A STUDY ON AWARENESS OF MUTUAL FUNDS.

SUBMITTED BY:-

name
MBA IIIrd SEM.

Under the Supervision of

Mr. Vinay Prakash Srivasatava
(Regional Head)

In Partial Fulfillment of Award of Master of Business Administration

SUBMITTED TO:-

MR.
(HOD OF MBA)

Declaration

I , a Student of MBA 2nd Year,

hereby declare that the project on “A study on Awareness Of Mutual

Funds.” is my original work and that it has not previously formed the basis

1
for the award of any other Degree, Diploma, Fellowship or other similar
titles.

CERTIFICATE

This is to certify that Gautam Kumar Sharma a bonafied student of

College (Sonipat) is undergoing his training and prepared his Interim Report

2
under my supervision and guidance and this is a piece of original work and

is true to best of my knowledge.

Acknowledgement

I would like to thank my Regional Head, Mr. Vinay Prakash Srivastava,

for accepting to be my guide. No words are enough to express my gratitude
to his for taking out time from his hectic schedule for being my guide.

3
I also wish to express my gratitude to all those who enhanced my knowledge
by providing invaluable guidance and cooperation during the course of the
project.The learning during the project was immense & invaluable.

PREFACE

For management career, it is important to develop managerial skills.

In order to achieve positive and concrete results, along with theoretical
concepts, the exposure of real life situation existing in corporate world is
very much needed. To fulfill this need, this practical training is required.

4
 I took training in Awereness on Mutual Funds.It was my fortune
to get training in a very healthy atmosphere. I got ample opportunity to view
the overall working of the stock exchange.

CONTENTS

 Declaration
 Certificate
 Acknowledgement
 Preface

5
  Company Profile
 Introduction
 Objective of the study
 Research methodology

 Findings

 Conclusions

 Bibliography

ABOUT KARVY:

Building a heritage of Confidence.

Since its inception in 1982, Karvy has demonstrated a dedication coupled

with dynamism that has inspired trust from various segments, corporate,
government bodies and individuals. Karvy has since been performing a
pivotal role as the interface between these players.

6
Our ability to mass customize and offer a diverse range of products for a
diverse range of customers has helped corporate to uniquely position
themselves in the market place. These diverse range of services cut across
multiple delivery channels, service centers, web, mobile phones, call center
and has brought home the benefits of technology to customers, middle men
and corporate.

Going forward, we will create new products and services, which would
address the needs of the end customer. Our single minded focus in delivering
products for customers has given us the distinguished position of being the
preferred provider of financial services in the country.

Commodities market, contrary to the beliefs of many people, has been in

existence in India through the ages. However the recent attempt by the

Government to permit Multi-commodity National levels exchanges has

ndeed

given it, a shot in the arm. As a result two exchanges Multi Commodity
Exchange

(MCX) and National Commodity and derivatives Exchange (NCDEX) have

come

into being. These exchanges, by virtue of their high profile promoters and

7
stakeholders, bundle in themselves, online trading facilities, robust
surveillance

measures and a hassle-free settlement system. The futures contracts

available

on a wide spectrum of commodities like Gold, Silver, Cotton, Steel, Soya

oil,

Soya beans, Wheat, Sugar, Chana etc., provide excellent opportunities for

hedging the risks of the farmers, importers, exporters, traders and large scale

consumers. They also make open an avenue for quality investments in

precious

metals. The commodities market, as it is not affected by the movements of

the

stock market or debt market provides tremendous opportunities for better

diversification of risk. Realizing this fact, even mutual funds are

contemplating of

entering into this market

Karvy Comtrade Limited is another venture of the prestigious Karvy group.

With our well established presence in the multifarious facets of the modern
Financial services industry from stock broking to registry services, it is
indeed a pleasure for us to make foray into the commodities derivatives
market which opens yet another door for us to deliver our service to our
beloved customers and the investor public at large.

8
With the high quality infrastructure already in place and a committed
Government providing continuous impetus, it is the responsibility of us, the
intermediaries to deliver these benefits at the door-steps of our esteemed
customers. With our

expertise in financial services, existence across the lengths and breadths of

the country and an enviable technological edge, we are all set to bring to
you, the pleasure of investing in this burgeoning market, which can touch
upon the lives of a vast majority of the population from the farmer to the
corporate alike. We are confident that the commodity futures can be a good
value addition to your portfolio.

The company provides investment, advisory and brokerage services in

Indian Commodities Markets. And most importantly, we offer a wide reach
through our branch network of over 225 branches located across 180 cities.

