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Mutual fund is a pool of funds which is divided into units of equal value and sold to investing public and the funds so collected are utilized for collective investments in various capitals and money market instrument. In todays market people invest money to gain more. So when they take into account, they mostly look out for Investment Company where they can get more income.
Investment companies can be classified into closed-end and open-end investment companies. Closed-end is when it is readily transferable in the market. Open-end funds sell their own shares to investors and ready to buy back their old shares. If we talk about the investment options today, in India we have so many investment companies like UTI, LIC etc, all have their own special ways of servicing the customers. The investors also feel that they are worth to be the part of that company. These days people mainly look for avoiding tax so normally they look out for some investments which can help them in doing so. When it comes to this point of view, people mainly look out for mutual fund.
Mutual fund is a trust at law; it is a special type of managed, pooled portfolio financial company or financial service organization that sells shares/units/stocks in itself, to the public to obtain its resources and it invests the savings so mobilized or pooled in a large, diversified, & sound portfolio of equity shares, bonds, money market instruments etc., Redeemable trust certificates are sold to investors at net asset value (NAV) plus a small commission. All interest/dividend and principal repayments are distributed to the holders of the certificates.
Mutual fund is a pool of funds which is divided into units of equal value and sold to investing public and the funds so collected are utilized for collective investment in various capital and money market instrument. Investment is a commitment of a persons funds to derive future income in the form of interest, dividends, rent, premiums, pension benefits or the appreciation of the value of their principal capital. Investments have a return but there can be no return without risk.
Definitions Different persons in different words have defined mutual fund. The SEBI (MF) Regulations, 1993 defines mutual fund as A fund established in the form of a trust by a sponsor to raise money by the trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations. Investment is the allocation of monetary resources to assets that are expected to yield some gain or positive return over a given period of time. These assets range from safe investments to risky investments. Investments in this form are also called Financial Investments.
Characteristics of MF
A mutual fund actually belongs to the investors who have pooled their funds. The ownership of the MF is in the hands of the investors. A MF is managed by investment professionals and other service providers, who earn a fee for their services from the fund. The pool of funds is invested in a portfolio of marketable investment. The value of the portfolio is updated every day. The investors share in the fund is denominated by units. The value of the units changes with change in the portfolios value, every day. The value of one unit of investment is called as the net assets value or NAV. The investment portfolio of the Mutual fund is vested according to the stated Investment objectives of the fund.
Investment Company A company or trust that uses its capital to invest in other companies. There are two principal types closed-ended and the open-ended. Shares in closed-ended investment companies, some of which are listed on the New York Stock Exchange are readily transferable in the open market and are bought and sold like other shares. Open-ended funds sell their own shares to investors, stand ready to buy back their old shares and are not listed. These funds are so called because their capitalization is not fixed; they issue more shares as people want them.
When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.
CONSTITUENTS OF MUTUAL FUND There are many entities involved and the diagram below illustrates the constitut ion of a mutual fund: Fig.1.2 Constituents of Mutual Fund Industry
Formation process starts from sponsor {the investment advisor or manager}. Sponsor selects & appoints the Board of Trustees. Trustees again hire or contract a separate AMC that is run by professional managers. The AMC conducts the necessary research & based on it, manages the fund or portfolio. It is responsible for floating, managing, redeeming the schemes; it also handles the administrative chares. It receives the fees for the services rendered by it. The custodian is responsible for co-ordination with brokers, the actual transfer & storage of stocks, & handling the property of the trust.
Organization of a Mutual Fund All mutual funds comprise four constituents Sponsors, Trustees, Asset Management Company (AMC) and Custodians. 1. Sponsors: The sponsors initiate the idea to set up a mutual fund. It could be a registered company, scheduled bank or financial institution. A sponsor has to satisfy certain conditions, such as capital, record (at least five years operation in financial services), de-fault free dealings and general reputation of fairness. The sponsors appoint the Trustee, AMC and Custodian. Once the AMC is formed, the sponsor is just a stakeholder.
2. Trust/ Board of Trustees: Trustees hold a fiduciary responsibility towards unit holders by protecting their interests. Trustees float and market schemes, and secure necessary approvals. They check if the AMCs investments are within well-defined limits, whether the funds assets are protected, and also ensure that unit holders get their due returns. They also review any due diligence by the AMC. For major decisions concerning the fund, they have to take the unit holders consent. They submit reports every six months to SEBI; investors get an annual report. Trustees are paid annually out of the funds assets 0.5 percent of the weekly net asset value.
3. Fund Managers/ AMC: They are the ones who manage money of the investors. An AMC takes decisions, compensates investors through dividends, maintains proper accounting and information for pricing of units, calculates the NAV, and provides information on listed schemes. It also exercises due diligence on investments, and submits quarterly reports to the trustees. A funds AMC can neither act for any other fund nor undertake any business other than asset management. Its net worth should not fall below Rs. 10 crore. And, its fee should not exceed 1.25 percent if collections are below Rs. 100 crore and 1 percent if collections are above Rs. 100 crore. SEBI can pull up an AMC if it deviates from its prescribed role.
