t. >mployees, )P are in A!riculture and IP are in others.

:=30 Mont# , Fam! , In'ome o" t#e In1e&tor& o" De #! 0

Income "roup N15555 15555. 35555 35550.O5555 O5550.85555 P85555

No of In(e$tor$ @ 01 18 32 21

Inter$retat!on +n the +ncome Jroup of the in,estors of Aelhi, out of %20 in,estors, )9P in,estors that is the maximum in,estors are in the monthly income !roup 5s. 20,00% to 5s. )0,000, (econd one i.e. 2:P in,estors are in the monthly income !roup of more than 5s. )0,000 and the minimum in,estors i.e. -P are in the monthly income !roup of below 5s. %0,000

:>3 In1e&tor& !n1e&ted !n d!""erent k!nd o" !n1e&tment&0

Cind of +n,estments
(a,in! AO3

.ixed deposits +nsurance /utual .und @ost office (0(3) (haresOAebentures JoldO(il,er 5eal >state

0o. of 5espondents %9I %-# %I2 %20 :I I0 )0 9I

Inter$retat!on* .rom the abo,e !raph it can be inferred that out of 200
people, 9:.IP people ha,e in,ested in (a,in! AOc, :9P in +nsurance, :-P in .ixed Aeposits, 90P in /utual .und, ):.IP in @ost 2ffice, 2IP in (hares or Aebentures, %IP in JoldO(il,er and )2.IP in 5eal >state.

?0 Pre"eren'e o" "a'tor& +#! e !n1e&t!ng

.actors (a) ?i7uidity (b) ?ow 5isk (c) 4i!h 5eturn (d) Trust

0o. of 5espondents

-0

90

9-

)9

Inter$retat!on*
2ut of 200 @eople, )2P @eople prefer to in,est where there is 4i!h 5eturn, )0P prefer to in,est where there is ?ow 5isk, 20P prefer easy ?i7uidity and %#P prefer Trust

@0 A+arene&& about Mutua Fund and !t& O$erat!on&

5esponse 0o. of 5espondents

=es %)I

0o 9I

Inter$retat!on
.rom the abo,e chart it is inferred that 9:P @eople are aware of /utual .und and its operations and ))P are not aware of /utual .und and its operations.

A0 Sour'e o" !n"ormat!on "or 'u&tomer& about Mutua Fund

Sour'e o" !n"ormat!on Ad,ertisement @eer Jroup *ank .inancial Ad,isors (o0 o" Re&$ondent& %# 2I )0 92

Inter$retat!on*
.rom the abo,e chart it can be inferred that the .inancial Ad,isor is the most important source of information about /utual .und. 2ut of %)I 5espondents, -9P know about /utual fund Throu!h .inancial Ad,isor, 22P throu!h *ank, %9P throu!h @eer Jroup and %)P throu!h Ad,ertisement

#. In1e&tor& !n1e&ted !n Mutua Fund

Re&$on&e =>( 02 Total (o0 o" Re&$ondent& %20 #0 200

Inter$retat!on*
2ut of 200 @eople, 90P ha,e in,ested in /utual .und and -0P do not ha,e

in,ested in /utual .und.

B0 Rea&on "or not !n1e&ted !n Mutua Fund

Rea&on 0ot Aware 4i!her 5isk 0ot any (pecific 5eason (o0 o" Re&$ondent&

@? ? ;C

Inter$retat!on*
2ut of #0 people, who ha,e not in,ested in /utual .und, #%P are not aware of /utual .und, %)P said there is likely to be hi!her risk and 9P do not ha,e any specific reason.

;C0 In1e&tor& !n1e&ted !n d!""erent A&&et& Management Co0 :AMC3

(ame o" AMC

(*+/. 'T+ 4A.3 5eliance +3+3+ @rudential Cotak 2thers

(o0 o" In1e&tor& II :I )0 :I I9 -I :0

Inter$retat!on*
+n ?udhiana most of the +n,estors preferred 'T+ and 5eliance /utual .und. 2ut of %20 +n,estors 92.IP ha,e in,ested in each of them, only -9P ha,e in,ested in (*+/., -:P in +3+3+ @rudential, ):.IP in Cotak and 2IP in 4A.3.