To open a commodities trading account, click here else contact the nearest
Karvy branch.

Registered Office:

Karvy Comtrade Limited.

46, Avenue 4, Street No. 1,
Banjara Hills, Hyderabad – 500 034.
Andhra Pradesh, India.

9
Mail : commodity@karvy.com
Telephone : +91-40–23431569/23388708/32946279/32946313
Fax : +91-040-

About KARVY Insurance Broking Ltd. (KIBL):

Introduction :
At KIBL we provide both life and non-life insurance products to retail
individuals, high net-worth clients and corporate. With the opening up of the

10
insurance sector, we are in a position to provide holistic and tailor made
policies for different segments of customers. With Indian markets seeing a
sea change, both in terms of investment pattern and attitude of investors,
insurance is no more seen as only a tax saving product but also as a product
which provides a financial solution for the customer. Our wide national
network, spanning the length and breadth of India, further supports these
initiatives. Our strengths include personalized service provided by a
dedicated team committed in giving hassle-free service to the clients.

Welcome to Karvy Investor Services Limited

Deepening of the Financial Markets and an ever-increasing sophistication in

corporate transactions, has made the role of Investment Bankers
indispensable to organizations seeking professional expertise and
counseling, in raising financial resources through capital market apart from
Capital and Corporate Restructuring, Mergers & Acquisitions, Project
Advisory and the entire gamut of Financial Market activities.

Karvy Investor Services Limited (‘KISL’), a SEBI registered Merchant

Banker has emerged as a leading Investment Banking entity in the country
with over a decade of experience. KISL has built its reputation by
capitalizing on its qualified.

11
Professionals, who have successfully executed a large number of complex
and unique transactions.

Our quality professional team and our work-oriented dedication have

propelled us to offer value-added corporate financial services and act as a
professional navigator for long term growth of our clients, who include
leading corporate, State Governments, Foreign Institutional Investors, public
and private sector companies and banks, in Indian and global markets.

We have also emerged as a trailblazer in the arena of relationships, both at

the customer and trade levels because of our unshakable integrity, seamless
service and innovative solutions that are tuned to meet varied needs. Our
team of committed industry specialists, having extensive experience in
capital markets, further nurtures this relationship.

KARVY REALTY (INDIA) LIMITED

Karvy Realty (India) Limited (KRIL) is promoted by the Karvy Group,

India’s largest financial services group. The group carries forward its legacy

12
of trust and excellence in investor and customer services delivered with
passion and the highest level of quality that align with global standards.
Karvy Realty (India) Limited is engaged in the business of real estate and
property services offering:

Buying/ selling/ renting of properties

Identifying valuable investments opportunities in the real estate sector
Facilitating financial support for real estate and investments in properties
Real estate portfolio advisory services.
KRIL is your personal real estate advisor guiding and hand holding you
through real estate transactions and offering valuable investment
opportunities.

Building on the KARVY brand as a leading industry benchmark for world

class customer servicing and quality standards, KRIL brings to investors a
reputation of reliability, dependability and honesty. Our understanding of the
needs and preferences of ourClients and our teams of qualified realty
professionals help us to establish fruitful relationships with buyers and
sellers of properties alike.

INTRODUCTION

As we all know financial sector is growing very fast. One aspect every

financial company is emphasizing is that its different offers should reach to

its targeted customer within time. For fulfillment of this purpose the term of

13
“financial marketing” was introduced. Financial marketing basically deals

with marketing of various financial instrument like bonds, securities, mutual

funds and all other services provided by various NBFC’s. Todays as per

capital income is growing up people are getting into investment business.

The factors that investors should considers while deciding any

investment is the track records of company liability side of company.

MUTUAL FUNDS:

A mutual fund is a trust that pools together the saving of a number of

investors who share a common financial goal. All such investor buy units of
a fund that best suits their needs be its capital growth regular returns or
safety of capital. The fund manager then invests this pool of money in
securities coming from shares to debentures to money market instrument
depending on the objective of the scheme.

The money thus collected is then invested by the fund manager in different
of

Securities. These could ranges from shares to debentures to money market

Instrument depending upon the scheme started objective. The income earned

14
Through this investment and the capital appreciation realized by the scheme

are shared by its unit holder in proportion to the numbers of unit owned by

them.

