A Project Report on Karvvy

8/14/2019 A Project Report on Karvvy

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BHUBANESWARBHUBANESWAR

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CONTENTS:

serial

no Topic

Page

no.

1 certificate by organization 4

2 certificate by faculty guide 5

3 Acknowledgement 6

4 executive summary 7

5 company overview 817

6 karvy at eastern zone 1720

7 mutual funds basics 21--31

8 concept of benchmarking 31

9 financial planning for investors 32

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why has it becomethe largest financial

intermediary? 32-34

11 how investors choose between funds? 34-36

12 most popular stocks among fund managers 37

13 most lucrative sectors among fund managers 38-39

14 Systematic Investment Plan (in details) 39-41

15 does fund ranking and performance persist? 42-43

16 portfolio analysis tools 44-49

17 research report 50

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DECLARATION

I, Ms. JyotiVerma do hereby declare that the project report titled NEED

OF FINANCIAL ADVISORS FOR MUTUAL FUND

INVETORS is a genuine research work undertaken by me and it has not

been published anywhere earlier.

Date:

Place:

Jyoti Verma

ASBM, Bhubaneswar

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Certificate by the organization:

This is to certify that Mrs.Nitin Lohia, pursuing M.B.A at

Amity Business School, Amity University Rajasthan has worked

under my supervision and guidance on her summer internship

program entitled customer satisfaction study and

consumer perception towards J.K.Tyre at

J.K.Tyre & industries Ltd.,Jaipur from May 25th 2009 toJuly 25th 2009. To the best of my knowledge this is an original

piece of work.

Mr.Rajendra Singh

Sr. Sales Officer

J.K.Tyre & Industries Ltd.

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Certificate by the faculty guide:

This is to certify that the project report entitled customer

satisfaction study and consumer perception

towards J.K.Tyreat J.K.Tyre & industries Ltdis

a bonafide record of work done by Nitin Lohia, and submitted in

partial fulfillment of the requirements of M.B.A degree of Amity

Business School, Amity University Rajasthan, Jaipur

Ms. Hemlata Mangalani

Lecturer, Amity Business School

Amity University Rajasthan

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Sometimes words fall short to show gratitude, the same happened with me during this

project. The immense help and support received from Karvy stock broking limited

overwhelmed me during the project.

My sincere gratitude to Mr.Alok Chaturvedi (Head, eastern region, karvy) and Dr.

Biswajeet Pattanaik(Director, ASBM, Bhubaneswar), for providing me with an

opportunity to work with karvy stock broking limited.

I am highly indebted to Mr. Rohit Vyas., product head ( MF), eastern zone, karvy and

company project guide, who has provided me with the necessary information and his

valuable suggestion and comments on bringing out this report in the best possible way.

I also thankProf. P. Mahapatra, faculty guide, ASBM, Bhubaneswar who has sincerely

supported me with the valuable insights into the completion of this project.

I am grateful to Mr. Dhirendra Pradhan (branch head, Karvy, JDR) and allof themembers of Rashbehari Avenue branch, who have helped me in the successful

completion of this project, special mention of Ms. Debarati dey, Ms. Nidhi dhingra, Mr.

Debasish panda and Mr. Jyotirmoyee Bhattacharjee.

Last but not the least; my heartfelt love for my parents, whose constant support and

blessings helped me throughout this project.

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Executive summary:

This project has been a great learning experience for me; at the same time it gave me

enough scope to implement my analytical ability. This project as a whole can be divided

into two parts:

The first part gives an insight about the mutual funds and its various aspects. It is

purely based on whatever I learned at karvy. One can have a brief knowledge

about mutual funds and all its basics through the project. Other than that the real

servings come when one moves ahead. Some of the most interesting questions

regarding mutual funds have been covered. Some of them are: why has it become

one of the largest financial intermediaries? How investors do chose between

funds? Most popular stocks among fund managers, most lucrative sectors for

fund managers, a special report on Systematic Investment Plan, does fund

performance persists and the topping of all the servings in the form of portfolio

analysis tool and its application.