4. Custodian: Often an independent organization, it takes custody of securities and other assets of mutual fund. Its responsibilities include receipt and delivery of securities, collecting income-distributing dividends, safekeeping of the units and segregating assets and settlements between schemes. Their charges range between 0.15-0.20 percent of the net value of the holding. Custodians can service more than one fund.
Investment Alternatives I. Direct Investment Alternatives A. Fixed Principal Investments i. ii. iii. iv. v. Cash Savings account Savings Certificate Government Bonds Corporate Bonds and Debentures
B. Variable Principle Securities i. ii. Equity Shares Convertible Debentures or Preference Securities
C. Non-Security Investments i. ii. iii. iv. v. Real Estate Mortgages Commodities Business Ventures Art, Antiques and Other Valuables
II. Indirect Investment Alternatives A. Pension Fund B. Provident Fund C. Insurance D. Investment Companies E. Unit Trust of India and Other Trust Funds F. Mutual Funds
1.3 A comparison of different investment options with respect to their Performance is as shown in the following table.
Options Equity FI Bond Debentures Company FD PPF LIC Gold Real Estate Mutual Fund Bank Deposit
Returns High Moderate Moderate Moderate Moderate Low Moderate High High Low
Safety Low High Moderate Low High High High Moderate High High
Volatility High Moderate Moderate Low Low Low Moderate High Moderate Low
Liquidity High/Low Moderate Low Low Moderate Low Moderate Low High High
Convenience Moderate High Low Moderate High Moderate Low Low High High
Financial Institutions:
Financial institutions are business organizations that act as mobilizes & depositors of savings & purveyors of credit or finance. Financial Institutions are engaged in these activities
Financing by way of loans, advances, and so on any activity except its own. Acquisition of shares/ stocks/ bonds/ debentures/ securities Hire- purchase Any class of insurance, stock- broking, etc. Chit funds and Collection of money by way of subscription/ sale of units or other instruments/ any other manner and their disbursement.
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Financial Institutions
Financial Services
Financial Markets
Regulator y
Intermediaries
Nonintermediaries
Others
Primary
Secondary
Banking
Nonbanking
Short term
Medium term
Long term
Organized
Unorganized
Primary
Secondary
Money Market
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RBI also regulates money market & Government. Securities Markets, in which mutual funds invest. Since the AMC & Trustee Company is Companies, they are regulated by the department of Company affairs. They have to send periodic reports to the Registrar of the Company (ROC) & the Company Law Board (CLB).
Regulatory institutions: These institutions regulate Indian financial system. The major regulatory arms of the Government of India are Reserve Bank of India (RBI) Securities Exchange Board of India (SEBI) and Association of Mutual Fund Industry (AMFI)
Regulatory Bodies
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SEBI
Mutual Funds
Sponsor
Trustee
AMC
Custodian
Investor
UTI
Bank Sponsored
Domestic
Offshore
Open ended
Closed ended
Growth Funds
Income Funds
Balanced Funds
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FUNCTIONS OF RBI
F U N C T I O N S
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The SEBI was established on April.12.1982 through an administrative order, but it became a statutory and really powerful organization only since 1992. SEBI was set up on 21st February.1992 through an ordinance issued on 30th January.1992. The SEBI Act on 4th April.1992 replaced the ordinance. The SEBI is under the overall control of the ministry of Finance, and it has head office at Mumbai. It has now become a very important constituent of the financial regulatory framework in India.
OBJECTIVES:
To regulate stock exchanges & securities industry to promote their orderly functioning. To protect the interest of investors so that there is a steady flow of savings in to the capital market and educating individual investors. To prevent trading malpractices and aims at achieving a balance between selfregulation by securities industry and its statutory regulation.
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INDIAN MUTUAL FUND INDUSTRY Structure Of The Indian Mutual Fund Industry
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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.
Amount Mobilised
199293
Assets Under
Mobilis ation as
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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.
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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 October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386 schemes.
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By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40,90,000 crore.
The annual composite rate of growth is expected 13.4% during the rest of the decade. In the last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010, mutual fund assets will be double.
Let us discuss with the following table: Table 1.6 Aggregate deposits of Scheduled Banks in India (Rs.Crore) Month/Year Deposits Change in % over last yr Source RBI Mutual Fund AUMs Growth Month/Year MF AUM's Change in % over last yr Source - AMFI Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sep-04 4-Dec 68984 93717 26 83131 13 94017 12 75306 25 13762 6 45 15114 1 9 149300 1 Mar-98 Mar-00 Mar-01 Mar-02 605410 851593 989141 1131188 15 14 13 Mar-03 1280853 12 Mar04 Sep-04 1567251 18 4-Dec 1622579 3
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100% growth in the last 6 years. Number of foreign AMC's are in the que 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 We have approximately 29 mutual funds which is much less than 'B' and 'C' class cities are growing rapidly. Today most of the channelizing these savings in mutual funds sector is required. US having more than 800. There is a big scope for expansion. mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. advice. Mutual fund can penetrate rurals like the Indian insurance industry 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 with simple and limited products.
