A PROJECT REPORT ON COMPARATIVES STUDY AMONG MUTUAL FUNDS OFFER VARIOUS COMPANIES IN INDIAN MARKET

Submitted in partial fulfillment of the requirements of the award of degree of

POST GRADUATION IN MANAGEMENT OF BUSINESS ADMINISTRATION

FROM ARNI SCHOOL OF BUSINESS MANAGEMENT AUGUST 2010 Submitted to ASBM KATHGARH (INDORA) MBA 3rd sem Submitted By SATISH KUMAR ID.AEMB0012A/09

ARNI UNIVERSITY
KATHGARH (INDORA), KANGRA (H.P) PIN-176401 www.arni.in 1

DECLARATION

I, SATISH KUMAR, ID. No. AEMB0012A/09 M.B.A. Final year (III semester) of Arni School of Business Management hereby declare that the Summer Training Report entitled COMPARATIVES STUDY AMONG MUTUAL FUNDS OFFER VARIOUS COMPANIES IN INDIAN MARKET is an original work and the same has not been submitted to any other University/Organization for the award of any other degree. A seminar presentation of the Training Report was made on 10/sep/2010 and the suggestions as approved by the faculty were duly incorporated.

Signature of the Candidate charge (Faculty)

Presentation In

Countersigned Director/Dean/Coordinator

ACKNOWLEDGEMENT

Completing this project for submission for academic purposes has been one of the most enlightening and interesting experience in itself for it not only has helped gained an insight into an unknown territory to me, but also is going to be helpful to everyone who goes through this project.

The success of this project is an outcome of sincere efforts channeled in right direction. And for this proper channeling I would first and foremost like to thank Mr. AMIT PATIAL (sr.executive) and Mr. Sudhir bhardwaj(CRO) without whose able guidance this would never have been possible. Hes been the sincere advisor and inspiring force behind the outcome of this project.

My deepest thanks to Mr. Ravikant Swami dean of ASBM and lecturer Mr. Rajeev Sawal the Guide of the project for guiding and correcting various documents of mine with attention and care. He has taken pain to go through the project and make necessary correction as and when needed.

I would also thank my Institution and my faculty members without whom this project would have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.

SATI SH KUMAR

CONTENTS

S.NO. CHAPTER 1. 2. 3. HISTORY OF MUTUAL FUND COMPANY PROFILE INTRODUCTION ABOUT MUTUAL FUND ADVANTAGES DISADVANTAGES TYPES 4. 5. 6. 7. 8. 9. 10. 11. 12. INDUSTRY PROFILE ECONOMIC ENVIRONMENT LEGAL & POLITICAL ENVIRONMENT

PAGE NO. 1 5 13 17 19 20 27 29 34

COMPARATIVE STUDY AMONG MUTUAL FUND OFFERS 42 BY VARIOUS COMPANIES IN INDIA. KOTAK OPPRTUNITY FUND RELIANCE EQUITY OPPRTUNITY FUND FRANKLIN INDIA FLEXI CAP HSBC INDIA OPPRTUNITY FUND RESEARCH METHODOLOGY 43 47 50 53 58 61 71 74 75

DATA ANALYSIS & INTERPRETATION FINDING & SOLUTION

CONCLUSIONS ANNEXURES

REFERENCES & BIBLIOGRAPHY QUESTIONNAIRE

HISTORY OF MUTUAL FUND

HISTORY OF MUTUAL FUND

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases: -

First Phase 1964-87

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

IMPORTANT PHASES OF INDIAN MUTUAL FUND INDUSTRY

UTI sole player in the industry, created by an Act of Parliament ,1963 1963 1987 UTI launches first product Unit Scheme 1964 UTI creates products such as MIP's, children plans ,offshore funds etc MASTERSHARE Ist Diversified Equity Investment Scheme in India. INDIA Fund Ist indian offshore fund lauched in August 1996. In 1987 Public Sector Banks and FI's got permission to set up MF. 1987 - 1993 SBI mutual fund was the first non -UTI mutual fund In 1993, Mutual Fund Industry was open to private players. 1993 - 1996 SEBI's first set of regulations for the industry formulated in 1993 Significant innovations, mostly initiated by private players Implementation of new SEBI regulations led to rapid growth 1996 - 1999 Bank mutual funds were recast as per SEBI guidelines UTI came under voluntary SEBI supervision. Dividends made tax free in 1999. Rapid growth, significant increase in corpus of private players 1999 - 2000 Tax break offered created arbitrage opportunities Bond funds and liquid funds registered highest growth

COMPANY PROFILE

COMPANY PROFILE

NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financial products and services in India. Established in year 1994, NJ has over a decade of rich exposure in financial investments space and portfolio advisory services. From a humble beginning, NJ over the years has evolved out to be a professionally managed, quality conscious and customer focussed financial / investment advisory & distribution firm. NJ prides in being a professionally managed, quality focused and customer centric organisation. The strength of NJ lies in the strong domain knowledge in investment consultancy and the delivery of sustainable value to clients with support from cutting-edge technology platform, developed in-house by NJ.

At NJ we believe in .. having single window, multiple solutions that are integrated for simplicity and sapience making innovations, accessions, value-additions, a constant process providing customers with solutions for tomorrow which will keep them above the curve, today

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NJ had over INR 5,050* Crores of mutual fund assets under advice with a wide presence in over 130 locations* in 22 states* in India. The numbers are reflections of the trust, commitment and value that NJ shares with its clients. At NJ, we continue to innovate, enrich our intellect, and ask critical questions. We challenge our own processes and systems on constant basis to emerge more convinced. At NJ, we continue to expand the scope and depth of our offerings, making apt use of technological support.

Philosophy

At NJ our Service and Investing philosophy inspire and shape the thoughts, beliefs, attitude, actions and decisions of our employees. If NJ would resemble a body, our philosophy would be our spirit which drives our body.

