A

Summer Training Report

ON
Insurance vs. Mutual fund
CONDUCTED AT

SUBMITTED TO:

Kurukshetra University, Kurukshetra

In the partial fulfillment for the degree of Master in Business Administration

(SESSION 2009-2011)
UNDER THE GUIDANCE OF: SUBMITTED BY:

Ms. Sneha Sharma Nanvinder Singh

Faculty (MBA) MBA Final

Semester – 3rd

Roll no. - ………….

HARYANA ENGINEERING COLLEGE, JAGADHRI

(Affiliated to Kurukshetra University, Kurukshetra and Approved by AICTE)

DECLARATION
1
I Nanvinder Singh student of HARYANA ENGINEERING COLLEGE ,JAGADHRI
here by state that the Summer Training Report entitled “Insurance vs. Mutual Fund”
Submitted is partial fulfillment for the requirement of degree of Master of Business
Administration. It is the original work done by me and the information provided in the
study is authentic to the best of my knowledge .This study report has not been submitted
to any other Institution and University for the award of any other degree.

Date:

Place: (Nanvinder Singh)

PREFACE
2
Summer training is an integral part of MBA course. It is meant to make the student
familiar with the actual functioning of the real atmosphere of an organization. Apart from
the theoretical knowledge, we get the practical training to understand the natural and
normal industrial atmosphere through the participation and observations. Project is a
bridge between theoretical and practical knowledge. I, as a student of MBA of Haryana
Engineering College took up the industrial training at Anand Rathi

Today rapidly changing business world is characterized by Liberalization, Privatization

and Globalization which poses a challenge for management. The information technology
has caused a revolution in the field of communication and manner of doing business as
most of the information / data is available online just whit a click of a button resulting in
reduced response time. The business is facing competition not only from the national
players but also from those in the outside world. To be a world class organization is no
longer a pious wish or a matter of pride but it is a prerequisite for the survival.

The challenges for the topic Insurance VS Mutual fund Have increased as never before. It
is imperative for an organization to offer quality goods and services at a competitive price
at the time and place as per the customer’s requirement.

The project undertaken entitled topic “INSURANCE vs. MUTUAL FUND” at Anand
Rathi is an attempt to assess the effectiveness of the FINANCE and training programs
whit a view to improved them.

The project has been done up to the best of the researcher’s abilities but there can be some
erro She will be highly obliged if they are brought to his notice. He welcomes the
suggestions and criticism from the reader for the improvements in the project.

ACKNOWLEDGEMENT
3
 A drop of ink makes million think”

Although Training work is thought and is based on one’s shoulder but many remains
unseen. Any research is never an individual’s effort. It is Contributory effort of many
hearts, hands & heads.

My debt to those who have helped me in one way or other way is heavy indeed. While, I
take this opportunity to thanks all of them. They are too numerous to be mentioned in this
brief “Acknowledgement”

This piece of acknowledgement may not be sufficient to express the feeling of gratitude
towards people, who have helped me successfully in completing my training.

I am also thankful to Mr. Naveen Bajaj, Mr. Sachin Walia,and Mr. Charan Singh, Mr.
Ujjawal Kumar for their constant guidance of Dr. O.P Taneja (Principal), Dr.
Dharamveer (HOD),Ms Sneha Sharma (Faculty) co-operation and their valuable time,
without their help the project would not have proven meaningful.

Last but not least, I would pay my regards to my parents & friends. Without their
wholehearted support, the report would have never seen the light of the day and also I pay
my great regards to my almighty.

Nanvinder Singh

M.B.A

Contents

4
 Page No.
Certificate……………………………………………….

Declaration………………………………………………

Preface……………………………………………………

Acknowledgement………………………………………..

1. INTRODUCTION…………………………………….

2. REVIEW OF LITERATURE: ……………………….

3. RESEARCH METHODOLOGY…………………….

• Objectives of the study

• Significance of the study
• Scope/area of study
• Nature of the study
• Nature of the data to be used
• Data collection techniques
• Limitations of the study

4. INTRODUCTION OF TOPIC………………………

5. ANALYSIS OF DATA………………………………..

• Tabular/graphical presentation
• Used statistical techniques
• Interpretation of each table

6. FINDINGS AND SUGGESTIONS …………………

7. CONCLUSION.............................................................

BIBLIOGRAPHY:

ANNEXURE:

5
 CHAPTER 1

INTRODUCTION

6
STATEMENT OF THE PROBLEM

In research process, the first and foremost step happens to be that of selecting and
properly defining a research problem.

Currently more than 33 mutual fund companies with more than 1800 schemes are
operating in India. From these mutual funds, it is very difficult for the public to choose
from different mutual fund houses and also the different schemes, they are dealing with.

Here, the problem is to compare Mutual Funds and Insurance (BIRLA) and to find out
how much the consumers are aware about these investment alternatives along with their
best results.

7
Company Overview

Anand Rathi Share and Stockbrokers Ltd. is a boutique investment bank that offers
financial advisory services to institutions, corporations, high net worth
individuals, and families. It provides mergers and acquisitions, private
placements, transaction structuring, pricing, potential financing,
restructuring, capital market, initial public offerings (IPOs), advisory
services. Additionally, the firm offers fairness opinions and valuation
analysis, due diligence, bid evaluation, and negotiation services. Anand
Rathi Financial Services caters to industrial and capital goods, business
services, real estate, retail, education, healthcare, transportation, and telecom
sectors and financial institutions. Anand Rathi Financial Services Ltd. was
formerly known as Anand Rathi Securities Limited and changed its name to
Anand Rathi Share and Stockbrokers Ltd. on 5th March, 2008. The firm
was founded in 1994 and is based in Mumbai, India.

Anand Rathi is a leading full service investment bank founded in 1994 offering a wide
range of financial services and wealth management solutions to institutions,
corporations, high–net worth individuals and families. The firm has rapidly
expanded its footprint to over 350 locations across India with international
presence in Dubai, Hong Kong. Founded by Mr. Anand Rathi and Mr.
Pradeep Gupta, the group today employs over 2,500 professionals
throughout India and its international offices.

The firm’s philosophy is entirely client centric, with a clear focus on

providing long term value addition to clients, while maintaining the highest
standards of excellence, ethics and professionalism. The entire firm
activities are divided across distinct client groups: Individuals, Private
Clients, Corporate and Institutions. Anand Rathi has been named The Best
Domestic Private Bank in India by Asia money in their Fifth Annual Private
Banking Poll 2009. The firm has emerged a winner across all key segments
in Asia money’s largest survey of high net worth individuals in India.
8
 MANAGEMENT TEAM

Anand Rathi, Founder & Chairman

A gold medalist Chartered Accountant and former President Bombay Stock

Exchange (BSE). Key Executive of the Birla Group. The driving force
behind the setting up of the Birla Group’s Cement and Financial Services
business among of the And in the setting up of the online trading system and
the Central Depository Services Ltd in India. With over 40 years in the
industry.

Pradeep Gupta, Co-founder & Vice chairman

With over twenty years experience in the securities market. Co-founder and
key driver of the Retail and Institutional Equities business of the group.

Amit Rathi, Managing Director

A rank holder chartered Accountant and an MBA from Leonard N. Stern

9
School of Business, New York University joined the group in 1998. He was
instrumental in establishing the group's private wealth management and
investment banking businesses. Calling him a 'financial guru', the Times of
India group, listed Amit in 2008 amongst the top 51 young Marwari’s in
India (under the age of 40).

P G Kakodkar, Director

Former Chairman of State Bank of India. Director in Financial Technologies

(India). Director in Sesa Goa Ltd. Director in SBI Funds Management Pvt.
Ltd. & the Multi Commodity Exchange of India Ltd and a M. A. in
Economics .

Dr. S A Dave, Director

Former Chairman Securities & Exchange Board of India (SEBI) and Deputy
Director of the RBI. Former Chairman Unit Trust of India (UTI). Member of
General Committees of Government of India & Financial Reforms and
Chairman CMIE 1998 till date. And a M. A. (USA) with Ph D in Economics.

C D Arha, Director

Formerly Secretary in the Union Ministry of Mines. Special Secretary &

Additional Secretary in the Ministry of Coal. Resident Chief Information
Commissioner -AP (Right to Information Act). Commissioner Civil Supplies
(AP). Chairman & MD, APSEC. With a M .A. (History) and diploma
Management & Administration of Rural Development (Birmingham, UK)

SERVICES OF ANAND RATHI

10
1. Call N Trade

2. Mutual Fund

3. Depository Services

4. Commodities

5. Insurance

6. IPOs

7. Online Trading

BRANCHES OF ANAND RATHI

1. Andhra Pradesh

2. Jammu & Kashmir

3. Punjab

4. Assam

5. Jharkhand

6. Rajasthan

7. Bihar

8. Karnataka

9. Tamil Nadu

10. Chhattisgarh

11. Kerala

12. Uttar Pradesh

11
13. Delhi

14. Madhya Pradesh

15. Uttaranchal

16. Goa

17. Maharashtra

18. Gujarat

19. Orissa

20. Haryana

21. West Bengal

12
 CHAPTER 2

REVIEW OF LITERATURE

Since 1992, a number of articles and brief essays have been published in financial dailies,
periodicals, professional and research journals, explaining the basic concept
of Mutual Funds and life insurances and behavior of investors on them.

They underline the importance of mutual funds and life insurances in the Indian capital
market environment. They touch upon varied aspects like regulation of
mutual funds and life insurances, investor expectations, investor safety

13
 ,trend in growth and some other critical views on the performance and
functioning of mutual funds/life insurance schemes.

Gupta (1994)

Made a household investor survey with the objective to provide data on the investor
preferences on MFs and other financial assets. The findings of the study
were more appropriate, at that time, to the policy makers of mutual funds to
design the financial products for the future.