All the topics have been covered in a very systematic way. The language has

been kept simple so that even a layman could understand. All the datas have been

well analyzed with the help of charts and graphs.

The second part consists of datas and their analysis, collected through a survey

done on 200 people. It covers the topic need of financial advisors for mutual

fund investors. The data collected has been well organized and presented. Hope

the research findings and conclusions will be of use. It has also covered why

people dont want to go for financial advisors? The advisors can take further

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steps to approach more and more people and indulge them for taking their

advices.

Organization overview

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Introduction:

Success is a journey, not a destination. If we look for

examples to prove this quote then we can find many but there is none like that of karvy. Back in

the year 1981, five people created history by establishing karvy and company which is today

known as karvy, the largest financial service provider of India.

Success sutras of karvy:

The success story of karvy is driven by 8 success sutras adopted by it namely trust,

integrity, dedication, commitment, enterprise, hard

work and team play, learning and innovation,

empathy and humility.These are the values that bind success with karvy.

Vision of karvy:

To achieve & sustain market leadership, Karvy shall aim for complete customer satisfaction, by

combining its human and technological resources, to provide world class quality services. In the

process Karvy shall strive to meet and exceed customer's satisfaction and set industry standards.

Mission statement:

Our mission is to be a leading and preferred service

provider to our customers, and we aim to achieve

this leadership position by building an innovative,

enterprising , and technology driven organization

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which will set the highest standards of service and

business ethics.

The success ladder:

Company overview:

Karvy was established as karvy and company by five chartered accountants during the

year 1979-80, and then its work was confined to audit and taxation only. Later on it

diversified into financial and accounting services during the year 1981-82 with a capital

of rs.150000. it achieved its first milestone after its first investment in technology. Karvy

became a known name during the year 1985-86 when it forayed into capital market as

registrar.

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Evolution of KARVY:

It is well said that success is a journey not a destination and we can see it being proved

by karvy. Under this section we will see that how this karvy and company of 1980

became karvy of 2008. Karvy blossomed with the setting up of its first branch atMumbai during the year 1987-88. The turning point came in the year 1989 when it

decided to enter into one of the not only emerging rather potential field too i.e; stock

broking. It added the feather of stock broking into its cap. At the same time it became

the member of Hyderabad Stock Exchange through associate firm karvy securities ltd

and then karvy never looked back..it went on adding services one after another, it

entered into retail stock broking in the year 1990. Karvy investor service centers were

set up in the year 1992. Karvy which already enjoyed a wide network through its

investor service centers, entered into financial product distribution services in the year

1993. One year more and karvy was now dealing into mutual fund services too in the

year 1994 but it didnt stopped there, it stepped into corporate finance and investment

banking in the year 1995.

Karvys strategy has always been being the first entrant in the market. Karvy again hit

the limelight by becoming the first registrar in the country to be awarded ISO 9002 in

the year 1997. Then it stepped into the other most happening sector i.e; IT enabled

services by establishing its own BPO units and at a gap of just 1 year it took the path of

e-Business through its website www.karvy.com . Then it entered into insurance services

in the year 2001 with the launch of its retail arm karvy- the finapolis: your personal

finance advisor. Then in the year 2002 it launched its PCG(Private Client Group) which

looks after its High Networth Individuals .and maintain their portfolio and provides

them with other financial services. In the year 2003, it commenced secondary debt and

WDM trading.

It was a decade which saw many Indian companies going global..so why the largest

financial service provider of India should lag behind? Hence, karvy launched karvy

global services limited after entering into a joint venture with Computershare, Australia

in the year 2004.the year 2004 also saw karvy entering into commodities marketing

through karvy comtrade.

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Year 2005 saw karvy establishing a separate branch for its insurance services under the

head karvy insurance broking ltd and in the same year, after being impressed with the

rapid growth of karvy stock broking limited, PCG group of Hong Kong acquired 25%

stake at KSBL. In the year 2006, karvy entered into one of the hottest sector of present

time i.e real estate through Karvy realty& services (India) ltd. hence , we can see now

karvy being established as the lagest financial service provider of the country.

