DEEP SAIKIA Summer Project 2003

8/4/2019 DEEP SAIKIA Summer Project 2003

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SUMMER INTERNSHIP PROJECTREPORT

ON

COMPARATIVE STUDY OF MAJORCOMPANIES

MUTUAL FUNDS & ULIP PLANS

WITH SPECIAL REFERENCE

TO

‘BAJAJ CAPITAL’

BHUBANESWAR (ORISSA)

Submitted in partial fulfillment of requirements for the degreeof

Master of Business Administration (2010 – 2012) affiliated to

Biju Pattnaik University of Technology, Rourkela (Orissa)

UNDER THE ESTEEMED GUIDENCE OF :-SUBMITTED BY :-

Mr. Sanat Kumar PattnaikNabadip Saikia Lecturer1006283061 MarketingMBA



RAJDHANI COLLEGE OF ENGG & MANAGEMENT

BHUBANESWAR, ORISSA

CERTIFICATE FROM THE GUIDE

This is to certify that the Summer Internship projectwork titled

“COMPARATIVE STUDY OF MAJOR COMPANIES MUTUALFUND & ULIP PLANS WITH SPECIAL REFERENCE TO‘BAJAJ CAPITAL’ BHUBANESWAR, (ORISSA)” is abonafide work of Nabadip Saikia, UniversityRoll No- 1006283061 is carried out in partial fulfillmentfor the award of M.B.A. From RAJDHANI COLLEGE OFENGG. & MANAGEMENT IS affiliated to Biju PattnaikUniversity of Technology, Rourkela (Orissa) under my

guidance.

This project has not been submitted earlier for theaward of any degree/diploma of any otherInstitution/University.

NAME OF THE GUIDE:Mr. Sanat Kumar Pattnaik

DESIGNATION OF THE GUIDE:LECTURER IN MARKETING



SIGNATURE OF THE GUIDE:PL

ACE:BH

UBANESWAR(O

RISSA)DA

TE:SE

PTEMBER, 2011

DECLARATION BY THE STUDENT

I hereby declare that this project report entitled

“COMPARATIVE STUDY OF MAJOR COMPANIES MUTUALFUNDS & ULIPS PLANS WITH SPECIAL REFERENCE TOBAJAJ CAPITAL, BHUBANESWAR (ORISSA)”

Has been written and prepared by me under theguidanceand supervision of Mr. Sanat Kumar Pattnaik inrequirement for the

fulfillment of Master of business administration.I also declare that this project is the result of my ownefforts andHad not been presented to any other university orinstitution for theaward of any degree or diploma.



DATE:-SEPTEMBER 2011NABADIP SAIKIAPLACE:-BHUBANESWAR, (ORISSA)

ACKNOWLEDGEMENT

No work is considered complete unless dueindebtedness is expressed to all those, who made thework successful. Concentration, dedication, hard work &application are essential but not the only factors toachieve the desired goal. There must be supplemented

by guidance, assistance and co-operation of people tomake it a success. Every complete successfulassignment is the result of many hands joined together.

A formal statement of acknowledgement is hardlysufficient to express my gratitude towards thepersonalities who have helped me to undertake thistraining.



I am highly indebted to Mr.Sambit Mohanty, (areamanager)Mr.Rabindra Nath Das (Asst Manager), Mr.Kalandi Das &cooperative staff of BAJAJ CAPITAL, BHUBANESWAR whogave me weighty guidance in the study. It was reallynice experience to work in their guidance and helpingme in knowing practical things, which was my mainobjective, before entering the corporate world. Theyhave provided me an Unconditional support during theproject work.

I am highly thankful to Mr.Sanat Kumar Pattnaik for hisGuidance. He had been a constant source of inspirationand his critical evaluations during our course in thecollege have helped me to complete this projectproperly.

Through this acknowledgement, I would like to grab theopportunity to thank all those who helped me from thestart of my training, to its end.

It is warmth and efforts of my teachers, friends and wellwishers who have been a source of strength andconfidence for me in the end devour. Finally, yetimportantly, we would like to thank almighty forblessing me to do and complete this project.