Jambodekar (1996)

Conducted a study to assess the awareness of MFs among investors, to identify the
information sources influencing the buying decision and the factors
influencing the choice of a particular fund. The study reveals among other
things that Income Schemes and Open Ended Schemes are more preferred
than Growth Schemes and Close Ended Schemes during the then prevalent
market conditions. Sikidar and Singh (1996) carried out a survey with an
objective to understand the behavioral aspects of the investors of the North
Eastern region towards mutual funds investment portfolio. The survey Vol.
3, No. 10 International Journal of Business and Management 92 revealed
that the salaried and self-employed formed the major investors in mutual
fund primarily due to tax concessions.

Sundar (1998)

Conducted a survey to get an insight into the mutual fund operations of private
institutions with special reference to Kothari Pioneer. The survey revealed
that agents play a vital role in spreading the Mutual Fund culture; open-end
schemes were much preferred then age and income are the two important
determinants in the selection of the fund/scheme; brand image and return are
the prime considerations while investing in any Mutual Fund.
14
Black (2004)

Observed that in recent years, investors' attitudes towards the securities industry
plummeted, in reaction to both the conflicted research and the mutual fund
scandals. He concluded that the most optimistic assessment is that the SEC
has plenty of unfinished business to attend to

Keli (2005) is of opinion that Past performance and Fund’s Investment Strategy
continued to be the top two drivers in the selection of a new fund manager.

Rajeswari and Mothy 2000.observed that investors demand inter-temporal

wealth shifting as they progress through the life cycle.

Headen and Lee (1974)

studied the effects of financial market behavior and consumer expectations on purchase of
ordinary life insurance and concluded that life insurance demand is inelastic
and positively affected by change in consumer sentiments; interest rates
playing a role in the short run as well as in the long run.

15
 CHAPTER 3
RESEARCH METHODOLOGY

16
OBJECTIVES OF THE STUDY

The present study focuses on the comparative analysis of mutual funds schemes
performance. The objectives of the research are:

To evaluate the schemes on the basis of risk and return by calculating

To identify the features as the retail investors look for in investment products.

To identify the scheme preference of investors.

To identify the factors those influence the investor’s fund/scheme selection

To identify the source of information that influences the fund/scheme selection decision.

Average daily returns of the funds.

To find out the best investment plan from Insurance and Mutual fund .

To calculate the maximum return.

To know the performance of mutual funds and insurance in corporate sector.

Significance OF THE STUDY

It has great practical implications in investment decisions. An investment portfolio can be

suggested on the basis of the study.

This research work can be used for further analysis and study.

This study clears which alternative is better whether Mutual Fund or Insurance.

This research work also helps for future decisions while making new investments.

17
SCOPE OF THE STUDY

The scope of the study is kept limited to the period beginning from 1st April 2005 to 31st
March 2008. It is important to point out that NVA’s have been taken on
daily basis. The study basically focused on the study regarding mutual funds
and insurance that how much the consumers are aware about these
investment avenues,the rate of satisfaction regarding the returns they are
getting.

Research design

Exploratory type of research designs adopted because sources of information are

relatively few and the purpose is merely to find and to understand the
possible actions.

The major purposes of exploratory study are:

• Identification of problem.

• The precise formulation of problems including the identification of variables.

• Formulation of alternative course of action.

An exploratory research is often the first in the series of projects that culminates in one
concerned with the drawing of inferences that aroused as a basis of
monetary action. Exploratory study is often used as an introductory phase of
a larger study and results are used in 38.

Study on Procurement and Development of Life advisors

18
Developing specific technique for larger study. Of the study the relevant questionnaire
was prepared and circulated among a stratified sample of 50 employees of
Anand Rathi Limited. This questionnaire formed the basis for the views on
each of the points raised in the questionnaire. The data thus obtained formed
the basis of information regarding the existing recruitment and selection
processes at Anand Rathi LTD. and the same is analyzed and interference is
drawn regarding the various aspects of recruitment and the entire process of
selection at Anand Rathi ltd.

RESEARCH DESIGN

A Research Design is the framework or plan for a study, which is used as a guide in
collecting and analyzing the data collected. It is the blue print that is
followed in completing the study. The basic objective of research cannot be
attained without a proper research design. It specifies the methods and
procedures for acquiring the information needed to conduct the research
effectively. It is the overall operational pattern of the project that stipulates
what information needs to be collected, from which sources and by what
methods.

This chapter has been divided into 10 sections that consist of Statement of the problem,
Objectives of the Study, values taken in the study, Research Methodology,
Scope of the study, Statistical tools, Problems encountered, Importance of
study, its limitations and organization of the study.

Each section gives the complete description of the things included in it. In the sections,
the topic related to particular section is very clearly written to enhance the
understanding of the concepts.

Type of research

For the purpose of the study Descriptive cum Analytical Research has been used. The
main characteristic of Descriptive research is that the researcher has no
19
 control over the variables. He can only report what has happened or what is
happening. In Analytical Research, the researcher has to use facts and
information already available and make an analysis on the basis of these
only. The researcher cannot manipulate the information.

Sampling

Sample unit: Mutual Funds schemes have been selected for the purpose of the study.

Sample size: Due to a large number of Mutual Fund schemes in existence, it was not
feasible to analyze the performance of each of them separately. Therefore, sample has
been collected of 24 schemes of 8 mutual fund companies namely Reliance, DSPML,
BOB, ING Vysya, Kotak, HSBC, Principal and Birla Sun Life mutual fund.

Sampling Technique: In the present study Convenience Sampling technique has

been used. The Mutual Fund Houses are selected on the basis of the ease of availability of
their NAV

Data Collection Method

20
 Data Collection
Method

Primary Data Secondary Data

Interviews,surveys Magazines,
etc. Journals etc.

Primary Data Sources:

Primary data is that data which is collected for the first time by the user.

1) Data can be collected by Primary as well as secondary method Primary Data Sources.
2) Questionnaire methods and discussions with the HR and the Employees were used to
collect data.

3) Study on Procurement and Development of Life advisors Questionnaire Designed

Questionnaire was used for the Survey.
Best examples are: mail survey, interviews, observations etc.

Secondary Data Sources:

The secondary data sources were collected from the company manuals, handbooks, and
management books and are edited to suite the purpose.
21
Data Collection :

MUTUAL FUND SCHEMES

1. BIRLA SUNLIFE • BIRLA ADVANTAGE
• BIRLA MIDCAP
• BIRLA FRONTIFE EQUITY

• BIRLA SUNLIFE EQUITY

2. BOB • BOB DIVERSIFIED

• BOB GROWTH
1. DSPML • DSPML OPPORTUNITIES
• DSPML TOP 100 EQUITY REG

• DSPML T.I.G.E.R REG

2. HSBC • HSBC EQUITY

• HSBC INDIA OPPORTUNITIES

3. ING VYSYA • ING CORE EQUITY
• ING DOMESTIC OPPORTUNITIES

• ING NIFTY PLUS

4. KOTAK • KOTAK 30
• KOTAK GLOBAL INDIA GROWTH
• KOTAK MIDCAP
• KOTAK MNC

• KOTAK OPPORTUNITIES
GROWTH
5. PRINCIPAL • PRINCIPAL GROWTH

• PRINCIPAL RESURGENT INDIA

EQUITY
6. RELIANCE • RELIANCE GROWTH
• RELIANCE VISION

22 • RELIANCE EQUITY
OPPORTUNITIES
In my study I had used both PRIMARY AND SECONDARY STUDY.The data has been
collected from the secondary sources including the fact sheets, annual reports and offer
documents of various mutual fund companies. NAVs of selected schemes and closing
values of S&P CNX 500 have been noted from www.amfindia.com,
www.indiainfoline.com and www.nseindia.com and Mutual Fund House’s Personal Sites.

LIMITATIONS OF THE STUDY

The study is based only on secondary data, the researcher therefore cannot
comment on the investors’ preferences of the schemes in the future.

Data used in the research is past data. So, it cannot be used in the future uncertain events.

Only Equity Diversified Growth Oriented Schemes are taken into consideration.
Evaluating any Mutual Fund only on the basis of their Equity Diversified
schemes in not true.

The study is limited on only few performance measure tools. There are some other tools
also like time adjusted performance measure, M square measure,
information ratio etc.

The data used in the study is limited to only 3 yea For more accuracy, data should be of
time period of 5-7 years.

23
CHAPTER 4

24
 INTRODUCTION OF
INSURANCE AND

MUTUAL FUNDS

INTROCUTION TO INSURANCE

What is Insurance

"Insurance is a contract between two parties whereby one party called insurer undertakes
in exchange for a fixed sum called premiums, to pay the other party called
insured a fixed amount of money on the happening of a certain event."

Insurance is a protection against financial loss arising on the happening of an unexpected

event. Insurance companies collect premiums to provide for this protection.

25
 A loss is paid out of the premiums collected from the insuring public and the
Insurance Companies act as trustees to the amount collected.

For Example, in a Life Policy, by paying a premium to the Insurer, the family of the
insured person receives a fixed compensation on the death of the insured.

Similarly, in car insurance, in the event of the car meeting with an accident, the insured
receives the compensation to the extent of damage.

It is a system by which the losses suffered by a few are spread over many, exposed to
similar risks.

Why should you take Insurance

Insurance is desired to safeguard oneself and one's family against possible losses on
account of risks and perils. It provides financial compensation for the losses
suffered due to the happening of any unforeseen events.

By taking life insurance a person can have peace of mind and need not worry about the
financial consequences in case of any untimely death.

Certain Insurance contracts are also made compulsory by legislation. For example, Motor
Vehicles Act, 1988 stipulates that a person driving a vehicle in a public
place should hold a valid insurance policy covering “Act” risks. Another
example of compulsory insurance pertains to the Environmental Protection
Act, wherein a person using or carrying hazardous substances (as defined in
the Act) must hold a valid public liability (Act) policy.

Who provides Insurance

In India, prior to liberalization Insurance protection was made available through Public
sector Insurance Companies, namely, Life Insurance Corporation of India
(LIC) and the four subsidiaries of Life Insurance Corporation of India .