Now karvy group consists of 8 highly renowned entities which are as follow:

1. : The first securities registry to receive ISO 9002 certification in

India. Registered with SEBI as Category I Registrar, is Number 1 Registrar in the

Country. The award of being Most Admired Registrar is one among many of the

acknowledgements we received for our customer friendly and competent services.

2. : karvy stock broking ltd. Consists of five units namely stock

broking servics, depository participant, advisory services, distribution of financial

products, advisory services and private client goups.

3. : it is registered with SEBI as a category 1 merchant banker. Its

clientele includesinclude leading corporates, State Governments, foreign institutional

investors, public and private sector companies and banks, in Indian and global markets.

4. : karvy insurance broking ltd is also a part of karvy stock broking

ltd. At Karvy Insurance Broking Limited both life and non-life insurance products are

provided to retail individuals, high net-worth clients and corporates.

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5. : The company provides investment, advisory and brokerage

services in Indian Commodities Markets. And most importantly, it offer a wide reach

through our branch network of over 225 branches located across 180 cities.

6. :Karvy Global is a leading business and knowledge process

outsourcing Services Company offering creative business solutions to clients globally. It

operates in banking and financial services, inurance, healthcare and pharmaceuticals,

media , telecom and technology. It has its sales and business development office in New

York, USA and the offshore global delivery center in Hyderabad, India

7. : Karvy Realty (India) Limited is engaged in the business of real

estate and property services offering:

Buying/ selling/ renting of properties

Identifying valuable investments opportunities in the real estate sector

Facilitating financial support for real estate and investments in properties

Real estate portfolio advisory services

8. : it is a joint venture between Computershare, Australia and KarvyConsultants Limited, India in the registry management services industry.

Organization structure of karvy:

talking about the organization structure of karvy, we have the board of directors as the supreme

governing body , the chairman being Mr. C parthasarthy, mr. m yugandhar as the managing

director, mr m s ramakrishna andmr. Prasad v. potluri as directors.

The board of diretors head the karvy group, karvy computershares limited, karvy investors

services ltd., karvy comtrade, karvy stock broking ltd., and karvy global services ltd.

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Karvy group being the flagship company looks after the functional departments such as

corporate affairs, group human resources, finance & accounting, training & development,

technology services and corporate quality.

Karvy computershare private limited facilitates mutual fund services, share registry and issue

registry whereas merchant banking is looked after by karvy investor services ltd. Karvy stock

broking ltd heads its another branch too ie. Karvy insurance broking ltd. The services offered by

KSBL are: stock broking, depository, research, distribution, personal client group and

institutional desk. And finally the BPO services are managed by karvy global services ltd.

Summarizing it in a diagram, it can be presented as:

Spectrum of services offered by karvy:

Karvy being the top registrar and transfer agent, functions as registrar in most of the issues in the

country. Talking about the mutual fund services offered by karvy, we can get the products of 33

AMCs over here. it deals in both closed ended funds as well as open ended too. Now one must

be thinking why to get the mutual funds from karvy instead of getting it directly from

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AMCs???we have great reasons for it: the first one being ; if we avail the services of karvy then

we can get the information about all the AMCs and their products at a single place along with

expert recommendations whereas at an AMC we can get information about the products of that

specific AMC only. And the second being wide network of karvy.nowadays we can find karvy

offices at remote areas too.

Along with these, karvy is very well handling the role of depository participant. Being

registered with both the depositories i.e.; NSDL (national securities depository ltd) and CDSL

(central depository services ltd), karvy can have access to both. Its wide network also facilitates

it in distribution of retail financial products.

Karvy believes in being updated always. So it is always ready to use latest technologies so thatits clients always be in touch with the latest happenings along with karvy. It offers e-business

through internet through its website: www.karvy.com . Other than it, it also provides its various

services through SMSes.

Karvys services are not limited to its investors only rather its offerings are for its corporate

clients and distributors too. it is very well aware of the fact that in this era of neck to neck

competition, we cant ignore any of the aspects of our business.so theres a offering for

everybodyeveryones welcome at karvy.

Why should investors choose for karvy?