Mutual funds are a pool of investments. In simple words a collection

of money from small investors and then in returns giving them a portfolio

i.e. a variety of investment. it is not wise for an investor to put all his

investment in a single security. For ex. You are investing all your money in

a share of single company in any time of slowdown you may incur losses. If

you hav invested money in different companies loss from one get

compensated from profit of others. This is what a mutual fund does. These

dates buying hundred shares of infosys will cost you more than a four lack

rupees. That’s a fortune? But if you zeal’s to be the proud owner of these

pricey stocks is bit extinguished by the astronomical price tag. What do you

do? The simplest thing to do is of course to walk up to your father in law for

the ransom or you could sell the dreams to colleges who pool in money to

jointly buy the hundred stocks. Or you can invest in mutual fund that holds

infosys stocks.

While we leave it on you to decide whether the first two option are

safe and risk free, let us tell you that crores of Indian have found mutual

15
funds a great way to invest when they don’t have enough money to buy

more than a few stocks.

Mutual funds have many benefits. They offer an easy and inexpensive
way for an individual to get returns from stocks and bonds without:

· Incurring the risk involved in buying them directly .

· Needing the capital to buy quality stocks.
· Having the expert knowledge to buy or sell stocks.

Type of mutual funds:

There are wide variety of mutual fund schemes that cater to investors needs,
whatever the age financial position, risk tolerance and return exceptations.

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 MUTUAL FUND

DEBT EQUITY BALANCE

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18
How to sell Mutual Funds

The essence of professional selling toda is building and maintaining of

high quality relationship, based on establishing a high level of trust and
credibility with customer indefinitely. You keep your customer by
continually investing in the quality of your relationship. You should
approach your customer as a consultant not as a vendor and help them
achieve their financial goal. The following chart explain the selling process
of mutual funds.

Know your product

Know your client

Prioritize your client

Understand your clients need

Help them choose their investments

Encourage regular investments

Commit them to invest

Provide personalized after sales service

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Type of clients

• Young and accumulating under 40 seeking capital appreciation. They

are willing to take high returns.
• Middle aged with family commitments. Aged between 40-60 and
looking at stable investment and lower risk.
• Retired persons, which are aged above 60. Seeking income to meet
institution and high net worth individuals. Include corporate, banks, trust
and wealthy investors who seek an appropriate combination of tax efficient
growth and income depending upon their returns expectations.

MUTUAL FUND INDUSTRY:

An overview:
The mutual fund industry in India began with the setting of the Unit Trust of
India (UTI) in 1964 by the Government of India. During the last 36 years.
UTI has grown to be a dominant player in the industry with assets of over
Rs. 76,547 crores as on March 31, 2000. The UTI is governed by a special
legislation, the Unit Trust of India Act, 1963. In 1987 public sector banks
and insurance companies were permitted to set up mutual funds and
accordingly since 1987, 6 public sector banks have set up mutual funds.
Also the two Insurance companies LIC and GIC established mutual funds.
Securities Exchange Board of India (SEBI) formulated the mutual fund

20
(Regulation) 1993. Which for the first time established a comprehensive
regulatory framework for the mutual fund industry.

Since then several mutual funds have been set up by the private and joint
sectors.

Special Schemes:
The category include index schemes that attempt o replicate the performance
of a particular index such as the BSE Sensex of the NSE 50, or industry
specific schemes which invest in specific industries or sectoral schemes
which invest exclusively in segments such as ‘A’ group shares or initial
public offering.

Index fund schemes are ideal for investors who are satisfied with a return
approximately equal to that of an index.
Sectoral fund schemes are ideal for investors who have already decided to
invest in a particular sector or segment.

Distribution of Income earned on Mutual Fund:

The income by the investment of the scheme, net of recurring expenses

subject to a maximum ceiling of 2.5% in equity schemes and 2.25% in debt
schemes, is already by way of dividends or capital gains by the unit holders
of the scheme proportionately. These recurring expenses include asset

21
management fees, not exceeding 1.25% in case of equity funds and lower
than 1% in case of debt funds.

Features of Mutual Funds:

Mutual Funds offer a wide variety of schemes. Many of these schemes,
which only invest in debt instruments like company debentures, government
securities and money market instruments. Such schemes do not invest at all
in equity markets and offer safe investment alternative for your hard-earned
money. Infact both internationally and in India, mutual funds manage more
money in debt schemes than in equity schemes.

TYPES OF MUTUAL FUNDS:

Debt Funds/Bonds Funds:

It invest only in debt instrument, government securities and money market
instruments, completely avoiding any investment in the stock markets.
Hence they are safer than equity funds. At the same time the expected
returns from debt funds would be lower.