By the passing of the IRDA Bill, the Insurance sector has been opened up for private
companies to carry on Insurance business.
26
What is the procedure to obtain insurance

The simplest procedure to obtain insurance is:

1. Approach the Insurance Companies directly or through Insurance agents of the

concerned companies or through Intermediaries.

2. Complete a proposal from giving full details. Submit Date of Birth Certificate and other
relevant documents.

3. Insurance contracts are based on good faith i.e. the details furnished by the proposer are
accepted in good faith and this will form the basis of the contract.

What are the other alternatives to Insurance

One alternative to Insurance is to provide self-Insurance i.e. the individual has to create a
fund to meet risk agencies. Specified trusts have also tried to provide
insurance by a scheme of self-insurance. However, these are not very
popular.

The postal department provides Insurance coverage to all working people. There are many
financial instruments which advocate savings and provide future returns at
specific intervals such as the provident fund and pension plans. However,
none of these provide for life coverage.

What are the other benefits of taking Insurance

Tax Relief: Under Section 88 of Income Tax Act, a portion of premiums paid for life
insurance policies are deducted from tax liability. Similarly, exemption is available for
Health Insurance Policy premiums. Money paid as claim including Bonus under a life
policy is exempted from payment of Income Tax. However annuities received under
certain pension plans are taxable.

27
Encourages Savings: An insurance scheme encourages thrift among individuals. It
inculcates the habit of saving compulsorily, unlike other saving instruments,
wherein the saved money can be easily withdrawn.

The beneficiaries to an insurance claim amount are protected from the claims of creditors
by affecting a valid assignment.

For a policy taken under the MWP Act 1874, (Married Women's Property Act), a trust is
created for wife and children as beneficiaries.

Life Policies are accepted as a security for a loan. They can also be surrendered for
meeting unexpected emergencies.

Based on the concept of sharing of losses, the society will benefit as catastrophic losses
are spread globally.

28
Insurance Principles

Main principles of Insurance:

PRINCIPLES OF
INSURANCE

UTMOST GOOD FAITH INDEMNITY

SUBROGATION CONTRIBUTION

PROXIMATE CAUSE INSURABLE INTEREST

Utmost Good Faith

As a client it is your duty to disclose all material facts to the risk being covered. A
material fact is a fact which would influence the mind of a prudent
underwriter in deciding whether to accept a risk for insurance and on what
terms. The duty to disclose operates at the time of inception, at renewal and
at any point mid term.

Indemnity
On the happening of an event insured against, the Insured will be placed in the same
monetary position that he/she occupied immediately before the event taking
place. In the event of a claim the insured must:

Prove that the event occurred .

Prove that a monetary loss has occurred .

29
Transfer any rights which he/she may have for recovery from another source to the
 M
embers should be persons of ability integrity and standing

They should have an experience in the fields of

Life insurance

General Insurance

Actuarial Science

Finance

Economics

Law

Accountancy

Administration

FUNCTIONS OF IRDA

To protect the interest of policy holders in the matter of insurance contract with the
company.

To specify requisite qualification, code of conduct and training for insurance

intermediaries and agents.

To specify code of conduct for surveyors/loss assesso

To promote efficiency in the conduct of insurance business.

To promote and regulate professional organization connected with the insurance and
reinsurance business.

30
To undertake inspection, conduct enquires and investigation including audit of insurers
and insurance intermediaries.

To control and regular the rates, terms and conditions to be offered by the insurer
regarding general insurance business not so controlled by Tariff Advisory
Committee u/s 604 of Insurance Act, 1938.

To regulate investment of funds by the insurance companies.

To adjudicate dispute between insurers and intermediaries of insurance.

LIFE INSURANCE CORPORATION OF INDIA ACT, 1956.

Life insurance business was nationalized in India with effect from 19th January 1956.

The life insurance business of 154 Indian life officers constituted by 16 non-Indian
insurers operation in Indian and 75 provident societies was taken over by the
Govt. of India.

LIC of India Act was passed by the Parliament on 16th June 1956 and it came into effect
from 1st July 1956.

31
Joint Venture of BIRLA SUN LIFE INSURANCE CO. LTD

74 %

26%

=
32

10
 Aditya Birla Group

The group is India's leading business house

1 .Turnover of over ` 37,200 crores (US$ 8.3 billion)

33
2 .Market Capitalization of ` 100,300 crores

3. Fixed assets worth `26,500 crores (US$ 5.7 billion)

4. Total employee strength of 100,000 people.

5. 800,000 share holders in 40 companies, in 18 countries, situated around the globe.

JOINT VENTURE IN BUSINESS STRATEGY

34
 RATIONAL FOR JOINT VENTURES

Companies of Aditya Birla Group

Aditya Birla Nuvo

GRASIM

Indo Gulf Fertilizers Ltd

UltraTech Cement Ltd

Birla Globe Finance Ltd

HINDALCO

35
Birla Sun Life Insurance

Indian Aluminum Co. Ltd.

Birla Sun Life Asset Mgmt.

Birla Sun Life Distribution

Idea Cellular Ltd.

THE COMPANY THAT GO FOR JOINT VENTURE IN INDIA

Integrity

Commitment

Passion

Seamlessness

Speed

About Birla Sun Life Insurance company limited.

Birla Sun Life Insurance pioneered the unique Unit Linked Life Insurance Solutions in
India.

Within 4 years of its launch, BSLI has cemented its position as a leading player in the
Private

Life Insurance Industry.

There has been focus on Investment Linked Insurance Products, supported with protection
products to maintain leadership in product innovation.

Multi Distribution Channels- Direct Sales Force, Alternate Channels and Group
offering convenient channels of purchase to customer

Web-enabled IT systems for superior customer services

36
First to have issued policies over the Internet

Corporate governance and a high degree of transparency in all business practices and
procedures.

First to have an operational Business Continuity Plan.

First to have issued policies over the Internet.

BIRLA SUN LIFE CHILDREN’S DREAM PLAN

V/S HDFC CHILD PLAN

37
BIRLA SUN LIFE CHILDREN’S DREAM PLAN V/S
ICICI SMART KID
Sr. Features HDFC CHILD PLAN BIRLA SUN LIFE
No CHILDREN,S DREAM
PLAN
1) Min. Max child 0-13 Years
age

2) Min.Max Age of 18-60 Years 18-60 Years

parents

3) Life Assured Policy Holder Policy Holder

4) Beneficiary Child Policy Holder

5) Flexibility The customer has to The customer has to

choose amongst 3 plans, choose amongst 3
with different premiums. options, with different
premiums

6) Death of Parent 1)SA + Bonuses paid 1) SA + Bonus

upfront

2) SA + Bonuses paid on
maturity

3) SA paid on death +
bonuses

7) Death of They give nothing. SA with accrued

Children bonuses will be paid

8) Riders Available None ADB

38
Sr. FEATURES ICICI SMART KID BIRLA SUN LIFE
No CHILDREN,S DREAM PLAN
1) Min. Max child 10-25 0-13 Years
age

2) Min.Max Age of 22-25 Years 18-60 Years

parents

3) Life Assured Policy Holder Policy Holder

4) Beneficiary Child Policy Holder

5) Flexibility Two structures- The customer has to choose

when the child amongst 3 options, with
reaches his critical different premiums
mile stones. Last 4
years before
maturity.

6) Death of Parent SA is paid up front. 1) SA + Bonus

All future premiums
2) Family Income Benefit
are waived.

7) Death of Policy continues as SA with accrued bonuses will

Children it is. be paid

8) Riders Available ADBR/IBR/WOP ADBR

LIFE INSURANCE IN INDIA

Life Insurance in its existing form came to India form the United Kingdom with the
establishment of a British from Oriental Life Insurance Company in Calcutta
in 1818 followed by Bombay Life Assurance Company in 1823.

39
The Indian Life Assurance Companies Act, 1912 was the first statutory measure to
regulate life insurance business. Later in 1928 the Indian Insurance
Companies Act was enacted to enable the Government to collect statistical
information about both life and non-life insurance business transacted in
India by Indian and foreign insurers including provident insurance societies.
In 1948 with a view to protecting the interest of insuring public earlier
legislation was consolidated and effective control over the activities of
insure

The Act was amended in 1950 resulting in far reaching changer in the insurance sector.
These included a statutory requirement of equity capital for companies
carrying on life insurance business, ceiling on share holdings in such
companies, stricter control on investments, submission of periodical returns
relation to investments and such other information to the controller. The
controller could also call for appointment of administrators and put a ceiling
on expenses of management and agency commission for mismanaged
companies.

By 1956, 154 Indian insurers, 16 foreign insurers and 75 provident societies were carrying
on life insurance business in India. Life Insurance business was concentrated
in urban areas and confined to the higher strata of the society. On January
19, 1956 the management of Life Insurance business of 245 Indian and
foreign insurers and provident societies then operating in India was taken
over by the Central Government. Life Insurance Corporation was formed in
September 1956 by an Act of Parliament, viz. LIC Act 1956 with a capital
contribution of Rs 50 million.

Then the Finance Minister MR C.D. Deshmukh while piloting the bill for nationalization
outlined the objectives of LIC thus:

“TO CONDUCT THE BUSINESS WITH ATMUST ECONOMY WITH THE SPIRIT
OF TRUSTEESHIP; TO CHARGE PREMIUM NO HINNER THAN
WARRANTED BY STRICT ACTURAL CONSIDERTION ; TO INVEST

40
 THE FUNDS FOR OBTAINING MAXIMUM YIELD FOR THE POLICY
HOLDERS CONSISTENT WITHSAFETYOF CAPITAL; TO RENDER
PROMPT AND EFFICIENT SERVICE TO POLICY HOLDERS THERBY
MAKING INSURANCE WIDELY POPULAR”.

