EXECUTIVE SUMMARY

The project titled “MUTUAL FUND-AWARENESS AND SCOPE” is being

carried out for KARVY STOCK BROKING LTD.
The evaluation of financial planning has been increased through decades, which is best
seen in customer rise. Now a day’s investment of saving has assumed great importance.

According to the study of the markets, it is being observed that markets are doing well in
Mutual fund. In near future a proper financial planning is required to invest money in all
type of financial product because there is good potential in market to invest.

In this project the great emphasis is given to the investor’s mind in respect to investment
in Mutual Fund .The needs and wants of the client is taken into consideration.

I hope KARVY, Pune will recognize this as well as take more references from this project
report. The main objective of this project is to know the Awareness of Mutual Fund
among investors, investing pattern of people of different financial background and also
scope of mutual fund in future.

IT sector has been given more emphasis for the study of the project because it is the only
sector where all type of Age group, Income class and different level of people are
represented. After analyzing the feedback the conclusion has been made that the Indian
financial market is having lots of potential customer the only thing is to give a proper
guidance to the prospective customers.

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OBJECTIVE OF
THE STUDY

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 OBJECTIVE OF STUDY:-

• To know the awareness of MUTUAL FUND among people.

• To know the different Asset management companies involve in MUTUAL FUND.
• To see the interest of people in investing in MUTUAL FUNDS.
• To know the future of MUTUAL FUNDS in India.
• To know the different attitudes of people regarding risk, rate of return, period of
investment etc.
• To study the diversification of mutual fund.

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COMPANY
PROFILE

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OVERVIEW:

KARVY, is a premier integrated financial services provider, and ranked among the
top five in the country in all its business segments, services over 16 million individual
investors in various capacities, and provides investor services to over 300 corporate,
comprising the who is who of Corporate India. KARVY covers the entire spectrum of
financial services such as Stock broking, Depository Participants, Distribution of financial
products - mutual funds, bonds, fixed deposit, equities, Insurance Broking, Commodities
Broking, Personal Finance Advisory Services, Merchant Banking & Corporate Finance,
placement of equity, IPO’s, among others. Karvy has a professional management team
and ranks among the best in technology, operations and research of various industrial
segments.

EARLY DAYS:
The birth of Karvy was on a modest scale in 1981. It began with the vision and
enterprise of a small group of practicing Chartered Accountants who founded the flagship
company …Karvy Consultants Limited. Company started with consulting and financial
accounting automation, and carved inroads into the field of registry and share accounting
by 1985. Since then, they have utilized their experience and superlative expertise to go
from strength to strength…to better their services, to provide new ones, to innovate,
diversify and in the process, evolved Karvy as one of India’s premier integrated financial
service enterprise.

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 Thus over the last 20 years Karvy has traveled the success route, towards building
a reputation as an integrated financial services provider, offering a wide spectrum of
services. And we have made this journey by taking the route of quality service, path
breaking innovations in service, versatility in service and finally…totality in service.
Their highly qualified manpower, cutting-edge technology, comprehensive infrastructure
and total customer-focus has secured for them the position of an emerging financial
services giant enjoying the confidence and support of an enviable clientele across diverse
fields in the financial world.

MISSION OF KARVY:

Their mission is to be a leading, preferred service provider to their customer, and

their aim to achieve this leadership position by building an innovative, enterprising, and
technology driven organization which will set the highest standards of service and
business ethics

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 KARVY GROUP COMPANIES

(1) KARVY CONSULTANTS LIMITED:

As the flagship company of the Karvy Group, Karvy Consultants Limited has
always remained at the helm of organizational affairs, pioneering business policies, work
ethic and channels of progress.

Having emerged as a leader in the registry business, the first of the businesses that
Karvy ventured into, company have now transferred this business into a joint venture with
Computer share Limited of Australia, the world’s largest registrar. With the advent of
depositories in the Indian capital market and the relationships that Company have created
in the registry business, Karvy believe that they were best positioned to venture into this
activity as a Depository Participant. Karvy were one of the early entrants registered as
Depository Participant with NSDL (National Securities Depository Limited), the first
Depository in the country and then with CDSL (Central Depository Services Limited).
Today, Karvy service over 6 lakhs customer accounts in this business spread across over
250 cities/towns in India and are ranked amongst the largest Depository Participants in
the country. With a growing secondary market presence, they have transferred this
business to Karvy Stock Broking Limited (KSBL), their associate and a member of NSE,
BSE and HSE.

The corporate website of the company, “www.karvy.com”, gives access to in-

depth information on financial matters including Mutual Funds, IPOs, Fixed Income
Schemes, Insurance, Stock Market and much more. A link called ‘Resource Center’,
devoted solely to research conducted by team of experts on various financial aspects like
‘Sector Research’, deals exclusively with in-depth analysis of the key sectors of the
Indian economy. Besides, a host of other links like ‘My Portfolio’ which acts as a
personalized and customized financial measure, makes this site extremely informative
about investment options, market trends, news and also about our their company and each
of the services offered here.

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(2) KARVY STOCK BROKING LIMITED

Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows
freely towards attaining diverse goals of the customer through varied services. Creating a
plethora of opportunities for the customer by opening up investment vistas backed by
research-based advisory services. Here, growth knows no limits and success recognizes
no boundaries. Helping the customer create waves in his portfolio and empowering the
investor completely is the ultimate goal.

Karvy is a Member of National Stock Exchange (NSE), The Bombay Stock Exchange
(BSE), and The Hyderabad Stock Exchange (HSE).

(3) KARVY INVESTORS SERVICES LIMITED:

Merchant Banking- Recognized as a leading merchant banker in the country,

Karvy are registered with SEBI as a Category I merchant banker. This reputation was
built by capitalizing on opportunities in corporate consolidations, mergers and
acquisitions and corporate restructuring, which have earned us the reputation of a
merchant banker. Raising resources for corporate or Government Undertaking
successfully over the past two decades have given us the confidence to renew company
focus in this sector.

Karvy quality professional team and their work-oriented dedication have

propelled company to offer value-added corporate financial services and act as a
professional navigator for long term growth of companies clients, which includes leading
corporate, State Governments, foreign institutional investors, public and private sector
companies and banks, in Indian and global markets.

Karvy financial advice and assistance in restructuring, divestitures, acquisitions,

de-mergers, spin-offs, joint ventures, privatization and takeover defense mechanisms have
elevated company relationship with the client to one based on unshakable trust and
confidence.

