Needoffinancialadvisorsformutualfundinvestorswithspecialreferencetokarvy 110502150920 Phpapp02

A Project Report On:
Need of financial advisors for mutual fund investors

(With special reference to KARVY)
Interim report SUBMITTED BY:
Roll no. -
Under the guidance of:
ASIAN SCHOOL OF BUSINESS MANAGEMENT,
projectsformba.blogspot.com
BHUBANESWAR
CONTENTS:
serial no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Topic certificate by organization certificate by faculty guide Acknowledgement executive summary company overview karvy at eastern zone mutual funds basics concept of benchmarking financial planning for investors why has it becomethe largest financial intermediary? how investors choose between funds? most popular stocks among fund managers most lucrative sectors among fund managers Systematic Investment Plan (in details) does fund ranking and performance persist? portfolio analysis tools research report
Page no. 4 5 6 7 817 1720 21--31 31 32 32-34 34-36 37 38-39 39-41 42-43 44-49 50
DECLARATION
I, . do hereby declare that the project report titled NEED OF FINANCIAL ADVISORS FOR MUTUAL FUND INVETORS is a genuine research work undertaken by me and it has not been published anywhere earlier.
Date: Place:
Mutual funds
its all about mutual funds:

Mutual funds: 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. No. of shares currently issued and outstanding
Advantages of a MF Mutual Funds provide the benefit of cheap access to expensive stocks Mutual funds diversify the risk of the investor by investing in a basket of assets A team of professional fund managers manages them with in-depth research inputs from investment analysts. Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information, which individual investors cannot access.
History of the Indian mutual fund industry:

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 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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 6 projectsformba.blogspot.com
projectsformba.blogspot.com (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 Canbank 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) 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. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. 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 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. consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. 7
Categories of mutual funds:
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 can not 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
projectsformba.blogspot.com 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 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: i) 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. ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks. iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields. iv) 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. v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks. vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the
risk-return 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: i) Debt-oriented funds -Investment below 65% in equities. ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.
projectsformba.blogspot.com 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 fixed-income 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. i) Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market. ii)Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills. iii)Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate. iv)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. v)Gilt funds LT- They invest 100% of their portfolio in long-term government securities. vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term debt papers. vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities. viii)FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund. Investment strategies: 1. 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) 2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give 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.
10
Risk v/s. return:
11
Working of a Mutual fund:
The entire mutual fund industry operates in a very organized way. The investors, known as unit holders,handover their savings to the AMCs under various schemes. The objective of the investment should match with the objective of the fund to best suit the investors needs. The AMCs further invest the funds into various securities according to the investment objective. The return generated from the investments is passed on to the investors or reinvested as mentioned in the offer document. Regulatory Authorities:
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projectsformba.blogspot.com To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody. According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees must be independent. The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework. Its objective is to increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading professional standards and in promoting best industry practices in diverse areas such as valuation, disclosure, transparency etc.
Documents required (PAN mandatory): Proof of identity :1.photo PAN card 2. In case of non-photo PAN card in addition to copy of PAN card any one of the following: driving license/passport copy/ voter id/ bank photo pass book. Proof of address (any of the following ) :latest telephone bill, latest electricity bill, Passport, latest bank passbook/bank account statement, latest Demat account statement, voter id, driving license, ration card, rent agreement. Offer document: an offer document is issued when the AMCs make New Fund Offer(NFO). Its advisable to every investor to ask for the offer document and read it before investing. An offer document consists of the following: Standard Offer Document for Mutual Funds (SEBI Format) Summary Information Glossary of Defined Terms Risk Disclosures Legal and Regulatory Compliance Expenses Condensed Financial Information of Schemes Constitution of the Mutual Fund Investment Objectives and Policies Management of the Fund Offer Related Information. Key Information Memorandum: a key information memorandum, popularly known as KIM, is 13 projectsformba.blogspot.com
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
14 projectsformba.blogspot.com
55 32 21
Pre retirement stage
27
Are you availing the services of personal financial advisors?
Yes No
87 48
15
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
16
What is the major reason for using financial advisors?
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
42 23 37 33
What is the major reason for not using financial advisor?
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
18 53 21 43
17
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. 18 projectsformba.blogspot.com
projectsformba.blogspot.com 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. 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.
Recommendations: 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. 19 projectsformba.blogspot.com
projectsformba.blogspot.com 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. 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.
Exhibit 1 Questionnaire:
.have you invested /are you interested to invest in mutual
funds? Yes [ ]
question)
No [ ] (plz. attempt the next
.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 [ ]
20
.where do 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 [ ]
.where from you purchase mutual funds?
Directly from the AMCs [ ] Brokers only Brokers/ sub-brokers Other sources [ ] [ ] [ ]
.which feature of the mutual funds allure you most?
Diversification Professional management
[ ] [ ]
Reduction in risk and transaction cost [ ] Helps in achieving long term goals [ ]
. 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 [ ]
. are you availing the services of personal financial advisors? YES [ ] NO [ ]
21
projectsformba.blogspot.com .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 [ ] [ ] [ ]
.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 [ ]
.what is the major reason for not using financial advisor?
Have access to all resources needed to invest on own [ ] Believe advisors are too expensive Unsure how to find a trustworthy advisor Want to be in control of own investment [ ] [ ] [ ]
Bibliography: Websites:
www.the-finapolis.com www.karvy.com
22 projectsformba.blogspot.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:

Karvy the finapolis Karvy- business associates manual The Economic Times Business Standard The Telegraph Business India Fact sheet and statements of various fund houses.
23

Needoffinancialadvisorsformutualfundinvestorswithspecialreferencetokarvy 110502150920 Phpapp02

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Needoffinancialadvisorsformutualfundinvestorswithspecialreferencetokarvy 110502150920 Phpapp02

Transféré par

Droits d'auteur :

Formats disponibles

A Project Report On:

Need of financial advisors for mutual fund investors

Under the guidance of:

ASIAN SCHOOL OF BUSINESS MANAGEMENT,

its all about mutual funds:

History of the Indian mutual fund industry:

Categories of mutual funds:

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

Risk v/s. return:

Working of a Mutual fund:

Which feature of the mutual funds allure you most?

Pre retirement stage

Are you availing the services of personal financial advisors?

Which expertise of the personal financial advisor is demanded most?

What is the major reason for using financial advisors?

What is the major reason for not using financial advisor?

No [ ] (plz. attempt the next

.where from you purchase mutual funds?

.which feature of the mutual funds allure you most?

Diversification Professional management

. According to you which is the most suitable stage to invest in

mutual funds? Young unmarried stage [ ]

. are you availing the services of personal financial advisors? YES [ ] NO [ ]

projectsformba.blogspot.com .which expertise of the personal financial advisor is demanded

.what is the major reason for using financial advisors?

.what is the major reason for not using financial advisor?

journals & other references:

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