INTRODUCTION TO MUTUAL FUNDS

This chapter has been divided into 19 sections that consist of Introduction of Mutual
Funds, its Concept, Organization, Terminology, Types and allocation of
Assets, Instruments of Investments, mutual fund industry, its evolution,
trends etc. Each section gives the complete explanation of the concept
included in it. In the sections, the topic related to particular section is very
clearly written to enhance the understanding of the concepts. This chapter
also includes the sub sections along with the sections wherever the need
occurs

INTRODUCTION

Mutual funds are financial intermediaries which pool the savings of numerous individuals
and invest the money thus raised in a diversified portfolio of securities,
including equity, bonds, debentures and other instruments, thus spreading
and reducing risk. The object is to maximize the return to the investor who
participates in equity indirectly through mutual funds.

Actually, it is a pool of money collected from investors and is invested according to

stated investment objectives. Mutual Fund investors are like shareholders
and they own the fund. They are not lenders or deposit holders in a mutual
fund. Everybody else associated with a mutual fund is a service provider,
who earns a fee. The money in the mutual fund belongs to the investors and
nobody else.

41
Mutual funds invest in marketable securities according to the investment objective. The
value of the investments can go up or down, changing the value of the
investor’s holdings. NAV of a mutual fund fluctuates with market price
movements. The market value of the investors fund is also called as net
assets. Investors hold a proportionate share of the fund in the mutual fund.
New investors come in and old investors can exit, at prices related to net
asset value per unit.

A mutual fund is the ideal investment vehicle for today’s complex and modern financial
scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature
and information driven. Prices changes in these assets are driven by global
events occurring in faraway places. A typical individual is unlikely to have
the knowledge, skills, inclination and time to keep track of events,
understand their implications and act speedily. An individual also finds it
difficult to keep track of ownership of his assets, investments, brokerage
dues and bank transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified
and experienced staff that manages each of these functions on a full time
basis. The large pool of money collected in the fund allows it to hire such
staff at a very low cost to each investor. In effect, the mutual fund vehicle
exploits economies of scale in all three areas- researches, investments and
transaction processing. While the concept of individuals coming together to
invest money collectively is not new, the mutual fund in its present form is a
20th century phenomenon. In fact, mutual funds gained popularity only
after the Second World War. Globally, there are thousands of firms offering
tens of thousands of mutual funds with different investment objectives.
Today, mutual funds collectively manage almost as much as or more money
as compared to banks. The assets of the funds and perhaps a third one to
handle registry work for the unit holders (subscribers) of the fund. In the
Indian context, the sponsors promote the Asset Management Company also,

42
in which it holds a majority stake. In many cases a sponsor can hold a 100%
stake in the Asset Management Company (AMC).

43
SEBI looks at track records of the sponsor and its financial strength in granting approval
to the fund for commencing operations. A sponsor then hires an asset
F
management company to invest theinvests
funds according to the investment
objective. It also hires another entity5000
to be the custodian of A draft offer
document is to be prepared at the time of launching the fund. Typically, it
pre specifies the investments objectives of the fund, the risk associated, the
costs involved in the process and the broad rules for entry into and exit from
Pool
the fund and otherofareas of operation. In India, as in most countries, these
0
500

sponsors need approval from a regulator, SEBI in our case.

inve
sts
Pool of money
E
Money
is managed by
100
5000 AMC
Cr.
invests D in
ves
A ts
500
0

C
5000 invests

invests 5000
B

44
CONCEPT OF MUTUAL FUND

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital
market instruments such as shares, debentures and other securities. The
income earned through these investments and its unit holders in share the
capital appreciations realized

Proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest
in a diversified, professionally managed basket of securities at a relatively
low cost. The flow chart below describes broadly the working of a mutual
fund:

Mutual Fund Operation Flow Chart

45
ORGANISATION OF MUTUAL FUND

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset
Management Company (AMC) and custodian. The trust is established by a
sponsor or more than one sponsor who is like promoter of a company. The
trustees of the mutual fund hold its property for the benefit of the unit holde
Asset Management Company (AMC) approved by SEBI manages the funds
by making investments in various types of securities. Custodian, who is
registered with SEBI, holds the securities of various schemes of the fund in
its custody. The trustees are vested with the general power of
superintendence and direction over AMC. They monitor the performance
and compliance of SEBI regulations by the mutual fund.SEBI Regulations
require that at least two thirds of the directors
Organizational set up of a mutual fund

46
of trustee company or board of trustees must be independent i.e. they should not be
associated with the sponso Also, 50% of the directors of AMC must be independent. All
mutual funds are required to be registered with SEBI before they launch any scheme. The
entities involved in mutual fund are also explained following diagram:

MUTUAL FUND TERMINOLOGY

Net Asset Value (NAV)

Net Asset Value (NAV) denotes the performance of a particular scheme of a mutual
fund. Mutual funds invest the money collected from the investors in
securities markets. In simple words, Net Asset Value is the market value of
the securities held by the scheme. Since market value of securities changes
every day, NAV of a scheme also varies on day-to-day basis. The NAV per
unit is the market value of securities of a scheme divided by the total
number of units of the scheme on any particular date.

For example:

If the market value of securities of a mutual fund scheme is 200 Lacs and the mutual fund
has issued 10 Lacs units of 10 each to the investors, then the NAV per unit
of the fund is 20. NAV is required to be disclosed by the mutual funds on a
regular basis - daily or weekly- depending on the type of scheme.

Loads or No Load Fund

A load fund is one that charges a percentage of NAV of entry or exit. That is, each time
one buys or sells units in the fund, a charge will be payable. That is, each
time one buys or sells units in the fund, a charge will be payable. This
charge is used by the mutual fund for marketing and distribution expenses.
Suppose the NAV per unit is 10. If the entry as well as exit load charged is
47
 1%, then the investors who buy would be required to pay 10.10 and those
who offer their units for repurchase to the mutual fund will get only 9.90 per
unit. The investors should take the loads into consideration while making
investment as these their yields/ returns. However, the investors should also
consider the performance track record and service standard of the mutual
fund, which are more important. Efficient funds may give higher returns in
spite of loads.

A no- load fund is one that does not charge for entry or exit. It means the investors can
enter the fund/scheme at NAV and no additional charges are payable on
purchase on purchase or sale of units.

Sale or Repurchase/ Redemption Price

The price or NAV a unit holder is charged while investing in an open-ended scheme is
called sales price. It may include sales load, if applicable.

Repurchase or redemption price is the price or NAV at which an open-ended scheme

purchases or redeems its units from the unit holde It may include exit load,
if applicable.

TYPES OF MUTUAL FUND SCHEMES

1. According to Maturity Period

• Open Ended
• Close Ended
2. According to Investment Objective
• Equity funds
• Debt funds
• Balanced funds
• Money Market funds
3. Other types of schemes
• Tax Saving schemes
• Index schemes
48
1. SCHEMES ACCORDING TO MATURITY PERIOD:

A mutual fund scheme can be classified into open -ended scheme or close-ended scheme
depending on its maturity period.

Open-ended Fund / Scheme

An open-ended fund or scheme is one that is available for subscription and repurchase on
a continuous basis. These schemes do not have a fixed maturity period.
Investors can conveniently buy and sell units at Net Asset Value (NAV)
related prices that are declared on a daily basis. The key feature of open-
ended schemes is liquidity. The AMC is always ready to accept money from
investors and is always willing to return the amount to the investo

Close-ended Fund/ Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 yea The fund is
open for subscription only during a specified period at the time of launch of
the scheme. Investors can invest in the scheme at the time of the NFO (New
Fund Offer) and thereafter they can buy or sell the units of the units of the
scheme on the stock exchange where the units are listed. In order to provide
an exit route to the investors, some close-ended funds give an option of
selling back the units to the mutual funds through periodic repurchase at
NAV related prices. SEBI Regulations stipulate that at least one of the exit
routes is provided to the investor i.e. either repurchases facility or through
listing on stock exchanges. These mutual funds schemes disclose NAV
generally on weekly basis.

2. SCHEMES ACCORDING TO INVESTMENT OBJECTIVE:

A scheme can also be classified as growth scheme, income scheme, or balanced scheme
considering its investment objective. Such schemes may be open ended or

49
 close-ended schemes as described earlier. Such schemes may be classified
mainly as follows:

Growth /Equity Oriented Scheme

The aim of growth funds is to provide capital appreciation over the medium to long-term.
Such schemes normally invest a major part of their corpus in equities. Such
funds have comparatively high risks. These schemes provide different
options to the investors like dividend option, capital appreciation, etc. and
the investors may choose an option depending on their preferences. The
investors must indicate the options at a later date. Growth schemes are good
for investors having a long-term outlook seeking appreciation over a period
of time.

Various kinds of equity funds

Simple diversified equity funds

Sector specific funds

Simple diversified equity funds

This fund invests in equity across all sectors, companies. These funds invest a pre-
dominant portion of the funds mobilized in equity, and equity related
products. In most cases about 80-90% of their investments are in equity
shares. These funds have the freedom to invest both in primary and
secondary markets for equity. A simple diversified equity fund can be made
by selecting companies based on their market capitalization or some other
predetermined criteria.

50
Sector specific funds

The investment objective of a sectoral fund is to invest in securities of a specific sector.

The choice of the sector could vary depending on the investor preference
and the return risk attributes of the sector. For example: banking stocks have
shown quite decent growth in the last four yea Investors who wanted to
participate in this sector could do so, by investing in sect oral funds. Sectoral
funds are not as well diversified as simple equity funds, as they tend to focus
on fewer sectors in the equity markets. They can exhibit very volatile
returns. Few examples:

a) Banking sector fund b) Power sector fund

c) IT sector fund d) FMCG sector fund .

e) Petroleum sector fund

Income / Debt Oriented Schemes

The aim of income funds is to provide regular and steady income to investo Such schemes
generally invest in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such
funds are less risky compared to equity schemes. These funds are not
affected because of fluctuations in equity markets. However, opportunities
of capital appreciation are also limited in such funds. The NAVs of such
funds are affected because of change in interest rates in the country. If the
interest rates fall, NAVs of such are likely to increase in the short run and
vice versa. However, long-term investors may not brother about these
fluctuations.