Excellence is next to nothing.and here at karvy everybody tries their best to offer excellent

services to its clientele through its offerings maintaining the karvy culture which includes:

1. Controlled and low cost service culture: karvy is there to serve its client at the minimum

possible cost. it controls cost by its various cost- cutting techniques and minimization of

avoidable costs.

2. Large volume processing capability: being the largest financial service provider in the

country, it has the unique distinction of operating its activities on a large scale which benefits all

the parties cordially.

3. Adherence to strict time schedule: karvy knows that time is money and tries it best to finish

the task within the stipulated time schedule.

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4. Expertise in coordinating multi-location responses: karvy has got a wide network and hence

one can find its branches at most of the places in India. Thus it enjoys its presence everywhere

and coordinates among itself in solving the queries and in responding to any situation.

5.Expertise in managing independent entities such as banks, post-office etc.: the work culture ofkarvy and the ethics followed inside karvy makes its workforce compatible with everybody, so

the karvy people establishes good coordination with independent entities too.

6. Pooling of group resources: karvy group consists of eight subsidiaries, so it can easily pool

up its resources for accomplishment of its goals, whenever needed. The groups can help each

other whenever there are peaks and lows, and even in the case when they have huge targets just

as we saw few years back, Tata group pooling its resources to acquire Corus.

How karvy achieved it?

The core competency of karvy lies in the following points due to which it enjoys a competitive

edge over its competitors. The following culture adopted by karvy makes it all time favorite

among its clientele:

1. Professionally managed by qualified and trained manpower.

2. Uniquely structured in-house software and hardware department

3. Query handling within 48 hrs.

4. Strong secretarial, accounting and audit systems.

5. Unique work culture of working 7 days a week in 3 shifts.

6. Unmatched network spreading all over India.

How Achievements sounds synonymous to karvy:

The landmarks achieved by karvy very well define its success story. In the previous

pages, we learnt how a company started by five chartered accountants, named as karvy

and company turned into todays karvy group, the largest financial intermediary of India.

But success didnt came to karvy at a flow, the hard work and dedication of its

workforce made it what it is todaygradually it achieved the following landmarks and

now it has became what we call the karvy group, now it is:

1.largest independent distributor for financial products.

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2.amongst the top 5 stock broker.

3.among the top 3 depository participants.

4.largest network of branches & business associates.

5.ISO 9002 certified operations by DNV.

6.Amongst top 10 investment bankers.

7.adjudged as one of the top 50 IT users in India by MIS south Asia.

8.full- fledged IT driven operation.

9.Indias no.1 registrar & securities transfer agent.

Clientele of karvy:

Karvys culture has helped karvy in achieving such a distinct position in the market where it can

boast of its huge client base. Be it a retail investor investing Rs. 500 in a SIP in Reliance mutual

fund or be it the largest corporate house of the country: Reliance industries- everybody is

heading towards karvy for their wealth maximization, lets have a look at the clientele of karvy :

According to the datas published in year 2007, karvy stock broking ltd. Operates

through more than 12000 terminals, more than 290000 accounts are maintained and

commands over 3.14% market share of NSE. The distribution services has access to

more than Rs. 40 billion Assets Under Management. Karvy being a depository

participant with both NSDL and CDSL, manages more than 700000 accounts from more

than 380 locations. Talking about the registry services, it manages over 750 public/ right

issues.at the same time, it is managing over 16 million portfolios as registrar.

If we took

a look at some of the top corporate houses availing the services of karvy then we have:

Reliance, IOC, IDBI,LIC, Hindustan Unilever, Principal Mutual Fund, Duetsche Mutual Fund,

Yogokawa, Marico Industries, Patni Computers, Morgan Stanley, Glenmark, CRISIL, 3M, Kotak

Mahindra Bank, Bharti Televenture, Infosys Technologies, Wipro, Infotech, IPCL,TATA

consultancy services, UTI mutual fund etc. Thus in total karvy serves over 16 million investors

and 300 corporates.

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Now, as the project was carried on in Kolkata, so

there is a special reference to working of karvy at

eastern zone and mutual funds in particular.