Gift Funds
It is debt fund, which invest only in government securities and hence have
zero credit risk.

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Liquid Funds:
They are debt funds, which invest in short term paper, with maturities
usually not exceeding 180 days and hence are safe from interest rate risk.

Balanced Funds:
It invest in a mix of equity and debt investments. Hence they are less risk
than equity funds, but at the same time provide commensurately lower
returns. They provide a good investment opportunity to investor who do not
wish to be completely exposed to equity markets, but are looking for higher
returns than those provided by debt funds.

Equity Funds:

Invest entirely in the stock markets and attempt to provide investors the
opportunity to benefit from the higher returns, which stock markets can
provide. However they are also exposed to the volatility and attendant risks
of stock market investment and hence should be chosen by investors who
have risk taking capabilities. Sectoral funds also specialized equity funds,
which restrict their in vestment only to shares of a particular sector and
hence, are riskier than diversified equity funds.

23
Detailed Analysis of Mutual Funds:

The Mutual Fund market in India is still in its early stages. Investors regard

mutual fund as safe and ideal investment instruments which helps them meet

their varied investment.

Mutual Funds are still considered a good invest but the investor should

achieve his financial goals.

Today many investor have started to see mutual funds as the best way to

invest their savings. They see mutual funds as safer bet as compared to bank

fixed deposits.

1. Mutual Funds are more transparent than any other form if

investment.

2. The investor is aware where his money is used.

3. Mutual funds are less risky than direct investment I equities.

4. There no need to maintain paper work for transfer of instrument.
Dividend warrants and redemption dated.
5. The best bargain in mutual fund is that one can enter the fund
with an investment of only 1000 whereas an individual would
need much higher amount to invest in a share or bond.

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DEBT/INCOME FUNDS:

A class of debt funds that invest in corporate debt with the expectation of
safety of principal and steady income generation.
To service to Investment objective most income funds invest a bulk of their
corpus in debt paper of financially strong companies.
Fund managers look beyond safe debt paper at securities issued by less
credit worthy companies.
Such companies offer higher returns. It’s a high return strategy which has
backfired money a time in India market.
The debt performing income funds are those which has struck to safe debt
those that ventured into risk debt are mostly languishing near the bottom of
the pile.

Advantage:
For the purpose of computing NAV debt securities are valued differently
from equities. Funds equity holdings are valued on the basis of their market
price. Since debt securities are not traded actively or not traded at all the
market price do not always accurately reflect their true worth. Therefore
mutual funds value debt securities held by them on the basis of yields
specified in the handful of approved valuation models, revised weekly.

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Default Risk:
Many issuers do default increases as one goes down the rating scale. In
credit rating parlance dept paper rated BBB and above is considered to be
investment grade from BB to B speculative grade.
Although the issuer is servicing the debt, his financial position is precarious
and C & D default grade, the issuer is defaulting AA is widely considered to
be the safety floor.

Liquidity Risk:
The other problem with low rated paper is poor liquidity. On an average
corporate debt worth just Rs. 150 crore is traded in a day. Of this AAA paper
accounts for 90% and AA another 5%. There is partially no liquidity in low
rated paper and a fund often has no option but to hold the paper through the
company’s journey.

SHORT TERM GILT FUNDS:

As an investor one has a little longer investment horizon than few months to
a year and we also want to pay it safe and moreover the investor seeks
current income also. The short term gilt funds could just be well suited.

Credit Risk – : These funds invest primarily in govt. bonds and treasury
bills, so do not carry any credit risk, By owing short maturity gilts, these
funds are less Susceptible, too big saving in value. Hence much less risky
than other investments besides being highly liquid.

26
Features:
1. Investors friendliness
2. Higher returns
3. Lower risk
4. Differ in portfolio maturity.

Example: The average life of a sovereign bond term gilt fund was 8.16 on
March 31, 2002. On the other hand it was little over two year under short
term gilt funds.
5. Lower average maturity
6. Interest rate sensitivity is lower
7. Low on volatility
While this category so low on volatility it surely does not mean that the
investor’s investment are absolutely insulated here from the vagaries of
the market. This category did witness a fail in net asset value when
interest rates hardened in July, 2000.
8. Conservative Investment:
Due to this the funds carry lower risk but also offer lower returns for the
financial year 2001-02 while long term gilt funds cover up to 25.49%
These gained an average of 11.59%.
Risk They could be a little more volatile than the liquid funds as measured
by standard deviation of returns.

