Vous êtes sur la page 1sur 60


5th Mile, Tadong, Gangtok 737102

Human Resource Management MU0005

Sikim Manipal University (MBA)







Sikim Manipal University (MBA)


A Study On Need of financial advisor for Mutual Fund Investors Conducted At BIRLA MUTUAL FUND Pvt. Ltd, Rajkot A project report submitted to in the partial fulfillment of requirement of the award of MASTER OF BUSINESS ADMINISTRATION (HRS) Submitted by Atulya Kumar Barik . M.B.A (Semster-4th) Reg No-510923220 Under the guidance of Mr. Hitesh Shah Sikkim Manipal University (MBA) At-Berhampur ,Church Road,(Old Bus Stand) Dit. Ganjam . Submitted To: SIKKIM MANIPAL UNIVERSITY, BERHAMPUR

Sikim Manipal University (MBA)


The only place where success comes before work is in the dictionary. It is great exposure for me using my theoretical knowledge which I have learnt till 4th semester of Master of Business Administration (M.B.A.) in my project work which I have done at Birla Sun Life Mutual Fund Pvt. Ltd. It is great pleasure to use knowledge in practical way in our tenure of training. Like to first heartily thanks to SKKIM MANIPAL UNIVERSITY (SMU) for including project in our M.B.A. syllabus. It is helpful to learn real situation of industry and helpful for increasing in our practical knowledge. I thankful to Sikkim Manipal University (SMU) , For giving me chance to do my project work. I am very thankful to Mr. Chirag Patel, Branch Manager of Birla Sun Life Mutual Fund Pvt. Ltd. As without his help and guidance this project is not possible, he share his good knowledge and guide in my project work. I am also thankful to all staff member of Birla Sun Life Mutual Fund Pvt. Ltd. I am thankful to my project guide Mr. Hitesh Shah for guiding during my project tenure. As he helps me whenever I need and spare her valuable time. Without her this project is not possible. I am thankful to my parents and my friends as they always motivate me and help me directly or indirectly in my project work. Atulya Kumar Barik

Sikim Manipal University (MBA)



I Atulya Kumar Barik , hereby declare that the project report entitled NEED OF FINANCIAL ADVISOR FOR MUTUAL FUND INVESTORS under the guidance of SIKKIM MANIPAL UNIVERSITY Submitted in partial fulfillment of the requirements for the award of the degree of Master of Business Administration to SIKIM MUNIPAL UNIVERSITY, Berhampur is my original work research study carried out during 2009 2010 to 2010 2011 and not submitted for the award of any other degree/diploma/fellowship or other similar titles or prizes to any other institution/organization or university by any other person.


( Atulya Kumar Barik) (M.B.A.)

Sikim Manipal University (MBA)


INDEX Sl. No. 1 Subject Executive Summary Company Profile History Vision Mission Values Product Offering Marketing Department HR Department Mutual Fund Introduction Advantages of Mutual Fund Drawbacks of Mutual Fund Risk in Mutual Fund Performance of Mutual Fund In India Organization of Mutual Fund Process of Invest in Mutual Fund Cost Associated with Mutual Fund Categories of Mutual Fund Measuring Performance of Mutual Fund Systematic Investment Plan Portfolio Analysis Tools Research Methodology Literature Review Objectives of Research Data Analysis Testing Hypothesis Findings And Conclusion Recommendations Sample Questionnaire Glossary of Some Concepts Conclusion Bibliography Page No. 01 02 03 03 03 07 08 10

15 17 18 19 22 24 30 31 33 38 45 47 51 52 54 64 66 68 69 72 75 76

4 5

7 8 9

Sikim Manipal University (MBA)



This project has been a great learning experience for me; at the same time it gave me enough scope to implement my analytical ability. This project as a whole can be divided into two parts: The first part gives an insight about the mutual funds and its various aspects. It is purely based on whatever I learned at Birla Sun Life Mutual Fund. One can have a brief knowledge about mutual funds and all its basics through the project. Other than that the real servings come when one moves ahead. Some of the most interesting questions regarding mutual funds have been covered. Some of them are: why has it become one of the largest financial intermediaries? How investors do chose between funds? Most popular stocks among fund managers, most lucrative sectors for fund managers, a special report on Systematic Investment Plan, does fund performance persists and the topping of all the servings in the form of portfolio analysis tool and its application. All the topics have been covered in a very systematic way. The language has been kept simple so that even a layman could understand. All the data have been well analyzed with the help of charts and graphs. The second part consists of data and their analysis, collected through a survey done on 200 people. It covers the topic need of financial advisors for mutual fund investors. The data collected has been well organized and presented. Hope the research findings and conclusions will be of use. It has also covered why people dont want to go for financial advisors? The advisors can take further steps to approach more and more people and indulge them for taking their advices.

Sikim Manipal University (MBA)



Sikim Manipal University (MBA)


The Aditya Birla Group is one of India's largest business houses. Global in vision, rooted in Indian values, the Group is driven by a performance ethic pegged on value creation for its multiple stakeholders. The Group's operations span 66 state of the art, straddling India, Thailand, Malaysia, Indonesia, Egypt, Philippines, Canada, Australia and China. A US $28 billion corporation with a market cap. Of US $31.5 billion and in the League of Fortune 500, the Aditya Birla Group is anchored by an extraordinary force of 100,000 employees, belonging to 25 different nationalities. Over 50 per cent of its revenues flow from its operations across the world. The Aditya Birla Group is a dominant player in all its areas of operations viz; Aluminum, Copper, Cement, Viscose Staple Fiber, Carbon Black, Viscose Filament Yarn, Fertilizers, Insulators, Sponge Iron, Chemicals, Branded Apparels, Insurance, Mutual Funds, Software and Telecom. The Group has strategic joint ventures with global majors such as Sun Life (Canada), AT&T (USA), the Tata Group and NGK Insulators (Japan), and has ventured into the BPO sector with the acquisition of Trans Works, a leading ITES/BPO company. Sun Life Financial Sun Life Financial is a leading international financial services organization providing a diverse range of wealth accumulation and protection products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading Mutual Funds managing assets of a large investor base. The fund offers a range of investment options, which include diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds.

Sikim Manipal University (MBA)


Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Services Inc. of Canada. The joint venture brings together the Aditya Birla Group s experience in the Indian market and Sun Life s global experience. No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes Equity & Debt Money Market Gilt Fund Corpus under management Rs.49983.17 Crs. as on Feb 28, 2009 Key Personnel Donald Stewart (Chairman), A Balasubramanian (CEO), Ashok Suvarna (COO), Abhay Palnitkar (CFO), Sanjay Singal(CMO), Bhavdeep Bhatt ( Head Products), Chandrashekhar Chavan (Head HRD), Rama Vasantharajan (Hd Compliance & Risk), Fund Managers Ajay Garg , Ankit Sancheti , Atul Penkar , Maneesh Dangi , Navneet Munot, Nishit Dholakia , Prasad Dhonde , Sanjay Chawla , Satyabrata Mohanty, Sunaina da Cunha , Vineet Maloo . 71 218 63 106 17 10 0 16

BSLAMC follows a long-term, fundamental research based approach to investment. The approach is to identify companies, which have excellent growth prospects and strong fundamentals. The fundamentals include the quality of the companys management, sustainability of its business model and its competitive position, amongst other factors. Birla Sun Life Asset Management Company has one of the largest team of research analysts in the industry, dedicated to tracking down the best companies to invest in. Birla Sun Life AMC strives to provide transparent, ethical and research-based investments and wealth management services. As of 30 June 2010, the Sun Life Financial group of companies had total assets under management of CDN $ 435 billion.