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The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S. Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital are non-bank mutual funds in this group. In the U.S. the total number of schemes is higher than that of the listed companies. Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway. In the U.S. about 9.7 million households will manage their assets online by the year 2003, such a facility is not yet of avail in India. On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets. 72% of the core customer base of mutual funds in the top 50-broking firms in the U.S. is expected to trade on-line by 2003.
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Portfolio diversification: Mutual Funds normally invest in a well-diversified portfolio or securities. Each investor in a fund is a part owner of all of the funds assets. This enables him to hold a diversified investment portfolio even with a small amount of investment that would otherwise require big capital.
Professional Management: Even if and investor has a big amount of capital available to him, he benefits from the professional management skills brought in the management of the investors portfolio. The investment management skills, along with the needed research into available investment options, ensure a much better return than what an investor can manage on his own. Few investors have the skills and resources of their own to succeed in todays fast moving, global and sophisticated markets.
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Reduction of transaction cost: What is true of risk is also true of the transaction costs. A direct investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund. He has the benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit passed on to its investors.
Liquidity: Often, investors hold shares or bonds they cannot directly, easily and quickly sell. Investment in a mutual fund, on the other hand, is more liquid. An investor can liquidate the investment, by selling the units to the fund if openend or selling them in the market if the fund is closed-end, and collect funds at the end of a period specified by the mutual fund or the stock market.
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Mutual funds & securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved. Past performance of the Sponsor or that of existing Schemes of the Fund does not indicate the future performance of the Schemes. As with any securities investment, the NAV of the Units issued under the scheme can go up or down depending on the factors and forces affecting the capital and money market. Tax laws may change, affecting the return on investment in Units.
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I. Schemes according to Maturity Period: A mutual fund scheme can be classified into open-ended scheme or ended scheme depending on its maturity period. close-
i.
An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.
ii.
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual funds NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.
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i.
Growth / Equity Oriented Scheme The aim of Growth funds is to provide capital appreciation over the medium to long-term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.
ii.
Income / Debt Oriented Scheme The aim of the income funds is to provide regular and steady investors. Such scheme generally invests in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. The NAVs of such funds are affected because of change in interest rates in the country.
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iv.
Gilt Fund These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as are the case with income or debt oriented schemes.
v.
Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as tracking error in technical terms.
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vii.
Tax Saving Schemes This 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. Investment made in Equity Linked Saving Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act 1961.
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Investors preferences towards Mutual Funds of Kotak 2.1 OBJECTIVES OF THE STUDY
1.
To track investors attitude, performance and behavior with respect to financial institutions and financial products.
2.
To find new and more effective ways of ensuring investor satisfaction and to find efficient ways of communicating it.
3.
To conduct the study with references to Kotak Mahindra products and the competitive scenario in which Kotak Mahindra operates.
4.
The study includes investors, financial institutions, investors who are interested in Kotak Mahindra Asset Management Companys mutual fund and also the individuals who are interested in the investment on the mutual fund. The individuals without investment are also included in the scope of the study.
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Investors preferences towards Mutual Funds of Kotak 2.3 STATEMENT OF THE PROBLEM
The investment objective of Kotak Mahindra Asset Management Co is to generate capital appreciation from a diversified portfolio of predominantly equity and equity related securities or securities issued by central and state government. Despite this objective, the reasons like mutual fund investments are subject to market risk, there is no assurance or guarantee that the objective of the scheme can be achieved and also the Net Asset Value (NAV) of the units can go up or down depending on factors affecting the capital and money market, many of the investors tend not to invest in the mutual fund investment.
Net Asset Value (NAV) denotes the performance of particular scheme of a mutual fund Mutual Funds invest he money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day-to-day basis. The NAV per unit is market value of securities of scheme divided by the total number of units of the scheme on any particular date.
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Market Value of Investments - Liabilities Net Asset Value = -------------------------------------------------------------No. of units Outstanding
However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit".
Risk
Risk may relate to loss of capital, delay in repayment of capital, non-payment of interest, or variability of returns.
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Primary Analytical Research Method was used for the study. Questionnaire was prepared and used for collecting the data about individual investors preference towards various investment avenues, their portfolio behaviors. The research required primary and secondary source of data. The primary data is obtained through structured questionnaires which were collected from Investors in Jayanagar Banks and Brokerage Offices such as Axis Bank, Reliance Money, Bajaj Capital etc,. Secondary Datas are the one which is collected from web site of Kotak Mahindra, investors and company records.
Sampling Design The Sampling technique used in this research is Convenient Judgment Sampling Method. Judgment Random Sampling, which by using the available information, concerning the population, attempts to design a more efficient sample. The study includes investors, financial institutions, investors who are interested in Kotak Mahindra Asset Management Companys mutual fund and also the individuals who are interested in the investment on the mutual fund. The individuals without investment are also included in the study.