;;0 C#anne Pre"erred b, t#e In1e&tor& "or Mutua Fund In1e&tment

3hannel 0o. of 5espondents .inancial Ad,isor :2 *ank %# A/3 )0

Inter$retat!on*
2ut of %20 +n,estors 90P preferred to in,est throu!h .inancial Ad,isors, 2IP

throu!h A/3 and %IP throu!h *ank.

;<0 Mode o" In1e&tment Pre"erred b, t#e In1e&tor&

/ode of +n,estment 0o. of 5espondents 2ne time +n,estment (ystematic +n,estment @lan ((+@) :# -2

Inter$retat!on*
2ut of %20 +n,estors 9IP preferred 2ne time +n,estment and )I P @referred throu!h (ystematic +n,estment @lan

/?% Preferred Portfolio$ 5y in(e$tor

Port"o !o
>7uity Aebt *alanced

(o0 o" In1e&tor&

I9 20 --

Inter$retat!on*
.rom the abo,e !raph -9P preferred >7uity @ortfolio, ):P preferred *alance and

%:P preferred Aebt portfolio

/A% Option for getting Return Preferred 5y t'e In(e$tor$

2ption 0o. of 5espondents

Ai,idend @ayout 2I

Ai,idend 5ein,estment %0

Jrowth #I

Inter$retat!on*
.rom the abo,e !raph :%P preferred Jrowth 2ption, 2%P preferred Ai,idend

@ayout and #P preferred Ai,idend 5ein,estment 2ption.

1inding$ In %elhi most o the Investors were Graduate or Post Graduate and below >&! there were very ew in numbers. In *ccupation group most o the Investors were Govt. employees, the second most Investors were Private employees and the least were associated with (griculture. In amily Income group, between Es. O5,550. 85,555 were more in numbers, the second most were in the Income group o more than Es.85,555and the least were in the group o below Es. 15,555. (bout all the Eespondents had a &aving (Jc in 9ank, ?OQ Invested in Fixed %eposits, only O5Q Eespondents invested in Mutual und. Mostly Eespondents pre erred >igh Eeturn while investment, the second most pre erred "ow Eisk then li=uidity and the least pre erred )rust. *nly O?Q Eespondents were aware about Mutual und and its operations and 22Q were not. *ut o 85 Eespondents 80Q were not aware o Mutual Fund, 02Q told there is not any speci ic reason or not invested in Mutual Fund and OQ told there is likely to be higher risk in Mutual Fund. (mong 155 Eespondents only O5Q had invested in Mutual Fund and 35Q did not have invested in Mutual und. *ut o 85 Eespondents 80Q were not aware o Mutual Fund, 02Q told there is not any speci ic reason or not invested in Mutual Fund and OQ told there is likely to be higher risk in Mutual Fund. O5Q Investors pre erred to Invest through Financial (dvisors, 1@Q through (M! 'means %irect Investment+ and 0@Q through 9ank. )he most pre erred Port olio was ,=uity, the second most was 9alance 'mixture o both e=uity and debt+, and the least pre erred Port olio was %ebt port olio.

Con' u&!on
Eunning a success ul Mutual Fund re=uires complete understanding o the peculiarities o the Indian &tock Market and also the psyche o the small investors. )his study has made an attempt to understand the inancial behavior o Mutual Fund investors in connection with the pre erences o 9rand '(M!+, Products, !hannels etc. I observed that many o people have ear o Mutual Fund. )hey think their money will not be secure in Mutual Fund. )hey need the knowledge o Mutual Fund and its related terms. Many o people do not have invested in mutual und due to lack o awareness although they have money to invest. (s the awareness and income is growing the number o mutual und investors are also growing. K9randL plays important role or the investment. People invest in those

!ompanies where they have aith or they are well known with them. )here are many (M!s in Punjab but only some are per orming well due to 9rand awareness. &ome (M!s are not per orming well although some o the schemes o them are giving good return because o not awareness about 9rand. %istribution channels are also important or the investment in mutual und. Financial (dvisors are the most pre erred channel or the investment in mutual und. )hey can change investors; mind rom one investment option to others. Many o investors directly invest their money through (M! because they do not have to pay entry load. *nly those people invest directly who know well about mutual und and its operations and those have time.