Sikim Manipal University (MBA)

10 | P a g e

Vision To be the most trusted name in investment and wealth management, to be the preferred employer in the industry and to be a catalyst for growth and excellence of the asset management business in India. Mission Achieving superior and consistent investment results. Creating a conducive environment to hone and retain talent. Providing customer delight. Institutionalizing system-approach in all aspects of functioning. Upholding highest standards of ethical values at all times. Values Integrity Commitment Passion Seamlessness Speed Track Record With a proven track record of over 14 years, Birla Sun Life Mutual Fund has been a catalyst towards the growth of the private sector asset management business. Investment Philosophy Birla Sun Life Mutual Fund follows a long-term, fundamental research based approach to investment. The approach is to identify companies, which have excellent credit-worthiness and strong fundamentals. The fundamentals include the quality of the company's management, sustainability of its business model and its competitive position, amongst other factors. Birla Sun Life Asset Management Company (BSLAMC) has one of the largest team of research analysts in the industry, dedicated to tracking down the best companies to invest in. BSLAMC will always strive to provide transparent, ethical and research-based investments and wealth management services. Geographical Reach Today, BSLAMC is present in 111 locations, including 74 branches. Product Offerings Birla Sun Life Mutual Fund offers a range of investment options, which include diversified and sector specific equity schemes, fund-of-fund schemes, hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds. BSLAMC also provides Private Wealth Management services.

Sikim Manipal University (MBA)

11 | P a g e


EQUITY SCHEMES Birla Sun Life Advantage Fund Birla Sun Life Dividend Yield Plus Birla Sun Life Tax Plan Birla Sun Life Index Fund Birla Sun Life India Gen Nect Fund Birla Sun Life India Opportunities Fund Birla Sun Life Midcap Fund Birla Sun Life MNC Fund Birla Sun Life Basic Industries fund

DEBT SCHEMES Birla Sun Life Short Term Opportunities Fund Birla Sun Life Dynamic Bond fund Birla Sun Life Gilt Plus- liquid Plan Birla Sun Life Gilt Plus-PF Plan Birla Sun Life Gilt Plus- Regular Plan Birla Sun Life Income Plus Birla Sun Life Govt. Securities(Long Term) Birla Sun Life Govt. Securities(Short Term) Birla Sun Life Income Fund- Half Yearly Dividend Birla Sun Life Income Fund- Quarterly Dividend Birla Sun Life Liquid Plus-Institutional Monthly Dividend Birla Sun Life Liquid Plus-Retail Monthly Dividend Birla Sun Life Short Term Fund- Monthly Dividend

Birla Sun Life Buy India Fund

Birla Sun Life Equity Fund

Birla Sun Life Frontline Equity Fund

Birla Sun Life New Millennium fund Birla Sun Life Tax Relief96 Birla Sun Life Top 100 fund

Sikim Manipal University (MBA)

12 | P a g e

Sikim Manipal University (MBA)

13 | P a g e

Marketing is a comprehensive term & it includes all resources & set of activities necessary to direct & facilitate the flow of goods & services from producer to consumer in the process of distribution. Marketing is the human activity directed at satisfying needs & wants through exchange process. Marketing is the process of planning, pricing, distribution of goods, ideas; services create exchanges that satisfy individual & organizational goals. PRODUCT PLANNING A product planning is a company plan for marketing its products. Product planning means planning for the product that is to decide what type of products to be produced or what needs or requirements the product should satisfy. In Birla Sun Life Mutual Fund, product planning is done very carefully. They first contact Advisors & ask, for the what type of product customers want means Debt based, Equity Based or Low risk Product etc then they prepare few samples & give to Advisors. As per the suggestions & Response of customers they prepare the new Schemes. STRATEGIES RELATED PRODUCT In developing a marketing strategy of individual products, the seller has to comfort many decision. There are four elements related to the products. The brief study of these elements will complete the concept. These four elements are: 1. Branding

2. 3. 4.

Packing & labeling Promotion

After sales service First one is Brand. Branding is the art and corner stone of marketing. A brand identifies the seller or marketing. It can a name, trademark, logo or other symbol under trademark law, the seller is granted exclusive right to the use of brand name. Second element is packing and labeling. Many marketers are of view that packing is a fifth Plan along with price, product, place and promotion. Packing includes the activities of designing and producing the container or wrapper for product while the label identifies the product. Birla Sun Life Mutual Fund also gives much important to the packing and labeling. Next is Promotion. Today promotion is one of the most important tools for stay in competition. Birla give full attention on this segment because Mutual Fund Industry is totally service based company and required high promotion to attract the investors.

Sikim Manipal University (MBA)

14 | P a g e

BIRLA prepare and distribute its new schemes regularly with some exclusive paper advertisement. Because in this industry the past performance is only measure of performance of company and it only show through paper Advertisement. It also distributes Seasonal Gifts to their Advisor for promoting their product and motivates them. Example: Give free Umbrella in Monsoon under Monsoon Dhamaka Schemes to attract the advisor for promote BIRLAs products. In this business the actual work of company start after sales of product i.e. After Sales Services. After Sales Services include how company response to their Clint. BIRLA is known for their After Sales Services. Birla send monthly valuation report of their Clint through currier. Birla solved any Query within 48 hours. Birla also continues suggest good schemes to their current Clint. Birla give Statement of their (Clint) investment free of costs.


Personnel management is the most important area of any business organization. The main aim of personnel management is to manage the personnel at work. It is concern with employees both as individual as well as group. The aim being to get better results with their collaboration and activity involvement in the organization activity. Personnel management means quite simply the task of dealing with human relationship within an organization. Personnel management is that phase of management which deals with the effective control and use of manpower as distinguished from other sources of power ORGANISATION STRUCTURE Organization is a group of people working together co-operating under authority, towards achieving benefit the participants and the organization. Every organization has goals and objectives. In Birla Sun Life Mutual Fund, there is a separate personnel department for achievement of goals. Personnel management is a most important part in an organization. All the functions related with personnel department. Personnel manager has got higher status in the organization. RECRUITMENT Recruitment is the process of selection for prospective employees simulating them to apply for job in the organization. In other words it is linking activity bearing to gather

Sikim Manipal University (MBA)

15 | P a g e

with jobs, selection jobs. Recruitment makes it possible to acquire the number and type of people necessary to ensure the continued operation of the organization. Recruitment is a process of searching for prospective employee and stimulating encouraging them to apply for jobs in an organization. There are two sources of requirement: 1. Internal Sources Promotion Transfer Demotion 2. External Sources Advertisement Employment On Campus Requirement Employee Recommendation In Birla Sun Life Mutual Fund they are using internal sources as well as external sources. Their policy for external sources is such that first they give advertisement in the newspaper and they have also contact with employment exchange through these source first of all collect application, separated and then after appropriate candidates are called for the interview. SELECTION After creating if application of required number of employees secured through different sources of recruitment the selection process begins. The main purpose of selection process of selection process is it find the right man for each job. The efficiency and profitability of the concern depends mainly on proper selection of the personnel. Company select employees through commercial made of three numbers. One is the work manager, second is of manager and the third is the head department in which company exists. WHY SHOULD INVESTORS CHOOSE BIRLA? Excellence is next to nothing.and here at Birla everybody tries their best to offer excellent services to its clientele through its offerings maintaining the Birla culture which includes: Controlled and low cost service culture Birla is there to serve its client at the minimum possible cost. it controls cost by its various cost- cutting techniques and minimization of avoidable costs. Large volume processing capability

Sikim Manipal University (MBA)

16 | P a g e

Being the largest financial service provider in the country, it has the unique distinction of operating its activities on a large scale which benefits all the parties cordially. Adherence to strict time schedule Birla knows that time is money and tries it best to finish the task within the stipulated time schedule. Expertise in coordinating multi-location responses Birla has got a wide network and hence one can find its branches at most of the places in India. Thus it enjoys its presence everywhere and coordinates among itself in solving the queries and in responding to any situation. Expertise in managing independent entities such as banks, post-office etc. The work culture of Birla and the ethics followed inside Birla makes its workforce compatible with everybody. Pooling of group resources Birla group consists of eight subsidiaries, so it can easily pool up its resources for accomplishment of its goals, whenever needed. The groups can help each other whenever there are peaks and lows, and even in the case when they have huge targets just as we saw few years back, Tata group pooling its resources to acquire Corus. How Birla achieved it? The core competency of Birla lies in the following points due to which it enjoys a1 competitive edge over its competitors. The following culture adopted by Birla makes it all time favorite among its clientele: 1. 2. 3. 4. 5. Professionally managed by qualified and trained manpower. Uniquely structured in-house software and hardware department Query handling within 48 hrs. Strong secretarial, accounting and audit systems. Unique work culture of working 7 days a week in 3 shifts.