Sample Size A sample size of 100 people was selected for the study. The sample for data collection was within the geographical boundaries of Bangalore City, Jayanagar.
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Secondary data was collected from Fact Sheets of the Company Websites, newspapers and journals.
Period of Study The study was made during 1st January 2008 to 31st January 2008.
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Investors preferences towards Mutual Funds of Kotak 2.6 LIMITATIONS OF THE STUDY
1. A descriptive research was undertaken for the purpose of project. But descriptive research has its own limitations regarding the selection of sample size of sample unit. 2. Some of the data gathered from the mutual fund holders may not be reliable. 3. Time limit was also a constraint while conducting the study. So, the study does not give a picture of the whole market. 4. Time factor, as a period of one month, for gathering data is inadequate gamut of information needs to be synchronized to give much more view of the problems and prospects. 5. Detailed and depth research was not conducted due to financial factors. 6. The study curtails comparison as it was done only in one city i.e. Bangalore. 7. The information provided by the organizations was limited to a far extent due to drawbacks like competition. as the
comprehensive
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Investors preferences towards Mutual Funds of Kotak 2.7 OVERVIEW OF THE REPORT
In Chapter 1 this report bring out the General Introduction and explains the theoretical background of the organization
Chapter 2 includes the Design of the study. It covers the objectives, scope, statement of the problem, Review of literature, operational definitions, Research Methodology, statement of hypothesis, sampling methods, Data Analysis tool, overview of the Report and the limitations.
Chapter 3 includes the profile of the organization, profile of the study unit, organizational chart and functional department of the organization.
Chapter 5 includes the summary, which covers findings, contribution of the study, Suggestions, Conclusion, Questionnaire and Bibliography.
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Investors preferences towards Mutual Funds of Kotak 3.1 PROFILE OF THE ORGANISATION
Corporate Profile Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates.
Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has over 4 Lac investors in various schemes. KMMF offers schemes catering to investors with varying risk - return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. KMMF has been registered with SEBI vide registration number MF/038/98/1 dated 23rd June 1998.
The sponsor company, Kotak Mahindra Finance Limited (KMFL), was converted into Kotak Mahindra Bank Limited (Kotak Bank) in March 2003 their being granted a Banking License by Reserve Bank of India. KMFL promoted by Mr. Uday S Kotak, Mr. S.A.A.Pinto and Kotak & Co., was incorporated on November 21, 1985, under the name Kotak Capital Management Finance Limited.
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The Sponsor and its subsidiaries / associates offer wide ranging financial services such as loans, lease and hire purchase, consumer finance, home loans, commercial vehicles and car finance, investment banking, stock broking, primary market distribution of equity and debt products and life insurance. The group has offices in over 88 Indian cities and also present internationally in Mauritius, London, Dubai and New York. Kotak Mahindra (UK) Limited, an ultimate subsidiary of Kotak Bank, is the first company owned from India to be registered with the Financial Services Authority in UK. Kotak Mahindra Old Mutual Life Insurance Limited is a joint venture between Kotak Bank and Old Mutual Plc based in the UK and with large presence in the South African insurance market.
Some of the other subsidiaries of Kotak Bank are Kotak Mahindra Securities Limited, Kotak Mahindra Prime Limited, Kotak Mahindra International Limited, Kotak Mahindra Private-Equity Trustee Limited, Kotak Mahindra Investments Limited, Kotak Mahindra Inc., and Kotak Forex Brokerage Limited.The Sponsor has been consistently profitable and dividend paying company since inception. All group companies are professionally run companies, employing over 5,000 professional staff including CAs, MBAs and Engineers.
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NDTV AWARDS, 2006 LIPPER FUND AWARDS, 2006 ICRA AWARDS, 2006 ICRA MFR 1 (December 2004 & December 2005) OUTLOOK MONEY BEST WEALTH CREATOR DEBT 2003 CRISIL BEST FUND AWARD 2003
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Kotak Mahindra is one of India's leading financial conglomerates, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the diverse financial needs of individuals and corporate. The group has a net worth of over Rs. 5,609 crore, employs around 17,100 people in its various businesses and has a distribution network of branches, franchisees, representative offices and satellite offices across 344 cities and towns in India and offices in New York, London, Dubai, Mauritius and Singapore. The Group services around 3.6 million customer accounts. The journey so far
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Investors preferences towards Mutual Funds of Kotak Key group companies and their businesses
Kotak Mahindra Bank The Kotak Mahindra Group's flagship company, Kotak Mahindra Finance Ltd which was established in 1985, was converted into a bank- Kotak Mahindra Bank Ltd in March 2003 becoming the first Indian company to convert into a Bank. Its banking operations offer a central platform for customer relationships across the group's various businesses. The bank has presence in Commercial Vehicles, Retail Finance, Corporate Banking, Treasury and Housing Finance.