ServicePhilosophy: Our primary measure of success is customer satisfaction . We are committed to provide our customers with continuous, long-term improvements and value-additions to meet the needs in an exceptional way. In our efforts to consistently deliver the best service possible to our customers, all employees of NJ will make every effort to: think of the customer first, take responsibility, and make prompt service to the customer a priority deliver upon the commitments & promises made on time anticipate, visualize, understand, meet, exceed our customer's needs bring energy, passion & excellence in everything we do be honest and ethical, in action & attitude, and keep the customers interest supreme

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strengthen customer relationships by providing service in a thoughtful & proactive manner and meet the expectations, effectively

Clients want need-based solutions, which fits them Long-term wealth creation is simple and straight Asset-Allocation is the ideal & the best way for long-term wealth creation Educating and disclosing all the important facets which the customer needs to be aware of, is important The solutions must be unbiased, feasible, practical, executable, measurable and flexible Constant monitoring and proper after-sales service is critical to complete the on-going process InvestingPhilosophy: We aim to provide Need-based solutions for long-term wealth creation We aim to provide all customers of NJ, directly or indirectly, with true, unbiased, need-based solutions and advice that best meets their stated & un-stated needs. In our efforts provide quality financial & investment advice, we believe that.

At NJ our aim is to earn the trust and respect of the employees, customers, partners, regulators, industry members and the community at large by following our service and investing philosophy with commitment and without exceptions.

Products
12

NJ offers advisory and distribution services on the following products. 1. 2. 3. 4. 5. Mutual funds covering all AMCs & all schemes, Fixed deposits of companies, Government/RBI bonds, Infrastructure Bonds, Approved securities for charitable trusts, etc

Vision & Mission

Vision:
To be the leader in our field of business through, Total Customer Satisfaction Commitment to Excellence Determination to Succeed with strict adherence to compliance Successful Wealth Creation of our Customers

Mission: Ensure creation of the desired value for our customers, employees and associates, through constant improvement, innovation and commitment to service & quality. To provide solutions 13

which meet expectations and maintain high professional & ethical standards along with the adherence to the service commitments.

Management
The management at NJ brings together a team of people with wide experience and knowledge in the financial services domain. The management provides direction and guidance to the whole organisation. The management has strong visions for NJ as a globally respected company providing comprehensive services in financial sector. The 'Customer First' philosophy in deeply ingrained in the management at NJ. The aim of the management is to bring the best to the customers in terms of Range of products and services offered Quality Customer Service

All the key members of the organisation put in great focus on the processes & systems under the diverse functions of business. The management also focuses on utilizing technology as the key enabler for all the activities and to leverage the technology for enhancing overall customer experience.

The key members of the management are:

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Mr. NeerajChoksi

Jt. Managing Director

Mr. Jignesh Desai

Jt. Managing Director

Key Sales Team:

Mr. Misbah Baxamusa Mr. Naveen Rathod Mr. Kulbhushan Nandwani Mr. Prashant Kakkad National Head V.P. (Sales) A.V.P. (Marketing) A.V.P. (Sales)

Key Executive Team :

Mr. Shirish Patel Mr. Abhishek Dubey Mr. Vinayak Rajput Mr. Dhaval Desai Mr. Col. Dixit Mr. Tejas Soni Mr. Viral Shah Mr. Rakesh Tokarkar Information Technology Business Process Operations Human Resources Administration Finance Research Compliance

Recognition
Some of the awards & recognitions 15 that we have received in past..

Year2000: For Outstanding

Performance

presented

by

Chairman,

Prudential

Plc.

at

London

Year2002: For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at London Year2003: For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at London Year2004: Among Most Valued Business Associates presented by HDFC Standard Life at Edinburgh, Scotland Year2004: For Outstanding Performance by Deputy CEO, Prudential Singapore at Malaysia Year2006: Award for mobilising the Highest Number of SIPs at National Level by Fidelity Mutual Fund Plc at Mumbai Year Award 2006: Vietnam

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Introduction about Mutual funds:

Introduction about Mutual funds:

17

Mutual fund operations is a circle in which the investors pool in their money to earn income and then the fund manager invests the money in securities, which may be debt or equity, which in turn generates income in the form of returns to the investors and then investors again invest their money. So the circle continues with more investors coming in and some of them leaving.

Definition:A mutual fund is an investment that pools money from many individuals and invests it according to the fund's stated objectives. Professional money managers make investment decisions on behalf of fund investors, buying and selling investments such as money market investments, bonds and stocks

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 type of securities depending upon the objective of scheme. These could range from shares to debentures to money market instruments. The income earned through these and the capital appreciations realized by the scheme are shared by its unit holders in proportion to the number of units owned 18

by them (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. Any body with an inventible surplus of as little 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 todays 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 far away 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.

MUTUAL FUND OPERATION

19

Mutual fund operation flow chart:-

INVESTORS PASS TO INVESTOR

GENERATE RETURN INVEST IN

STOCK & SECURITES

FUND MANAGERS

Advantages of Mutual Funds to Investors?

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Portfolio diversification Professional Management Reduction in Risk Reduction in Transaction costs Liquidity Convenience and Flexibility Safety Well regulated TAX BENIFIT

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

21

Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. 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 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 investors.

Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

Transparency

22

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
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.

DISADVANTAGES OF MUTUAL FUNDS

Mutual funds have their following drawbacks:

No Guarantees
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. 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 mutual fund runs the risk of losing the money.

Fees and Commissions

23

All funds charge administrative fees to cover their day to day expenses. Some funds also charge sales commissions or loads to compensate brokers, financial consultants, or financial planners. Even if you dont use a broker or other financial advisor, 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 percent 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 you reinvest the money you made.

Management Risk
When you invest in mutual fund, you depend on fund manager to make the right decisions regarding the funds portfolio. If the manager does not perform 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.

TYPES OF MUTUAL FUNDS

1. By Structure Open Ended Funds Close Ended Funds Interval Funds 2. By Investment Objective Growth Funds Income Funds Balanced Funds Money Market Funds 3. Other Schemes Tax Saving Schemes 24

Special Schemes Index Schemes Sector Specific Schemes Industry Specific Schemes Specific Area Schemes Bond Scheme

Mutual fund schemes may be classified on the basis of its structure and the investment objective.