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(4) KARVY COMPUTERSHARE PVT. LIMITED

Karvy have traversed wide spaces to tie up with the world’s largest transfer agent,
the leading Australian company, Computershare Limited. The company that services
more than 75 million shareholders across 7000 corporate clients and makes its presence
felt in over 12 countries across 5 continents has entered into a 50-50 joint venture with
KARVY.

Mutual Fund Services:

Karvy have attained a position of immense strength as a provider of across-the-

board transfer agency services to AMCs, Distributors and Investors.

Nearly 40% of the top-notch AMCs including prestigious clients like Deutsche
AMC and UTI swear by the quality and range of services that company offer. Besides
providing the entire back office processing, Karvy provide the link between various
Mutual Funds and the investor, including services to the distributor, the prime channel in
this operation.

Karvy service enhancements such as ‘Karvy Converz', a full-fledged call center, a top-
line website (www.karvymfs.com), the ‘m-investor' and many more, creating a galaxy of
customer advantages. www.karvymfs.com

Issue Registry:

In company voyage towards becoming the largest transaction-processing house in

the Indian Corporate segment, KARVY have mobilized funds for numerous corporate,
and emerged as the largest transaction-processing house for the Indian Corporate
sector. With an experience of handling over 700 issues, Karvy today, has the ability to
execute voluminous transactions and hard-core expertise in technology applications have
gained company the No.1 slot in the business. Karvy is the first Registry Company to
receive ISO 9002 certification in India that stands testimony to its stature

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Corporate Shareholder Services:

Karvy has been a customer centric company since its inception. Karvy offers a
single platform servicing multiple financial instruments in its bid to offer complete
financial solutions to the varying needs of both corporate and retail investors where an
extensive range of services are provided with great volume-management capability.

Today, Karvy is recognized as a company that can exceed customer expectations

which is the reason for the loyalty of customers towards Karvy for all his financial needs.
An opinion poll commissioned by “The Merchant Banker Update” and conducted by the
reputed market research agency, MARG revealed that Karvy was considered the
“Most Admired” in the registrar category among financial services companies.

(5) KARVY GLOBAL SERVICES LIMITED:

The specialist Business Process Outsourcing unit of the Karvy Group. The legacy
of expertise and experience in financial services of the Karvy Group serves us well as
company enter the global arena with the confidence of being able to deliver and deliver
well.

Here company offer several delivery models on the understanding that business
needs are unique and therefore only a customized service could possibly fit the bill.
KARVY service matrix has permutations and combinations that create several options to
choose from.

KARVY is in re-engineering and managing processes or delivering new

efficiencies, company’s service meets up to the most stringent of international standards.
Their outsourcing models are designed for the global customer and are backed by sound
corporate and operations philosophies, and domain expertise. Providing productivity
improvements, operational cost control, cost savings, improved accountability and a
whole gamut of other advantages.

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KARVY operate in the core market segments that have emerging requirements for
specialized services. Their wide vertical market coverage includes Banking, Financial and
Insurance Services (BFIS), Retail and Merchandising, Leisure and Entertainment, Energy
and Utility and Healthcare.

(6) KARVY COMMODITIES BROKING LIMITED:

At Karvy Commodities, they are focused on taking commodities trading to new

dimensions of reliability and profitability. They have made commodities trading, an
essentially age-old practice, into a sophisticated and scientific investment option.

Company enables trade in all goods and products of agricultural and mineral
origin that include lucrative commodities like gold and silver and popular items like oil,
pulses and cotton through a well-systematized trading platform.

The technological and infrastructural strengths and especially the street-smart

skills make them an ideal broker. Their service matrix is holistic with a gamut of
advantages, the first and foremost being their legacy of human resources, technology and
infrastructure that comes from being part of the Karvy Group.

Their wide national network, spanning the length and breadth of India, further
supports these advantages. Regular trading workshops and seminars are conducted to
hone trading strategies to perfection. Every move made is a calculated one, based on
reliable research that is converted into valuable information through daily, weekly and
monthly newsletters, calls and intraday alerts. Further, personalized service is provided
here by a dedicated team committed to giving hassle-free service while the brokerage
rates offered are extremely competitive.

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 Karvy’s commitment to excel in this sector stems from the immense importance
that commodity broking has to a cross-section of investors & dash; farmers, exporters,
importers, manufacturers and the Government of India itself.

(7)KARVY INSURANCE BROKING PRIVATE LIMITED:

At Karvy Insurance Broking Pvt. Ltd., they provide both life and non-life
insurance products to retail individuals, high net-worth clients and corporate. With the
opening up of the insurance sector and with a large number of private players in the
business, they are in a position to provide tailor made policies for different segments of
customers. In their journey to emerge as a personal finance advisor, they will be better
positioned to leverage their relationships with the product providers and place the
requirements of their customers appropriately with the product providers.

With Indian markets seeing a sea change, both in terms of investment

pattern and attitude of investors, insurance is no more seen as only a tax saving
product but also as an investment product. By setting up a separate entity, we would
be positioned to provide the best of the products available in this business to their
customers.

KARVY have wide national network, spanning the length and breadth of India,
further supports these advantages. Further, personalized service is provided here by a
dedicated team committed in giving hassle-free service to the clients.

KARVY Alliances:

Karvy Computershare Private Limited is a 50:50 joint venture of Karvy

Consultants Limited and Computershare Limited, Australia. Computershare Limited is
world's largest -- and only global -- share registry, and a leading financial market services
provider to the global securities industry.

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 The joint venture with Computershare, reckoned as the largest registrar in the
world, servicing over 60 million shareholder accounts for over 7,000 corporations across
eleven countries spread across five continents. Computershare manages more than 70
million shareholder accounts for over 13,000 corporations around the world.

Karvy Computershare Private Limited, today, is India's largest Registrar and

Share Transfer Agent servicing over 300 corporate and mutual funds and 16 million
investors.

Achievements:

• Among the top 3 stock brokers in India (4% of NSE volumes)

• India's No. 1 Registrar & Securities Transfer Agents

• Top most Depository Participants

• Largest Network of Branches & Business Associates

• ISO 9002 certified operations by DNV

• Among top 10 Investment bankers

• Largest Distributor of Financial Products

• Adjudged as one of the top 50 IT uses in India by MIS Asia

• Full Fledged IT driven operations

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 “SWOT ANALYSIS OF KARVY”

Strengths:

• High degree of trust

• Communication Cell
• IT enabled service delivery
• Over 20 years of customer service expertise
• Entire suit of financial services under one roof.
• Expertise in managing financial intermediaries
• Focus on quality of human resources
• Large network of branches

Weaknesses:

• Liaising – no channel between branches.