Sikim Manipal University (MBA)

17 | P a g e


Unmatched network spreading all over India.

Sikim Manipal University (MBA)

18 | P a g e


INTRODUCTION 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 invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by the (pro rata). 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 portfolio at a relatively low cost. Anybody with an invest able surplus of as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. 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. Price 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 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 research, 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 fund 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 Mutual Funds now represent perhaps the most appropriate investment opportunity for most investors. As financial markets become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. As a result, in the birthplace of mutual funds - the U.S.A. - the fund industry has overtaken the banking industry: more funds are under mutual fund management than deposited with banks.

Sikim Manipal University (MBA)

19 | P a g e

In India with more person getting interested to earn more from their saving to minimize the effect of growing inflation mutual funds are becoming one the best way to achieve the required solution. Despite the fact that mutual funds are still a new financial intermediary in India, they have started opening up many exciting investment opportunities for the Indian investor. A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. In other words we can say that A Mutual Fund is a trust registered with the Securities and Exchange Board of India (SEBI), which pools up the money from individual / corporate investors and invests the same on behalf of the investors /unit holders, in equity shares, Government securities, Bonds, Call money markets etc., and distributes the profits. The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. The value of all the securities in the portfolio in calculated daily. From this, all expenses are deducted and the resultant value divided by the number of units in the fund is the funds NAV. NAV = Total value of the fund Number of shares currently issued and outstanding ADVANTAGES OF MUTUAL FUNDs Professional Management The primary advantage of funds (at least theoretically) is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolios. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments. Diversification By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds you own, the less any one of them can hurt you (think about Enron). Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money. Economies of scale Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for securities transactions.

Sikim Manipal University (MBA)

20 | P a g e

Liquidity Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time. DRAWBACKS OF MUTUAL FUNDs No guarantee No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio is. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money. Fees and commission All funds charges administrative fees to cover their day to day expenses. Some funds also charge sales commission or loads to compensate brokers, financial consultants or financial planners. Even if you do not use a broker or other financial adviser, you will pay a sales commission if you buy shares in a load fund. Taxes During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 % of the securities in their portfolios, if your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made. Management risk When you invest in a mutual fund, you depend on the fund manager to make the right decisions regarding the funds portfolio. If the manager does not freeform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index funds, you forego management risk because these funds do not employ managers. RISK ASSOCIATED WITH THE INVESTMENT IN THE MUTUAL FUNDS Savings are invested in various investment opportunities for earning better returns. The returns of the investment depend upon the risk of such investment. All investments involve some risk. The objective of any investor is to minimize the risk and maximize returns. The value of financial assets depends on their return and risk patterns. Risk can be defined as the chance factor in trading in which expected or perspective advantage, gain, profit or return may not materialize

Sikim Manipal University (MBA)

21 | P a g e

The actual outcome of investment may be less than the expected outcome. The greater is the variability in the possible outcome, the greater is the risk. Generally, the variance and the standard deviation of return are used as the alternative statistical measures of the risk of the financial asset. Similarly, co-variance measured the risk of the assets, relative to other assets in a portfolio. Some risks can be controlled by the investors. Others cannot be controlled, and they are to be borne by the investor compulsorily. DIFFERENT TYPES OF RISK IN MUTUAL FUNDs Risk is an inherent aspect of every form of investment. For mutual fund investments, risks would include variability, or period-by-period fluctuations in total return. The value of the schemes investment may be affected by factors affecting capital markets such as price and volume, volatility in the stock markets, interest rates, currency exchange rates, foreign investment, changes in government policy, political, economic or other developments. Market Risk At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the stock prices of both an outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is due to market risk. Inflation Risk Sometimes it is referred to as loss of purchasing power. Whenever the rate of inflation exceeds the earnings on your investment, you run the risk that you will actually be able to buy less, not more. Credit Risk In short, how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised, or repay your principal when the investment matures? Interest Rate Risk Changing interest rates affect both equities and bonds in many ways. Bond prices are influenced by movements in the interest rates in the financial system. Generally, when interest rates rise, prices of the securities fall and when interest rates drop, the prices increase. Interest rate movements in the Indian debt markets can be volatile leading to the possibility of large price movements up or down in debt and money market securities and thereby to possibly large movements in the NAV. Investment Risk In the sectored fund schemes, investments will be predominantly in equities of selected companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities.

Sikim Manipal University (MBA)

22 | P a g e

liquidity Risk Thinly traded securities carry the danger of not being easily saleable at or near their real values. The fund manager may therefore be unable to quickly sell an illiquid bond and this might affect the price of the fund unfavorably. Liquidity risk is characteristic of the Indian fixed income market. Changes in the Government Policy Changes in government policy especially in regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund. PERFORMANCE OF MUTUAL FUND IN INDIA Let us start the discussion of the performance of mutual funds in India from the concept of mutual fund took birth in India. The year was 1963, Unit Trust of India invited investors or rather to those who believed in savings, to park their money in UTI mutual fund. And their idea of this investment was good. For 30 years it goaled without a single second player. Though the 1988 year saw some new mutual fund companies, but UTI remained in a monopoly position. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. People rarely understood, and of course investing was out of question. But yes, some 24 million shareholders were accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of investors touched the sky in profitability factor. However, people were miles away from the preparedness of risks factor after the liberalization. The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets under Management rose to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as high as Rs.1,540bn. The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative investments. There were rather no choices apart from holding the cash or to further continue investing in shares. One more thing to be noted, since only closed-end funds were floated in the market, the investors disinvested by selling at a loss in the secondary market.

Sikim Manipal University (MBA)

23 | P a g e

The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandals, the losses by disinvestments and of course the lack of transparent rules in the where about rocked confidence among the investors. Partly owing to a relatively weak stock market performance, mutual funds have not yet recovered, with funds trading at an average discount of 1020 percent of their net asset value.

The supervisory authority adopted a set of measures to create a transparent and competitive environment in mutual funds. Some of them were like relaxing investment restrictions into the market, introduction of open-ended funds, and paving the gateway for mutual funds to launch pension schemes. The measure was taken to make mutual funds the key instrument for long-term The more the variety offered, the quantitative will be investors.


At last to mention, as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time, more and more people will be inclined to invest until and unless they are fully educated with the dos and donts of mutual funds.

Sikim Manipal University (MBA)

24 | P a g e


Sikim Manipal University (MBA)

25 | P a g e

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 holders. AMC approved by SEBI manages the fund by making investments in various types of securities. A 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. Sponsor Mutual Fund as Trust Asset Management Company Other Fund Constituents Sponsor Any person acting alone or in concert with another body corporate comparable to a promoter of a company as he gets fund registered with SEBI. For person to qualify as sponsor at least 40% of the initial Net worth of AMC should be contributed by him should be in the financial services business for a period of not less than five years should possess sound financial track record of over five years & should have positive net worth in all the immediately preceding five years form a trust and appoint Board of Trustees appoint AMC directly or in concert with Trustees. Mutual Fund as Trust Constituted as Trust under Indian Trust Act, 1882 (and registered under Indian Registration Act, 1908). Sponsor acts as Settler of trust contributes initial trustee to hold the investors assets in trust. Trust deed to be executed by the sponsor in favor of trustees. 3. Trustees 2. 1.