Sugge&t!on& and Re'ommendat!on&

)he most vital problem spotted is o ignorance. Investors should be made aware o the bene its. $obody will invest until and unless he is ully convinced. Investors should be made to reali#e that ignorance is no longer bliss and what they are losing by not investing. Mutual unds o er a lot o bene it which no other single option could o er. 9ut most o the people are not even aware o what actually a mutual und isR )hey only see it as just another investment option. &o the advisors should try to change their mindsets. )he advisors should target or more and more young investors. Ioung investors as well as persons at the height o their career would like to go or advisors due to lack o expertise and time. Mutual Fund !ompany needs to give the training o the Individual Financial (dvisors about the FundJ&cheme and its objective, because they are the main source to in luence the investors. 9e ore making any investment Financial (dvisors should irst en=uire about the risk tolerance o the investorsJcustomers, their need and time 'how long they want to invest+. 9y considering these three things they can take the customers into consideration. !ustomers with graduate level education are easier to sell to and there is a large untapped market there. )o succeed however, advisors must provide sound advice and high =uality.

,I,LIO"RAP+3

N WS PAP RS BT'e conomic time$ O2TLOOK #ON 3 T L 0ISION C+ANN L *CN,C AAWA&#2T2AL 12N! +AN! ,OOK : Securitie$ and Cc'ange ,oard of India 1ACT S+ T AN! STAT # NT

We5$it$/ WWW%S,I#1%CO# WWW%#ON 3CONTROL%CO# WWW%A#1IIN!IA%CO# WWW%ONLIN R S ARC+ONLIN %CO# WWW% #2T2AL12N!SIN!IA%CO#

QUESTIO((AIRE A &tud, o" $re"eren'e& o" t#e !n1e&tor& "or !n1e&tment !n mutua "und&0 ;0 Per&ona Deta! &*

(a). 0ameG1 (b). AddG 1 (c). A!eG1 (d). SualificationG1 JraduationO@J 'nder Jraduate 2thers
@honeG1

(e). 2ccupation. @l tick (U) Jo,t. (er @,t. (er *usiness A!riculture 2thers

(!). Khat is your monthly family income approximatelyT @l tick (U).

'p to 5s.%0,000

5s. %0,00% to %I000

5s. %I,00% to 20,000

5s. 20,00% to )0,000

5s. )0,00% and abo,e

<0 Khat kind of in,estments you ha,e made so farT @l tick (U). All applicable. a. (a,in! account e. @ost 2ffice10(3, etc b. .ixed deposits c. +nsurance d. /utual .und h. 5eal >state

f. !. JoldO (il,er (haresOAebentures

=0 Khile in,estin! your money, which factor will you preferT (a) ?i7uidity (b) ?ow 5isk (c) 4i!h 5eturn (d) Trust

>0 Are you aware about /utual .unds and their operationsT @l tick (U). =es

0o

?0 +f yes, how did you know about /utual .undT a. Ad,ertisement b. @eer Jroup c. *anks d. .inancial Ad,isors

@0 4a,e you e,er in,ested in /utual .undT @l tick (U).

=es

0o

A0 +f not in,ested in /utual .und then whyT (a) 0ot aware of /. (b) 4i!her risk (c) 0ot any specific reason

*a- Not a)are of #1

*5-+ig'er ri$k

*c- Not any $pecific

Not Specific rea$on

;. I yes8 in which Mutual Fund you have investedR Pl. tick 'S+. (ll applicable.

a. (*+/.

b. 'T+

c. 4A.3

d. 5eliance e. Cotak

f. 2ther. specify

B. Khen you plan to in,est your money in asset mana!ement co. which A/3 will you preferT Assets /ana!ement 3o. a. (*+/. b. 'T+ c. 5eliance d. 4A.3 e. Cotak f. +3+3+

;C. Khich 3hannel will you prefer while in,estin! in /utual .und (a) .inancial Ad,isor (b) *ank (c) A/3

;;0 Khen you in,est in /utual .unds which mode of in,estment will you preferT @l. tick (U).

a. 2ne Time +n,estment

b. (ystematic +n,estment @lan ((+@)

;<0 Khen you want to in,est which type of funds would you chooseT a. 4a,in! only debt portfolio b. 4a,in! debt D e7uity portfolio. c. 2nly e7uity portfolio.

%) .>ow would you like to receive the returns every year RPl(U) a. Ai,idend payout d. in,estment b. Ai,idend re1 c. Jrowth in 0AE

;>0 +nstead of !eneral /utual .unds, would you like to in,est in sectorial fundsT

@lease tick (U).

=es

0o

Any su!!estionsVVVVVVVVVVVVVVVVVVVVVVVVV

VVVVVVVVVVVVVVVVVVVVV..