NABADIP SAIKIA

PREFACE

The present era is undoubtedly a management era.Management is an important function in any

organization. A management is one of the mostimportant fields which are widely used in every stage of



life. The effective management can be achieved only byeffective management training and developing skillto understand the organizational level this projectwork is a part of the course of MBA and was done atBajaj Capital.

This project is prepared on the basis of awareness of Bajaj Capital in market andunderstanding the requirement of financial planningadvisor by the customer.

Bajaj Capital is world class financial service providingcompany who provides financial solution to customer.

It consists of an integrated team consisting of highlyqualified, versatile and experienced f inanceprofessionals. This project helps me to betterunderstanding of market and financial productsand their benefits.

Now I am feeling the great pleasure in delivering this

project because of a better skill of handling thesituation and customer understanding.

CONTENTS

· INTRODUCTION



(a) Bajaj Capital La Premier’s Wealth ManagementServices.(b) Bajaj Capital’s 4-step Advisory Process.(c) Services of Bajaj Capital.

· COMPANY PROFILE(a) Four decades of excellence.(b) Wide range of services.(c) The History of Bajaj Capital.(d) Mission, Aims & Objectives.(e) The Significance of Logo.(f) Bajaj Capital’s Vale Added Services.(g) Management Team.

· OBJECTIVES OF THE STUDY.

· COMPARATIVE STUDY OF MAJOR COMPANIES(a) MUTUAL FUNDS &(b) ULIPS

· RESEARCH METHODOLGY· DATA ANALYSIS AND INTERPRATIONS· RESULTS & FINDINGS· LIMITATIONS. CONCLUSION· RECOMMENDATION· BIBLIOGRAPHY· ANNEXURE

INTRODUCTION



INTRODUCTION

Bajaj Capital is one of India’s leading Financial Services

companies offering Free Advice on Investments,



Insurance, Tax Saving, Retirement Planning, Financial

Planning, Children’s Future Planning and other services.

They are also SEBI-approved Category I Merchant

Bankers.

Today, Bajaj Capital is a one of the largest financial

planning and investment advisory companies in India,

with a strong presence all over the country. They offer a

comprehensive range of services including financial

planning and investment advice, and the entire gamut

of financial instruments and investment products of

almost all major companies, both public and private. In

addition, they also provide investment assistance by

helping clients complete all the formalities, and help

them keep regular track of their investments.

They offer personalized Investment Advisory andFinancial Planning services to individual investors,

corporate houses, institutional investors, Non- Resident

Indians (NRIs) and High Net worth Clients, among

others.

As one of India’s largest distributors of financial

products, they offer a wide range of investment

products such as mutual funds, life and generalinsurance, bonds, post office schemes, etc. offered by

reputed public and private and government

organizations.



Bajaj Capital La Premier’s WealthManagement Services

Bajaj Capital La Premier was created to cater to theneeds of High Net worth Individuals. It is a specializedgroup comprising handpicked professionals thatprovides exclusive and world-class wealth managementservices to a select group of clients.

Essentially, the Wealth Management Services aim to

help clients preserve, enhance and grow their wealth by

implementing the well-accepted principles and global

best practices on wealth management. To cater to theelite segment of High Net worth Clients, La Premier

offers an exclusive range of value-added service,

including:

• Personalized attention through a dedicatedRelationship Manager

• Market information sharing through quality in-houseresearch reports,

• Periodic portfolio review and regular update onportfolio valuation

• Pro-active advice on market events and triggers



• Immediate alerts on new products and New FundOffers

• Need-based interactions with Fund Managers

• Independent, unbiased advice

Bajaj Capital’s 4-step AdvisoryProcess

Investment consultancy is a complex business,

requiring an intimate understanding of several financial

parameters and human factors, including the client’s

requirements and the market subtleties. Being a

process-driven organization, they have perfected a

four-step advisory procedure, which includes:-

• Need Analysis

• Asset Allocation

• Portfolio Construction

• Ongoing Review



Bajaj Capital was one of the first companies in the

organized sector to offer investment advisory and

financial planning services along with a wide spectrumof financial products and services, all under one roof.