Eligibility of Board of Trustees or a Trustee Company Not guilty of moral turpitude Not convicted (economic offence and securities laws) Not part of AMC (director, employee or officer of AMC) Appointment approved by SEBI More than one trusteeship (in mutual fund industry; approved by SEBI) At least two third should be independent Meaning of Independence

Sikim Manipal University (MBA)

26 | P a g e

Rights of Trustees Appoint AMC with SEBI approval Approve schemes floated by AMC Right to necessary information

Remedial action to ensure that business is conducted as per SEBI regulation

right to dismiss AMC with approval from SEBI and in accordance with regulations Ensure based on quarterly review that any shortfall in NW of AMC is made up.

Obligations of Trustee

Investment Management Agreement between trustee and AMC with approval

from SEBI (4th schedule) Monitoring of AMC by trustees right to information Right to dismiss the AMC with approval SEBI Must ensure transactions are in accordance with trust deed Ensure AMC has proper systems and procedures Due diligence in appointment of brokers Ensure AMC is managing funds independent of other activities

Half yearly report of fund activities and certificate that AMC has been managing
funds 4. i. independent of other activities Other Fund Constituents




Custodian and Depositories For safekeeping of securities and participating in clearing system through approved depository companies. Entity independent of the sponsors direction and responsibility of the Trustees. Bankers Bankers are dealing with money for buy and sale of units, paying and receiving funds for investments, discharging obligations for operational expenses. Transfer Agent Transfer agents are used for used for issuing and redeeming units, preparation of transfer documents, updating investor records, in-house or external agency. Distributors Distributor enable fund to sell units over a wide bas of investors, brokers, banks, individual agents.

Sikim Manipal University (MBA)

27 | P a g e

HOW TO INVEST IN MUTUAL FUND 1. 2. 3. 4. Reading a Prospectus Objective Statement Performance Fees and Expenses THE PROCESS TO PURCHASE AND REDEEM UNITS The most common method to invest in a fund once you are in it is to simply fill out investment forms and write a check to the mutual fund family. This is probably the easiest but it often takes a few days or even a week to have the funds credited to your account. Another method that is common is automatic withdrawals. These allow you to have a certain amount, which you choose to be deducted from your bank account each month. These are excellent for getting into the habit of investing on a regular basis. The fund will also provide information on how you can redeem your shares. One common way is to request redemption by filling out a form or writing a letter to the mutual fund family. This is the most common method but it isnt the only one. Now that you understand the basics of a prospectus, you are one step closer to getting started in mutual funds. So when you finally receive the information you requested on a mutual fund, look it over carefully and make an educated decision if it is right for you.


Identify Your Investment Needs Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs, which could be regular income, buying a home or finance a wedding or educate your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements. Choose the Right Mutual Fund The important thing is to choose the right mutual fund scheme, which suits your requirements. The offer document of the scheme tells you its objectives and provides

Sikim Manipal University (MBA)

28 | P a g e

supplementary details like the track record of other schemes managed by the same Fund Manager.

Select the Ideal Mix of Schemes Investing in just one Mutual Fund scheme may not meet all your investment needs. Your may consider investing in a combination of schemes to achieve your specific goals. Invest Regularly The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and do investors all over the world follow a disciplined investment strategy. Start Early It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return. The Final Step All your need to do now is to for online application forms of various mutual fund schemes and start investing. You may reap the rewards in the years to come. THE COST ASSOCIATED WITH MUTUAL FUND Costs are the biggest problem with mutual funds. These costs eat into your return, and they are the main reason why the majority of funds end up with sub-par performance. What's even more disturbing is the way the fund industry hides costs through a layer of financial complexity and jargon. Some critics of the industry say that mutual fund companies get away with the fees they charge only because the average investor does not understand what he/she is paying for. Fees can be broken down into two categories: 1. ongoing yearly fees to keep you invested in the fund. 2. Transaction fees paid when you buy or sell shares in a fund. The Expense Ratio The ongoing expenses of a mutual fund are represented by the expense ratio. This is sometimes also referred to as the management expense ratio (MER). The expense ratio is composed of the following: 1. The Cost Of Hiring The Fund Manager(S)

Sikim Manipal University (MBA)

29 | P a g e

Also known as the management fee, this cost is between 0.5% and 1% of assets on average. While it sounds small, this fee ensures that mutual fund managers remain in the country's top echelon of earners. Think about it for a second: 1% of 250 million (a small mutual fund) is $2.5 million - fund managers are definitely not going hungry! It's true that paying managers is a necessary fee, but don't think that a high fee assures superior performance.

2. Administrative Costs These include necessities such as postage, record keeping, customer service, cappuccino machines, etc. Some funds are excellent at minimizing these costs while others (the ones with the cappuccino machines in the office) are not. On the whole, expense ratios range from as low as 0.2% (usually for index funds) to as high as 2%. The average equity mutual fund charges around 1.3%-1.5%. You'll generally pay more for specialty or international funds, which require more expertise from managers. Loads are just fees that a fund uses to compensate brokers or other salespeople for selling you the mutual fund. All you really need to know about loads is this: don't buy funds withloads. Here is how certain loads work 3. Front-end loads These are the simplest type of load: you pay the fee when you purchase the fund. If you invest $1,000 in a mutual fund with a 5%, $50 will pay for the sales charge, and $950 will be invested in the fund. 4. Back-end loads (also known as deferred sales charges) These are a bit more complicated. In such a fund you pay the back end load. If you sell a fund within a certain time frame. A typical example is a 6% back-end load that decreases to 0% in the seventh year. The load is 6% if you sell in the first year, 5% in the second year, etc. If you don't sell the mutual fund until the seventh year, you don't have to pay them. CATEGORIES OF MUTUAL FUND

Sikim Manipal University (MBA)

30 | P a g e

Mutual funds can be classified as follow: Based on their structure

Open-ended funds:

Investors can buy and sell the units from the fund, at any point of time. Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments cannot be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity. Based on their investment objective


Equity Funds

These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at

Sikim Manipal University (MBA)

31 | P a g e

relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as: Index funds

In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weightages. Equity diversified funds 100% of the capital is invested in equities spreading across different sectors and stocks. Dividend yield funds

It is similar to the equity diversified funds except that they invest in companies offering high dividend yields. Thematic funds Invest 100% of the assets in sectors which are related through some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc. Sector funds Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks. ELSS- Equity Linked Saving Scheme provides tax benefit to the investors. ii. Balanced fund Their investment portfolio includes both debt and equity. As a result, on the riskreturn ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes: Debt-oriented funds -Investment below 65% in equities. Equity-oriented funds -Invest at least 65% in equities, remaining in debt. iii. DEBT FUND They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixedincome instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs.

Sikim Manipal University (MBA)

32 | P a g e

Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market. Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills. Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate. Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities. Gilt funds LT- They invest 100% of their portfolio in long-term government securities. Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term debt papers. MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities.



Systematic Investment Plan

Under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)


Systematic Transfer Plan

Under this an investor invests in debt oriented fund and gives instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan If someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month. RISK Vs RETURN

Sikim Manipal University (MBA)

33 | P a g e

MEASURING AND EVALUATING MUTUAL FUND PERFORMANCE Every investor investing in the mutual funds is driven by the motto of either wealth creation or wealth increment or both. Therefore its very necessary to continuously evaluate the funds performance with the help of factsheets and newsletters, websites, newspapers and professional advisors like BIRLA mutual fund services. If the investors ignore the evaluation of funds performance then he can lose hold of it any time. In this ever-changing industry, he can face any of the following problems: 1. Variation in the funds performance due to change in its management/ objective. 2. The funds performance can slip in comparison to similar funds. 3. There may be an increase in the various costs associated with the fund. 4. Beta, a technical measure of the risk associated may also surge. 5. The funds ratings may go down in the various lists published by independent rating agencies. 6. It can merge into another fund or could be acquired by another fund house.