• Infrastructure
• No online trading services for personal trading

Opportunities:

• Registered by NSDL for MAPIN.

• Dealing in NASDAQ.
• Expansion abroad in countries like U.K., Dubai, etc.

Threats:

• Competition from JM Morgan Stanley, Kotak Securities, Indiabulls and Motilal

Oswal
• New foreign entrants in the financial market.

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INTODUCTION TO
MUTUAL FUNDS

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 MUTUAL FUND:

A mutual fund is simply a financial intermediary that allows a group of investors to

pool their money together with a predetermined investment objective. The mutual fund will
have a fund manager who is responsible for investing the pooled money into specific
securities (usually stocks or bonds). When you invest in a mutual fund, you are buying shares
(or portions) of the mutual fund and become a shareholder of the fund.

Mutual funds are one of the best investments ever created because they are very cost
efficient and very easy to invest in (you don't have to figure out which stocks or bonds to
buy). By pooling money together in a mutual fund, investors can purchase stocks or bonds
with much lower trading costs than if they tried to do it on their own. But the biggest
advantage to mutual funds is diversification.

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through these
investments and the capital appreciation realized are shared by its unit holders in proportion
to the number of units owned by them. Thus a Mutual Fund is the most suitable investment
for the common man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost. The flow chart below describes broadly
the working of a mutual fund

What is a Mutual Fund?

Mutual fund is an investment vehicle that pools the money of many investors and
invests them in a diversified portfolio of securities.

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History of Mutual Funds in India:

In India the setting up of Unit Trust of India (UTI) in 1963 marked the advent of
mutual fund industry. Unit Trust of India was set up by an Act of Parliament. The purpose
of establishing of Unit Trust of India was to give a fillip to the equity market. In the wake
of Indo-China war of 1962, there was shortage of savings going into industrial investment
for economic development. There was a need to mobilize adequate amount of risk capital
for industrial enterprise. The household savings were sought to be channelized into
primary and secondary market through units. However, in the initial years, the emphasis
in UTI was on income product. MasterShare launched in 1986 ushered in the equity-
oriented schemes in India. Unit Trust of India launched a variety of innovative products
suited to meet diverse needs of investors, virtually the complete life cycle of investors.

Evolution of Mutual Fund in India:

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. The history of
mutual funds in India can be broadly divided into four distinct phases.

*First Phase: 1964-1987

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. 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.

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*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)

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 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.

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*Fourth Phase: Since 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.

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Mutual Fund Operation Flow Chart:

Mutual F und Basics

Inve stor s

Incom e /Divide nd/

Tota l Re turn P rofe ssiona l
M a na ge r

Stock Market
Debt market
Money Market

Where Do Mutual Funds Invest?

Stocks:
Stocks represent shares of ownership in a public company. Examples of public companies
include IBM, Microsoft, Ford, Coca-Cola, Reliance, Infosys, General Mills and other
companies. Stocks are the most common ownership investment traded on the market.

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Bonds:
Bonds are basically a chance for you to lend your money to the government or a company.
You can receive interest and your principle back over predetermined amounts of time. Bonds
are the most common lending investment traded on the market.
There are many other types of investments other than stocks and bonds (including annuities,
real estate, and precious metals), but the majority of mutual funds invest in stocks and/or
bonds.

How is a mutual fund set up?

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management
Company and custodian. The trust is established by a sponsor or more than one sponsor who
is like promoter of a company. The trustees of the mutual fund hold its property for the
benefit of the unit holders. AMC approved by SEBI manages the funds by making
investments in various types of securities. Custodian who is registered with SEBI holds the
securities of various schemes of the fund in its custody.

MUTUAL FUND SPONSORS:-

The mutual fund itself is a trust registered under the Indian Trust Act, and is initiated by a
sponsor. The sponsor is the person who acts alone or with another corporate to establish a
mutual fund. The sponsor then appoints an AMC to manage the investment, marketing,
accounting and other functions pertaining to the fund.

MUTUAL FUND TRUSTEES:-

The trustees are vested with the general power of superintendence and direction over AMC.
They monitor the performance and compliance of SEBI regulations by the mutual fund. SEBI
regulations require that at least two thirds of the directors of trustee company or board of
trustees must be independent i.e. they should not be associated with the sponsors. Also, 50
per cent of the directors of AMC must be independent.

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 MUTUAL FUND CUSTODIAN:-
A trust company, bank or similar financial institution responsible for holding
and safeguarding the securities owned within a mutual fund. A mutual fund's custodian may
also act as the mutual fund's transfer agent, maintaining records of shareholder transactions
and balances. Also referred to as a "mutual fund corporation". Since a mutual fund is
essentially a large pool of funds from many different investors, it requires a third-party
custodian to hold and safeguard the securities that are mutually owned by all the fund's
investors. This structure mitigates the risk of dishonest activity by separating the fund
managers from the physical securities and investor records.

ASSET MANAGEMENT COMPANY:-

A firm that invests the pooled funds of retail investors in securities in line with the stated
investment objectives. For a fee, the investment company provides more diversification,
liquidity, and professional management service than is normally available to individual
investors

Future Scenario:

The asset base will continue to grow at an annual rate of about 30 to 35 % over the
next few years as investor’s shift their assets from banks and other traditional avenues.
Some of the older public and private sector players will either close shop or be taken
over.
Out of ten public sector players five will sell out, close down or merge with
stronger players in three to four years. In the private sector this trend has already started
with two mergers and one takeover. Here too some of them will down their shutters in the
near future to come.
But this does not mean there is no room for other players. The market will witness
a flurry of new players entering the arena. There will be a large number of offers from
various asset management companies in the time to come. Some big names like Fidelity,
Principal, Old Mutual etc. are looking at Indian market seriously.

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 One important reason for it is that most major players already have presence here
and hence these big names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in India as
this would enable it to hedge its risk and this in turn would be reflected in it’s Net Asset
Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund schemes to
trade in derivatives. Importantly, many market players have called on the Regulator to
initiate the process immediately, so that the mutual funds can implement the changes that
are required to trade in Derivatives.

Recent trends in mutual fund industry:-

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
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 good start due to the stock market boom prevailing then. 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 the 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. and it is doubtful
whether, barring a few exceptions, they have serious plans of continuing the activity in a
major way. The experience of some of the AMCs floated by private sector Indian
companies was also very similar. They quickly realized that the AMC business is a
business, which makes money in the long term and requires deep-pocketed support in the
intermediate years. Some have sold out to foreign owned companies, some have merged
with others and there is general restructuring going on.

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 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.