SERVICES OF BAJAJ CAPITAL

They are SEBI approved merchant banker, investmentadvisory and financial planer. They have a track recordof ethical dealing for last, 40 years and have had thehonors of helping millions of investor achieve their life’sfinancial goal.

Bajaj capital is acting like a super market of financialproducts. They offer a comprehensive range of services,which will help in achieving life’s goal, all under oneroof.

Bajaj capital offers a variety of services to their clientslike:



➢ INSURANCE➢ INVESTMENT

➢ MUTUAL FUND

➢ FINANCIAL ADVISORY➢ SYSTAMATIC INVESTMENT PLANNING (SIP)➢ FINANCIAL PLANING➢ COMPANY FIX DEPOSITS➢ BOND

➢ PENSION SCHEMES➢ POST OFFICE SCHEMES➢ HOUSING LOANS

➢ INITIAL PUBLIK OFFER (IPO)

COMPANY PROFILE



COMPANY PROFILE

Bajaj Capital is one of India’s leading Financial Services

companies offering Free Advice on Investments,

Insurance, Tax Saving, Retirement Planning, Financial

Planning, Children’s Future Planning and other services.We also have a wide range of products and services for



Corporate, High Net worth Individuals, and NRIs… all

under than one roof.

At Bajaj Capital, we believe in dreaming big. Dreams

inspire us to excel. They ignite hope and kindle in us

the passion to stretch our limits. We also believe that

nothing can or should stop us from realizing our

dreams… and financial constraints should be the last

thing to stop anyone.

FOUR DECADES OF EXCELLENCE

For over four decades, we have been helping peoplerealize their aspirations by helping them to make theirwealth grow, and plan their financial lives.

Today, we are a one of the largest financial planning

and investment advisory companies in India, with a

strong presence all over the country. We take pride in

serving our customers – both individual and institutional

– and are known for our strong professionalism and

work ethics.

WIDE RANGE OF SERVICES

We offer a comprehensive range of services including

financial planning and investment advice, and the

entire gamut of financial instruments and investment



products of almost all major companies, both public and

private.

In addition, we also provide investment assistance by

helping you complete all the formalities, and help youkeep regular track of your investments. These services

and products are delivered through our network of 109

Bajaj Capital Investment Centers located all over the

country.

We are also a SEBI-approved Category I Merchant

Banker. We raise

resources for over 1,000 top institutions and corporate

houses every year, and offer specialized services to

Non-Resident Indian (NRIs) and High Net worth Clients.

WHAT YOU CAN EXPECT FROMBAJAJ CAPITAL

(A) Sound, research-based advice.(B) Unbiased, independent and need-basedadvice.(C) Prompt, courteous service.(D) Honest, ethical dealings.



HISTORY OF BAJAJ CAPITAL

Bajaj Capital has contributed to the growth of the Indian

Capital Market at every step.

In 1965, we were the first to innovate the CompaniesFixed Deposit. Today, we are playing an active role inthe growth of the Indian Mutual Fund industry. We arealso working closely with private insurance companies todeepen India's insurance market.

Here is a brief gist of Bajaj Capital’s journeythrough the years

1964 Bajaj Capital sets up its first Investment Centre inNew Delhi to

Guide individual investors on where, when and how to

invest.

India's first Mutual Fund, Unit Trust of India (UTI) is

incorporated in the

same year.

1965 Bajaj Capital is incorporated as a Company. In thesame year, the

Company introduces an innovative financial instrument

– the Company

Fixed Deposit. EIL Ltd. (Oberoi Hotels, then known as

Associated Hotels of

India Ltd.) becomes the first company to raise

resources through Company Fixed Deposits.



1966 Bajaj Capital expands its product range to includeall UTI schemes and Government saving schemes inaddition to Company Fixed Deposits.1969 Bajaj Capitalmanages its first Equity issue (through an associatecompany) of & Wells India Ltd.; right from drafting theprospectus to marketing the issue.

Contd…1975 Bajaj Capital starts offering 'need-based'investment advice to investors, which would later beknown as 'Financial Planning' in the investment world.