KARVY at eastern zone:

Karvy stock Broking Ltd was started 11 yrs ago i.e.; during the year 1996 at Jatin Das road

which was later on established as the regional head office. Presently Mr. Alok Chaturvedi is

heading the eastern zone. Talking about the zonal offices, Karvy has zonal offices at Kolkata,

south Bengal, north Bengal, North east, Jharkhand, Bihar, Orissa and Chhattisgarh. Each zonal

office has got its own zonal heads. Karvy is a member of three stock exchanges of India:

National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and Hyderabad Stock

Exchange (HSE).

Hierarchical Structure in diagram:

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10. Howrah.

Structure according to the Products offered by Karvy:

KA

KARVY Mutual Fund Services:

Mutual funds have servings for everybody. Whichever type of investor you are, you will

surely get a mutual fund meeting your requirements. But investing in mutual funds is no

childs play therefore karvy mutual fund advisory services is there to guide in each andevery step of investment in mutual funds so that the dream of wealth creation doesnt

turns into nightmares. Its offerings includes: products of all the 33 major AMCs,

research report about all the existing funds as well as NFOs, customized mutual fund

portfolios designed for individual as well as institutional customers, it not only design

the portfolios rather it offers continuous portfolio revision too depending on changing

market outlook and evolving trends, it further gives access to its online consolidated

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portfolio statement. Thus karvy with its various offerings makes the investor feel safe in

this dynamic environment of the Indian financial market.

Karvy Computershare mutual fund services offers investors services, distributor services and

client services. It can be said that karvy is dedicated towards providing quality service to all

these three facets of the investment process.

Karvy being an intermediary is well registered with the Association of Mutual Funds of India

(AMFI). KARVY has got the registration no [ARN 0018] for mutual funds, which is mentioned

on every form. After the procurement of forms from various AMCs, the forms are passed on to

its various zonal and branch offices (as per their requirements) and then further processing is

done either directly or through sub-brokers.

Karvy operates through its sub- brokers, associates and its excellent pool of own direct

employees. The employees are offered salary by karvy whereas the sub- brokers and associates

get certain commission. Karvy has 70 branches and 3 franchisees in the eastern region. All the

work of mutual funds is regulated from Rashbehari avenue branch, an extension of the JDR

branch.

The main source of earning for KARVY is the brokerage offered by the various AMCs known as

pay-in. The amount offered may vary from AMC to AMC. Also, the franchisees have to pay a

certain amount every month. Now karvy also pay a certain amount to the sub brokers and

associates known as pay-out. The payout is decided according to the procurement done by them.

Recruitment:

Karvy has an enviable pool of dynamic employees. Its people power has a great contribution in

making it the No. 1 financial intermediary. All the employees of karvy dealing in mutual funds

have to go through AMFI test. The recruitment process is at par with the industry standards, it is

mostly done through campus recruitment from reputed B- schools. Other than that, it also

recruits through direct interviews and GDs as per their requirement.

Karvy never compromises with quality thats the reason it is excelling by providing quality

services to all the investors, clients, AMCs etc. associated with it.

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Mutual funds

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its all about mutual funds:

Mutual funds: A mutual fund is a professionally-managed firm of collective investments that

pools money from many investors and invests it in stocks, bonds, short-term money market

instruments, and/or other securities.in other words we can say that A Mutual Fund is a trustregistered with the Securities and Exchange Board of India (SEBI), which pools up the money

from individual / corporate investors and invests the same on behalf of the investors /unit

holders, in equity shares, Government securities, Bonds, Call money markets etc., and

distributes the profits.

The value of each unit of the mutual fund, known as the net asset value (NAV), is mostly

calculated daily based on the total value of the fund divided by the number of shares currently

issued and outstanding.The value of all the securities in the portfolio in calculated daily. Fromthis, all expenses are deducted and the resultant value divided by the number of units in the fund

is the funds NAV.

NAV = Total value of the fund.