List of Members:
A) Bank List of Members:
A) Bank Sponsored
1. Joint Ventures - Predominantly Indian
a. SBI Funds Management Private Ltd.
2. Others
a. BOB Asset Management Co. Ltd.
b. Canbank Investment Management Services Ltd.
c. UTI Asset Management Co. Private Ltd.
B) Institutions
a. Jeevan Bima Sahayog Asset Management Co. Ltd.
C) Private Sector
1. Indian
a. Benchmark Asset Management Co. Private Ltd.
b. Cholamandalam Asset Management Co. Ltd.
c. Credit Capital Asset Management Co. Ltd.
d. Escorts Asset Management Ltd.
e. J. M. Financial Asset Management Private Ltd.
f. Kotak Mahindra Asset Management Co. Ltd.
g. Quantum Asset Management Co. Private Ltd.
h. Reliance Capital Asset Management Ltd.
i. Sahara Asset Management Co. Private Ltd
j. Sundaram Asset Management Co. Ltd.
k. Tata Asset Management Ltd.

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2. Joint Ventures - Predominantly Indian
a. Birla Sun Life Asset Management Co. Ltd.
b. DSP Merrill Lynch Fund Managers Ltd.
c. HDFC Asset Management Co. Ltd.
d. Prudential ICICI Asset Management Co. Ltd.
3. Joint Ventures - Predominantly Foreign
a. ABN AMRO Asset Management (India) Ltd.
b. Deutsche Asset Management (India) Private Ltd.
c. Fidelity Fund Management Private Ltd.
d. Franklin Templeton Asset Management (India) Private Ltd.
e. HSBC Asset Management (India) Private Ltd.
f. ING Investment Management (India) Private Ltd.
g. Morgan Stanley Investment Management Private Ltd.
h. Principal Pnb Asset Management Co. Private Ltd.
i. Standard Chartered Asset Management Co. Private Ltd.

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 Snapshot of Mutual Fund Schemes

Mutual
Investment Who should
Fund Objective Risk Investment horizon
Portfolio invest
Type
Treasury Bills,
Liquidity + Those who park
Certificate of
Moderate their funds in
Money Deposits,
Income + Negligible current accounts or 2 days - 3 weeks
Market Commercial
Reservation of short-term bank
Papers, Call
Capital deposits
Money
Call Money,
Short-term Commercial
Funds Papers,
Liquidity + Those with surplus
(Floating - Little Interest Treasury Bills, 3 weeks -
Moderate
short-term) Rate CDs, Short- 3 months
Income short-term funds
term
Government
securities.
Predominantly
Bond
Debentures,
Funds Credit Risk Salaried &
Government
Regular Income & Interest conservative More than 9 - 12 months
securities,
(Floating - Rate Risk investors
Corporate
Long-term)
Bonds
Salaried &
Security & Interest Rate Government
Gilt Funds conservative 12 months & more
Income Risk securities
investors
Long-term Aggressive
Equity
Capital High Risk Stocks investors with long 3 years plus
Funds
Appreciation term out look.
To generate
returns that are Portfolio
NAV varies
Index commensurate indices like Aggressive
with index 3 years plus
Funds with returns of BSE, NIFTY investors.
performance
respective etc
indices

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 Balanced ratio
Capital of equity and
Balanced Growth & Market Risk debt funds to Moderate &
2 years plus
Funds Regular Income and Interest ensure higher Aggressive
Rate Risk returns at lower
risk

MUTUAL FUND ADVANTAGE:

It seems strange to compare mutual funds to stocks since mutual funds are primarily
composed of stocks, but it is important to distinguish the two because there are some notable
advantages to using mutual funds.

Get Focused:
Investing in individual stocks can be fun because each company has a unique story.
However, it is important for people to focus on making money. Investing isn't a game. Your
financial future depends on where you put you hard earned dollars and it shouldn't be taken
lightly.

Diversification:
Diversification is the idea of spreading out your money across many different types of
investments. When one investment is down another might be up. Choosing to diversify your
investment holdings reduces your risk tremendously.
The most basic level of diversification is to buy multiple stocks rather than just one
stock. Mutual funds are set up to buy many stocks (even hundreds or thousands). Beyond
that, you can diversify even more by purchasing different kinds of stocks, then adding bonds,
then international, and so on. It could take you weeks to buy all these investments, but if you
purchased a few mutual funds you could be done in a few hours because mutual funds
automatically diversify in a predetermined category of investments (i.e. - growth companies,
low-grade corporate bonds, international small companies).

27
Professional Management:
By purchasing mutual funds, you are essentially hiring a professional manager at an
especially inexpensive price. It would be a bit cocky to think that you know more than mutual
fund manager.

These managers have been around the industry for a long time and have the academic
credentials to back it up. Saying you could outperform a mutual fund manager is similar to a
football fan sitting on their couch saying "I could have made that catch" -possible, but not
likely.
Even if some of us are better at picking stocks than a professional and their support
staff, most of us would not want to spend the amount of time it takes to watch, research and
trade the market on a daily basis.

Efficiency
By pooling investors' monies together, mutual fund companies can take advantage of
economies of scale. With large sums of money to invest, they often trade commission-free
and have personal contacts at the brokerage firms.

Ease of Use
Can you imagine keeping track of a portfolio consisting of hundreds of stocks? The
bookkeeping duties involved with stocks are much more complicated than owning a mutual
fund. If you are doing your own taxes, or are short on time, this can be a big deal.

Liquidity
If you find yourself in need of money in a short amount of time, mutual funds are
highly liquid. Simply put in your order during the day and when the market closes a check
will be sent to you or you can have it wired to a bank account. Stocks can be much more
difficult depending on what kinds of stocks you are invested in. CD's offer no liquidity (not
without a hefty fee) and bonds can be difficult, too. Some mutual funds also carry check

28
writing privileges, which means you can actually write checks from the account, similar to
your checking account at the bank.

Cost
Mutual funds are excellent for the new investors because you can invest small amounts
of money and you can invest at regular intervals with no trading costs. Stock investing,
however, carries high transaction fees making it difficult for the small investor to make
money. If an investor wanted to put in 1000 a month into stocks and the broker charged 150
per transaction, their investment is automatically down 15 percent every time they invest.
That is not a good way to start off!
Wealthy stock investors get special treatment from brokers and wealthy bank account
holders get special treatment from the banks, but mutual funds are non-discriminatory. It
doesn't matter whether you have 50 or 500,000, you are getting the exact same manager, the
same account access and the same investment.