1. According to Structure
Open Ended Funds
An open ended fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. The key feature of open ended schemes is liquidity.

Close Ended Funds

A close ended fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the same time of the initial public issue and thereafter they can buy and sell the units of the scheme on the stock exchanges where they 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 fund through periodic repurchase at NAV related prices.

Interval Funds
Interval funds combine the features of open ended and close ended schemes. They are open for sales or redemption during pre-determined intervals at their NAV.

2.

According to Investment Objective:

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Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks are much better than the other investments had over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time.

Income Funds
The aim of the income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and government securities. Income funds are ideal for capital stability and regular income.

Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

Money Market Funds

The main aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safe short term instruments such as treasury bills, certificates of deposit, commercial paper and inter bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for corporate and individual investors as a means to park their surplus funds for short periods.

3. Other Schemes
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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 Linked Saving Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains.

Special Schemes :
Index Schemes Index funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50.

Sector Specific Schemes

Sector funds are those which invest exclusively in a specified industry or a group of industries or various segments such as A group shares or initial public offerings.

Industry Specific Schemes

Industry specific schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like Info Tech, FMCG and Pharmaceuticals etc.

Specific Area Schemes

It seeks investment in a specific area usually a country or state, country funds floated by various international fund management companies.

Bond Schemes
It seeks investment in bonds, debentures and debt related instrument to generate regular income flow.

How are funds different in terms of their risk profile?

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EQUITY FUNDS DEBT,s FUND LIQUID AND MONEY MARKET FUND

High level of return, but has a high level of risk too Return compartively less risk than equity funds Provide stable but low level of return

Investors have to phase the riskreturn trade off

What are liquid and money market funds?

These debt funds invest only in instruments with maturities less than a year. The investment portfolio is very liquid and enables investors to hold their investments for very short horizons of a day or more.

What are Gilt Funds?

It invests only in securities that are issued by the Government and therefore do not carry any credit risk Government papers are called as dated securities also. It invests in both long-term and short-term paper. Ideal for institutional investors who have to invest in Govt. Securities Enables retail Participation

ELSS ( Equity linked saving scheme )

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3 year lock in period Minimum investment of 90% in equity markets at all times So ELSS investment automatically leads to investment in equity shares. Open or closed ended. Eligible under Section 80 C upto Rs.1 lakh allowed Dividends are tax free. Benefit of Long term Capital gain taxation.

ASSET MANAGEMENT COMPANY (AMC) :The AMC is appointed by the Trustee as Investment Manager of the mutual fund . The AMC is required to be approved by the SEBI to act as an asset management company of the mutual fund . At least 50% of the directors of AMC are independent Directors who are not associated with the sponsor in any manner .The AMC must have a net worth of at least 10 crores at all times. The trustees, on the advice of the sponsors usually appoint the AMC The AMC is usually a private limited co., in which the sponsors and their associates or JV partners ,are shareholders The AMC has to be a SEBI registered entity, with a minimum net worth of Rs. 10 Cr. The trustees sign an investment management agreement with the AMC, which spells out the functions of the AMC

Restrictions on AMC : AMC s cannot launch a scheme without the prior approval of the trustees AMC s have to provide full details of investments by employees and Board members in all cases where the investment exceeds Rs.1 Lakh AMC s cannot take up any activity that is in conflict with the activities of the mutual fund

COMPARISON OF MUTUAL FUNDS

29

Mutual funds Equity funds Balanced funds Index funds Gilt funds Bond funds

Objective

Risk

Investment portfolio Stock &share

Who invest

should Investment horizon

Long-term capital

High risk

appreciation Growth & regular Capital market income risk & interest risk To generate returns that commensurate with returns of respective indices Securities & Income NAV varies with index performance Interest rate risk

Aggressive 3 years + investors , long term investment Balanced ratio Moderate & 2 years + of equity &debt aggressive funds to ensure investors higher return at low risk Portfolio indices Aggressive 3 years + like BSE, investors NIFTY etc. Government Securities

Money market

Salaried & 12 months + conservative Investors Regular Income Credit Risk & Debentures Salaried & 12 months + Interest rate risk ,Govt. securities conservative , corporate Investors Bonds Liquidity + Negligible Treasury Bills, Park funds in 2 Days to 3 Moderate Income Certificates of current A/c s or weeks + Reservation of Deposits , short term Bank Income commercial Deposits papers, Call money

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INDUSTRY PROFILE

INDIAN MAJOR PLAYERS

List of Asset Management Companies in India Bank Sponsored I. Bank of Baroda Asset Management Co. Ltd. 31

II. Canbank Investment Management Services Ltd. III. PNB Asset Management Ltd. IV. UTI Asset Management Company (P) Ltd. Institutions I. GIC Asset Management Co. Ltd. II. Jeevan Bima Sahayog Asset Management Co. Ltd. Private Sector INDIAN I. Benchmark Asset Management Co. Ltd. II. Cholamandalam Asset Management Co. Ltd. III. Escorts Asset Management IV. J.M. Capital Management Ltd. V. Kotak Mahindra Asset Management Co. Ltd. VI. Sundaram Asset Management Co. VII. Reliance Capital Asset Management Ltd. FOREIGN I. Principal Asset Management Co. Ltd. Joint Ventures Predominantly Indian I. Birla Sun Life Asset Management Pvt. Co. Ltd. II. Credit Capital Asset Management Co. Ltd. III. DSP Merrill Lynch Fund Managers Ltd. IV. First India Asset Management Pvt. Ltd. V. HDFC Asset Management Co. Ltd. VI. Tata TD Waterhouse Asset Management Pvt. Ltd. Joint Ventures Predominantly Foreign I. Alliance Capital Asset Management (India) Pvt. Ltd. II. Deutsche Asset Management (India) Pvt. Ltd. III. HSBC Asset Management (India) Pvt. Ltd. IV. ING Investment Management (India) Pvt. Ltd. V. Prudential ICICI Management Co. Ltd.