Kotak Mahindra Capital Company Kotak Mahindra Capital Company Limited (KMCC) is India's premier Investment Bank. KMCC's core business areas include Equity Issuances, Mergers & Acquisitions, Structured Finance and Advisory Services.
Kotak Securities Kotak Securities Ltd. is one of India's largest brokerage and securities distribution houses. Over the years, Kotak Securities has been one of the leading investment broking houses catering to the needs of both institutional and non-institutional investor categories with presence all over the country through franchisees and coordinators. Kotak Securities Ltd. offers online (through www.kotaksecurities.com) and offline services based on wellresearched expertise and financial products to non-institutional investors.
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Kotak Mahindra Asset Management Company Kotak Mahindra Asset Management Company Kotak Mahindra Asset Management Company (KMAMC), a subsidiary of Kotak Mahindra Bank, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). KMMF manages funds in excess of Rs 20,800 crore and offers schemes catering to investors with varying riskreturn profiles. It was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities.
Kotak Mahindra Old Mutual Life Insurance Limited Kotak Mahindra Old Mutual Life Insurance Limited is a joint venture between Kotak Mahindra Bank Ltd. and Old Mutual plc. Kotak Life Insurance helps customers to take important financial decisions at every stage in life by offering them a wide range of innovative life insurance products, to make them financially independent.
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Uday S. Kotak B.Com, MMS has been an Executive Vice Chairman and Managing Director of Kotak Mahindra Bank Limited (Formerly known as Kotak Mahindra Finance Limited) since August 1, 2002. Mr. Kotak is the principal founder and promoter of Kotak Mahindra Finance Ltd. He is responsible for the growth of Kotak Mahindra from a fledgling finance company in 1985 to a financial institution providing the full basket of financial services today. He serves as Chairman of the Board.
Mr. Amit Desai is a graduate in Commerce and Law from the Bombay University. He is an advocate and has about 20 years of experience in criminal, economic and revenue laws. Mr. Desai is associated with the Sponsor.
Mr. Girish Sharedalal is a graduate in Commerce and Arts and also a Fellow of the Institute of Chartered Accountants of India. Formerly a Senior Partner of Messrs Dalal, Desai and Kumana, a firm of Chartered Accountants, he has about 44 years of experience in the field of audit, taxation and management consultancy.
Mr. Tushar Mavani is a graduate in Commerce and Law from the Bombay University. He is a partner with Messrs Mulla & Mulla & Craigie Blunt & Caroe and has about 14 years of experience in the legal field.
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Mr. Chandrashekhar Sathe is a graduate with B. Tech.(Chemical Engineering) from IIT, Mumbai. He has over 27 years' experience in Banking and Finance. He has been a part of the Senior Management team of the Kotak Mahindra Group since 1992 and was responsible for setting up the Fixed Income Securities capability of Kotak Mahindra Capital Company. Mr. Sathe is a widely consulted expert on Foreign Exchange and Money Markets in India and is a frequent contributor to financial newspapers, magazines and TV News channels. Mr. Sathe was the Chief Executive Officer of the AMC for the period, 1st April, 1998 to 30th November, 2001 and currently heads the Risk Management function at Kotak Mahindra Bank Limited. Mr. Sathe is associated with the Sponsor.
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Investors preferences towards Mutual Funds of Kotak 3.3 SCHEME DETAILS OF KOTAK MAHINDRA
1. KOTAK 30
Objective: - The investment objective is to generate capital appreciation from a portfolio of predominantly equity and equity related securities with investment in, generally not more than 30 stock. Structure :Open Ended Equity Growth Scheme
2. KOTAK TECH
Objective: - The investment objective is to generate capital appreciation from a predominantly equity and equity related securities issued by multinational companies. Structure: - Open Ended Equity Growth Scheme. Minimum investment:- Rs 5,000
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Objective: - The investment objective is to generate capital appreciation from a portfolio of predominantly equity and equity related securities issued by multinational companies. Structure: Open Ended Equity Growth Scheme
4. KOTAK BALANCE
Objective: -
and equity related instruments, balanced with income generation by Investing in debt and money market instruments Structure :Open Ended Balanced Scheme.
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Objective: - To enhance returns over a portfolio of debt instruments with a moderate exposure in Equity & Equity related instruments Structure:- Open Ended Income Scheme Minimum Investment: - Rs 5,000
6. KOTAK GILT
Objective: - To generate risk free returns through investments in sovereign Securities issued by the central government and / or a state in such securities Structure: Open Ended Dedicated Gilt Scheme government and / or reverse repos
Minimum Investment: - Savings & investment Plan; Rs 5,000 Serial Plans; Rs 10 lakhs
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Objective: -
different maturities so as to spread the risk across a wide maturity Horizon & different kinds of issuers in the debt market Kotak Bond Short Term Plan To provide reasonable returns and high level of liquidity by investing in debt & money market instruments of different maturities, So as to spread the risk across different kinds of issuers in the debt market.