27
Comparative Advantage:
Investment is default free sovereign bonds-these bonds offer better credit
quality than medium term debt funds.

Parking a large part of assets in corporate bonds of varying qualities

Mandate to stretch portfolio maturity up to 3-4 year.

Can beat debt funds in softening interest rates, since gilts can be actively
traded.

Sectoral Funds:

The mutual fund industry is expending to cover all the ends of the general
investor. The launch of sector funds is one step in this direction. With sector
funds, the MF sector has expanded its products range, and helped fund
managers widen their products designs. Sector finds are more focused as
their instruments are aimed at a particular industry so that maximum benefit
can be achieved from the market cycles. However they work well when the
market timing is perfect, caution experts.
1. since sector funds comprise instruments of a particular sector.
2. The investment is at a greater risk. That is, the effect of any
movement in the sector.
Upward or downward is clearly.

28
 3. The diversified funds have some protection against markets odds
since the instruments are spread across various sectors. Sliding
show in one can be countered with the other super hit sector.

4. In sector funds, is the gains will be stupendous, the losses too may be
high. It is therefore suggested that sector funds should constitute very
small proportion of investor’s portfolio.

Balanced Funds:

This fund is suitable for anyone who can put away money for the medium-
term (upwards of 3 years). It suits the busy saver who would like to adapt a
sensible approach to investing with a well-balanced portfolio of stock and
bonds but does not have the time and expertise to constantly keep re-
balancing his portfolio to stay on the sensible path.
While there is a tendency for many to classify 9 stocks as “risk” and bonds
as safe research shows many interesting facts. If the investor takes time to
look up the section he can get a better understanding of various investment
options and their performance over varying time periods

SYSTEMATIC WITHDRAWAL PLAN:

Systematic withdrawal Plan is an option from mutual funds by which the

investors can get regular by steadily redeeming small amount of their
holding month,

29
where as their investment remains same. This can help in recording a far
lower taxable income, but same as dividend payout, thus resulting in lower
tax outgo and higher post tax value of investment.

Key Features:
1. Option of receiving month/quarterly income as specified by the
investor based on his needs and investment goals.
2. Withdrawal can be fixed amount or fixed number of units.
3. Withdrawal is normally processed on the 30of each month and
cheques couriered on the first of the month.

4. Additionally facility to receive payouts directly into his bank

account through the Electronic Clearing Service

5. TDS deduction on SWP on growth option

6. No entry or exit load

In case of normal divided payout the dividend amount is distributed which
the investor receives as income and the units that he has bought are left
intact.
When one withdraws some amount under SWP there is a simultaneous
reduction in the number of units being held by the investor? But the real
benefit would be on the tax aspect.
As the dividend become taxable in this budget @ 31% to investor would be
far better off using the withdrawal route.
Time of purchase is Rs. 10 which means a total of Rs. 10000 units are
allotted to the investor. Under the dividend plan, dividend is distributed @
7.5% there is payment of Rs.750 each month for a period of 12 months

30
amounting to Rs. 9000 over a period. As per the budget the entire amount
will be taxable in the hands of the investor.

In the second option the investor opts for growth option of the income fund
and Redeems units allotted to him by an amount equivalent to Rs. 750 each
month. The NAV of the fund if assumed to increase by 10 paisa every month
and at the end of the every month redemption takes place at the prevailing
NAV. According to this calculation the NAV at the end of the month is Rs.
10.70. When redemption occurs at this stage a amount of Rs.750 is paid out
just Rs. 5.58 becomes his taxable income.

Reason

The reason behind this is that every withdrawal results in short term capital
gain, which is the difference between the withdrawal amount ad the
respective cost of acquisition ad taxed as per respective slab applicable to
the investor. The same process continues every month.
Now the capital gain is taxable @ 10% which is lower than the dividend tax.

31
Entities Involved in Mutual Fund
The following diagram illustrates various entities involved in the organizational
structure of Mutual Fund

32
Parties involved in Mutual Fund:
Name of the parties involved Role and function
Sponcer * Established MF along with any individual
corporate
* Liability limited to his contribution
* Contribution by the sponsor must be
maximum 40% of network of AMC (only
who qualify the criteria permitted by setup
MF
Trustee * Board of trusty holding property of the
benefit of the unit holders.