Risk
In general, mutual funds carry much lower risk than stocks. This is primarily due to
diversification (as mentioned above). Certain mutual funds can be riskier than individual
stocks, but you have to go out of your way to find them.With stocks, one worry is that the
company you are investing in goes bankrupt. With mutual funds, that chance is next to nil.
Since mutual funds typically hold anywhere from 25-5000 companies, all of the companies
that it holds would have to go bankrupt.

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

29
 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.
.

Transparency
Investors get regular information on the value of your investment in addition to
disclosure on the specific investments made by the 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, one 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.

Choice of Schemes
Mutual Fund offers a family of schemes to suit your varying needs over a lifetime.
This offers investors to further diversify their investments

Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions
of strict regulations designed to protect the interests of investors. The operations of
Mutual Funds are regularly monitored by SEBI.
ADVANTAGE OF DIRECT EQUITY INVESTMENT

30
  An advantage of direct shareholding vis-à-vis mutual fund equity schemes is that
direct investors do not have to pay the annual management fees and expenses charged
by mutual funds. Such burden usually amounts to around 2.5% per annum of mutual
fund portfolio value, in addition to the entry and exit loads. For the direct long-term
investor, this makes considerable difference to net annual return from investment.

 Over the years, the investor becomes more knowledgeable about companies,
industries and the share market. He/she can then differentiate the more promising
companies from the less promising ones and also begins to understand when to enter
the market and when to quit. Such gain in investment skills is a valuable asset. This
point has already been dealt with above.

 No tailor –made portfolios: - Investors who invest on their own can build their
own portfolios of shares. Investing through funds means he delegates this decision to
the fund managers. High –net-worth Individuals or large corporate investors may find
this to be a constraint in achieving their objectives.

 Managing a portfolio of Funds: - Availability of a large number of options from

mutual funds can actually mean too much choice for the investor. He may again need
advice on how to select a fund to achieve his objectives, quite similar to the situation
when he has to select individual share to invest in.

Following comparison between a mutual fund scheme and Direct Stock Purchase
make it clearer.

31
 Direct Stock Purchase Mutual Fund

Primary Participation Initial Public Offer (IPO) New Fund Offer (NFO)

Secondary Participation Stock Exchange Mutual Fund Advisor

Asset Class Equity Share Units of Fund

VARIOUS
COST INVOLVED
Brokerage at the entry Delivery @ 0.50% entry load@ 2.25%

Brokerage at the exit Delivery @ 0.50% exit load@ Nil to 2.25%

OTHER COST

Service tax @12.36%

Securities Transaction tax Yes

@ 0.125%
Turnover tax @ 0.035%

Stamp duty @0.0255

DIVIDEND Tax- free Tax-free

32
 Types of Mutual Funds Schemes in India

Wide varieties of Mutual Fund Schemes exist to cater to the needs such as financial
position, risk tolerance and return expectations etc. The table below gives an overview into
the existing types of schemes in the Industry.

TYPES OF MUTUAL FUND SCHEMES

• By Structure
o Open - Ended Schemes
o Close - Ended Schemes
o Interval Schemes

• By Investment Objective
o Growth Schemes
o Income Schemes
o Balanced Schemes
o Money Market Schemes

• Other Schemes
o Tax Saving Schemes
o Special Schemes
o Index Schemes Sector Specific Schemes

33
 TYPES OF MUTUAL FUNDS

Mutual Funds have specific investment objectives such as growth of capital, safety of
principal current income or tax exempt income, one can select one fund or any number of
different funds to help one meets ones specific goals. In general mutual fund fall under 3
general categories: -

 Equity fund invest in shares of common stocks.

 Fixed income funds invest in government or corporate securities, which offer fixed rate
of returns.
 Balanced fund invest in a combination of both stocks and bonds

By Structure:

Open-ended Funds
An open-end 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-end schemes is liquidity.
Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem
units any time during the life of schemes. Hence unit capital of open-ended funds can
fluctuate on a daily basis. The advantages of open-ended schemes are: -

1. Any time exit option

2. Any time enter option

34
Closed-ended Funds

A closed-end 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 time of the initial public issue and thereafter they can buy
or 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.
SEBI Regulations stipulate that at least one of the two exit routes is provided to the
investor.

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

By Investment Objective:

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, have outperformed most other kind of investments
held 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 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.

35
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 aim of money market funds is to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer 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.

Load Funds
A Load Fund is one that charges a commission for entry or exit. That is, each time
you buy or sell units in the fund, a commission will be payable. Typically entry and exit
loads range from 1% to 2%. It could be worth paying the load, if the fund has a good
performance history.

No-Load Funds
A No-Load Fund is one that does not charge a commission for entry or exit. That
is, no commission is payable on purchase or sale of units in the fund. The advantage of a
no load fund is that the entire corpus is put to work.

36
Other Schemes:

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the
Indian Income Tax laws as the Government offers tax incentives for investment in
specified avenues. Investments made in Equity Linked Savings 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 u/s 54EA
and 54EB by investing in Mutual Funds, provided the capital asset has been sold prior to
April 1, 2000 and the amount is invested before September 30, 2000.

Special Schemes

• 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 InfoTech, FMCG, and
Pharmaceuticals etc.
• Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50
• Sectoral Schemes
Sectoral 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.

37
HOW LONG TO KEEP INVESTMENT TO GET MAXIMUM RETURNS

Technically open-ended funds you can withdraw your investments even within a week, but to
get desired returns positive time frame is required are:

Funds Time Period

Equity Funds 3 Years (plus)

Balanced Funds 18 months to 3 Years

MIP’s 1 Year (plus)

Income Funds 6 months to 1 Year

Liquid Funds few days to 6 months

WHAT RETURNS CAN I EXPECT IF I KEEP MY MONEY FOR SUGGESTED

TIME FRAMES

38
Funds Returns

Sector funds 22% to 25% p.a

Balance funds 15% to 18% p.a

MIP’s Pension Plans 12% to 15% p.a

Income Funds 10% to 12% p.a

Liquid Funds 7% to 9% p.a

The above-mentioned returns in the table are indicative and not assured. All
investments in MUTUAL FUNDS are securities and are subject to market risk and the
NAVs of the schemes may go up and down depending upon the factors and forces
affecting the security market including the fluctuations in the internal rates .The past
performance of the MUTUAL FUNDS is not indicative of future performance.

THE RISK RETURN GRAPHS FOR VARIOUS FUNDS:-

39
 Sector Funds

R
E Equity Funds
T
U Balanced Funds
R
N Income Funds
S
Liquid Funds

RISKS

The above Graph shows the Risk and Returns generated by different Funds. Liquid Funds
are less Risky and also generate less Returns where as Sector Funds are more Risky but
generate more Returns by the example of above two Funds it is clear that Risk and
Returns are directly proportional to each other. Other Funds like Equity Funds, Balanced
Funds and Income Funds are also gives the same percentage of Returns as the Risk
involved.