Performance measures Equity funds The performance of equity funds can be measured on the basis of: NAV Growth, Total Return; Total Return with Reinvestment at NAV, Annualized Returns and

Sikim Manipal University (MBA)

34 | P a g e

Distributions, Computing Total Return (Per Share Income and Expenses, Per Share Capital Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Turnover Rate, Fund Size, Transaction Costs, Cash Flow, Leverage. Debt fund Likewise the performance of debt funds can be measured on the basis of: Peer Group Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs, besides NAV Growth, Total Return and Expense Ratio. Liquid funds The performance of the highly volatile liquid funds can be measured on the basis of: Fund Yield, besides NAV Growth, Total Return and Expense Ratio To measure the funds performance, the comparisons are usually done with 1. 2. 3. With a market index. Funds from the same peer group. Other similar products in which investors invest their funds.

Financial Planning For Investors (Ref. To Mutual Funds) Investors are required to go for financial planning before making investments in any mutual fund. The objective of financial planning is to ensure that the right amount of money is available at the right time to the investor to be able to meet his financial goals. It is more than mere tax planning. Steps in financial planning are 1. 2. 3. Asset allocation. Selection of fund. Studying the features of a scheme.

In case of mutual funds, financial planning is concerned only with broad asset allocation, leaving the actual allocation of securities and their management to fund managers. A fund manager has to closely follow the objectives stated in the offer document, because financial plans of users are chosen using these objectives. WHY HAS IT BECOME ONE OF THE LARGEST FINANCIAL INSTRUMENTS? If we take a look at the recent scenario in the Indian financial market then we can find the market flooded with a variety of investment options which includes mutual funds, equities, fixed income bonds, corporate debentures, company fixed deposits, bank deposits, PPF, life insurance, gold, real estate etc. All these investment options could be judged on the

Sikim Manipal University (MBA)

35 | P a g e

basis of various parameters such as- return, safety convenience, volatility and liquidity. Measuring these investment options on the basis of the mentioned parameters, we get this in a tabular form Return Safety Volatility Liquidity Convenienc e Equity High Low High High Moderate Bonds Moderate High Moderate Moderate High Co. Moderate Moderate Moderate Low Low Debentures Co. FDs Moderate Low Low Low Moderate Bank Low High Low High High Deposits PPF Moderate High Low Moderate High Life Low High Low Low Moderate Insurance Gold Moderate High Moderate Moderate Gold Real Estate High Moderate High Low Low Mutual High High Moderate High High Funds We can very well see that mutual funds outperform every other investment option. On three parameters it scores high whereas its moderate at one. comparing it with the other options, we find that equities gives us high returns with high liquidity but its volatility too is high with low safety which doesnt makes it favorite among persons who have low riskappetite. Even the convenience involved with investing in equities is just moderate. Now looking at bank deposits, it scores better than equities at all fronts but lags badly in the parameter of utmost important i.e.; it scores low on return , so its not an happening option for person who can afford to take risks for higher return. The other option offering high return is real estate but that even comes with high volatility and moderate safety level, even the liquidity and convenience involved are too low. Gold have always been a favorite among Indians but when we look at it as an investment option then it definitely doesnt gives a very bright picture. Although it ensures high safety but the returns generated and liquidity are moderate. Similarly the other investment options are not at par with mutual funds and serve the needs of only a specific customer group. Straightforward, we can say that mutual fund emerges as a clear winner among all the options available. The reasons for this being: 1. Mutual funds combine the advantage of each of the investment products Mutual Fund is one such option which can invest in all other investment options. Its principle of diversification allows the investors to taste all the fruits in one plate. Just by investing in it, the investor can enjoy the best investment option as per the investment objective. 2. Dispense the shortcomings of the other options Every other investment option has more or less some shortcomings. Such as if some are good at return then they are not safe, if some are safe then either they have low

Sikim Manipal University (MBA)

36 | P a g e

liquidity or low safety or both.likewise, there exists no single option which can fit to the need of everybody. But mutual funds have definitely sorted out this problem. Now everybody can choose their fund according to their investment objectives. 3. Returns get adjusted for the market movements As the mutual funds are managed by experts so they are ready to switch to the profitable option along with the market movement. Suppose they predict that market is going to fall then they can sell some of their shares and book profit and can reinvest the amount again in money market instruments. HOW DO INVESTORS CHOOSE BETWEEN FUNDS? When the market is flooded with mutual funds, its a very tough job for the investors to choose the best fund for them. Whenever an investor thinks of investing in mutual funds, he must look at the investment objective of the fund. Then the investors sort out the funds whose investment objective matches with that of the investors. Now the tough task for investors start, they may carry on the further process themselves or can go for advisors like BIRLA. Of course the investors can save their money by going the direct route i.e. through the AMCs directly but it will only save 1-2.25% (entry load) but could cost the investors in terms of returns if the investor is not an expert. So it is always advisable to go for MF advisors. The mf advisors thoughts go beyond just investment objectives and rate of return. Some of the basic tools which an investor may ignore but an mf advisor will always look for are as follow: 1. Rupee Cost Averaging The investors going for Systematic Investment Plans (SIP) and Systematic Transfer Plans (STP) may enjoy the benefits of RCA (Rupee Cost Averaging). Rupee cost averaging allows an investor to bring down the average cost of buying a scheme by making a fixed investment periodically, like Rs 5,000 a month and nowadays even as low as Rs. 500 or Rs. 100. In this case, the investor is always at a profit, even if the market falls. In case if the NAV of fund falls, the investors can get more number of units and vice-versa. This results in the average cost per unit for the investor being lower than the average price per unit over time. The investor needs to decide on the investment amount and the frequency. More frequent the investment interval, greater the chances of benefiting from lower prices. Investors can also benefit by increasing the SIP amount during market downturns, which will result in reducing the average cost and enhancing returns. Whereas STP allows investors who have lump sums to park the funds in a low-risk fund like liquid funds and make periodic transfers to another fund to take advantage of rupee cost averaging. 2. Rebalancing Rebalancing involves booking profit in the fund class that has gone up and investing in the asset class that is down. Trigger and switching are tools that can be used to rebalance a portfolio. Trigger facilities allow automatic redemption or switch if a specified event occurs. The trigger could be the value of the investment, the net asset value of the scheme, level of capital appreciation, level of the market indices or even a date. The funds redeemed can be switched to other specified schemes within the same fund house. Some fund houses allow such switches without charging an entry load.

Sikim Manipal University (MBA)

37 | P a g e

To use the trigger and switch facility, the investor needs to specify the event, the amount or the number of units to be redeemed and the scheme into which the switch has to be made. This ensures that the investor books some profits and maintains the asset allocation in the portfolio. 3. Diversification Diversification involves investing the amount into different options. In case of mutual funds, the investor may enjoy it afterwards also through dividend transfer option. Under this, the dividend is reinvested not into the same scheme but into another scheme of the investor's choice. For example, the dividends from debt funds may be transferred to equity schemes. This gives the investor a small exposure to a new asset class without risk to the principal amount. Such transfers may be done with or without entry loads, depending on the MF's policy. 4. Tax efficiency Tax factor acts as the x-factor for mutual funds. Tax efficiency affects the final decision of any investor before investing. The investors gain through either dividends or capital appreciation but if they havent considered the tax factor then they may end loosing. Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and education fess) on dividends paid out. Investors who need a regular Stream of income have to choose between the dividend option and a systematic withdrawal plan that allows them to redeem units periodically. SWP implies capital gains for the investor. If it is short-term, then the SWP is suitable only for investors in the 10-per-centtax bracket. Investors in higher tax brackets will end up paying a higher rate as short-term capital gains and should choose the dividend option. If the capital gain is long-term (where the investment has been held for more than one year), the growth option is more tax efficient for all investors. This is because investors can redeem units using the SWP where they will have to pay 10 per cent as long-term capital gains tax against the 12.50 per cent DDT paid by the MF on dividends. All the tools discussed over here are used by all the advisors and have helped investors in reducing risk, simplicity and affordability. Even then an investor needs to examine costs, tax implications and minimum applicable investment amounts before committing to a service.