AMC (Asset Managing Company) * Company registered under the

company Act,
(Investment Manager of the Fund) 1956 and approved by SEBI
* Entrusted with the task of managing
scheme and operations.
* Minimum network of Rs. 5 crore at least
50% of Board of AMC are independent
director i.e. not connected with the spacing
organization.
*Cannot act as an AMC/Trusty to any
Mutual Fund

33
 * No person can be a Director of more than
AMC or Director of Trust Company open
by same AMC.

Custodian * Person holding a certificate to carry on

ness of custodian of securities under
(Custodian
SEBI) (Custodian of security regulations
to hold fund assets and details from the
AMC.

31.10.0 Entry Lad and Exit Load: A load is a sales fee charged by the fund.

Entry Load Charged at the time of entering into the scheme. The entry
load percentage is added NAV at the time of allotment of
units.
For example, if an open-end fund’s per unit is Rs. 11 with
frontload of 2%. The funds which an investor can buy a
unit is Rs. 11.22.
In other works, Rs. 100 would buy units=(100-
2)=98/11=8.9 units.
Exit Load Charged at the time of receeming transfer between
schemes. The exit load percentage deducted from the NAV
at the time of redemption or transfer between schemes.

34
 For example, if the redemption price is Rs. 10.70, with a
back end load of 2% of exit charged by the fund amounts to
Re. 0.21 so the net sale proceed will be (10.70-0.21)=1049.
In other words , sale of 50 units would not fetch
50x10.70=Rs. 535 but only 50x10.49=524.5

ENTRY LOAD AND EXIT LOAD

Return of Investment
The investor can receive returns in one of two ways.
Capital Appreciation Profit earned on sale of units at a higher NAV
than the original cost.
Income distribution When a fund makes a profit on its investments,
this
(dividend) profit will give to investors as a dividend which
can be re-invested in the fund or retail the form of
cash.

35
 INVESTMENT IN MUTUAL FUND

How to invest in a scheme of a mutual fund:

Mutual funds normally come out with an advertisement in news

papers publishing the date of launch of the new schemes. Investors can also
contact the agents and distributors of mutual funds eho are spread all over
the country for necessary information and application forms. Forms can be
deposited with mutual funds through the agents and distributor’s eho provide
such service. Now a days, the post office and banks also distribute the units
of mutual funds. However, the investors may please not that the mutual
funds schemes being marketed by banks and post offices should not be taken
as their own schemes and no assurance of returns is given by them. The only
role of banks and post offices is to help in distribution of mutual funds
schemes to the investors.
Investors should not be carried away by commission/gifts given by
agents/distributors for investing in a particular scheme. On the other hand
they must consider the track record of the mutual fund and should take
objective decision.

Risk management and Mutual funds:

The basic objective of mutual fund is to provide a diversified portfolios so as

to reduce the risk in investment at lower cost. The mutual fund industries
worldwide is based on this primes. Investor take up the mutual funds root for
the investment believe that their risk is minimized at lower cost, and they get

36
the optimum portfolio of securities that match their risk appetite. They are
ignorant about the divers technique and hedging product that can be used for
minimizing volatility and hence take the help of fund managers. It is very
daunting to note that the drop in the NAV of some of the schemes is higher
than the erosion of value in some of the ICE stocks. The recent survey
conducted by PricewaterhouseCoopers (PWC) on risk management by
mutual funds has posted interesting as well as worrying results. According to
the survey, as many as 50% of the respondent mutual funds are not
managing risk properly. If this not

all, 50%of the respondent did not even have documented risk procedures or
dedicated risk manager. the respondent included among other, some of the
heavy weights of the Indians MF industries viz Templeton , alliance,
prudential and IDBI Principal MF. Worrisome news it is , for the investor
who still believes MFs are the route manage one’s money in a better and
safe manner. The recent wild movement in the NAVs of several equity funds
have belied all expectation of a diversified portfolio from the fund managers
when the basic tenet behind portfolio is risk management. Mr.Shyam Bhat,
Fund Manger-Tata asset management Ltd. said Indian Mutual Fund industry
is not using statistical techniques of risk management but is using
diversification effectively within market limitations. As far as use of
derivatives is concerned, they are not

presently used because of the low volumes, low liquidity and absence of
sufficient hedging products in market .