No. of shares currently issued and outstanding

Advantages of a MF

Mutual Funds provide the benefit of cheap access to expensive stocks

Mutual funds diversify the risk of the investor by investing in a basket of assets

A team of professional fund managers manages them with in-depth research

inputs from investment analysts.

Being institutions with good bargaining power in markets, mutual funds have

access to crucial corporate information, which individual investors cannot

access.

History of the Indian mutual fund industry:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at

the initiative of the Government of India and Reserve Bank. The history of mutual funds in India

can be broadly divided into four distinct phases.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank

of India and functioned under the Regulatory and administrative control of the Reserve Bank of

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a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth

Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity

window on a periodic basis such as monthly or weekly. Redemption of units can be

made during specified intervals. Therefore, such funds have relatively low liquidity.

Based on their investment objective:

Equity funds: These funds invest in equities and equity related instruments. With

fluctuating share prices, such funds show volatile performance, even losses. However,

short term fluctuations in the market, generally smoothens out in the long term, thereby

offering higher returns at relatively lower volatility. At the same time, such funds can

yield great capital appreciation as, historically, equities have outperformed all asset

classes in the long term. Hence, investment in equity funds should be considered for a

period of at least 3-5 years. It can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked.

Their portfolio mirrors the benchmark index both in terms of composition and individual stock

weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different

sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest in

companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme.

e.g. -An infrastructure fund invests in power, construction, cements sectors etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will

invest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund:Their investment portfolio includes both debt and equity. As a result, on the

risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual

funds vehicle for investors who prefer spreading their risk across various instruments. Following

are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

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3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he

can withdraw a fixed amount each month.

Risk v/s. return:

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Working of a Mutual fund:

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The entire mutual fund industry operates in a very organized way. The investors, known as unit

holders,handover their savings to the AMCs under various schemes. The objective of the

investment should match with the objective of the fund to best suit the investors needs. The

AMCs further invest the funds into various securities according to the investment objective.

The return generated from the investments is passed on to the investors or reinvested as

mentioned in the offer document.

Regulatory Authorities:

To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It

notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time.

SEBI approved Asset Management Company (AMC) manages the funds by making investments in

various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of

the fund in its custody.

According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees

must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that

the mutual funds function within the strict regulatory framework. Its objective is to increase public

awareness of the mutual fund industry. AMFI also is engaged in upgrading professional standards and

in promoting best industry practices in diverse areas such as valuation, disclosure, transparency etc.

Documents required (PAN mandatory):

Proof of identity :1.photo PAN card

2. In case of non-photo PAN card in addition to copy of PAN card any one of the following: driving

license/passport copy/ voter id/ bank photo pass book.

Proof of address (any of the following ) :latest telephone bill, latest electricity bill, Passport, latest bank

passbook/bank account statement, latest Demat account statement, voter id, driving license, ration card,

rent agreement.

Offer document: an offer document is issued when the AMCs make New Fund Offer(NFO). Its

advisable to every investor to ask for the offer document and read it before investing. An offer

document consists of the following:

Standard Offer Document for Mutual Funds (SEBI Format)

Summary Information

Glossary of Defined Terms

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Risk Disclosures

Legal and Regulatory Compliance

Expenses

Condensed Financial Information of Schemes

Constitution of the Mutual Fund

Investment Objectives and Policies

Management of the Fund

Offer Related Information.

Key Information Memorandum: a key information memorandum, popularly known as KIM, is

attached along with the mutual fund form. And thus every investor get to read it. Its contents are:

1.name of the fund.

2.investment objective

3.asset allocation pattern of the scheme.

4.risk profile of the scheme

5.plans & options

6.minimum application amount/ no. of units

7.benchmark index

8.dividend policy

9.name of the fund manager(s)

10.expenses of the scheme: load structure, recurring expenses

11.performance of the scheme (scheme return v/s. benchmark return)

12.year- wise return for the last 5 financial year.