1981 SAIL becomes the first government company toaccept deposits,

Followed by IOC, BHEL, BPCL, HPCL and others; thus

opening the

floodgates for growth of retail investment market in

India.Bajaj Capital plays an active role in all the schemes as

'Principal Brokers'

1986 Public Sector Undertakings (PSUs) begin makingpublic issues of bonds MTNL, NHPC, IRFC offer a series of Bond Issues.

Bajaj Capital isamong the top ranks of resource mobilizes.

1987 SBI leads the launch of Public Sector Mutual Fundsin India. BajajCapital plays a significant role in fund mobilization forall these players.

1991 SBI issues India Development Bonds for NRIs.Bajaj Capital becomes



the top mobilize with collections of over US $20 million.

1993 The first private sector Mutual Fund – Kothari

Pioneer – is launched, followed by Birla and Alliance inthe following years. Bajaj Capital plays an active role

and is ranked among the top mobilizes for all these

schemes.

1995 IDBI and ICICI begin issuing their series of Bondsfor retail investors. Bajaj Capital is the co-manager in all

these offerings and consistently ranks among the topfive mobilizers on an all-India basis.1997 Private sector players lead the revival of MutualFunds in India through Open-ended Debt schemes.Bajaj Capital consolidates its position as India's largestretail distributor of Mutual Funds.

Contd…

1999 Bajaj Capital begins marketing Life and GeneralInsurance products of LIC and GIC (through associatefirms) in anticipation of opening up of the InsuranceSector. Bajaj Capital achieves the milestone of becoming the top 'Pension Scheme' seller in India andlaunches marketing of GIC's Health Insurance schemes.

2000 Bajaj Capital implements its vision of being a'One-stop Financial

Supermarket.' The Company offers all kinds of financial

products, including the entire range of investment and

insurance products through its Investment Centers.

Bajaj Capital offers 'full-service merchant banking'

including structuring, management and marketing of



Capital issues. Bajaj Capital reinvents 'Financial

Planning' in its international sense and upgrades its

entire team of Investment Experts into Financial

Planners.

2002 The Company focuses on creating investorawareness for Financial

Planning and need-based investing. To achieve this

goal, the company

introduced the International College of Financial

Planning. The graduates of this institute becomeCertified Financial Planners (CFPs), a coveted

professional qualification.

2004 Bajaj Capital obtains the All India InsuranceBroking License.Simultaneously, a series of wealth creation seminarsare launched all over the country, making Bajaj Capital

a household name.

2005 Bajaj Capital launches 360° Financial Planning, asoftware-basedProgramme aimed at encouraging scientific and holisticinvesting.2007 Bajaj Capital launches Stock Broking andDepository (Demit) Services.

2008 Bajaj Capital launches Just Trade, an onlinePlatform for investing in Equities, Mutual Funds andIPO’s.

MISSION ,AIM & OBJECTIVES

Bajaj Capital's Mission Statement :-



The focus of our organization is to be the most useful,

reliable and efficient provider of Financial Services. It is

our continuous Endeavour to be a trustworthy advisor

to our clients, helping them achieve their financialgoals.

Aim :- To serve our clients with utmost dedication andintegrity so that we exceed their expectations and buildenduring relationships.

OBJECTIVES :- To offer unparalleled quality of service through

complete knowledge of products, constant innovationin services and use of the latest technology.

To always give honest and unbiased financial adviceand earn our clients' everlasting trust.

To serve the community by educating individuals onthe merits of Financial Planning and in turn helpshape a financially strong society.

To create value for all stake holders by ensuringprofitable growth.

To build an amicable environment that accordsrespect to every individual and permits their personalgrowth.

To utilize the power of teamwork to function as a

family and build aseamless organization.



WHY INVEST THROUGH BAJAJCAPITAL

Wide range of products and services.

41 years’ experience as Investment Advisorsand Financial Planners.

More than seven lakhs satisfied clients all overIndia.

Countrywide network of 109 branches.

Over 12,000 NRI clients across the globe.

Personalized wealth management advice.

24 x 7 online accessibility throughwww.bajajcapital.com.

Strong team of qualified and experiencedprofessionals including CAs,MBAs, MBEs, CFPs,CSs, Insurance experts, Legal experts and,

SEBI-Approved Category I Merchant Bankers.