Various kinds of debt funds:

Diversified debt funds

Gilt funds
51
Focused debt funds

High yield debt funds

Liquid and money market mutual funds

Floating rate debt funds

Fixed term plan series

Diversified debt funds

These funds invest in a portfolio of debt securities issued by entities across all sectors and
industries.

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 are the case with income or debt oriented
schemes.

Focused debt funds

These funds invest in a predetermined subset of the debt markets, and hence have a
narrower focus with less diversification in its investment. For example,
sector specific funds, offshore funds etc.

High yield debt funds

High yield debt fund invests in securities, which have high risk (below investment grade)
to obtain high returns. However in India, SEBI guidelines do not allow a
fund to invest more than 25% of its net assets in a below investment grade
or unrated debt security.

52
Money Market or Liquid Fund

The 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 for short periods.

Floating rate debt funds

These funds invest their money only in securities, which pay interest on a floating rate
basis. The interest is not fixed and keeps on adjusting itself to the market
rates.

Fixed term plan series

FTP has been designed to meet the needs of those investors who want assured or stable
returns. In a FTP, is a series of close-end plans are offered and units are
issued at frequent intervals for short-term durations. A FTP makes one time
offer of units, but such an offer is made in the form of a series of plan under
one scheme and offer document.

Balanced schemes

A balanced fund invests in debt and security in comparable proportion. The proportion
need not be exactly same but comparable. In India, balanced funds are
normally invested 60% in debt and remaining in equity. A balanced fund
tends to provides investors an exposure to both equity and debt markets in a
one product. This provides “asset call” diversification, as equity and debt
markets are not subject to the same kinds of external risk facto A balanced
fund gives an investor exposure in equity at a relatively lower volatility.

53
3. OTHER SCHEMES:

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian
Income Tax laws as the Government offers tax incentives for investment in
specified avenues. Investments made in Equity likened Savings Schemes
(ELSS) and Pension Schemes are allowed as deduction under Section 88 of
the Indian Income Tax Act, 1961

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.

ALLOCATION OF ASSETS

Investment Pattern of Mutual Funds

The most important feature in a mutual fund scheme is the allocation of its assets. The
investment pattern of a scheme is to a large extent determined by the broad
guidelines issued by SEBI. But these are of a generalized nature and
applicable to all mutual fund schemes. What primarily distinguishes one
scheme from another is the manner in which a fund manager actually
deploys the amount raised from investor.

INSTRUMENTS OF INVESTMENT

54
At the outset, therefore, it is essential to consider the various instruments in which mutual
funds deploy their funds.

1. Equity

Equity represents the shares of a company. Mutual funds can invest in the shares with the
claim to participate in the whole range of activities in the net profits after the
company has satisfied all charges due to it and met all liabilities, including
the fixed are entitled, in addition, to dividend, rights and bonus issues, as
and when announced. The recent amendments in the Companies Bill 1993
have a proposed voting right to the mutual funds to enable them to have a
legitimate say on behalf of their investors in the affairs of a company.

The advantage of investing in equity is the prospect of growth and capital appreciation,
which, in turn, should be reflected, in similar appreciation of the units of
mutual funds.

2. Convertible debentures

These come under the head of equity related instruments. Once the convertible portion of
debentures is converted into equity it gives the same benefits as shares. It is
equally attendant with the same risks as outlined above.

3. Fixed income Securities

In addition, mutual funds invariably invest a part of their money in fixed income
securities. This is necessary in order to generate some income to pay for
their own establishment and operating expenses and also in order to pay
annual dividend to investo These are:

Debt instruments, like non convertible debentures; and

55
Bonds, particularly those issued by the public sector undertakings.

4. Short term Securities

These are:

Certificates of deposit;

Treasury bills;

Bill discounting;

Commercial paper; and

Call money

These are meant for shot term investments. Their yield is relatively low but there is
greater liquidity. Mutual Funds invest a portion of their money market
investments in order to meet their need for money at short notice, whether to
meet dividend liabilities or for redemption of units upon the maturity of a
scheme.

2.7 INVESTOR’S INTERESTS

A mutual fund’s foremost duty is towards its investors and hence it has at all times to
safeguard their interests. Without making a sweeping generalization it can
reasonably be stated as a truism that the average Indian investor’s primary
consideration is that of the safety of his capital. It is all the more so since he
is essentially risk averse. Mutual funds are primarily meant for the small
investor, who neither has aptitude nor professional background, let alone the
funds- to place them alternately, at the mercy of the bulls and the bears in
the stock market. Those with even streaks of adventurism choose to
participate directly in equity. Safety should, therefore, get the top priority.

56
Next to safety what the investor values most is liquidity. He should be able to get a fair
price for his investment whenever he desires instead of waiting till the
termination of a scheme. This can be possible either if his units are
repurchased by the mutual fund scheme itself or else if his units are
repurchased by the mutual fund scheme itself or else if he is able to sell
them in market once they are listed. He also justifiably expects that in the
market once they be listed. He also justifiably expects that for meeting
short-term commitments he should be able to get loans from the nationalized
banks and other recognized institutions by pledging the units of the mutual
fund scheme held by him. At no point of time should they become a
millstone around his neck.

MEASURING AND EVALUATING MUTUAL FUND PERFORMANCE

Change in NAV = NAV at the end of the period – NAV at the beginning of the period
Advantage: Very simple method.

Disadvantage: However does not give the correct picture, in case the fund has
distributed dividend.

Total Return = [Dividend distributions + change in NAV] *100

Beginning NAV

Advantage: Corrects the shortcomings of the first method by taking into account the
divided distributed. Suitable for all types of funds. Performance must be interpreted in
the light of market conditions and investment objectives.

Disadvantage: However, it ignores the fact that distributed dividend also get reinvested.

Expense Ratio:

Total expense/average net assets of the fund. Is an indicator of the funds efficiency and
cost effectiveness?
57
Income Ratio:
Net Investment Income

Net Assets

Portfolio Turnover Ratio

It measures the amount of buying and selling done by a fund. It gives an idea of how fast
the fund manager is churning his portfolio.

High turnover ratio also indicates high transaction costs.

Transaction Costs include all expenses related to trading such as brokerage commission
paid; stamp duty on transfer registrar fees and custodians fees. It has
significant bearing a fund performance.

Fund Size

Small Funds

Easy to manage.

Achieve objective in focused manner with limited holding.

Large Funds

Economies of scale.

Lower Expense Ratio.

Cash Holdings

Enables meeting redemption needs.

A cushion against decline in market prices of shares/bonds.

May reduce the return on the portfolio.

58
Evaluating Fund Performance

Basis of choosing an appropriate performance Benchmark:

The asset class if invests in.

An equity fund should be judged against another equity fund &equity benchmark
(indices).

Equity Funds

Index Fund – An Index fund invests in the stock comprising of the index in the same
ratio.

For example,

Market Index Fund - BSE Sensex

Nifty Index Fund - NIFTY

This is a passive management style.

“TRACKING ERROR” can explain the difference between the return of this fund and its
index benchmark.

Active Equity Funds – The fund manager actively manages this fund. To evaluate
performance in such case we have to select an appropriate benchmark. Large
diversified equity fund – BSE 100

Sector fund -- Sectoral Indices

Even when two funds with similar characteristics are otherwise comparable, their returns
must be calculated on a comparable basis. Hence,

Compare returns of two funds over the same periods only.

59
Similarly, only average annualized compound returns are comparable.

Only after tax returns of two different schemes should be compared.

NET ASSET VALUE (NAV) OF MUTUAL FUND UNITS

The net asset value (NAV) of the units of a mutual fund scheme is of vital importance to
determine its performance and health.

Formula for Determination of NAV

The calculation of NAV is based on the total market value of a mutual fund scheme’s
assets, to which are added the following:

Receivables. b) Accrued income .c) Other assets.

From the total of the above is deducted the aggregate of:

Accrued expenses. b) Payables. c) Other net liabilities.

Total market value of mutual fund scheme’s assets ___

+ Receivables. ___

+ Accrued income. ___

+ Other assets. ___

---------------

---------------

- Accrued expenses. ___

- Payables. ___

60
- Other net liabilities. ___

-----------------

Net figure -----------------

No. of units outstanding

-------------------------------

NAV

-------------------------------

INVESTOR SERVICES

No mutual fund scheme is worth considering unless it is backed by adequate investor

services. The issue has assumed increased importance with the entry of
private mutual funds that are vying with each other to provide better
‘response’ to investor

Investor services comprise:

Collection of subscription at convenient locations.

Dispatch of unit certificates.

Effecting change in address, if any.

Suitable transfer mechanism in the case of units of schemes listed on the stock exchanges.

Timely dispatch of dividend warrants and other cheques in respect of bonus growth.

Timely redemption and dispatch of cheques relating to the proceeds of redemption.

ADDITIONAL FACILITIES PROVIDED BY MUTUAL FUNDS TO THE INVESTORS

61
Systematic Investment Plan (SIP)

Systematic Withdrawal Plan (SWP)

Systematic Transfer Plan (STP)

Dividend Transfer Plan (DTP)

Auto debit facility and Electronic Clearing Service (ECS)

Switching

Systematic Investment Plan (SIP)

An existing unit holder can benefit under this facility by investing specified amounts
regularly. By investing a fixed amount of rupees at regular intervals, one
would end up buying more units of the fund when the price is low and fewer
units when the price is high. As a result, over a period, the average cost per
unit to the unit holder will always be less than the average subscription price
per unit, irrespective of whether it is a rising, falling or fluctuating market.
Thus, the unit holder automatically gains and averages out the fluctuations
of market, without having to monitor prices on a day-to-day basis. This
concept is called “Rupee Cost Averaging”.

The following points should be noted regarding SIP:

In case of a SIP, the minimum amount for investing is much lower around 500 to 1000.