Structure: -
Minimum Investment: - Deposit Plan Rs 5,000 Wholesale Plan: Rs 1 lakh Short Term Plan: Rs5, 000 Institutional Plan; Rs 1 crore
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Objective; - To provide reasonable returns and high level of liquidity by across different kinds of Issuers in the debt markets Structure; - Open Ended Debt Scheme Minimum Investment: - Rs 5,000 Institutional plan: Rs 1 crore Institutional Premium Plan: Rs 20 crores
Investing in
debt and money market instruments of different Maturities so as to spread the risk
9. KOTAK FLOATER
Objective: - To reduce the interest rate risk associated with investments in fixed rate instruments by investing predominantly in floating rate securities, money market Instruments and using appropriate derivatives Structure: Open Ended Debt Scheme
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Objective: To maximize returns through an active management of a portfolio of debt and securities. Structure: Open Ended Debt Scheme
11. KOTAK GLOBAL INDIA Objective: To generate capital appreciation from a diversified portfolio of
predominantly equity and equity related securities issued by globally competitive Indian Companies.
Highlights Investment in a diversified equity portfolio of Globally Competitive Indian Companies. Tax advantage Recurring Investment Facility available during continuous offer. Redemption on all Working days.
Management of one's finances to attain a defined goal calls for a lot of discipline, many a times self-imposed. Our Systematic Investment Plan is a tool, which can help you, inject this discipline in your financial management efforts. Our Systematic Investment Plan (SIP) provides you the facility to periodically invest a fixed sum over any defined period of time (6 months or more) in a disciplined manner. SIPs help in arresting uncertainties associated with trying to time the market and thus, in the long term tends to iron out market fluctuations. It brings down your average cost of acquisition of units. As you would allocate a fixed sum every month, you would buy more units when the prices of our units are lower than when they are higher.
Our Systematic Withdrawal Plan (SWP) is designed receive a regular stream of payouts in a defined frequency and to book profits periodically Through our SWP you can redeem defined sums at a pre-defined frequency by giving a one-time instruction to us. You may choose to regularly withdraw either a fixed sum or just the appreciation on your investments.
This facility caters to two segments of investor needs: 1) Investors wanting defined, regular funds inflow from their investments. 2) Investors interested in booking gains at a regular interval.
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Systematic Transfer Plan (SWP) caters a phased entry into the Equity markets rather than putting in all your money at one trench and to book profits from your equity holdings. Through our STP you can choose to switch your investments from one Kotak Mutual scheme to another at a predefined frequency by giving a one-time instruction to us. You also have a choice between switching a fixed sum or only the appreciation on your investments. You can choose to transfer either a fixed sum every defined period or only the appreciation on your investments over that period from one scheme to another. The later is helpful, where you do not want the transfer to disturb your capital contribution.
4. Direct Credit Facility: Our Direct Credit Facility comes automatically to you (unless you choose otherwise) if you hold an account with any of the 12 banks listed below: ABN AMRO Bank Citi Bank Centurion Bank of Punjab Deutsche Bank HSBC HDFC ICICI IDBI Bank Indusind Bank Kotak Mahindra Bank Standard Chartered UTI Bank
Direct Credit is safer, faster and convenient compared to the conventional cheque payout mechanism.
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5. ECS of Dividends: ECS (Electronic Clearing Service) is a Reserve Bank of India offering to facilitate, among others, faster and seamless payout of dividends directly into your bank account. ECS as a mechanism for payout of Dividends is faster, convenient, cost-effective and hassle-free. Besides, you don't run the risk of loss of dividend instruments in transit and the associated delays in obtaining a duplicate instrument. This facility is currently offered across all banks in over 48 locations.
6. Online Transactions Facility: Our Online Transactions Facility allows you to have instant access to your investments at any time from anywhere just at the click of a button. Here's a list of all facilities you can avail by signing in for our Online Transactions Facility: -Redemption. -Switch Over. -Account Statement.
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7. Email Communication: The world over, e-mail has been revolutionizing communication. No more need to have paper trails; e-mail makes communication real-time, easy to store and retrieve and cost-effective. You can now opt to receive all your communication from us over e-mail: - Account Statement for your investments -Transaction Confirmations -Daily NAVs and Dividend Updates -Market Reviews -Information on product launches, service initiatives, dividends, etc. -Annual Reports -Other Statutory Communication
8. SMS Services: With cell phones fast qualifying for an assured parking in every pocket, we could not resist allowing you that extra convenience to be in touch with your investments whenever you wish, wherever you are. Try our SMS facility to : -Access the latest NAVs and Dividends for our various schemes on SMS.
-Receive information on product launches, service initiatives, dividends, etc. on SMS. -Post your queries to our Dedicated Services Desk.