FUTURE OF MUTUAL FUNDS IN INDIA

It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks
should be Rs 40,90,000 crore.

40
 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

Some Facts About Mutual Funds Industry In India:-

• 100% growth in the last 6 years.

• Number of foreign AMC’s is 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 rural like the Indian insurance industry with simple and
limited products.

• SEBI allowing the MF's to launch commodity mutual funds.

How to choose mutual funds

41
 Choosing a mutual fund seems to have become a very complex affair lately. There are no
dearths of funds in the market and they all clamor for attention. The most crucial factor in
determining which one is better than the rest is to look at returns. Returns are the easiest to
measure and compare across funds.
At the most trivial level, the return that a fund gives over a given period is just the percentage
difference between the starting Net Asset Value (price of unit of a fund) and the ending Net
Asset Value.
Returns by themselves don't serve much purpose. The purpose of calculating returns is to
make a comparison. Either between different funds or time periods. And, you must be careful
not to make a mistake here. Or else, you could end up investing in the wrong funds.

 Invest in various funds, not one

Absolute returns
Absolute returns measure how much a fund has gained over a certain period. So you
look at the NAV on one day and look at it, say, six months or one year or two years later. The
percentage difference will tell you the return over this time frame.
But when using this parameter to compare one fund with another, make sure that you
compare the right fund. To use the age-old analogy, don't compare apples with oranges.
So if you are looking at the returns of a diversified equity fund (one that invests in different
companies of various sectors), compare it with other diversified equity funds. Don't compare
it with a sector fund which invests only in companies of a particular sector.
Don't even compare it with a balanced fund (one that invests in equity and fixed return
instruments).

 Why has my fund not declared a dividend?

Benchmark returns

42
 This will give you a standard by which to make the comparison. It basically indicates
what the fund has earned as against what it should have earned.A fund's benchmark is an
index that is chosen by a fund company to serve as a standard for its returns. The market
watchdog, the Securities and Exchange Board of India, has made it mandatory for funds to
declare a benchmark index.

In effect, the fund is saying that the benchmark's returns are its target and a fund should
be deemed to have done well if it manages to beat the benchmark.

Let's say the fund is a diversified equity fund that has benchmarked itself against the
Sensex. So the returns of this fund will be compared vis-a-viz the Sensex.

Now if the markets are doing fabulously well and the Sensex keeps climbing upwards
steadily, then anything less than fabulous returns from the fund would actually be a
disappointment.

If the Sensex rises by 10% over two months and the fund's NAV rises by 12%, it is said
to have outperformed its benchmark. If the NAV rose by just 8%, it is said to have
underperformed the benchmark.

But if the Sensex drops by 10% over a period of two months and during that time, the
fund's NAV drops by only 6%, then the fund is said to have outperformed the benchmark.

A fund's returns compared to its benchmark are called its benchmark returns. At the
current high point in the stock market, almost every equity fund has done extremely well but
many of them have negative benchmark returns, indicating that their performance is just a
side-effect of the markets' rise rather than some brilliant work by the fund manager.

 The best mutual fund scheme for you

Time period

43
 The most important thing while measuring or comparing returns is to choose an
appropriate time period.

The time period over which returns should be compared and evaluated has to be the
same over which that fund type is meant to be invested in.
If you are comparing equity funds then you must use three to five year returns. But this is not
the case of every other fund.
For instance, cash funds are known as ultra short-term bond funds or liquid funds that
invest in fixed return instruments of very short maturities. Their main aim is to preserve the
principal and earn a modest return. So the money you invest will eventually be returned to
you with a little something added.
Investors invest in these funds for a very short time frame of around a few months. So it
is alright to compare these funds on the basis of their six month returns.

Market conditions
It is also important to see whether a fund's return history is long enough for it to have
seen all kinds of market conditions.For example, at this point of time, there are equity funds
that were launched one to two years ago and have done very well. However, such funds have
never seen a sustained declining market (bear market). So it is a little misleading to look at
their rate of return since launch and compare that to other funds that have had to face bad
markets. If a fund has proved its mettle in a bear market and has not dipped as much as its
benchmark, then the fund manager deserves a pat on the back.

 Why you should watch over your mutual fund

Final checklist
Here are some quick pointers when comparing funds.

44
 Compare funds that are similar. For instance, compare Alliance Equity with Franklin
India Prima. Both are diversified equity funds. Similarly, compare UTI Auto with J M Auto,
both being auto sector funds. Or Birla Midcap with Magnum Midcap, both being funds that
invest in mid-cap companies. Don’t compare the performance of Alliance Equity with UTI
Auto or even Alliance Equity with Birla Midcap. When returns are compared, make sure that
the time period is identical. Or else, you may be looking at the one-year returns for one fund
and the three-year returns for another. For instance, if you were told that the return of HDFC
Equity was 59.72% and that of Franklin India Prima was 61.74%, it would be misleading.
Because the return stated of HDFC Equity is a one year return while that of Franklin India
Prima is the three-year return.
A good comparison would be:

Returns Franklin India Prima HDFC Equity

1 year 81.13% 59.72%
3 year 61.74% 47.52%
5 year 39.58% 27.04%
-
- Compare a fund with it's own stated benchmark, not another. For instance, Fidelity
Equity, Escorts Growth and BoB Growth are all diversified equity funds with different
benchmarks.
Fidelity Equity - BSE 200
Escorts Growth - S&P CNX Nifty
BoB Growth – Sensex

While there are other factors that have to be considered when investing in a mutual
fund, returns is the most important. So make sure you do your homework right on this count.

TAX saving aspect of Mutual fund:

Invest in an ELSS fund. Earn big!

45
 Equity linked saving schemes is mutual funds with a tax benefit. If we are talking
of this investment year (April 1, 2006 to March 31, 2007), you can invest up to Rs 10,000
a year in such schemes to avail of the tax benefit. If you are looking at the next
investment year (April 1, 2007 to March 31, 2008), you can look at whatever limit you
want (up to Rs 100,000).

What is ELSS?

ELSS are the mirror image of diversified equity funds. That means the fund
manager will invest in shares of various companies across various industries. Hence, it is
a normal equity diversified fund. Then, there is the added tax benefit, which a normal
diversified equity fund will not have. This sets it apart. Currently, if you invest in such
funds, you get a rebate. Let us do it with figures.