Sikim Manipal University (MBA)

38 | P a g e


We have already mentioned about SIPs in brief in the previous pages but now going into details, we will see how the power of compounding could benefit us. In such case, every small amounts invested regularly can grow substantially. SIP gives a clear picture of how an early and regular investment can help the investor in wealth creation. Due to its unlimited advantages SIP could be redefined as a methodology of fund investing regularly to benefit regularly from the stock market volatility. In the later sections we will see how returns generated from some of the SIPs have outperformed their benchmark. But before moving on to that lets have a look at some of the top performing SIPs and their return for 1 year:
NAV Date 30/5/2010

Scheme Reliance diversified power sector retail Reliance regular savings equity principal global opportunities fund DWS investment opportunities fund BOB growth fund

Amount 1000

NAV 62.74

Total Amount 14524.07

1000 1000 1000 1000

22.208 18.86 35.31 42.14

30/5/2010 30/5/2010 30/5/2010 30/5/2010

13584.944 14247.728 13791.157 13769.152

In the above chart, we can see how if we start investing Rs.1000 per month then what return well get for the total investment of Rs. 12000. There is reliance diversified power sector retail giving the maximum returns of Rs. 2524.07 per year which comes to 21% roughly. Next we can see if anybody would have undertaken the SIP in Principal would have got returns of app. 18%. We can see reliance regular savings equity, DWS investment opportunities and BOB growth fund giving returns of 13.20%, 14.92%, and 14.74% respectively which is greater than any other monthly investment options. Thus we can easily make out how SIP is beneficial for us. Its hassle free, it forces the investors to save and get them into the habit of saving. Also paying a small amount of Rs. 1000 is easy and convenient for them, thus putting no pressure on their pockets. Now we will analyze some of the equity fund SIP s of Birla Sun life with BSE 200 and bank fixed deposits In a tabular format as well as graphical.

Sikim Manipal University (MBA)

39 | P a g e

Birla SL tax relief '96 Birla SL equity fund Birla frontline equity fund

144 114 66

1,44,000 1,14,000 66,000

5,53,190 3,88,701 1,56,269

16,84,008 6,69,219 1,81,127

In the above case, we have taken three funds of Birla sun life namely Birla sun life tax relief 96, Birla sun life equity fund and Birla sun life frontline equity fund. All these three funds follow the same benchmark ie; BSE 200. Here, we have shown how one would have benefitted if he would have put his money into these schemes since their inception. And the amount even is a meager Rs. 1000 per month. Starting from Birla frontline equity fund, we could spot that if someone would have invested Rs. 1000 per month resulting into total investment of Rs. 66000 then it would have amounted to rs.156269 if invested in BSE 200 whereas the fund would have given a total return of Rs 181127. Now moving next to Birla sun life equity fund, a total investment of 114000 for a total of 114 months at BSE 200 would have given a total return of Rs. 388701 whereas the fund gave a total return of Rs. 669219, nearly double the return generated at BSE 200. And now the cream of all the investments, Birla sun life tax relief 96. A total investment of Rs. 144000 for a period of 12 years at BSE 200 would have given total returns of just Rs. 553190 but the Birla sun life tax relief 96 gave an unbelievable total return of Rs 1684008. Thus the above case very well explains the power of compounding and early investment. We have seen how a meager amount of Rs. 144000 turned into Rs. 1684008. It may appear unbelievable for many but SIPs have turned this into reality and the power of compounding is speaking loud, attracting more and more investors to create wealth through SIPs. PORTFOLIO ANALYSIS TOOLS With the increasing number of mutual fund schemes, it becomes very difficult for an investor to choose the type of funds for investment. By using some of the portfolio analysis tools, he can become more equipped to make a well informed choice. There are many financial tools to analyze mutual funds. Each has their unique strengths and limitations as well. Therefore, one needs to use a combination of these tools to make a thorough analysis of the funds. The present market has become very volatile and buoyant, so it is getting difficult for the investors to take right investing decision. so the easiest available option for investors is to choose the best performing funds in terms of returns which have yielded maximum returns.

Sikim Manipal University (MBA)

40 | P a g e

But if we look deeply to it, we can find that the returns are important but it is also important to look at the quality of the returns. Quality determines how much risk a fund is taking to generate those returns. One can make a judgment on the quality of a fund from various ratios such as standard deviation, sharpe ratio, beta, treynor measure, R-squared, alpha, portfolio turnover ratio, total expense ratio etc. Now I have compared two funds of SBI on the basis of standard deviation, beta, R-squared, sharpe ratio, portfolio turnover ratio and total expense ratio. So before going into details, lets have a look at these ratios: Standard deviation In simple terms standard deviation is one of the commonly used statistical parameter to measure risk, which determines the volatility of a fund. Deviation is defined as any variation from a mean value (upward & downward). Since the markets are volatile, the returns fluctuate every day. High standard deviation of a fund implies high volatility and a low standard deviation implies low volatility. Beta analysis Beta is used to measure the risk. It basically indicates the level of volatility associated with the fund as compared to the market. In case of funds, as compared to the market. In case of funds, beta would indicate the volatility against the benchmark index. It is used as a short term decision making tool. A beta that is greater than 1 means that the fund is more volatile than the benchmark index, while a beta of less than 1 means that the fund is more volatile than the benchmark index. A fund with a beta very close to 1 means the funds performance closely matches the index or benchmark. The success of beta is heavily dependent on the correlation between correlation between a fund and its benchmark. Thus, if the funds portfolio doesnt have a relevant benchmark index then a beta would be grossly inappropriate. For example if we are considering a banking fund, we should look at the beta against a bank index. R-Squared (R2) R squared is the square of R (i.e.; coefficient of correlation). It describes the level of association between the funs market volatility and market risk. The value of R- squared ranges from0 to1. A high R- squared (more than 0.80) indicates that beta can be used as a reliable measure to analyze the performance of a fund. Beta should be ignored when the rsquared is low as it indicates that the fund performance is affected by factors other than the markets. For example:
Case 1 0.65 1.2 Case 2 0.88 0.9

R2 B

Sikim Manipal University (MBA)

41 | P a g e

In the above tableR2 is less than 0.80 in case 1, implies that it would be wrong to mention that the fund is aggressive on account of high beta. In case 2, the r- squared is more than 0.85 and beta value is 0.9. it means that this fund is less aggressive than the market. Sharpe ratio: sharpe ratio is a risk to reward ratio, which helps in comparing the returns given by a fund with the risk that the fund has taken. A fund with a higher sharpe ratio means that these returns have been generated taking lesser risk. In other words, the fund is less volatile and yet generating good returns. Thus, given similar returns, the fund with a higher sharpe ratio offers a better avenue for investing. The ratio is calculated as: Sharpe ratio = (Average return- risk free rate)/ standard deviation Portfolio turnover ratio Portfolio turnover is a measure of a fund's trading activity and is calculated by dividing the lesser of purchases or sales (excluding securities with maturities of less than one year) by the average monthly net assets of the fund. Turnover is simply a measure of the percentage of portfolio value that has been transacted, not an indication of the percentage of a fund's holdings that have been changed. Portfolio turnover is the purchase and sale of securities in a fund's portfolio. A ratio of 100%, then, means the fund has bought and sold all its positions within the last year. Turnover is important when investing in any mutual fund, since the amount of turnover affects the fees and costs within the mutual fund. Total Expenses Ratio A measure of the total costs associated with managing and operating an investment fund such as a mutual fund. These costs consist primarily of management fees and additional expenses such as trading fees, legal fees, auditor fees and other operational expenses. The total cost of the fund is divided by the fund's total assets to arrive at a percentage amount, which represents the TER: Total Expense Ratio = (Total fund Costs/ Total fund Assets) . RESEARCH REPORT REVIEW OF LITERATURE This chapter devoted to the review of literature available on the topic under study. The selection of the topic for the study has been undertaken after a brief review of literature available on the subject. The purpose of referring the research paper, project reports, articles and working paper was also to derive supporting evidence for some of the finding of the study. An attempt was made to refer some of the national as well as international journals and project reports. A few names may be mentioned here in:

Sikim Manipal University (MBA)

42 | P a g e

World development report Journal of financial performance The intelligent investors, Mumbai Chartered accountant, ICAI, New Delhi Chartered secretary, ICAI, New Delhi Vikalpa, The journal for decision makers, IIM, Ahmedabad Management review, IIM, Bangalore

In literature various researchers have used profitability and growth as measurement of performance. Profitability has been used as measure of performance by Gort (1962), Rumelt (1974), McDougal and Round (1984), Paul (1985-86), Sambharya (19950, Tallman and Li (1996), Faejoun (1998). One of the financial indicators that give the utmost satisfaction to the investors is return that is generated by their investment but at the same time they are worried about the risk that is associated with their investment. Hence, it turns out to be very significant and vital for the financial managers to analysis and identified the risk and return associated with the investment. According to Erich L. Kohlar It is a general term applied to a part or to all of the conduct of activities of an organization over a period of time; often with reference to Past or Projected costs efficiency management responsibility or accountability or the like. OBJECTIVE OF RESEARCH The main objective of this project is concerned with getting the opinion of people regarding mutual funds and what they feel about availing the services of financial advisors. I have tried to explore the general opinion about mutual funds. It also covers why/ why not investors are availing the services of financial advisors. Along with it a brief introduction to Indias largest financial intermediary, BIRLA has been given and it is shown that how they operate in mutual fund department SCOPE OF THE STUDY The research was carried on in the Eastern Region of India. It is restricted to Kolkata where it has got 11 branch offices and 3 franchisees. I have visited people randomly nearby my locality, different shopping malls, small retailers etc. DATA SOURCES Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been

Sikim Manipal University (MBA)

43 | P a g e

collected by interacting with various people. The secondary data has been collected through various journals and websites and some special publications of BIRLA. SAMPLING i. Sampling Procedure

The sample is selected in a random way, irrespective of them being investor or not or availing the services or not. It was collected through mails and personal visits to the known persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using the measures of central tendencies like mean, median, mode. The group has been selected and the analysis has been done on the basis statistical tools available. ii. Sample Size The sample size of my project is limited to 200 only. Out of which only 135 people attempted all the questions. Other 65 not investing in MFs attempted only 2 questions. iii. Sample Design Data has been presented with the help of bar graph, pie charts, line graphs etc. LIMITATION Time limitation. Research has been done only at Rajkot. Some of the persons were not so responsive. Possibility of error in data collection. Possibility of error in analysis of data due to small sample size. DATA ANALYSIS 1. Have you ever invested/ interested to invest in Mutual funds? NO 65

Sikim Manipal University (MBA)

44 | P a g e

2. What is the most important reason for not investing in mutual funds? (only for above 65 participants)
Lack of knowledge about mutual funds Enjoys investing in other options Its benefits are not enough to drive you for investment No trust over the fund managers 25 10 18 12

3. Where do you find yourself as a mutual fund investor?

Totally ignorant Partial knowledge of MFs Aware of only scheme in which invested Good knowledge of MFs 28 37 46 24

Sikim Manipal University (MBA)

45 | P a g e

4. Where from you purchases mutual funds?

Directly from the AMCs Brokers only ( large intermediaries) Broker/ sub-brokers Other sources 33 28 59 15

5. Which feature of the mutual funds allure you most?

Diversification Professional management Reduction in risk and transaction cost Helps in achieving long term goal 42 29 34 30


According to you which is the most suitable stage to invest in mutual funds?

Young unmarried stage Young Married with children stage Married with older children stage Pre retirement stage

55 32 21 27

Sikim Manipal University (MBA)

46 | P a g e


Are you availing the services of personal financial advisors?

Yes No 87 48


Which expertise of the personal financial advisor is demanded most?

Portfolio review & investment recommendation Planning to achieve specific financial goals Managing assets in retirement Access to specialists in areas such as tax planning

43 35 30 27

Sikim Manipal University (MBA)

47 | P a g e


What is the major reason for using financial advisors?

42 23 37 33

Want help with asset allocation Dont have enough time to make own decision To explain various investment options Want to have surety about financial goals


What is the major reason for not using financial advisor?

18 53 21 43

Have access to all resources needed Believe advisors are too expensive Unsure how to find a trustworthy advisor Want to be in control of own investments

HYPOTHESIS TESTING Following table shows the number as well as percentages of people who are availing the service of personal Financial Advisor for invent in mutual fund. 64.44% of the people are availing the service of personal Financial Advisor for invent in mutual fund and rest of 35.56% people not availing the service of personal Financial Advisor for invent in mutual fund.
Particular Yes No Total Frequency 87 48 135 Percent 64.44 35.56 100.00 Valid % 64.44 35.56 100.00 Cumulative % 64.44 100.00 100.00

Sikim Manipal University (MBA)

48 | P a g e

Ho: 60% People availing the service of personal Financial Advisor for invent in mutual fund. pHO=0.60 H1: 40% people availing the service of personal Financial Advisor for invent in mutual fund. qHO =0.40 pHO: Hypothesized value of population proportion of success. qHO: Hypothesized value of population proportion of failure. It is one tailed Sample size (n) = 135 p = 0.6444 q = 0.3555 Significance level = 0.05 p = n p = 135 p = 0.0422 Z = p pq

Z =

0.6444 0.6000 0.0422 = 1.0521

For = 0.05, Z = 1.96

Sikim Manipal University (MBA)

49 | P a g e

The calculated Z value falls in acceptance area. So, Accept null hypothesis and reject alternative.i.e. 60% People availing the service of personal Financial Advisor for invent in mutual fund. RESEARCH FINDINGS AND CONCLUSIONS At the survey conducted upon 200 people, 135 are already mutual fund investors or are interested to invest in future and the remaining 65 are not interested in it. So there is enough scope for the advisors to convert those 65 participants into investors through their convincing power and great communication skills. Now, when those 65 people were asked about the reason of not investing in mutual funds, then most of the people held their ignorance responsible for that. They lacked knowledge and information about the mutual funds. Whereas just 10 people enjoyed investing in other option. For 18 people, the benefits arousing from these investments were not enough to drive them for investment in MFs and 12 people expressed no trust over the fund managers decision. Again the financial advisors can tap upon these people by educating them about mutual funds. Out of the 135 persons who already have invested in mutual funds/ are interested to invest, only 18% have sound knowledge of MFs, 34% people are aware of only the schemes in which they have invested. 27% possess partial knowledge whereas 21% stands nowhere in knowledge about MFs. 33 participants buy forms directly from the AMCs, 28 from brokers only, 55 from brokers and sub-brokers even then 15 people buy from other sources. The brokers and sub brokers have the maximum reach so they should try to make those investors aware f the happenings, even the AMCs should follow it. When asked about the most alluring feature of MFs, most of them opted for diversification, followed by reduction in risk, helps in achieving long term goals and helps in achieving long term goals respectively. Most of the investor preferred to invest at a young unmarried stage. Even 32 persons were ready to invest at a stage of young married with children but person with older children avoid investing due to increased expenses. But again the number rose to 27 at pre-retirement stage.

Sikim Manipal University (MBA)

50 | P a g e

Out of them 87 were already availing the services of financial advisors whereas 48 didnt. When asked about the expertise of financial advisors which they liked most? 43 of them favored portfolio review and investment recommendation, followed by planning to achieve long term goals, managing assets in retirement and access to specialists in area such as tax planning.

42 participants regarded asset allocation as the major reason for going for financial advisors. 37 of them needed them to explain them the various investment options available.33 of them wanted to make sure that they were saving enough to meet their financial goals. While just 23 gave the reason- lack of time.

When asked about one reason for not availing the services of financial advisors, about 53 of them pointed the advisors as expensive. 43 of them wished to be in control of their own assets.21 of them said that they find it difficult to get trustworthy advisors. Whereas 18 of them said they have access to all the necessary resources required.


The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing.

Mutual funds offer a lot of benefit which no other single option could offer. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time.