37
 Aggression has been the key words followed by AMCs when it comes to
taking position in stocks. With investment in volatile ICE sectors being the
driver of growth last season, almost everybody has taken big exposure to
them. Birla MF maintained it exposures in infosys to almost 25% in all of its
equity schemes throughout last year. The same true for ING Saving Trust
that has Rs.60 crores invested in Wipro and Infosys out of the total fund size
of 135 crores in its growths funds. The result of these exposure is that the
fund witnessed a movement of almost 9%in single day on market saw an
appreciation of around 4.36%. in their quest for growth ,many funds have
seen
very volatile movements in NAVs. The investor confidence may not be lost
but such volatility sure dents it. The point is not whether AMCs should be
chastised or not but just to investor considers mutual funds as the expert in
investment decisions and so naturally expects the decision of investing in
mutual funds to bear fruits. However AMCs often leave a lot to be desired as
they falter on important from like NAV and portfolio disclosure beside
posting high fluctuation and poor returns. The Beta of some of the favorites
stock is shown below. The Table contains the Beta of some of the ICE
scrip’s that constitute the top 10 holding across various equity funds.

DSQ Software 2.09 Taurus Libra

Leap(5.68%)
DSP ML Tech (6.06%)

Satyam Computer service Ltd 2.00 ING Growth Port

(11.2%)

38
 Alliance Equity Fund
(9.7%)
Chola Freedom (11.51%)

SSI Ltd 1.98 Dhanasamridhi (9.18%)

Wipro Ltd 1.87

ING
growth(23.8%),Magnum
Sector Fund-
infotech(15%)
Alliance new Millennium

Himachal Futuristic 1.82 UTI Sector-

Service (9.48%)

Communication Ltd Taurus Discovery

Stock(10.4%

Global Tele-System Ltd 1.81 UTI US 92 (7.02%), ING

Zee Telefilms Ltd 1.70 UTI Sector Service

(7.21%)
ING Growth
Portfolio(10.06

Infosys technologies Ltd 1.54 ING Growth Portfolio

(20.5

As can be seen, some of the stocks are too volatile and cause wild movement
in the NAVs of fund that have taken exposures in them. The standard
deviation of the returns in some of these fund point to it. While Alliance

39
Equity fund has a standard Deviation of 2.53, Birla Advantage has its
Standard Deviation at 2.57 ING Growth has a standard deviation of 3.3
which is relatively high due to its exposure to two volatile ICE scrip’s. Birla
Advantage has reduced its exposure to infosys drastically in the two months
and taken step to contain volatity. Similar

steps are being planned by SBI mutual fund that is recasting its equity
portfolio to reduce risks as they can scare investors.

It is unfortunate that the fund managers are not taking due care for

Minimizing the risk and are in a race to post higher returns during the phase
of

Bull-run. They should understand that the investor forget the high returns
posted

in any specific period very soon but they take hell lot of time to forget the
burns

they get during period of losses. Hence for marinating the confidence of the
retail

Investor it is very important of control wild fluctuation in the NAV’s. the

basic

Technique of portfolio management thrust on diversification, which

preaches

Inclusion of negative beta, stocks in the portfolio so as to minimize the

impact of

40
Fluctuation in the market. Diversification always has a cost and investors are

willing to pay for it if it is properly done. The fund manager should disclose
what they are doing at the heeding front. They should come up and tell their
investor as to what they do at times of high fluctuations. Normally it has
been seen that they outperform the broad market indices during the bull-runs
and under-perform the indices during the bear-phases. The industry needs to
revise their attitude and try to streamline their action with their objectives.
Some mutual fund houses are quite disciplined but every body should
embrace the same sprit. There are some infrastructure problem but fund
managers need to be motre vigilant on the market movement. Mr. Bupinder
Sethi, fund manager- Dundee Mutual fund said ‘we are actively monitoring
the market movement and taking call accordingly. Though we are presently
not using derivatives for hedging of risk because of lack
debt in the market for the product, but we go into cash when we see the
expectation of huge correction coming in.

Poor performance, poor servicing to client and failure of third party service
providers, atre the three major reck factor identified im the survey by PWC.
These are also going to be crucial in a rapidly growing competitive scenario.
Under this setting, it is not just growth that should be the focus area but also
better management of all risk and hence, AMCs would do well to keep the
investor and his intrest in mind before taking any decision.

41
 Objective of study

 To know about the mutual funds.

 Customer satisfaction by the organization

 To create awareness about mutual funds providing by karvy

 To know about the corporate world’s working environment and to

enhance our potential.

 To convert our theoretical knowledge into practical knowledge.

42
 RESEARCH METHODOLOGY

The basic task of research is to generate accurate

information for use in decision making. Research can be defined as the

systematic and objective process of gathering, recording and analyzing data

for aid in making business decisions.