Distribution channels:

mutual funds posses a very strong distribution channel so that the ultimate customers doesnt face any

difficulty in the final procurement. The various parties involved in distribution of mutual funds are:

1.Direct marketing by the AMCs: the forms could be obtained from the AMCs directly. The

investors can approach to the AMCs for the forms. some of the top AMCs of India are;

Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, Sundaram, ICICI, Mirae

Assets, Canara Robeco, Lotus India, LIC, UTI etc. whereas foreign AMCs include: Standard

Chartered, Franklin Templeton, Fidelity, JP Morgan, HSBC, DSP Merill Lynch, etc.

2.broker/ sub broker arrangements: the AMCs can simultaneously go for broker/sub-broker to

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face any of the following problems:

1.variation in the funds performance due to change in its management/ objective.

2.the funds performance can slip in comparison to similar funds.

3. there may be an increase in the various costs associated with the fund.

4.beta, a technical measure of the risk associated may also surge.

5.the funds ratings may go down in the various lists published by independent rating agencies.

6.it can merge into another fund or could be acquired by another fund house.

Performance measures:

Equity funds: the performance of equity funds can be measured on the basis of: NAV

Growth, Total Return; Total Return with Reinvestment at NAV, Annualized Returns and

Distributions, Computing Total Return (Per Share Income and Expenses, Per Share Capital

Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Turnover Rate, Fund Size,

Transaction Costs, Cash Flow, Leverage.

Debt fund: likewise the performance of debt funds can be measured on the basis of: Peer

Group Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs,

besides NAV Growth, Total Return and Expense Ratio.

Liquid funds: the performance of the highly volatile liquid funds can be measured on the

basis of: Fund Yield, besides NAV Growth, Total Return and Expense Ratio.

Concept of benchmarking for performance evaluation:

Every fund sets its benchmark according to its investment objective. The funds performance is

measured in comparison with the benchmark. If the fund generates a greater return than the

benchmark then it is said that the fund has outperformed benchmark , if it is equal to

benchmark then the correlation between them is exactly 1. And if in case the return is lower

than the benchmark then the fund is said to be underperformed.

some of the benchmarks are:

1.equity funds: market indices such as S&P CNX nifty, BSE100, BSE200, BSE-PSU, BSE 500

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index, BSE bankex, and other sectoral indices.

2.debt funds: Interest Rates on Alternative Investments as Benchmarks, I-Bex Total Return

Index, JPM T-Bill Index Post-Tax Returns on Bank Deposits versus Debt Funds.

3. liquid funds: Short Term Government Instruments Interest Rates as Benchmarks, JPM T-

Bill Index

To measure the funds performance, the comparisons are usually done with:

I)with a market index.

ii)funds from the same peer group.

iii)other similar products in which investors invest their funds.

Financial planning for investors( ref. to mutual funds):

Investors are required to go for financial planning before making investments in any mutual

fund. The objective of financial planning is to ensure that the right amount of money is

available at the right time to the investor to be able to meet his financial goals. It is more than

mere tax planning. Steps in financial planning are:

Asset allocation.

Selection of fund.

Studying the features of a scheme.

In case of mutual funds, financial planning is concerned only with broad asset allocation,

leaving the actual allocation of securities and their management to fund managers. A fund

manager has to closely follow the objectives stated in the offer document, because financial

plans of users are chosen using these objectives.

Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then we can find the

market flooded with a variety of investment options which includes mutual funds, equities,

fixed income bonds, corporate debentures, company fixed deposits, bank deposits, PPF, life

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insurance, gold, real estate etc. all these investment options could be judged on the basis of

various parameters such as- return, safety convenience, volatility and liquidity. measuring

these investment options on the basis of the mentioned parameters, we get this in a tabular

form

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Return

Safety

Volatility

Liquidity

Convenience

Equity

High

Low

HighHigh

Moderate

Bonds

Moderate

High

Moderate

Moderate

High

Co.

Debentures

Moderate

Moderate

Moderate

Low

Low

Co. FDs

Moderate

Low

Low

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Which feature of the mutual funds allure you most?

Diversification

42

Professional management

29

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

Young unmarried stage 55

Young Married with children stage 32

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Married with older children stage 21

Pre retirement stage 27

Are you availing the services of personal financial advisors?

Yes 87

No 48

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Which expertise of the personal financial advisor is demanded most?