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9. Updates from Markets: Market Review-Weekly Market Review [ended 29th February 2008] Performance-Monthly Performance Snapshot [as on 31/12/2007] Half Yearly Accounts and Portfolio- March 2007&September 2007 Fact Sheet- Current Month, Yearly Fact Sheet KMAMC Annual Report-2006 - 2007 Credit Policy for 2007-08
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Sl. No. 1 2
Percentage 76 24 100
Source: Primary Data Interpretation: It is clear from the table that out of 100 respondents, 76% of the respondents say that they are income tax assesses and the rest 24% say that they are not.
58
80 Percentage 60 40 20 0
76
24
Yes Attributes
No
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TABLE NO 2.2. TO SEE WHETHER REPONDENTS INVEST FOR TAX EXEMPTION OR TAX SAVINGS
Sl. No. 1 2
Percentage 70 30 100
Source: Primary Data Interpretation: It is clear from the table that out of 100 respondents, 70% of the respondents say that they invest for tax exemption and the rest 30% say that they do not.
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GRAPH NO 2. TO SEE WHETHER REPONDENTS INVEST FOR TAX EXEMPTION OR TAX SAVINGS
80 Percentage 60 40 20 0
70
30
Yes Attributes
Source: Table No: 2.2
No
61
Sl. No. 1 2 3 4 5
Attributes Fixed Deposits Real Estate Insurance Mutual Fund Gold Total
Percentage 33 27 21 9 9 100
Interpretation: It is clear from the table that out of 100 respondents, 33% of the respondents invest in fixed deposits, 27% invest in Real Estate, 21% in Insurance, 9% in Mutual Fund and the rest 9% say that they invest in gold.
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35 30 25 20 15 10 5 0
33 27 21 9 9
Percentage
In su ra nc e M ut ua lF un d
ep os its
st at e
Fi xe d
ea lE
Attributes
TABLE
NO
2.4
REASONS
OF
INVESTMENT
PREFERENCE
G ol d
OF
63
RESPONDENTS
Source: Primary Data Interpretation: It is clear from the table that out of 100 respondents, 28% of the respondents prefer investment due to less risk, 21% due to good returns, 12% due to liquidity, 36% due to assured returns and the rest 3% do it due to other reasons.
GRAPH
NO
4.
REASONS
OF
INVESTMENT
PREFERENCE
OF
RESPONDENTS
64
40 35 30 25 20 15 10 5 0
36 28 21 12 3
Less Risk Good Returns Liquidity Assured Returns Other Reasons
Percentage
Attribute
Sl. No.
Attributes
No. of respondents
Percentage
65
Interpretation: It is clear from the table that out of 100 respondents, 61% of the respondents invest in Govt securities and bonds, 18% in Mutual funds and company fixed deposits and the rest 21% in equity shares.
66
70 60 50 40 30 20 10 0
61
Percentage
18
21
Govt securities Mutual funds & Equity Shares and bonds company FDs Attributes
67
Interpretation: It is clear from the table that out of 100 respondents, 61% of the respondents like their investment to grow steadily, 27% in an average rate and the rest 12% in a fast rate.
68
70 60 50 40 30 20 10 0
61
Percentage
27 12
Steadily
Fast
69
Sl. No. 1 2 3
Percentage 24 37 39 100
Interpretation: It is clear from the table that out of 100 respondents, 24% of the respondents invest 5% of their total income, 37% invests 5-10% and the rest 39% invest more than 10%.
70
45 40 35 30 25 20 15 10 5 0
37
39
Percentage
24
5%
5% - 10% Attribute
Sl. No.
Attributes
No. of respondents
Percentage
71
Interpretation: It is clear from the table that out of 100 respondents, only 27% of the respondents are investors of mutual funds and the rest 73% are not.
72
73
27
No
Sl. No. 1
Attributes Awareness
No. of respondents 15
Percentage 15
73
Interpretation: It is clear from the table that out of 100 respondents, 15% of the respondents do not invest in mutual funds because of lack of awareness, 58% as it is risky and the rest 27% as the returns are not assured.
74
58
27 15
75
Interpretation: It is clear from the table that out of 100 respondents, 21% of the respondents feel that investing in mutual funds are less risky and hence they invest, 30% invest due to liquidity, 24% due to Professional management and the rest 25% due to fast appreciation.
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35 30 25 20 15 10 5 0
30 21 24
Percentage
25
Le ss
Pr of es si
Attribute
Source: Table No: 2.10
Fa st A
pp re ci at io n
R isk y
di ty
Li qu i
on al M
gm t
Sl. No. 1 2
Percentage 57 43 100
Interpretation: It is clear from the table that out of 100 respondents, 57% of the respondents prefer open-ended mutual funds and the rest 43% closed-ended ones.
78
60 50 Percentage 40 30 20 10 0
57 43
Open-ended
Closed-ended Attributes
Sl. No. 1 2 3
Percentage 49 42 9 100
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Interpretation: It is clear from the table that out of 100 respondents, 49% of the respondents prefer equity type of scheme, 42% prefer debit type of scheme and the rest 9% due to balance type of scheme.