The advisors may try to highlight some of the value added benefits of MFs such as tax benefit, rupee cost averaging, and systematic transfer plan, rebalancing etc. these benefits are not offered by other options singlehandedly. So these are enough to drive the investors towards mutual funds. Investors could also try to increase the spectrum of services offered.

Sikim Manipal University (MBA)

51 | P a g e

Now the most important reason for not availing the services of advisors was spotted was being expensive. The advisors should try to charge a nominal fee at the beginning. But if not possible then they could go for offering more services and benefits at the existing rate. They should also maintain their decency and follow the code of ethics so that the investors could trust upon them. Thus the advisors should try to attract more and more persons and turn them into investors and finally their clients.

Sikim Manipal University (MBA)

52 | P a g e

QUESTIONNAIRE 1) Are you interested to invest in mutual funds? Yes [ ] No [ ] (please attempt the next question) 2) What is the most important reason for not investing in mutual funds? [ ] [ ] [ ] [ ]

Lack of knowledge about mutual funds Enjoys investing in other options Its benefits are not enough to drive you for investment No trust over the fund managers 3) Where did you find yourself as a mutual fund investor? Totally ignorant Partial knowledge of mutual funds Aware only of any specific scheme in which you invested Fully aware 4) From where you purchase mutual funds? Directly from the AMCs Brokers only Brokers/ sub-brokers Other sources 5) Which feature of the mutual funds attracts you most? Diversification Professional management Reduction in risk and transaction cost Helps in achieving long term goals

[ ] [ ] [ ] [ ]

[ ] [ ] [ ] [ ]

[ ] [ ] [ ] [ ]

Sikim Manipal University (MBA)

53 | P a g e


According to you which are the most suitable stage to invest in mutual funds? [ ] [ ] [ ] [ ]

Young unmarried stage Young Married with children stage Married with older children stage Pre-retirement stage 7) Are you availing the services of personal financial advisors?

Yes [ ] No [ ] 8) Which expertise of the personal financial advisor is demanded most? Portfolio review & investment recommendation Planning to achieve specific financial goals Managing assets in retirement Access to specialist in areas such as tax planning 9) What is the major reason for using financial advisors? [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]

Want help with asset allocation Dont have time to make my own investment decision To explain various investment options Want to make sure I am investing enough to meet my financial goals 10) What is the major reason for not using financial advisor?

Have access to all resources needed to invest on own

[ ]

Sikim Manipal University (MBA)

54 | P a g e

Believe advisors are too expensive Unsure how to find a trustworthy advisor Want to be in control of own investment Thank you So much for your response.

[ ] [ ] [ ]


AMC The AMC is the corporate entity, which markets and manager and manages a mutual fund scheme and in return receives a management fee from the fund corpus. SEBI specifies that an AMC must be separate entity the trust that manages it.

NAV It is the value of unit of a Mutual Fund scheme and represents its true worth. NAV is arrived at by dividing total value of all investment made under the scheme by number of units of the scheme. NAV is critical yardstick of the funds performance.

UNITS Units in a mutual fund scheme are similar to shares of a joint company. These are always in denominations of Rs. 10 each the sum total of all the units constitutes corpus of mutual fund.

SPONSORS Sponsor of a mutual fund are those who establish the mutual fund trust and the AMC they constitute the shareholders of the AMC and receive dividends on profits made by the AMC. SEBI rules stipulate that mutual fund trust as well as the AMC must maintain an arms length relationship with the sponsors to avoid any conflict to interests, which may affect the unit holders.

Sikim Manipal University (MBA)

55 | P a g e

INCOME FUND These Funds invest largely in fixed income securities like bonds and debentures. Such funds earn returns more regularly than a growth fund but level of returns over longer periods normally lag behind those offered by growth funds while returns in such funds may be regular, their scale may fluctuate depending upon the prevalent interest rates and credit quality of the debt securities.

GROWTH FUNDS Growth funds predominantly invest in stock market securities and carry risks larger than income funds. Since stock markets travel through a natural cycle of boom and bursts one should normally stay invested inequity funds for a longer times to earn higher returns. Equity funds may earn higher but they also carry larger risks. For risk taking investor equity are best suited. BALANCED FUNDS A balanced fund is the mixture of income fund and growth fund invested partly in equity to achieve a trade-of between risk and return. CLOSE ENDED In a close-ended fund an investor is allowed to subscribe only during the period of the initial offer. Close-ended funds mature after a specified period. OPEN ENDED FUNDS Those funds in which investor can invest & withdraw whenever they wish, after the close of initial offer. Withdrawals are allowed at NAV minus a back end load. LOCK IN PERIOD Time period during which investor can neither redeem nor they transfer their holdings to others. Lock in period is imposed to allow fund manager to deploy money for an adequate period of time to earn a reasonable return premature withdrawals may destabilize the fund & are not beneficial to the interests of investors. MANAGEMENT FEES An AMC that mangers & markets a mutual fund scheme is entitled to a management fee@ 1% to 25% of the total funds managed, it could be charged to the scheme irrespective of the performance of the scheme.

Sikim Manipal University (MBA)

56 | P a g e

REDEMPTION Disbursement of unit capital on the maturity of that particular scheme to all its existing unit holders. MARKET PRICE The price at which units of mutual funds are quoted in stock exchange where they are listed.

REGISTRAR Organization appointed by an AMC to the schemes it is registered, monitored, and regulated by SEBI, it provides required services like system capabilities back up, accepts and processes investors applications in informs AMC about amounts received/disbursed for subscription/ purchase/ redemption it also handles communications with investors, perform data entry services and dispatches account statements. CUSTODAIN Banking organization that keeps in safe custody all the securities & other instruments belonging to the fund to insure smooth inflow & outflow of securities. It is also approved regulated and registered with SEBI. EXIT LOAD Value of deduction from NAV on the date when one choose to withdraw from a fund, load is imposed because withdrawals carry transaction cost to AMC it can not be more than 6% of NAV of corpus as prescribed by SEBI many schemes offer redemption facility without exit load. ENTRY LOAD Charge paid by unit holder when he invests an amount in the scheme. Mutual funds incur many expenses during an issue, which are charged to the scheme. Such load is called entry load. LIQUIDITY Ability of investors to change its unit into cash within minimum time as and when he needs money.

Sikim Manipal University (MBA)

57 | P a g e

TRANSPARENCY Basic feature of mutual funds is transparency, their functioning is very efficient, well monitored & transparent working of AMC is regulated by SEBI it is audited weekly, it has to work under strict guidelines issued by SEBI, and its NAV is calculated and published daily so that there is no chance of any default in the working of Mutual Funds.

Sikim Manipal University (MBA)

58 | P a g e

Every person does not have all skills. Some are good at someplace but fail at another place. So we do work in area where we have core competence. The Mutual Fund has great scope but it still not as much famous as Stock Market. The people dont know how to invest in it and what is the benefit from it. So, the work of financial advisor is too aware the client for the different schemes of mutual fund for they work. Without the financial advisor the investor cannot easily convince to invest in mutual fund. Financial advisor are the backbone of the Mutual Fund Organization in this competition time. I also conclude that from this SIP I learn so many things like Self-discipline, Leadership Quality, regularity at work, innovation on consistent basis, how to survive in competition, etc. This SIP gives me great platform for applying my theoretical knowledge which I learned in 1 year of MBA.

At last I say that this SIP is very important for the current as well as future carrier prospective.

Websites www.the-finapolis.com www.Birla mutualfund.com www.mutualfundsindia.com www.valueresearchonline.com www.moneycontrol.com www.morningstar.com www.yahoofinance.com www.theeconomictimes.com www.rediffmoney.com www.bseindia.com www.nseindia.com www.investopedia.com Journals & Other References

Sikim Manipal University (MBA)

59 | P a g e

The Economic Times Business Standard The Telegraph

Business India Fact sheet and statements of various fund houses.

Sikim Manipal University (MBA)

60 | P a g e