Portfolio review & investment recommendation 43

Planning to achieve specific financial goals 35

Managing assets in retirement 30

Access to specialists in areas such as tax

planning

27

What

is the

major

reason

for

using

financial advisors?

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Want help with asset allocation 42

Dont have enough time to make own

decision

23

To explain various investment options 37

Want to have surety about financial goals 33

What is the major reason for not using financial advisor?

Have access to all resources needed 18

Believe advisors are too expensive 53

Unsure how to find a trustworthy advisor 21Want to be in control of own investments 43

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Research findings and conclusions:

At the survey conducted upon 200 people, 135 are already mutual fund investors or are

interested to invest in future and the remaining 65 are not interested in it. So there is

enough scope for the advisors to convert those 65 participants into investors through

their convincing power and great communication skills.

Now, when those 65 people were asked about the reason of not investing in mutualfunds, then most of the people held their ignorance responsible for that. They lacked

knowledge and information about the mutual funds. Whereas just 10 people enjoyed

investing in other option. For 18 people, the benefits arousing from these investments

were not enough to drive them for investment in MFs and 12 people expressed no trust

over the fund managers decision. Again the financial advisors can tap upon these people

by educating them about mutual funds.

Out of the 135 persons who already have invested in mutual funds/ are interested to

invest, only 18% have sound knowledge of MFs, 34% people are aware of only the

schemes in which they have invested. 27% possess partial knowledge whereas 21%

stands nowhere in knowledge about MFs.

33 participants buy forms directly from the AMCs, 28 from brokers only, 55 from

brokers and sub-brokers even then 15 people buy from other sources. The brokers and

sub brokers have the maximum reach so they should try to make those investors aware f

the happenings, even the AMCs should follow it.

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When asked about the most alluring feature of MFs, most of them opted for

diversification, followed by reduction in risk, helps in achieving long term goals and

helps in achieving long term goals respectively.

Most of the investor preferred to invest at a young unmarried stage. Even 32 persons

were ready to invest at a stage of young married with children but person with older

children avoid investing due to increased expenses. But again the number rose to 27 at

pre-retirement stage.

Out of them 87 were already availing the services of financial advisors whereas 48

didnt. When asked about the expertise of financial advisors which they liked most? 43

of them favored portfolio review and investment recommendation, followed by planning

to achieve long term goals, managing assets in retirement and access to specialists in

area such as tax planning.

42 participants regarded asset allocation as the major reason for going for financial

advisors. 37 of them needed them to explain them the various investment options

available.33 of them wanted to make sure that they were saving enough to meet their

financial goals. While just 23 gave the reason- lack of time.

When asked about one reason for not availing the services of financial advisors, about

53 of them pointed the advisors as expensive. 43 of them wished to be in control of their

own assets.21 of them said that they find it difficult to get trustworthy advisors. Whereas

18 of them said they have access to all the necessary resources required.

Recommendations:

The most vital problem spotted is of ignorance. Investors should be made aware of the benefits.

Nobody will invest until and unless he is fully convinced. Investors should be made to realize

that ignorance is no longer bliss and what they are losing by not investing.

Mutual funds offer a lot of benefit which no other single option could offer. But most of the

people are not even aware of what actually a mutual fund is? They only see it as just another

investment option. So the advisors should try to change their mindsets. The advisors should

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No trust over the fund managers [ ]

.where do you find yourself as a mutual fund investor?

Totally ignorant [ ]

Partial knowledge of mutual funds [ ]

Aware only of any specific scheme in which you invested [ ]

Fully aware [ ]

.where from you purchase mutual funds?

Directly from the AMCs [ ]

Brokers only [ ]

Brokers/ sub-brokers [ ]

Other sources [ ]

.which feature of the mutual funds allure you most?

Diversification [ ]

Professional management [ ]

Reduction in risk and transaction cost [ ]

Helps in achieving long term goals [ ]

. According to you which is the most suitable stage to invest inmutual funds?

Young unmarried stage [ ]

Young Married with children stage [ ]

Married with older children stage [ ]

Pre-retirement stage [ ]

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