80
49 42
Balance
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Interpretation: It is clear from the table that out of 100 respondents, 15% of the respondents prefer UTI mutual funds, 15% prefer Kotak, 30% prefer HDFC, 19% Templeton and the rest 21% prefer LIC.
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TABLE NO 2.14 TO ANALYSE WHETHER THE RESPONDENT SEES THE BRAND NAME WHILE INVESTING
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Interpretation: It is clear from the table that out of 100 respondents, 94% of the respondents see brand name while investing and the rest 6% are not.
GRAPH NO 14. TO ANALYSE WHETHER THE RESPONDENT SEES THE BRAND NAME WHILE INVESTING
84
100 90 80 70 60 50 40 30 20 10 0
94
Percentage
6 Yes Attribute No
Sl. No.
Attributes
No. of respondents
Percentage
85
Interpretation: It is clear from the table that out of 100 respondents, 39% of the respondents would withdraw the investment, 55% would wait and watch the show and the rest 6% say that they would invest more.
86
60 50 Percentage 40 30 20 10 0 39
55
6 Would Would wait and Would invest withdraw the watch more in it investment Attributes
TABLE NO 2.16 TO KNOW THAT THE RESPONDENTS HAVE HEARD OF KOTAK MUTUAL FUND
87
Interpretation: It is clear from the table that out of 100 respondents, all 100 respondents have heard of Kotak Mutual Fund.
GRAPH NO 16. TO KNOW THAT THE RESPONDENTS HAVE HEARD OF KOTAK MUTUAL FUND
88
100
100
0 No
Sl. No. 1 2
No. of respondents 25 49
Percentage 25 49
89
Interpretation: It is clear from the table that out of 100 respondents, 15% of the respondents view that Kotak MF is good, 36% feel that it is moderate and the rest 49% say that they are not aware.
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5.1 FINDINGS
91
92
1.
Help the financial institutions (KM) to provide goods and services in private
sector and convenience factor offered by the public sector. 2. Help local banks/small institutions to have big market share (i.e. banks or institutions which are mot easily accessible gets more preference even if it is a local bank with out much brand image.) 3. Helps the bank and institutions to provide E-banking facility more effective
and accurate towards investors or customers. 4. money. 5. Help KM to find out, is KM users are considering KM as one stop shop most of the time. Help KM to find out, in Kotak Mahindra product perceived as being value for
5.3 SUGGESTIONS
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Funds and will tend to invest in it. 3. Nice advertisements can be entertained so that people will get interest in
Mutual Funds. 4. 5. Kotak can come up with good, attractive schemes for its investors. Nowadays Indian Mutual fund Industry is attracting more and more retail
investors because of economic stability and increasing growth rate, it leads to gradual increase in the stock market indices. 6. Interest rates are falling gradually and mutual fund industry is booming
because of this reason investors can move from Bank deposits to mutual funds so mutual fund organizations should bring new schemes to satisfy the investors. 7. Mutual fund schemes have not gained importance as there is a lack of
awareness about Mutual fund schemes so the executives of the organization should take certain steps to educate the investors.
5.4 CONCLUSION
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QUESTIONNAIRE ON INVESTORS PREFERENCES TOWARDS MUTUAL FUNDS WITH REFERENCE TO KOTAK MUTUAL FUND
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Dear Sir/Madam, I, Hemanth.S, student of R.V.I.M, would like your kind attention for a few minutes to answer this questionnaire. This is part of a survey on Investors preference towards Mutual Funds with reference to Kotak (KMAMC) as a partial fulfillment of BBM course. Therefore, I kindly request you to fill the following questionnaire. The information provided by you will be used for academic purpose only & will be kept confidential.
() 5. Annual Income : Below 100,000 200,001 to 300,000 500,001 & above 6. Number of dependents: () () () 100,001 to 200,000 300,001 to 500,000 () ()
2. Are you investing for tax exemption or tax savings? Yes No 3. What kind of invest options you prefer? Fixed Deposit Real Estate Insurance Mutual Fund Gold 4. Why you prefer the above option? Less Risk Good Returns Liquidity Assured Returns Other Reasons 5. Your current investment portfolio includes majority of Govt. securities and Bonds Mutual funds & company fixed deposits Equity shares 6. You would like your investment to grow Steadily At average rate Fast
16. Have you heard of Kotak mutual fund and its scheme? Yes No 17. Your views on Kotak mutual fund and its scheme? Good Moderate Not aware Thank you very much for your valuable time & co-operation.
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BIBLIOGRAPHY Books Author Ronald J Jordan V K Bhalla By I.M. Pandey L M Bhole Preethi Singh Journals and Newspapers Business World Mint Financial Express Websites www.kotakmutual.com www.google.com www.sebi.com www.mutualfundsindia.com www.amfiindia.com www.wikipedia.org
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Book Management Investment Management Financial Management 7th Edition Financial Institutions and Markets Portfolio Management