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ECONOMIC ENVIRONMENT

GROWTH OF MUTUAL INDUSTRY IN INDIA

FUND

While the Indian mutual fund industry has grown in size by about 320% from March, 1993 (Rs. 470 billion) to December, 2004 (Rs. 1505 billion) in terms of AUM, the AUM of the sector excluding UTI has grown over 8 times from Rs. 152 billion in March 1999 to Rs. 1295 billion as at March 2005.

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Asset Under Management (excluding UTI)

1400 1200 AUM (Rs. Bn.) 1000 800 600 400 200 0 1998 1999 2000 2001 2002 2003 2004 2005 114 152 492 365 326 659 1201 1295

Though India is a minor player in the global mutual fund industry, its AUM as a proportion of the global AUM has steadily increased and has doubled over its levels in 1999. The growth rate of Indian mutual fund industry has been increasing for the last few years. It was approximately 0.12% in the year of 1999 and it is noticed 0.25% in 2004 in terms of AUM as percentage of global AUM.

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Growth rate of Indian MF Industry

0.30% AUM as % of Global AUM 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% 1999 2000 2001 2002 2003 2004

The GDP of different countries

9% 8% 7% 6% 5% 4% 3% 2% 1% 0% China Hong-Kong India Korea Singapore US

Now we can see from the above graph that India has robust GDP growth prospects.

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Some facts for the growth of mutual funds in India

100% growth in the last 6 years. Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide. Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. We have approximately 29 mutual funds which is 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 rurals like the Indian insurance industry with simple and limited products. SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance. Trying to curb the late trading practices. Introduction of Financial Planners who can provide need based advice.

Recent trends in mutual fund industry

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The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by the nationalized banks and smaller private sector players. Many nationalized banks got into the mutual fund business in the early nineties and got off to a start due to the stock market boom was prevailing. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as a difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. The foreign owned companies have deep pockets and have come in here with the expectation of a long haul. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. in fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.

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LEGAL AND POLITICAL ENVIRONMET

38

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

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 22nd August 1995. AMFI is an apex body of all Asset Management Companies (AMC), which has been registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under the supervision and guidelines of board of directors. AMFI has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interest of mutual funds as well as their unit holders.

REGULATORY MEASURES BY SEBI

Like Banking & Insurance up to the nineties of the last century, Mutual Fund industry in India was set up and functioned exclusively in the state monopoly represented by the Unit Trust of India. This monopoly was diluted in the eighties by allowing nationalized banks and insurance companies (LIC) to set up their institutions under the Indian Trusts Act to transact mutual fund business, allowing the Indian investor the option to choose between different service providers. Unit Trust was a statutory corporation governed by its own incorporating act. There was no separate regulatory authority up to the time SEBI was made a statutory authority in 1992. but it was only in the year 1993, when a government took a policy decision to deregulate Indian Economy from government control and to transform it market oriented, that the industry was opened to competition from private and foreign players. By the year 2007 there came to be established in the market 34 mutual funds offerings a variety of about 200 schemes, mobilizing a gross investment of Rs. 232000 crores.

39

SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) REGULATIONS, 1996

The fast growing industry is regulated by Securities and Exchange Board of India (SEBI) since inception of SEBI as a statutory body. SEBI initially formulated SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) REGULATIONS, 1993 providing detailed procedure for establishment, registration, constitution, management of trustees, asset management company, about schemes/products to be designed, about investment of funds collected, general obligation of MFs, about inspection, audit etc. based on experience gained and feedback received from the market SEBI revised the guidelines of 1993 and issued fresh guidelines in 1996 titled SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) REGULATIONS, 1996. The said regulations as amended from time to time are in force even today. The SEBI mutual fund regulations contain ten chapters and twelve schedules. Chapters containing material subjects relating to regulation and conduct of business by Mutual Funds.

STRUCTURE OF MUTUAL FUNDS

40

The mutual fund industry is governed by the Securities and Exchange Board of India (Mutual Fund) Regulations, 1996, which lays the norms for the structure and the operation of a mutual fund in India. The diagram below illustrates the organizational set up of a mutual fund:

Organizational Setup of a Mutual Fund

Sponsor: - A sponsor is a person who, acting alone or in combination

with another corporate body, establishes a Mutual Fund. In order o register with SEBI as a Mutual Fund, the sponsor should have a sound financial track record of over five years and general reputation of fairness and integrity in all his business transactions. Following its registration with SEBI, the sponsor forms a trust, appoints a Board of Trustees and an Asset Management Company (AMC) as a fund manager. The sponsor should contribute at least 40% of the net worth of the AMC.

41

SEBI
The regulation of mutual funds operating in India falls under the preview of authority of the Securities and Exchange Board of India (SEBI). Any person proposing to set up a mutual fund in India is required under the SEBI (Mutual Funds) Regulations, 1996 to be registered with the SEBI.

Mutual Fund: - A Mutual Fund is established in the form of a trust under the Indian
Trusts Act, 1882. The investor subscribes to the units issued by the Mutual Funds. The resources raised are pooled under various schemes established by the trust.

Trustees: - The Mutual Fund can either be managed by the Board of Trustees, which is a
body of individuals, or by a trust company, which is a corporate body. Most of the funds in India are managed by the Board of Trustees. The Trustees are appointed with the approval of the SEBI. Two thirds of the Trustees are independent persons and are not associated with the sponsors. The Trustees, however, do not manage the portfolio of Mutual Fund. It is managed by the AMC.

Unit Holders
They are the parties to whom the mutual fund is sold. They are ultimate beneficiary of the income earned by the mutual funds.

42

Asset Management Company (AMC):- The AMC, appointed by the

sponsors or the Trustees and approved by SEBI, acts like an investment manager of the Trust. The AMC should have a net worth of at least Rs. 10 crores. It functions under the supervision of its Board of Directors, Trustees and the SEBI. In the name of the Trust, AMC floats and manages different investment schemes as per the SEBI regulations.Apart from these, a Mutual Fund has some other constituents, such as, custodians and depositories, banks, transfer agents and distributors. A custodian is appointed for safe keeping the securities and participating in the clearing system through approved depository. The bankers handle the financial dealings of the fund. Transfer agents are responsible for issue and redemption of the units. The AMC appoints distributors or brokers to sell units on behalf of the fund.