The minimum number of payments that should be invested in order to get this facility
might be 12 cheques of 500 each or 6 cheques of 1000 each.

It is mandatory that cheques should be of same value.

The frequency of investment offered for SIP varies from fund to fund. In general all
mutual funds offer monthly and quarterly investment facility.

5.The first cheque can be of any date in the month but the subsequent cheques should bear
any of the dates offered by the mutual fund for this facility.
62
Systematic Withdrawal Plan (SWP)

Under a Systematic Withdrawal Plan, an investor can receive regular/quarterly payments

from the scheme into his account. The unit holder can opt to withdraw a
fixed amount subject to a prescribed minimum amount per month or per
quarter. The amount withdrawn by redemption shall be converted into units
at the applicable NAV and such units shall be subtracted from the unit
balance of the unit holder.

Systematic Transfer Plan (STP)

A systematic transfer plan gives investor facility to transfer amount from one scheme to
another scheme at periodic intervals. In STP, investors can choose between
a fixed systematic transfer plan and capital appreciation STP. Each mutual
fund specifies the schemes in which the amount can be transferred.

Dividend Transfer Plan (DTP)

Under DTP, investors can choose to transfer their dividends of one scheme on to the other
scheme as and when dividends are paid out. If such a plan is chosen than the amount of
dividend distribution will be automatically invested on the ex-dividend date into the
scheme selected by the investor and the units will be allotted accordingly.

Auto debit facility and Electronic Clearing Service (ECS)

A SIP can be affected in two ways. The investor can pay post-dated cheques dated at
requisite intervals or the investor can choose for an auto debit facility/ECS.
In auto debit/ECS facility, the amount mentioned in his application form
would be automatically debited on the date of investment and amount would

63
 be invested in the scheme. The investor opting for auto debit/ECS facility
will be required to sign up a mandate form based on which the mutual fund
will arrange for his account to be debited as per the frequency, amount &
date chosen by the investor.

Switching

Unit holders have an option to switch all or part of their investment in one scheme plan to
another scheme plan established by the fund that is available for investment
at that time. The switch will be affected by way of redemption of units and a
re-investment of the redemption proceeds in another scheme. To affect the
switch the unit holder must provide clear instructions to the fund, such
instructions may be provided by completing a form or lodging the same on
any business day with any of the investor service or collection center.

BENEFITS OF MUTUAL FUND INVESTMENT

Professional management

Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and
prospects of companies and selects suitable investments to achieve the
objectives of the scheme.
Diversification

Mutual Funds invest in a number of companies across a broad cross section of industries
and secto This diversification reduces the risk because seldom do all stocks
decline at the same time and in the same proportion. You achieve this
diversification through a Mutual Fund with far less money than you can do
on your own.
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

64
 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.

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 investor.
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 directly repurchase at NAV related prices by the Mutual
Fund.

Transparency

You get 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

65
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.
Choices of Schemes

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
Well Regulated

All Mutual Funds are registered with SEBI and they function within the provisions of
strict regulations designed to protect the interests of investor. The
operations of Mutual Funds are regularly monitored by SEBI.
Tax Benefits

It is essential for the investor to know about the tax benefits available for mutual funds.
These benefits fall into three categories:

Those available to mutual funds.

Those available to corporate bodies and trusts investing in mutual funds.

Tax benefits available to individual investors for investing in mutual funds.

(a) Tax benefits for mutual funds

So far as the mutual fund itself is concerned, i.e. the asset management company, the
income accrued to it by way of dividends on investment, or by way of
capital gains, is totally exempt from payment of income tax Section 10
(23D) and Section 196 of the Income Tax Act, 1961. This is meant to
provide a much higher yield to the mutual funds to enable them to distribute
a higher than average return to the investor.

(b) Benefits for corporate and trusts

For the corporate the dividend on Unit Scheme 64 was totally exempted from tax under
Section 80M of the Income Tax Act, 1961, thus making this an attractive
scheme for parking their funds. The concessions have since been withdrawn

66
 on a graded scale: 1994-95 is the last year when 40% concessions would be
available.

(c) Tax benefits to individual investors

The most important aspect is the tax relief available to individual investors in their
single or joint capacity. It should, however, be noted that in the case of joint unit holders,
only the first named holder of the mutual fund units is entitled to such tax benefits. These
benefits are available in respect of all the scheme of mutual funds-open ended or close
ended, both in the private as well as public sector. These tax benefits are:

All units of mutual funds are totally exempt from Wealth Tax under Section (IA) of
Section 5 of the Wealth Tax Act.

Gift Tax is exempted up to the present annual ceiling of 30000.

Income from mutual fund units qualifies, along with other eligible income, for deduction
under Section 80L of the Income Tax Act, subject to a maximum amount of
10000 per year.

The difference between the purchase price and the indexed price at the time of sale or
repurchase/redemption of the units attracts the provision of long term capital
gains if held continuously for one year and is taxable at a flat rate of 20%.

Under Section 196A of the Income tax Act, there shall be no deduction of tax at source by
the fund from any income payable to unit holders in respect of the units held
by them.

Specific mention of tax benefits

It is essential that the investor should not be kept in the dark about the admissibly of tax
benefits. There have been instances of mutual funds being ambiguous in
their language on this issue; many a time they are totally silent. This is
because they do not approach CBDT for the requisite clarification or

67
 relaxation. In many cases they just get the opinion of some ‘eminent’ tax
consultants instead of seeking unequivocal instructions from CBDT. This
tendency is more pronounced in scheme, which gives cumulative returns. It
is essential that the position be clarified in unequivocal terms in the offer
document.

Another gray area is the cumulative monthly income schemes wherein the dividend is not
physically paid to the investor every month but is instead reinvested and the
original investment gets doubled on maturity. The difference between the
amounts received on maturity. The difference between the amount received
on maturity and the amount invested is to be treated ‘accumulated’ income
subject to benefits under Section80L every year, and not as capital gains, as
per general guidelines issued by Vikas Patras of the National Saving
Organization which should normally apply in such cases. The offer letters
are, however, silent on this point leading the individual investor to fight his
own battle with the tax authorities.

Transparency in operations is an essential requirement for mutual funds and both the
government and SEBI should enforce it with stern measures.

DRAWBACKS

REGULATORY ASPECTS

Mutual funds in India are regulated by SEBI (Securities and Exchange Board of India).
All mutual funds in India are regulated by SEBI. SEBI has framed the SEBI
(Mutual Funds) Regulations, 1996, which provides the scope of the
regulation of mutual funds in India. It is mandatory for all mutual funds to
get registered with SEBI.

Apart from SEBI there are some other agencies that regulate mutual funds in their
respective fields. These are

68
1. RBI : RBI acts as regulator of sponsors of bank-sponsored mutual funds,
especially in case of funds offering guaranteed returns. No mutual fund can bring out
a guaranteed return scheme without taking approval from RBI.

Companies Act, 1956 AMC: Under the Act, Company Law Board is the regulator. CLB
has to be approached for filling complaints against directors of AMC and
Trustee Company. RoC is responsible for compliances: The RoC
oversees the compliance by the AMC and trustee company, with the
provisions of the companies act. Periodic reports and annual accounts have
to be filed by these companies with the RoC.
2. Stock Exchange The listing of close-ended funds are subject to listing regulation of
stock exchanges. Mutual funds have to sign the listing agreement and abide by its
provisions.

3. Indian Trust Act, 1882: Mutual funds have to follow the provisions of
the Indian Trusts Act, 1882.

4. Ministry of Finance: The finance ministry is the supervisor of both the RBI and
SEBI. Aggrieved parties can make appeals to the MOF on the SEBI rulings relating to
mutual funds.

AMFI (Association of Mutual Funds in India)

With the increase in mutual fund players in India, a need for mutual fund association in
India was generated to function as a non-profit organization. Association of
Mutual Funds in India (AMFI) was incorporated on 22 August 1995.

AMFI is an apex body of all Asset Management Companies (AMC) that has been
registered with SEBI. Till date all the AMCs are that have launched mutual
fund schemes are its membe it functions under the supervision and
guidelines of its Board of Director

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to
a professional and healthy market with ethical lines enhancing and

69
 maintaining standards. It follows the principle of both protecting and
promoting the interests of mutual funds as well as their unit holde
The Objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of the country.
It has certain defined objectives, which juxtaposes the guidelines of its
Board of Director the objectives are as follows:

This mutual fund association of India maintains high professional and ethical standards in
all areas of operations of the industry.

It also recommends and promotes the top class business practices and code of conduct
which is followed by members and related people engaged in the activities
of mutual fund and asset management. The agencies who are by any means
connected or involved in the field of capital markets and financial services
also involved in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund
industry.

Association of Mutual Fund of India does represent the Government of India. Reserve
Bank of India and other related bodies on matters relating to the Mutual
Fund Industry.

It develops a team of well-qualified and trained Agent distributo It implements a program

of training and certification for all intermediaries and other engaged in the
mutual fund industry

AMFI undertakes all India awareness program for investors in order to promote proper
understanding of the concept and working of mutual funds.

At last but not the least association of mutual fund of India also disseminate information
on Mutual Fund Industry and undertakes studies and research either directly
or in association with other bodies.

70
STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY

The Indian Mutual Fund industry is dominated by the Reliance mutual fund, which has a
total corpus of ` 70,000 crores with an investor base of around 40 lakh.
Reliance has many funds/schemes in all categories i.e. equity, balanced,
income etc with some being open ended and some being close ended.
Reliance mutual fund was floated by Reliance Capital Limited.

The second largest categories of mutual funds are the ones floated by nationalized banks.
UTI, Canbank Asset Management floated by Canara Bank and SBI Funds
Management floated by the State Bank of India are the largest of these. GIC
AMC floated by General Insurance Corporation and Jeevan Bima Sahayog
AMC floated by the LIC are some of the other prominent ones. The
aggregate corpus of funds managed by this category of AMC is about
`150bn.