There are basically two techniques adopted for obtaining information:

Primary Data.

Secondary Data.

Primary Data is gathered specifically for the project at hand through

personal interviews with the accounts officers.

Secondary data is previously collected and assembled for some

project other than the one at hand. It is gathered and recorded by someone

else prior to current needs of the researcher. It is less expensive than the

primary data.

SECONDARY DATA

Secondary data was collected from Internet and journal etc.

Data Collection:

43
Data is collected from secondary sources.
Sources of data collection are:
1) www.google.com
2) www.nseindia.com
3) www.bseindia.com
4) www.on-linetrading.com

For the successful research the manipulation of certain things, concepts, and
symbols for the purpose of generalization is inevitable. Research is
simply the pursuit of truth with the help of the study.

HDFHCHDF
C TAXSAVER - GROWTH TAXSAVER - GROW

FINDING

44
1. HDFC TAX SAVER PLAN-Growth

The fund plans to provide tax benefits along with capital appreciation
Type of Anand
Open Ended Fund Manager
Scheme Laddha .
Nature Equity SIP
Option Growth STP
Inception SWP
Jun 13, 1996
Date
Expense
2.06
Face Value ratio(%)
10
(Rs/Unit)
Portfolio
Fund Size in 1572.57 as on Turnover 54.96
Rs. Cr. Jun 30, 2009 Ratio(%)

Last Divdend
210 % as on Apr 4, 2000
Declared
Minimum
38053
Investment (Rs)
Purchase
Daily
Redemptions
NAV
Daily
Calculation

45
 Amount Bet. 0 to 49999999 then Entry load is
Entry Load 2.25%. and Amount greater than 50000000 then
Entry load is 0%.
Exit Load Exit Load is 0%.

Increase/Decrease in Fund Size since

21.46
May 29, 2009 (Rs. in crores)
Mutual Fund HDFC Mutual Fund
Ramon House, 3rd Floor,
H.T. Parekh Marg
169, Backbay Reclamation,
Churchgate
Mumbai
Tel.-22029111 ,56316333
Asset Management Company HDFC Asset Management
Company Limited
Ramon House, 3rd Floor,
H.T. Parekh Marg
169, Backbay Reclamation,
Churchgate
Mumbai - 400020 Tel.-
66316333 ,
Computer Age Management
Services Private Limited
Registrar A&B, Lakshmi Bhavan
609, Anna Salai
Chennai

46
NAV

Latest NAV
139.18 as on Jul
13, 2009
Benchmark 3,198.50 as on
Index - CNX500 Jul 13, 2009
149.82 as on
52 - Week High
Jul 3, 2009
83.66 as on
52 - Week Low
Mar 9, 2009

47
48
 Percentage
Percentage
of Change
Stock Sector P/E of Net Qty Value
with last
Assets
month
ICICI BANK
Banks Divis Laboratories
21.39 6.63 1,390,000
HDFC102.88
Bank Ltd 54.45
LTD.
State Bank of Limited Kotak Mahindra Bank
Banks 12.13 5.76 477,675 89.27 46.16
India Dishman Ltd.
Pharmaceuticals
Electricals & &
Crompton
ElectricalChemicals26.97 4.08 2,412,985 63.35 63.93
Greaves Ltd
Equipments
Bharti Airtel
Telecom 19.66 3.97 750,000 61.57 70.40
Ltd
Dr Reddys
Laboratories Pharmaceuticals 22.93 3.52 842,829 54.57 18.85
Ltd Auto & Auto 4.00
Computers -
ancilliaries
Mphasis BFL
Software & 13.74 3.11 1,433,000 48.28 50.17
Ltd. Banks 18.58
Education
Rural Chemicals
Electricals & 0.73
Electrification Electrical
Computers11.01
- 2.94
9.32 3,115,000 45.63 42.08
Corporation Equipments Software &
Reliance Oil &Education
Gas,
Industries Petroleum & 20.35 2.93 200,000 45.44 25.79
Ltd. Consumer
Refinery 0.99
Durables
United
Fertilizers,
Current Assets 9.16
Phosphorus
Pesticides & 42.30 2.90 2,748,990 45.06 42.60
Limited Electricals & 7.59
Agrochemicals
(New) Electrical
Bharat 19.89
Oil &Equipments
Gas, 49
Petroleum
Petroleum &
Engineering 21.13
& 2.85
5.41 950,000 44.15
Corporation
Refinery
Industrial
Ltd