Custodian
The mutual fund is required, under the Mutual Fund Regulations, to appoint a custodian to carry out the custodial services for the schemes of the fund. Only institutions with substantial organizational strength, service capability in terms of computerization and other infrastructure facilities are approved to act as custodians. The custodian must be totally delinked from the AMC and must be registered with SEBI.

REASONS FOR SELLING MUTUAL FUNDS

43

Easy to make more clints . . . greater variety of solutions to meet different needs of differents clients. higher acceptance by clients. less than 2% people have invested in mutual fund.

Less competition in the market . very few mutual fund advisors and huge demand of them.

. less than 60000 certified mutual fund advisors in comparisons with more than 20 lac. Advisors in insurance. Only 1MF advisors versus 32+insurance adcvisors.

More satisfections to the clients . . . complete financial planning for clients. professionally managed. strongy regulated by SEBI.

. .

Strong industry growth ahead MF industyry growing at 30% CAGR over the past 5 year. industry AUM trippled from 1.50 lac crores 2003 to 4.50lac crores in nov. 2008

. money in bank deposits still 10.50 times more than the entire mutual fund industry size.

44

FREQUENTLY USED TERMS

Advisor - Is employed by a mutual fund organization to give professional advice on the funds
investments and to supervise the management of its asset.

Diversification The policy of spreading investments among a range of different securities to

reduce the risk.

Net Asset Value (NAV) - Net Asset Value is the market value of the assets of the scheme
minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

Sales Price - Is the price you pay when you invest in a scheme. Also called Offer Price. It may
include a sales load.

Repurchase Price - Is the price at which a close-ended scheme repurchases its units and it
may include a back-end load. This is also called Bid Price.

Redemption Price - Is the price at which open-ended schemes repurchase their units and
close-ended schemes redeem their units on maturity. Such prices are NAV related.

Sales Load - Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load scheme

45

Comparison study of different mutual fund companies in India

46

HYPOTHESIS
The hypotheses of the study involve comparison between: 1. 2. 3. 4. Kotak opportunity fund. Reliance equity opportunity fund. Franklin India Flexi fund. HSBC India opportunity fund.

KOTAK OPPRTUNITY FUND PERFORMANCE

OBJECTIVE:To generate capital appreciation from a diversified portfolio of equity and equity related seacurity Kotak opportunity fund is diversified equity scheme, with a flexibal investing style. It will invest in sectors,which our fund manager belives would outperform other in the short and medium term. Kotak opportunity fund, spacially lies in giving fund manager flexibility to act based on his view on the market, and in to allowing to him to invest in higher concentration in sectors he belives will outperform other.

YEAR

(Rm-

(Rp-Rf) 47

X2

XY

(X-Xbar)

Rp LAST 1 MONTHS 5.92 LAST 3 MONTHS 24.61 LAST 6 MONTHS 34.42 Since inceptions 78.17 TOTAL

Rm

Rf

Rf) X -1.41 8.86 25.89

D2 Y 1.67 20.36 30.17 1.98 78.49 670.29 -2.35 180.38 781.10 D -20.11 -9.847 25.89 404.71 96.97 670.29

2.84 13.11 30.14

4.25 4.25 4.25

45.99

4.5

41.49 74.83

73.67 125.87

1721.42 2472.19

3056.56 4015.70

22.78 18.70

590.04 1691.02

WHERE, Rp portfolio return- Reliance equity opportunity fund Rm- market return - Funds benchmark BSE-500 Rf risk free rate of return. CALCULATION OF ARTHMETIC MEAN: = X/N = 74.83/4 = 18.70 CALCUATION OF STANDARD DEVIATION ( ):=(X-Xbar)2 /N =1691.02/4 =422.75 =20.56

48

CALCULATION OF BETA CO-EFFICIENT:= N(XY) - XY N(X)2-(X)2 = 4(4015.70)-(74.83)(125.87) 4(2472.19) (74.83 )2 = 16062.8-9418.85 9888.76-5599 = 6643.95 4289.76 = 1.54

CALCULATION OF SHARPE,S RATIO:Rp Rf/ =125.87/20.56 =6.12

CALCULTION OF TREYNOR,S RATIO:=Rp Rf / = 125.87/1.54 =87.73/100 =0.8173

Interpretation
Last I month: it reveals that reliance equity opportunity fund are 5.92 as compare to fund benchmark return are 2.84, and the risk free rate is common for next 9monts. (i.e.,4.25%)

49

Last iii month: it reveals that reliance equity opportunity fund are 24.61 as compare to fund benchmark return are 13.11, and the risk free rate is common for next 6monts. (i.e.,4.25%)

Last vi month: it reveals that reliance equity opportunity fund are 34.42as compare to fund benchmark return are 30.14, and the risk free rate is common for next 3monts. (i.e.,4.25%)

Since inception: it reveals that reliance equity opportunity fund are 78.17,as compare to fund benchmark return are 45.99, and there is a slide increase in risk free rate by 0.25%(4.5%) compare to last 9 month.

RELIANCE EQUITY OPPRTUNITY FUND:

INVESTMENT OBJECTIVE:The primary investment objective of the scheme is to seek to generate capital appreciation &provide long-term growth opportunity by investing in a portfolio constituted of equity security and equity related security and the secondary objective is to generate consistent return by investing in debts and money market security.

50

RELIANCE EQUITY OPPRTUNITY FUND PERFORMANCE

YEAR Rp LAST 1 MONTHS 2.4 LAST 3 MONTHS 16.22 LAST 6 MONTHS 29.46 Since inceptions 54.99 TOTAL 50.23 4.5 Rm Rf

(RmRf) X -0.53 9.57 26.85

(Rp-Rf) Y -1.85 11.97 25.21

X2

XY

(X-Xbar) D2 D

3.72 13.82 31.1

4.25 4.25 4.25

0.2809 91.5849 720.9225

0.9805 114.5529 676.8885

-20.935 9.57 6.445

438.2742 91.5849 41.538

45.73 81.62

50.49 85.82

2091.232 9 2904.021 2

2308.907 7 3101.329 6

45.73 40.81

2091.2329 2662.630

WHERE, Rp portfolio return- Reliance equity opportunity fund Rm- market return - Funds benchmark BSE-500 Rf risk free rate of return.