The third largest category of mutual funds is the one floated by the private sector and by
foreign asset management companies. The largest of these are Reliance
Mutual Fund, ICICI Prudential AMC, HDFC AMC and Birla Sun Life
AMC. The aggregate corpus of assets managed by this category of AMC is
in excess of ` 1,50,000 crores.

SOME OF THE AMC’S CURRENTLY OPERATING ARE:

Bank Sponsored

BOB Asset Management Co. Ltd.

Canbank Investment Management Services Ltd.

SBI Fund Management Ltd.

• UTI Asset Management Company Pvt. Ltd.

Institutions

71
GIC Asset Management Co. Ltd.

Jeevan Bima Sahayog Asset Management Co. Ltd.

Private Sector

Indian: -

Benchmark Asset Management Co. Pvt. Ltd.

Cholamandalam Asset Management Co. Ltd.

Credit Capital Asset Management Co. Ltd.

Escorts Asset Management Ltd.

JM Financial Mutual Fund

Kotak Mahindra Asset Management Co. Ltd.

Reliance Capital Asset Management Ltd.

Sahara Asset Management Co. Pvt. Ltd

Sundaram Asset Management Company Ltd.

Tata Asset Management Private Ltd.

Predominantly Indian Joint Ventures: -

Birla Sun Life Asset Management Co. Ltd.

DSP Merrill Lynch Fund Managers Limited

HDFC Asset Management Company Ltd.

ICICI Prudential Asset Management Co. Ltd.

Predominantly Foreign Joint Ventures: -

ABN AMRO Asset Management (I) Ltd.

Alliance Capital Asset Management (India) Pvt. Ltd.

Deutsche Asset Management (India) Pvt. Ltd.

Fidelity Fund Management Private Limited

72
Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.

HSBC Asset Management (India) Private Ltd.

ING Investment Management (India) Pvt. Ltd.

Morgan Stanley Investment Management Pvt. Ltd.

Principal Asset Management Co. Pvt. Ltd.

Standard Chartered Asset Mgmt Co. Pvt. Ltd.

MAJOR MUTUAL FUND COMPANIES IN INDIA

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India)
Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India)
Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN
AMRO Mutual Fund.

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital
Management Corp. of Delaware (USA) as sponsored. The Trustee is ACAM Trust
Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life
73
Financial. Sun Life Financial is a global organization evolved in 1871 and is being
represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from
India. Birla Sun Life Mutual Fund follows a conservative long-term approach to
investment. Recently it crossed AUM of 10,000 crores.

BOB Mutual Fund

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under
the sponsorship of Bank of Baroda. BOB Asset Management Company
Limited is the AMC of BOB Mutual Fund and was incorporated on
November 5, 1992. Deutsche Bank AG is the custodian.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt.
Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company.
Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset
Management Company Pvt. Ltd. is the AMC.
74
Canbank Mutual Fund

in Mumbai Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank
acting as the sponsor. Canbank Investment Management Services Ltd. incorporated on
March 2, 1993 is the AMC. The Corporate Office of the AMC is.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as its
sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was
incorporated on December 1, 1995 with the name Escorts Asset Management Limited.
Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company with a
global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial
services groups in the world. Investors can buy or sell the Mutual Fund through their
financial advisor or through mail or through their website. They have Open end
Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes,
Open end Tax Saving schemes, Open end Income and Liquid schemes, closed end Income
75
schemes and Open end Fund of Funds schemes to offer.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely
Housing Development Finance Corporation Limited and Standard Life
Investments Limited.

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital
Markets (India) Private Limited as the sponsor. HSBC Mutual Fund acts as the Trustee
Company of HSBC.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee
Company. It is a joint venture of Vysya and ING. The AMC, ING Investment

76
Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

ICICI Prudential Mutual

The mutual fund of ICICI is a joint venture with Prudential Plc. of UK, one of the largest
life insurance companies in the UK. ICICI Prudential Mutual Fund was
setup on 13th of October 1993 with two sponsors, Prudential Plc. and ICICI
Ltd. The Trustee Company formed is ICICI Prudential Trust Ltd. and the
AMC is ICICI Prudential Asset Management Company Limited
incorporated on 22nd of June 1993.

Kotak Mahindra Mutual Fund

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

presently having more than 1, 99,818 investors in its various schemes.
KMAMC started its operations in December 1998. Kotak Mahindra Mutual
Fund offers schemes catering to investors with varying risk - return profiles.
It was the first company to launch dedicated gilt scheme investing only in
government securities.
LIC Mutual Fund

77
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It
contributed 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as
a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Company
started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed
Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for
LIC Mutual Fund.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The
sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is
the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund that was
changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various
schemes under which units are issued to the Public with a view to contribute to the capital
market and to provide investors the opportunities to make investments in diversified
securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard
Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard
Chartered Asset Management Company Pvt. Ltd. is the AMC that was incorporated with
SEBI on December 20, 1999.

78
State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch
offshore fund, the India Magnum Fund with a corpus of 225 cr.
approximately. Today it is the largest Bank sponsored Mutual Fund in India.
They have already launched 35 Schemes out of which 15 have already
yielded handsome returns to investo State Bank of India Mutual Fund has
more than 5,500 Crores as AUM. Now it has an investor base of over 8
Lakhs spread over 18 schemes.
Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation
Ltd. as the sponsor. Sahara Asset Management Company Private Limited
incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund.
The paid-up capital of the AMC stands at Rs 25.8 crore.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsor for
Tata Mutual Fund is Tata Sons Ltd., and Tata Investment Corporation Ltd. The
investment manager is Tata Asset Management Limited and its Tata Trustee Company
79
Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country with
more than 7,703 crores (as on April 30, 2005) of AUM.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14,

2003, manages the UTI Mutual Fund with the support of UTI Trustee
Company Private Limited. UTI Asset Management Company presently
manages a corpus of over 20000 Crore. The sponsorers of UTI Mutual Fund
are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of
India (SBI), and Life Insurance Corporation of India (LIC). The schemes of
UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management
Funds, Index Funds, Equity Funds and Balance Funds.

Some facts for the growth of mutual funds in India

100% growth in the last 6 year

Our saving rate is over 23%, highest in the world. Only channelizing these savings in
mutual funds sector is required.

We have approximately 33 mutual funds that are much less than US having more than
800. There is a big scope for expansion.

‘B’and ‘C’ class cities are growing rapidly. Today most of the mutual funds are
concentrating on the ‘A’ class cities. Soon they will find scope in the
growing cities.

Mutual Fund can penetrate rural India like the Indian insurance industry with simple and
limited products.

Emphasis on better corporate governance.

80
Basis of Insurance
Difference
For most people who are new to the world of personal finance, the nuances of the
Introductio
Insurance, then, is the means by which Mutual funds make it easy and less
n
those unfortunate enough
to be the victim of some
loss can gain
compensation. The
insurance company is
able to offer you the
protection it does by
grouping together a large
number of people who all
feel exposed to the same
form of risk. This could
be fire, theft, accident or
any other risk we have
either mentioned or will
look at later.
Meaning
Descendents family receives financial
benefits. Life insurances
also offer paid proceeds
to the beneficiary.
Products
• Term Assurance
Whole of Life Assurance
Endowment Assurance
Annuities
81
- Fixed Annuities
- Variable Annuities
Mutual fund
costly for investors to
satisfy their need for
capital growth, income
and/or income
preservation. Mutual
fund brings the benefits
of diversification and
money management to
the individual investor,
providing an
opportunity for
financial success that
was once available only
to a select few.
Mutual funds are basically
investment funds where
the investment
companies collect
money from the
investors and invest the
same in various stocks
of different companies
and government bonds.
• Birla Fixed Term
Debt Funds(Birla Bond Index Fund
Birla Bond Plus Fund
Franklin India Bluechip Funda
Birl Cash Plus Fund etc.
of the difference between the two products.

A Mutual fund is a capital market investment product that gives you a return based on the
amount of risk that you are taking. Your investment is exposed to the risk of
the capital markets, and there are no guarantees that your invested amount
will be totally safe or preserved. As of August 1, 2009, investing in mutual
funds does not require you to pay any fees to the fund management
company at the time of investment. Life Insurance on the other hand is not
an investment product, but rather a protection product that will compensate
your family or survivors in case something happens to you. You can be
assured that the insurance company is contractually bound to meet its
obligation to your beneficiaries in case something happens to you. To get
this protection and security, you pay a premium. Generally speaking, basic
protection does not cost that much. Sometimes you might choose a policy
where you pay a higher premium amount in order to get an assured or
estimated return on this money at the time the policy matures, in addition to
all the protection benefits associated with the policy

82
 CHAPTER 5

Analysis and Interpretation

83
Analysis and Interpretation

Data analysis the most enjoyable part of carrying out study, since after all of the hard
work and waiting they get the chance to find out the answers. If thedata do
not provide answers, that presents yet another opportunity for creativity! So
analyzing thedata and interpreting the results are the “reward” for the work
of collecting the data.

Data do not, however, “speak for themselves”. They reveal what the analyst can detect.
So when the new investigator, attempting to collect this reward, finds
him/herself alone with the dataset and no idea how to proceed, the feeling
may be one more of anxiety than of eager anticipation. As with most other
aspects of a study, analysis and interpretation of the study should relate to
the study objectives and research questions. The usual analysis approach is
to begin with descriptive analyses, to explore and gain a “feel” for the data.
The analyst then turns to address specific questions from the study aims or
hypotheses, from findings and questions .

Analysis - major objectives

1. Evaluate and enhance data quality

2. Describe the study population and its relationship to some presumed source (account
for all

in-scope potential subjects; compare the available study population with the
targetpopulation).

3. Assess potential for bias (e.g., non response, refusal, and attrition, comparison groups)

4. Estimate measures of frequency and extent.

5. Estimate measures of strength of association or effect

6. Assess the degree of uncertainty from random noise (“chance”)

84
7. Control and examine effects of other relevant factors

8. Seek further insight into the relationships observed or not observed

9. Evaluate impact or importance

1.Do you make investment? : This question was asked to know how much percentage of
People makes investments in financial products.