You have to pay tax = Rs 18,000

your rebate = 20%
you invest Rs 10,000 in ELSS.
Your savings = Rs 2,000 of your tax (20% of Rs 10,000).
So instead of paying tax of Rs 18,000, you pay a tax of Rs 16,000 (18,000 – 2000).

This has changed and you can invest much more than Rs 10,000. You pick your limit (up
to Rs 100,000).

Why ELSS?

The returns are good. In the three years ended February 7, tax-planning funds
generated 42.58% annualized. These funds have a lock-in period of three years. This is
not bad at all. It prevents you from unnecessary withdrawals and spending and helps earn
a return over time. Moreover, the three-year lock-in period is needed. Because when you
invest in equity, you must take a long-term view.

The real potential of equities starts to show only after a few years. This allows you
to ignore the short-term slumps and stay invested for the long haul. In addition, the lock
in gives fund managers the freedom to take sector and stock bets, which they are not able

46
to do in the regular equity schemes. The dividends you earn will be tax-free. When you
sell the units of these funds, you can avail of the long-term capital gain for which there is
no tax. If you sell after one year, you pay no tax.

The good picks

Five ELSS worth considering are:

j. Franklin India Tax shield

ii. HDFC Long Term Advantage (Earlier HDFC Tax plan 2000)
iii. HDFC Tax Saver
iv. Prudential ICICI Tax Plan
v. Sundaram Tax saver

47
 RESEARCH
METHODOLOGY AND
LIMITATIONS

“Research Methodology is a way to systematically solve the research problem. It includes

not only the research methods, but also the logic behind using the methods.”

48
METHODOLOGY OF STUDY:

Research can be defined as a systemized effort to gain new knowledge. A research is

carried out by different methodologies which have their own pros and cons. Research
methodology is a way to solve research in study and solving research problems along with
logic behind them are defined through research methodology. Thus while talking about
research methodologies we are not only talking of research methods but also consider the
logic behind the methods. We are in context of our research studies and explain why it is
being used a particular method or technique and why the others are not used. So that research
result is capable of being evaluated either by researcher himself or by others.

RESEARCH METHODOLOGY:

Research has its special significance in solving various operational and planning problem of
business and industry. Research methodology is a way to systematically analyze the research
problem.

ASSUMPTIONS:

1. It has been assumed that sample of hundred represents the whole population
2. The information given by the customer is unbiased

Sampling size
Large sample gives reliable result than small sample. However, it is not feasible to
target entire population or even a substantial portion to achieve a reliable result. So, in

49
this aspect selecting the sample to study is known as sample size. Hence, for my project
my sample size was 100.

Development of Working Hypothesis: The hypothesis could be developed by discussing with

the consulting department heads and guides about this exploratory research and reach to the
conclusion that the data is to be collected by personal interaction with the clients, asking them
about their investment planning and their need for financial advisory service from KARVY
Stock Broking Ltd.

First of all are they aware of tax and investment planning or not and then analyzing the
findings to reach to the objectives of research.

DATA COLLECTION:

Proceeding further after determines the Methodology and limitation of the study the next
step is to analyze the Data being collected for the study. Data is being collected from
various sources like:-
 Questionnaire
 Personal visit
 Telephonic Information etc.

QUESTIONAIRE:-
Questionnaire is a written form being given to the prospective investor to give
feedback about the services provided to them and also to find the satisfaction level of the

50
investor for a particular investment product .Questionnaire is an easy and simple way of
collecting a data .After filling up of form the next step is to evaluate the form in different
dimensions and draw a conclusion.
It is difficult to get a Questionnaire filled by corporate because of time they don’t
have time to fill the Questionnaire so at the time of meeting them personally or after that
the Questionnaire is filled by us.
The Sample size taken for this study is 100 which is not enough to draw a
conclusion but due to time limitation only this much size has been taken into
consideration. After analyzing the Questionnaire the following evaluation has been done:-

CATEGORY OF TOTAL RISK RETURN

INVESTORS INCOME

IT PEOPLE HIGH LOW HIGH

OTHER PROFESSIONALS HIGH LOW HIGH
BUSINESSMENS HIGH HIGH HIGH

After analyzing the above table the conclusion was made that the business people are
more Risk taker while professional people are less Risk taker where the return expected in
both the case are high.

PERSONAL VISIT:-
The second way of collecting data is Personal Visits to the cooperates personally
by fixing an appointment. Personal Visit gives a clear picture of the conclusion drawn in

51
Questionnaire It gives a clear view of the client Awareness about the product .Some of
the difficulties in making Personal Visits are:-
 To take a time or appointment from the corporate.
 To convenes investor to invest in a particular product.

Personal Visit gives a clear picture about the Investment areas of both the categories
they are:-
PROFESSIONAL PEOPLE BUSINESS PEOPLE
PPF LAND
KISAN VIKAS PATR GOLD
BANK ACCOUNT STOCKS
INSURANCE INSURANCE
FURTHER STUDIES etc. VEHICLES etc.

From the above table it is clear that the Professional people invest in the Value Added
items where as Business people they invest in Future Prospect assets like land, gold
etc.

TELEPHONIC INFORMATION:-

The further source of collecting data is telephonic information with the existing
coustomer and the prospective investors. It is very difficult to reveal the data of investors

52
from the company itself because it has been kept as a secret document. After getting a
data some problems too come in the way.

Some are:-
 People are not ready to listen.
 People ask question like from where did you get the number?
 From this source not much of the Information is drawn.

 Few respondents where not happy with the level of customer services rendered
by KARVY CONSULTANT LTD. Particularly about the delays in replying or
not replying the queries raised by them.

EXECUTION OF PROJECT

It is very essential in the research process to know the accuracy of the finding’s which
depends on how systematically the study has been carried out so that it can make sense.
We have executed the project after prior discussion with our guide and structured in the
following steps:
a. Preparation of a questionnaire
b. The focal point of the designing the questionnaire was to comprehend the current
investment scenario
c. This questionnaire was primarily aimed to respondents who belong to the service and
business class people

d. The questionnaires were discussed through personal interface with the respondents

LIMITATIONS OF STREAMLINING RESULTS:

53
Every work has its own limitations. Limitations are extent to which the process should not
exceed. The following limitations for the project are:
1. Duration of project was not enough to make our conclusion on such a vast subject.
Time constraints has also become a major limitation
2. The sample size taken for drawing the conclusion was not sizeable
3. Investor ignorance was faced during discussions with respondents
4. Changing the Mentality of people for investing through particular Advisory services
is a difficult task.
5. The timing of interaction with people was not correct
6. Some of the customers was not interest to give there personal information.
7. In telephonic conversations customers always have some problem to give the
information.