CALCULATION OF ARTHMETIC MEAN: = X/N = 81.62/4 = 20.40

CALCUATION OF STANDARD DEVIATION ( ):=(X-Xbar)2 /N 51

=2662.63/4 =665,65 =25.80

CALCULATION OF BETA CO-EFFICIENT:= N(XY) - XY N(X)2-(X)2 = 4(3101.32)-(81.62) (85.82) 4(2404.02) (81.62 )2 = 12405-7002.91 11616-6661.82 = 5402.09 4954.18 = 1.09

CALCULATION OF SHARPE,S RATIO:Rp Rf/ =85.82/25.23=7.29

CALCULTION OF TREYNOR,S RATIO:=Rp Rf / = 85.82/1.47 =37.32/100 =0.37

52

Interpretation
Last I month: it reveals that reliance equity opportunity fund are 2.4 as compare to fund benchmark return are 3.72, and the risk free rate is common for next 9monts. (i.e.,4.25%) Last iii month: it reveals that reliance equity opportunity fund are 16.22 as compare to fund benchmark return are 13.82, and the risk free rate is common for next 6monts. (i.e.,4.25%)

Last vi month: it reveals that reliance equity opportunity fund are 29.46as compare to fund benchmark return are 31.1, and the risk free rate is common for next 3monts. (i.e.,4.25%)

Since inception: it reveals that reliance equity opportunity fund are 54.99,as compare to fund benchmark return are 50.23, and there is a slide increase in risk free rate by 0.25%(4.5%) compare to last 9 month.

53

FRANKLIN INDIA FLEXI CAP EQUITY FUND

INVESTMENT OBJECTIVE: Stocks of company are usually categorized as large-cap, midcap, and small cap depending on their market capitalization. History has demonstrated that these categorized tend to perform differently through economic and market cycles. For exp, mid and small cap stock could move up sharply during a certain time period while large cap fund remain range bound and visa-versa. In the other hand, large cap stock tend to be less volatile than mid & small cap stock on account of factors such as size, market leadership..Etc. moreover, such period of out performance are typically followed by a consolidate phase and a possible reversal of the situation. In order to drive optimal return from the stock market, investment need to be diversified and have flexible to shift allocation across market caps. Designed to help to achieve this with a single investment in Franklin India flexi cap fund (FIFCE). An open-ended diversified equity fund, FIFCE seeks to provide medium to long term capital appreciation by investing in stock across the entire market capitalization range.

FRAMKLINE INDIA FLEXI CAP FUND PERFORMANCE:-

Year

Rp

Rm

Rf

(RmRf) X

(RpRf) Y 0.78 12.2 32.3 57.3 101 54

XY

(XXbart) D

Last I month Last 3 month Last 6 month Since inception TOTAL

3.47 16.49 36.58 61.8

3.72 13.82 31.1 50.23

4.25 4.25 4.25 4.5

-0.53 9.57 26.9 45.7 81.6

0.281 91.58 720.9 2091 2904

0.4134 117.136 8 868.060 5 2620.32 9 3605.93 9

20.935 438.272 10.1 17.28 18.88 102.01 298.598 356.454

25.325 1195.337

WHERE, Rp portfolio return Franklin flexi cap fund Rm market return funds benchmark S&P CNX 500 Rf risk free rate of return

CALCULATION OF ARTHMETIC MEAN: = X/N = 81.6/4 = 20.4 CALCUATION OF STANDARD DEVIATION ( ):=(X-Xbar)2 /N =1195/4 =298.75 =17.28

CALCULATION OF BETA CO-EFFICIENT:= N(XY) - XY N(X)2-(X)2 = 4(3605)-(81.6)(101) 4(2904)-(2904) 2 = 14420-8241.6 11616-8433 = 6178.4 3183 55

= 1.94

CALCULATION OF SHARPE,S RATIO:Rp Rf/ =101/17.28 = 5.84

CALCULTION OF TREYNOR, S RATIO:=Rp Rf / = 101/1.94 =52.06/100

Interpretation
Last I month: it reveals that FRANKLIN India flexi cap fund return are 3.47 as compare to fund benchmark return are 2.8, and the risk free rate is common for next 9 months. (i.e.,4.25% Last iii month: it reveals that FRANKLIN India flexi cap fund return are 14.99 as compare to fund benchmark return are13.11 and the risk free rate is common for next 6 months. (i.e.,4.25%)

Last vi month: it reveals that FRANKLIN India flexi cap fund return are 36.58 as Compare to fund benchmark return are 30.14 and the risk free rate is common for next 3 months. (i.e.,4.25%) Since inception: it reveals that reliance equity opportunity fund are 61.8, as compare to fund benchmark return are 47.75, and there is a slide increase in risk free rate by 0.25%(4.5%) compare to last 9 month.

56

HSBC INDIA OPPORTUNITY FUND

INVESTMENT OBJECTIVE:
The fund is an open-ended equity scheme seeking long term capital growth through investment across all market capitalization, including small,mid and large cap stock. The fund will endeavor to investment in large cap companies as well as identify mid stocks, which have the potential to became blue chip large cap stock over time. The investment style is to seed aggressive growth by focusing on mid cap companies in addition to invest in large cap fund. This fund aim to be predominantly invested in equity related securities. However, it could move a significant portion of its asset toward fixed income securities if the fund became negative on equity market.