THE SIGNIFICANCE OF LOGO

Our logo depicts Lord Ganesha who is the source of allour values and ethics in business. The large ears of LordGanesha remind us to hear more. We listen carefully toour clients to understand their needs.

The weight of the trunk on the mouth symbolizessilence. We work silently, without blowing our owntrumpet. The long trunk symbolizes continuousexploration. We explore all avenues to provide the bestinvestment opportunities for our clients. The heavyposture of Ganesha symbolizes stability. We help ourclients to attain financial stability through wiseinvestments.

Lord Ganesha is known as the remover of obstacles andbestower of prosperity. We emulate His example and try our best tohelp our clientsattain prosperity by proper financial planning.

Our logo has a yellow background. Yellow is the color of

gold, which



symbolizes wealth. According to Vedic lore, it is also thecolor associatedwith Brihaspati, the guru and counselor of the Gods. Weoffer our clientssage counsel to make their wealth grow.

The letters are in red. Red is the color rajas –symbolizing power andincessant activity. It symbolizes our aggressive questfor your well-being and happiness. The white streakrepresents the trunk of Lord Ganesha. White is the colorof satva guna, and implies our selfless commitment to

your life-long happiness.

Contd…

By your side whenever you need us…

As your true partner, we promise to use our knowledgefor your benefit. Be it advice on the right insuranceproducts or looking after your rights and interests incase of a claim, we’ll be by your side... whenever youneed us. Risks are unavoidable in personal life and inbusiness, but can be managed by proper planning.

That's exactly where we at Bajaj Capital InsuranceBroking Ltd. step in. At BCIBL, an IRDA licensed directbroker (bearing license number DB042/02), we call it Risk Management. We help you toidentify the potential risks and pass some of them on toinsurance companies.We are your partners, who help you to identify andunderstand various risks, prioritize them and eventually

manage them. As a broker, we do not offer you just asingle option but multiple options available, and help



you select the most appropriate one.

BAJAJ CAPITAL WITH THEIR CIENTS

Bajaj capital is achieving great success in order toprovide reliable, useful, efficient financialservices. It IS THEIR CONTINIOUS ENDEAVOUR TOBE A TRUST WORTHY ADVISOR TO THEIRCLIENTS, HELPING THEM TO ACHIEVE THEIRFINANCIAL GOALS.

Bajaj capital provides services to their clientswith utmost dedication and integrity so that

they exceed their expectations and buildenduring relationships.



Bajaj capital offer unparallel quality of servicesthrough complete knowledge of products,constant innovation in services and use of thelatest technology.

Bajaj capital always gives honest and unbiasedfinancial advice.

One of its aims is to serve the community byeducating individuals on the merits of financialplanning and in turn help in shaping afinancially strong society.

Bajaj capital ensures profitable growth for all

stockholders.

BAJAJ CAPIT AL’S VAL U E ADDE D

S E RVIC E S

Bajaj capital offers comprehensive range of

services including financial planning and invests

mint advice, and entire gamut of financial

instruments and investment products of almostall major companies, both public and private. In



addition, we also provide investment assistance

by helping you complete all the formalities, and

help you keep regular track of your investments.

➢ REGULAR INFORMATION UPDATE They keep us updated on the latestopportunities in the world of investments.

➢ NEED BASED ADVICE Their advice is all “need based”. They give

customized advice only after understanding onesfinancial goals, risk tolerance and other prioritiesin life.

➢ RESEARCH BASED ADVICE Their professional research team will help onewith advice that is thoroughly based on analysis

of market dynamics, government policies andclose monitoring of global developments.

➢ FREE! INVESTMENT HEALTH CHECK They help one to achieve his financial goals byassessing his risk tolerance level andrecommending to him a suitable asset allocation

model for his investments.

Contd…➢ DOOR-TO-DOOR SERVICE

They have vast network of branches all overIndia, helping one to get services at his door step.



➢ REGULAR INFORMATION Through their in houses publications like Bajajcapital investors India, Investors outlook,investment, s select list and others, they keepone updated on the latest opportunities in theworld of investments.

➢ ACCESSIBILITY They has branches spread nation wide,

covering all-important Indian cities almost everynook and corner of the country.