54
 DATA ANALYSIS
AND
INTERPRETATION

Q1. Do you invest annually?

YES 89

55
 NO 11
TOTAL 100

Percentage of people making any

investment

11%

YES
NO

89%

It has been observed that approximately 90% of the correspondents invest in some or the
other financial instrument. Though the percentage of choice of investment may vary due to
different factors such as age, education, risk etc.

a. Bonds & Debentures

YES 34
NO 66

56
 TOTAL 100

BONDS & Debentures

YES
NO

It has been observed that only 34% they have invested in Bonds and Debentures AS
compared to those who have not. This may be due to less knowledge about it or the time of
re-demption.

b. Equities & Share Market

YES 45
NO 55
TOTAL 100

57
 Equity & Share Market

YES
YES
NO
NO

By the chart we observe that the percentage of people investing in equity and share market is
not much but there is a going interest among people especially the younger generation to
invest so as to make quick bucks with the market boom.

2. What are you preferred investment priorities?

Direct equity 22
Mutual fund 27
Bank deposit 18
Post Office saving 17
Any other(PPF,KVP) 16 58
Total 100
 Any Other (PPf,
KVP, Insurance) Direct Equity
16% 22%
Direct Equity
Post Office Mutual Fund
seving Bank Deposit
17% Post Office seving
Mutual Fund Any Other (Specify)
Bank Deposit 27%
18%

INTERPRETATION: By the Chart we observed that 22% of people investing in Direct

Equity market and 27% of people investing in Mutual Fund, especially the younger
generation to invest so as to make quick bucks with the market boom. Out of total people
asked 18% said they invest in bank deposit and 17% said that they invest in post office
savings and 16% are investing in PPF, KVP and insurance.

Q3. What is your perception about mutual funds?

SAFE 35%
RISKY 25%
Good return 20%

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 Tax saver 20%
TOTAL 100%

Perception about Mutual Funds

40%
35%
35%
30%
25%
25%
20% 20%
20% Series1
15%
10%
5%
0%
SAFE RISKY Good Tax saver
return

The percentage of person who say that mutual fund is safe are 35%, an those who say it is
risky is 25% ,20% people say it is good return giving instrument for them and same number
of people say’s its only tax saver for them.

Q4. Have you ever invested in mutual fund?

YES 41
NO 59
TOTAL 100

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 investment in mutual funds

60
50
40
30
20
10
0
Yes No

Out of the total correspondents asked about 41% have said that they had invested in mutual
funds before while 59% said NO. Out of the total people who have said yes a majority of
them are young, having disposable income and willingness to take risk.

Q5. Do you know different type of mutual scheme present in the market?

YES 36
NO 64
TOTAL 100

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 Types of mutual funds

100%

80%

60%

40%

20%

0%
Yes No

Out of total corresponds only 36% said that they know about various mutual schemes as this
number is very small it explains that people still don’t know about various schemes in the
market. It also shows that even those who have bought mutual funds are still ignorant about
the different schemes.

Q6. How you choose a mutual fund?

BRAND NAME 35
HIGH NAV 26
HIGH RETURNS 15
ADVERTISING 12
OTHERS 12
TOTAL 100

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 Choosing of mutual fund

40
35
30
25
Subject:
20
15
10
5
0
Brand Name High NAV High Returns Advertising Others

It has been observed that brand name does matter when people are choosing a mutual fund as
35% said brand name. The next is NAV at about 26%. These two factors play a major role
during selection of mutual funds.

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 PROJECT FINDINGS
&
RECOMMENDATIONS

PROJECT FINDINGS:

• There is great opportunity for Mutual Fund companies as there is a is a rise in number
of people who want to invest in share market but don’t have time and knowledge to do so,
also these people want to take less risk .

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• With booming market and falling interest rate of bank deposits, people see mutual funds
as an attractive financial tool which provide a high return rate at lower risk as compared to
equity market.

• Young people these days are particularly more interested in mutual funds because they
see mutual fund as safe bet. Also these people have large disposable incomes and risk taking
capability too.

• The bad part is people are still ignorant about mutual funds and different schemes about
mutual funds, hence it is very necessary to educate them about mutual funds

• Advertising can also play a major part as it has been seen that people buy mutual fund
looking at the brand name.

RECOMMENDATIONS:

• India is passing through a tremendous growth phase with an average growth rate of 7-
8% per annum. With this growth phase there is growth in each and every sector, hence there
is rush to by shares and equities. It is also a very good time for mutual fund companies but it
is advisable for them and their brokers that they don’t just sell mutual funds but sell the right
kind of scheme which is comfortable to a person nature of taking risk and need,

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 • There is a general ignorance and questions about, what are mutual funds? What are
different schemes of mutual funds? How to invest in a mutual? And many more. This thing
should be handled by mutual fund companies and their brokers to provide knowledge to their
clients.

• It has been seen that there is a major increase in the percentage of young investors who
have large amount of disposable income with them and want to invest, these type of
prospective clients should be tapped at an early stage.

• Small towns, villages are still untapped and can also acts as an business area of very
huge potential.

• Now even co-operative society can invest up to 10% of their capital in mutual funds
which open the door to new and very important client base.

BIBLIOGRAPHY

 www.njindiainvest.com

 www.moneycontrol.com

 www.amfiindia.com

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 www.karvy.com

 MUTUAL FUND
PRODUCT AND SERVICES---- TAXMAN

 AMFI COURSE BOOK

 www.valueresearch.com

 THE FINAPOLIS

ANNEXURES

1. Are you a regular investor?

a. Yes b. No

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2. Do you invest using –
a. Scientific Tools b. By Intuition

3. What are your preferred investment priorities?

Name of Investment
Insurance
Bank
Bonds & Debentures
Equities & Share Market
PPF (Public Provident Fund)
NSC (National Saving Schemes)
Post Office Saving Schemes
Real Estate
Gold
Others

4. What percentage of your income do you invest?

a. Below 10%
b. 10% - 30%
c. 30% - 50%
d. Above 50%

5. Are you aware about Mutual Funds?

a. Yes b. No

6. What is your perception about Mutual Funds?

a. Safe

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b. Risky
c. ---------------

7. Have you invested in some Mutual Funds?

a. Yes b. No

8. Do you know different type of Mutual Fund scheme present in the market?
a. Yes b. No

9. How do you select and choose Mutual Funds?

a. Brand Name b. High NAV
c. High Dividends d. Advertisement
e. Others

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