HSBC INDIA OPPRTUNITY FUND PERFORMANCE:(Rm-Rf) YEAR

Rp

Rm

Rf

(RpRf)

XY

XXba r

X LAST I MONTH -0.57 2.81 4.25 -1.44

Y -4.82 2.0736 6.9408

19.6 95

387.893025

LAST 3 MONTH 12.4 5 LAST 6 MONTH 27.6 7 SINCE INCEPTI 48.6 ON 2 TOTAL

13.4 5 28.1 3 45.8 8

4.25 4.25 4.5

9.2 23.88 41.38

8.2 23.42 44.12

84.64 570.254 1712.30

75.44 559.2696 1825.6856

9.15 13.67 11.58

83.7225
186.8689 134.0964

73.02

70.92

2369.27 57

2467.336

14.705

792.580825

Where:Rp portfolio return Rm market return Rf risk free rate of return

CALCULATION OF ARTHMETIC MEAN: = X/N = 73.02/4 = 18.25 CALCUATION OF STANDARD DEVIATION ( ):=(X-Xbar)2 /N =792.58/4 =198.14 =14.07

CALCULATION OF BETA CO-EFFICIENT:= N(XY) - XY N(X)2-(X)2 = 4(2467.33)-(73.02)(70.92) 4(2369.27)-(73.02) 2 = 9869.32-5178.57 9477.08-5331.92 = 4690.75 4145.18 = 1.13

58

CALCULATION OF SHARPE,S RATIO:Rp Rf/ =70.92/14.07 = 5.04

CALCULTION OF TREYNOR, S RATIO:= Rp Rf / = 70.92/1.13 = 62.76/100 = 0.62

Interpretation
Last I month: it reveals that HSBC India opportunity fund return are 0.57 as compare to fund benchmark return are 2.81, and the risk free rate is common for next 9 months. (i.e.,4.25% Last iii month: it reveals that HSBC India opportunity fund return are 12.45 as compare to fund benchmark return are13.45 and the risk free rate is common for next 6 months. (i.e.,4.25%)

Last vi month: it reveals that HSBC India opportunity fund return are 27.87 as Compare to fund benchmark return are 28.13 and the risk free rate is common for next 3 months. (i.e.,4.25%) Since inception: it reveals that HSBC India opportunity fund are 48.82, as compare to fund benchmark return are 45.82, and there is a slide increase in risk free rate by 0.25%(4.5%) compare to last 9 month.

59

OBSERVATION:
Observations are made from the data analysis. The following observation are drawn from the analysis of schemes:

KOTAK OPPRTUNITIES FUND

FRANKLIN RELIANCE INDIA FLEXI EQUITY CAP FUND OPPRTUNITIES FUND

HSBC INDIA OPPRTUNITIES FUND

Monthly returns

5.92

3.47

2.4

-0.57

Sharpe,s Ratio

6.12

5.84

7.29

5.04

Treynor,s Ratio

0.81

0.52

0.37

0.62

Co-efficient( )

1.54

1.94

1.09

1.13

Std. Deviation( )

20.56

17.28

25.80

14.07

60

LIMITATION OF THE STUDY

1. The study is limited only to the analysis of different schemes and its suitability to different investor according to their risk-talking ability. 2. The study is based on secondary data available from monthly fact sheets, websites and other books as primary data was not accessible 3. The study is limited by the detailed study of various schemes of Five Asset Management Companies.

STEP,s FOR AMC,s

The Asset Management Companies must design the portfolio in such a way, to increase the return. The asset management companies must design the portfolio in such a way, to lessen the risk that is common in the market. The asset management companies must dedicated itself, because its motivates the investor and potential investor to invest in mutual fund. The asset management companies must manage the fund efficiently and with dedication to earn the goodwill of public. The asset management companies must make the most advantageous use of print and electronic media in order to motivate the investor and potential investor to invest in mutual fund.

61

RESEARCH METHODOLOGY

62

RESEARCH METHODOLOGY
OBJECTIVES: To study about the mutual funds industry. To study the approach of investors towards mutual funds. To study the behaviour of the investors whether they belong to bull or bear category.

SCOPE OF THE STUDY: Subject matter is related to the investors approach towards mutual funds. People of age between 20 to 60 Area limited to Chandigarh,Panchkula,pinjor,kalka Demographics include names, age, qualification, occupation, marital status and annual income.

STEPS OF RESEARCH DESIGN:

1. Define the information needed:- This first step states that what is the information that is actually required. Information in this case we require is that what is the approach of investors while investing their money in mutual funds e.g. what do they consider before investing in mutual fund, how often do they monitor their investment etc. So, the information sought and information generated is only possible after defining the information needed. 2. Design the research:A research design is a framework or blueprint for conducting the research project. It details the procedures necessary for obtaining the information needed to solve research problems. In this project Descriptive Research is designed. 3. Specify the methods if data collection:Both primary and secondary data have been used for the purpose of the data collection. Primary data was collected by administering an unbiased structured questionnaire to the respondents. And the secondary data was collected from secondary sources of information that included websites, books and business magazines.

63

4. Specify the scaling procedures:- Scaling involves creating a continuum on which measured objects are located. Both nominal and interval scales have been used for this purpose. 5. Construct and pretest a questionnaire:A questionnaire is a formalized set of questions for obtaining information from respondents. Where as pretesting refers to the testing of the questionnaire on a small sample of respondents in order to identify and eliminate potential problems.

6. Specify the sampling process and sample size: Population All the investors of Chandigarh,panchkula,pinjor & kalka in June-July 2010 who are investing money in mutual funds. Sample Unit Any investor in Chandigarh,panchkula,pinjor&kalka Sample Size This study involves 100 respondents. Sample Design The study uses convenient sampling technique to make contacts with the respondents.

7. Plan for data analysis:Analysis of data is planned with the help of mean, chisquare technique and analysis of variance.

64

DATA ANALYSIS AND INTERPRETATION

65

DATA ANALYSIS AND INTERPRETATION

Options Safety of principal Low risk High returns Percentages 7% 35% 58%

1. Which factor do you consider

before investing in mutual fund?

7% 35% Safety of principal Low risk 58% High returns

66

It shows that only 7% of people of Chandigarh prefer safety of principal, which means they have Options Steadily At an average rate Fast Percentages 12% 35% 53%

a conservative approach towards their investment in mutual funds. Where as 58% of people want high returns from their investment that means they have an aggressive approach because if there is a high return then there will be a high risk also.

2. At which rate do you want your investment to grow?

12%

Steadily At an average rate 53% 35% Fast

67

It shows that more than half of the investors .i.e. 53% want their investment to grow at a faster rate and only 12% investors want their investment to grow steadily.