➢ TAILOR MADE SOLUTIONSOne gets easy transactions and tailor-madesolutions through their, investment centerseven at the tinkle of phone.

➢ SPECILISATION IN ALL CLIENT SEGMENTS

They offer financial planning for housewives,celebrities, players, doctors, architects,professionals, army officers and the likes.

➢ 24 HOURS AVILABILITY

Bajaj capital is available to one, 24 hours aday on their website, WWW.Bajajcapital.com

MANAGEMENT TEAM OF BAJAJ

CAPITAL



Mr. K K Bajaj Mr. RajivDeep Bajaj

CHAIRMAN VICE CHAIRMAN &

MANAGING DIRECTOR



Mr.Sanjiv Bajaj

Mr.Anil Chopra

MANAGING DIRECTOR GROUP

CEO & DIRECTOR

MUTUAL FUNDS



What are Mutual Funds?

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 appreciations realized are

shared by its unit holders in proportion to the number of

units owned by them. Thus a Mutual Fund is the mostsuitable 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.

Today, the mutual fund industry in the country

manages around Rs 100,000 crore of assets, a large

part of which comes from retail investors. Markets for

equity shares, bonds and other fixed income

instruments, real estate, derivatives and other assets

have become mature and information driven. Price

changes in these assets are driven by global events

occurring in faraway places. A typical individual is

unlikely to have the knowledge, skills, inclination and

time to keep track of events, understand their

implications and act speedily. An individual also finds it

difficult to keep track of ownership of his

assets, investments, brokerage dues and bank

transactions etc.

A mutual fund is the answer to all these situations. It

appointed professionally qualified and experienced staff

that manages each of these functions on a full time bas

The history of the mutual fund in India can

be divided into 5 important phases:



1963-1987: The Unit Trust of India was the sole player in the

industry. Created by an Act of Parliament in 1964, which is even

today the single largest mutual fund scheme. UTI created anumber of schemes such as monthly income plans, children’s

plan, equity oriented schemes and offshore funds during this

period. UTI managed assets worth Rs. 6700 core at the end of

this phase.

1987-1993: In 1987 public sector banks and financial

institutions entered the mutual fund industry. SBI mutual fund

was the first non-UTI fund to be set up in 1987. Significant shift

of investors from deposits to mutual fund industry happened

during this phase. Most funds were growth oriented close-ended

funds. By the end of this period, assets under UTI’s

management grew to Rs. 38,247 crore and public sector funds

managed Rs. 8750 crore.

1993-1996: In 1993, the mutual fund industry was open to

private players, both Indian and foreign. SEBI’s first set of

regulations for the industry were formulated in 1993, and

substantially revised in 1996. Significant innovations in

servicing, product design and information disclosure happened

in this phase, mostly initiated by private sector players.

1996-1999: The implementation of the new SEBI regulations

and the restructuring of the mutual fund industry led to rapid

asset growth. Bank mutual funds were re-cast according to SEBI

recommended structure, and UTI came under voluntary SEBIsupervision.

1999-2002: This phase was marked by very rapid growth in the

industry, and significant increase in the market share of private

sector players. Assets crossed Rs. 1, 00,000 crore. The tax

break offer to mutual funds in 1999 created arbitrage

opportunities for a number of institutional players. Bond funds

and liquid funds registered the highest growth in this period,



accounting for nearly 60% of the assets. UTI’s share of the

industry dropped to nearly 50%.

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 (AMC) and

custodian. The trust is established by a sponsor/s that is like

promoter of a company. The trustees of the mutual fund hold

its property for the benefit of the unit holders. AssetManagement Company (AMC) approved by SEBI manages the

funds by making investments in various types of securities.

Custodian, who is also registered with SEBI, holds the securities

of various schemes of the fund in its custody. 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 directorsof trustee company or board of trustees must be independent

i.e. they should not be associated with the sponsors. Also, 50%

of the directors of AMC must be independent. All mutual funds

are required to be registered with SEBI before they launch any

scheme.