No
11%

Yes
No

Yes
89%

Fig. 1

This figure represents that 89% of 100 i.e. 89 people make investments in financial
products such as bank, equity, mutual funds , Insurance, etc.

2.What kind of investment do you make? : This question is asked to find out the
investment patterns of people in financial products.

Table 2

85
 Investment Avenues No. of Respondents Percentage (%)
(Out of 100)
Bank 10 10%
Govt. Securities/Debts 20 20%
Insurance 45 45%
Mutual Fund 25 25%

50
40
30 Bank

20 Govt. Securities/Debts
Insurance
10
Mutual Fund
0
No. ofRespondents Percentage (%)
(Out of100)

In insurance sector I is wide and in which 45% people invest but compare to another
sector in mutual fund 20% people interest invest in mutual fund because in
which more risk included.

And more risk more return strategy in which used by people but comparison to mutual
fund insurance is more secure because in which not waste time period.

Q3. Do you have any Insurance Policy?

Customers Having Life Insurance Response

15%
Yes
No 85%

86
 100%
80%

60% Yes
40% No

20%

0%
Response

The data above and the graph represent that maximum number of people i.e. 15% peoples
having life insurance policy & rest of peoples don’t have life insurance policy. It’s shows
that there is a great market for a insurance companies. In which main find out the result in
india only 20% people use insurance policy and 15 % people come in Birla sunlife . they
give 100% return of own coustomer.

Q4.Which company policy you are having?

Policy Plan Respondents

BIRLA SUN LIFE INSURANCE 30%

45%
LIC
ICICI PRODENTIAL LIFE 15%

HDFC STANDERD LIFE 5%

TATA AIG 5%

87
The data above and the graph represent that maximum number of people i.e. 45% of
respondents have the policy from L.I.C, 30% respondents have policy from
Birla Sun Life, 15% respondents have policy from ICICI and 5% customer
have the policy from Tata and HDFC. It shows that mostly people trusted on
Government companies.
Q5. Why you invest your money in Insurance?s

Benefits of Life Insurance In% age

Tax 53
Risk 20
Saving 27

88
The data above and the graph represent that maximum number of people i.e., 53% of
people invest their money in insurance because they are trying to save
Income Tax and only 20% people thinks about a risk cover and 27% people
thinks this is just an investment.in which most of people take tax rebate
under section80c so its benefits percentage is high.

Q6. Which policy you are having?

Policies Planning %Age

Money Back 22
Endowment 62
Whole life plan 12
Unit Link 4

89
The data above and the graph represent that maximum number of people having
Endowment Plan and they are interested to deposit their money at long time.
They are looking for returns at regular intervals.

Q7. Time Horizon of investments: This question is to find out whether people think for
short term or for long term.

70%
60% 62%
50%
40% Short Term
30% Middle Term
20% 20% 18% Long Term
10%
0%
Short Middle Long Term
Term Term

The above figure shows that 62% of the respondents think for long term i.e. above 5
years, 18% respondents invest for middle term i.e. 1-5 years and only 20% respondents
save their money for short term i.e. up to 1 year .Because if a person invest for long term
period than they got high return that is main reason long term percentage is high.
90
Q8. How much risk are you ready to assume in following?

This question was asked to find out the risk appetite of people.

(a) Bank

(b) Government Securities

(c) Insurance

(d) Mutual funds

No 11%
RISK

LOW 34%
RISK

MODRE 39%
AT
RISK

HIGH 15%
RISK

91
 40% 39%
35% 34%
30%
25%
No Risk
20%
16% Low Risk
15%
11% Moderate Risk
10%
High Risk
5%
0%
No Risk Low Risk M oderate High Risk
Risk

The above diagram shows that 11% respondents don’t want to take risk at all, 39%
respondents are ready to take moderate returns, 34% invest their money at low risk and
only 11% respondents have high risk appetite to get high returns. Because government
security is more safe investment regarding other investment.

Q9. Have you ever invested through ANANDRATHI?

100%
82%
80%

60%
Yes
40% No

20% 18%

0%
Yes No

The above diagram depicts that 100 people out of 82 i.e. 82% people who does
investment in mutual funds are known to the company and they have been investing in
this company and only 18% i.e. 32 out of 100 people have never invested in company.

92
Q10. In Anand Rathi, in which plan have you opted?

Lump SIP

Lum p Sum
Sum,
46%
SIP, 54%

Looking at the above diagram, we can find out that majority of the people go for SIP
(Systematic Investment Plan) and these people do not want to take risk and mostly are
middle-class people. Rest 46% of the remaining people opt the lump sum payment plan as
they want more returns on their investment.

Q11. Why have you choose SIP for doing investment?

Long term purpose

13%
Monthly Saving

To reduce the risk of

fluctuating m arket
To reduce the risk of Monthly Saving
fluctuating m arket 56% Long term purpose
31%

In the above diagram, we find that majority of the people (56% i.e. 45 out of 80 people)
go for the option of monthly saving, 31% people i.e. 25 of them wants to reduce the risk
of fluctuating market and rest 13% wants to do SIP for long term purpose.

12. Why have you opted lump sum for doing investment?

93
 60% 60%
50%
40%
30% 30%
Greater returns
20%
10% 10% To take the advantage of
arbitrage
0% Short period investm ent
Greater To take the Short period
returns advantage inv estment
of arbitrage

In the above diagram it is shown the preference of the people regarding investment in
lump sum plan and it is found that majority of the people (60% i.e. 41 out of 68 people)
invest for the purpose of getting higher returns, they give first preference of investing in
lump sum plan to getting higher returns and they give preference to the fluctuating market
or arbitrage i.e. buying in lower market and selling in higher market (30% i.e. 20 people)
and lastly they want to invest for short period (only7 out of 68 people). As they earn profit
or get returns maximum returns they sell the fund.

94
CHAPTER 6

FINDING AND
SUGGESTION

95
In my study I find various suggestion regarding insurance and mutual fund

It is found that, the different investment pattern do not provide the same level of services
with respect to age of the investors in India.

Although the investment patterns provide more or less the same service, there exist
differences depending on the education level of the investors. It is observed
that investors with the graduate & postgraduate level of academic
qualification are investing more in life insurance and the professionals are
investing more in mutual fund.

The investors have a wide difference with respect to their profession and also the different
investment patterns vary widely.

Maximum investors (45%) like to invest in life insurance followed by mutual fund (25%)
& Government saving schemes (20%).

Mutual fund and insurance both are provide benefit in income tax 80C and 88CCC.

More people believe public sector insurance policy

In my study I find Birla company is provide 100% return of Insurance .

Maximum people take Endowment policy62% .it mean maximum people believe
endowment policy.

In mutual fund study people invest long term period so in which I suggest regarding
mutual fund insurance plan is best.

96
In mutual fund scheam SIP is better it provide maximum saving and control fluctuation of
market .but long term purpose is it is create difficulty.

CHAPTER 7

CONCLUSION

97
From the above discussion we can say that insurance plan is much better than mutual
funds as insurance plan help us in saving different type of taxes, medical
benefits life insurance benefits etc .on the other hand mutual fund help us
to earn maximum profit at certain level of risk. In this high risk higher
profit low risk low profit.

In mutual fund more risk and this is long term purpose beneficial .in which all condition
are depend on market share growth and different sector . Because mutual
fund scheam companies invest money two sector debt and equity in which
more part invest in equity(65%) and remain invest in debts

In insurance sectors all terms condition are clearly present by companies and in which
public sector and private sector provide same insurance services.

So instead of investing money in mutual fund people should invest money in insurance
sector

98
BIBLOGRAPHY

Books

• Cooper, H. (1998). Synthesizing In Research: A Guide for

Literature Reviews.

• Cooper, H.M. (1988): The structure of knowledge synthesis -

Knowledge in Society, vol. 1, pp, 104-126.

• Dellinger, A. (2005). Validity and the Review of Literature.

Research in the Schools, 12(2), 41-54.

• Dellinger, A. B. & Leech, N. L. (2007). Toward a Unified

Validation Framework in Mixed Methods Research. Journal of
Mixed Methods Research, Vol. 1, No. 4, 309-332.

• Galvan, J.L. (1999). Writing Literature Reviews.

Websites:

www.irda.com

www.hdfcbank.com

www.google.com

99
 www.bimaonline.com

www.icicipru.com

Newspapers

Times of India

The Hindu

Business Standard

Economics Times

Journals

Journal of Business

Journal of finance

Journal of emerging market finance

Journal of public finance review

Indian Journal of Finance

100
ANNEXURE

101
1. What is your age?

(a) 20-25 (b) 25-30 (c) 30-35 (d) 35-40 (e) Above 40

Q2. What kind of investment do you make? (You can tick more than
one)

Bank

Government Securities/Debts

Insurance

Mutual funds

Equity

Real Estate

Q3. Do you have any Insurance Policy

Yes

No
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 Q4.Which company policy you are having?

BIRLA SUN LIFE INSURANCE

LIC

ICICI PRODENTIAL LIFE

HDFC STANDERD LIFE

TATA AIG

Q5. Why you invest your money in Insurance?

Safety

Tax saving

Returns

Capital appreciation

6. Time Horizon of investments

Short term

Middle term

Long term

7. How much risk are you ready to assume in following?

Bank

Government Securities/Debts

Insurance

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Mutual funds

Equity

Real Estate

9. Have you ever invested through Anand Rathi?

(a) Yes (b) No

10. Why have you choose SIP for doing investment?

(a) Long term purpose

(b) Monthly saving

(c) To reduce risk of fluctuating market

(d) Any other

11. Why have you opted lump sum for doing investment?

(a) Short period investment

(b) Greater returns

(c) To take the advantage of arbitrage (buying in lower market and selling in higher
market

12. Are you doing investment in any other company mutual funds?

YES

NO

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