Options Withdraw your money Wait and watch Invest more in it

Percentages 15% 57% 28%

3. Imagine that stock market drops immediately after you invest in it then what will you do?

28%

15%

Withdraw your money Wait & watch Invest more in it 57%

It shows that, 15% of people of Chandigarh prefer withdrawing their money when stock market drops that means they belong to the category of risk avoiders who dont want to take the risk and may be treated as bears. 68

More than half of the investors .i.e. 57% prefer to just wait and watch when stock market drops immediately after their investment that means they belong to the category of risk averse who minimize the return at fixed risk. Only 28% of the investors prefer investing more money when stock market drops that means they are risk takers who takes risk with the expectation of high returns and they may be called bulls.

4. How long have you been investing in mutual funds?

12% For the last 1-5 years For the last 5-10 years 32% 56% For over 10 years & above

TIME 1 2 3 Total

Annual Income Below 1,50,000 15 7 2 24

Total 1,50,000-2,50,000 2,50,000-4,00,000 Above 4,00,000 18 20 3 10 11 4 8 2 36 33 7 56 32 12 100

It shows most of the people who are having an annual income of rs.1,50,000-2,50,000 have been investing for the last 1-5 years.

69

5. What percentage of your income do you invest annually?

23%

29% Upto 5% 5%-10% More than 10%

48%

% of Income 1 2 3 Total

Annual Income Below 1,50,000 1,50,0002,50,000 12 8 9 18 3 10 24 36

Total 2,50,0004,00,000 8 16 9 33 Above 4,00,000 1 5 1 7 29 48 23 100

It shows that most of the people who are having an annual income of between 1,50,000 2,50,000 invest 5% - 10% of their income.

Chi-Square Tests Value Pearson Chi-Square 8.384 df 6 Sig. (2-sided) .211

70

Hypothesis: It shows that there is no significant difference between the annual income of
the investors and the percentage of their income which they invest in mutual funds.

Options Daily Monthly Occasionally

Percentages 15% 52% 33%

6. How often do you monitor your investment?

Occasionally 33%

Daily 15%

Monthly 52%

71

It shows that most of the people .i.e. 52% prefer monitoring their investment on monthly basis. 33% of the people monitor their investment occasionally.

7.

Do you invest your money in share market?

No 40% Yes 60%

It shows that 60% of the people invest their money in share market where as only 40% of people dont invest their money in share market. Chi-Square Tests Value Pearson Chi-Square 8.361 df 2 Sig. (2-sided) .015

Hypothesis: There is no significant difference between the age of the people and the people
who invest their money in share market.

72

DEMOGRAPHICS

Age Group
17% 20-30 30-40 25% 58% Above 40

58% of people belong to 20-30 age group and on the other hand only 17% of people belong to above 40 age group.

Qualification
17% Under graduate Graduate Post graduate 52%

31%

17% of the people are under graduate. 52% of the people are graduates, and 31% of the people are post graduates.

73

Occupation
Retired 5%

Professional 25% Housewife 8%

Salaried 31%

Business 31%

31% of the people are having their own business. 31% of the people are salaried. 25% are professionals. 8% are housewives. 5% are retired.

Annual Income
7% 33% 24%

Below 1,50,000 1,50,000-2,50,000 2,50,000-4,00,000 Above 4,00,000

36%

24% of the people belong to below 1,50,000 income group. 36% of the people belong to1,50,000 2,50,000 income group. 33% of the people belong to 2,50,000 4,00,000 income group. Only 7% of the people belong to above 4,00,000 income group.

74

FINDINGS & SUGGESTIONS

75

FINDINGS
Highest number of investors comes from the salaried class. Highest number of investors comes from the age group of 20-30. Most of the investors belong to bull category that invest more money when the stock market drops. Most of the people have been investing their money for the last 1-5 years belong to 1,50,000 2,50,000 income group. Mostly investors prefer monitoring their investment on monthly basis. Most of the people invest their 5% - 10% of their annual income in mutual funds.

Most of the people between the age group of 20 30 invest their money in share market

SUGGESTIONS
AMC,s should decrease charges upon amfi test. Provide better awareness about mutual fund. Improve the commission of the financial advisors Choose the large scale strategy in mutual fund schemes Asset manager should be loyal & expertise. The people do not want to take risk. The AMC should launch more diversified funds so that the risk becomes minimum. This will lure more and more people to invest in mutual funds. The expectation of the people from the mutual funds is high. So, the portfolio of the fund should be prepared taking into consideration the expectations of the people. People age group of 50 and above should go for high percentage of debt mutual funds as they are risk avoiders.

76

77

CONCLUSION
A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixes income instruments, real estate, derivatives and other assets have become mature and information driven. Today each and every person is fully aware of every kind of investment proposal. Everybody wants to invest money, which entitled of low risk, high returns and easy redemption. In my opinion before investing in mutual funds, one should be fully aware of each and everything.

78

ANNEXURES

79

REFERENCES & BIBLIOGRAPHY

Websites: www.amfiindia.com www.principalindia.com www.investorsguide.com www.moneycontrol.com www.mutualfundsindia.com Magazines: Dalal Street Business Standard Business Today Books: Mutual Fund Guide for Investors Newspapers: Business Standard The Economic Times The Hindu Business Line
80

By: AMFI

QUESTIONNAIRE
1) Which factor do you consider before investing in mutual fund? 1. Safety of principal 2. Low risk 3. High returns At which rate do you want your investment to grow? 1. Steadily 2. At an average rate 3. Fast Imagine that stock market drops immediately after you invest in it then what will you do? 1. Withdraw your money 2. Wait and watch 3. Invest more in it 4) How long have you been investing in mutual fund? 1. For the last 1-5 years 2. For the last 5-10 years 3. For over 10 years and above What percentage of your income do you invest? 1. Up to 5% 2. 5%-10% 3. More than 10% How often do you monitor your investment? 1. Daily 2. Monthly 3. Occasionally Do you invest your money in share market? Yes No Mobile no:.. Name:.. Address . ...... 81

2)

3)

5)

6)

7)