There are many entities involved and the diagram below

illustrates the organizational set up of a mutual fund:



Net asset value (NAV) of a scheme

Net asset value denotes the performance of a particular scheme

of a mutual fund. Mutual funds invest the money collected fromthe investors in securities markets. In simple terms, NAV is the

market value of the securities held by the scheme. Since market

value of securities changes every day, NAV of a scheme also

varies on a day-to-day basis. The NAV per unit is the market

value of securities of a scheme divided by the total number of

units of the scheme on any particular date.

For example, if the market value of securities of a mutual fund

scheme is Rs 200 lakes and the mutual fund has issued 10 lakh

units of Rs 10 each to the investors, then the NAV per unit of the

fund is Rs 20. NAV is required to be disclosed by the mutual

funds on a regular basis - daily or weekly - depending on the

type of scheme.





By Structure

Open–ended funds: Investors can buy and sell units of open-

ended funds at NAV-related price every day. Open-end funds do

not have a fixed maturity and it is available for subscription

every day of the year. Open-end funds also offer liquidity to

investments, as one can sell units whenever there is a need for

money.

Close-ended funds: These funds have a stipulated maturity

period, which may vary from three to 15 years. They are open

for subscription only during a specified period. Investors have

the option of investing in the scheme during initial public offer

period or buy or sell units of the scheme on the stock

exchanges. Some close-ended funds repurchase the units at

NAV-related prices periodically to provide an exit route to the

investors.

Interval Funds: These funds combine the features of both open

and close-ended funds. They are open for sale and repurchase

at a predetermined period.

By Investment objective

Growth funds: They normally invest most of their corpus in

equities, as their objective is to provide capital appreciation

over the medium-to-long term. Growth schemes are ideal for

investors with risk appetite.



Income funds: As the name suggests, the aim of these funds is

to provide regular and steady income to investors. They

generally invest their corpus in fixed income securities like

bonds, corporate debentures, and government securities.

Income funds are ideal for those looking for capital stability and

regular income.

Balanced funds: The objective of balanced funds is to provide

growth along with regular income. They invest their corpus in

both equities and fixed income securities as indicated in the

offer documents. Balanced funds are ideal for those looking for

income and moderate growth.

Money market funds: These funds strive to provide easy

liquidity, preservation of capital and modest income. MMFs

generally invest the corpus in safer short-term instruments like

treasury bills, certificates of deposit, commercial paper and

inter-bank call money. Returns on these schemes hinges on the

interest rates prevailing in the market. MMFs are ideal for

corporate and individual investors looking to park funds for

short periods.

Other schemes

Tax saving schemes: Tax saving schemes or equity-linked

savings schemes offer tax rebates to investors under section 88

of the Income Tax Act. They generally have a lock-in period of

three years. They are ideal for investors looking to exploit tax

rebates as well as growth in investments.



Special schemes: These schemes invest only in the industries

specified in the offer document. Examples are InfoTech funds,

FMCG funds, pharma funds, etc. These schemes are meant for

aggressive and well-informed investors.

Index funds: Index Funds invest their corpus on the specified

index such as BSE Sensex, NSE index, etc. as mentioned in the

offer document. They try to mimic the composition of the index

in their portfolio. Not only the shares, even their weightage is

replicated. Index funds are a passive investment strategy and

the fund manager has a limited role to play here. The NAVs of

these funds move along with the index they are trying to mimic

save for a few points here and there. This difference is called

tracking error.

Sector specific schemes: These funds invest only specified

sectors like an industry or a group of industries or various

segments like ‘A’ Group shares or initial public offerings.

Measuring Performance of Mutual Funds

Benchmark Method

Under this method a comparison is made between the returns

given by a market index and the fund over a given period of

time. If the returns generated by the fund as measured by

changes in NAV over that given period of time are greater than

those generated by the benchmark then the fund is deemed to

have outperformed the market portfolio.



Sharps Ratio

This measure uses standard deviation as a measure to evaluate

a fund’s risk-adjusted returns. Mathematically, it is arrived at by

deducting the risk free returns from the returns generated by

the fund and dividing the residual figure by the standard

deviation of the fund's returns. One thing that has to be kept in

mind while using this measure is that the ratio is not an

absolute figure. Its real utility lies in inter scheme comparison.

where,

S = Sharpe's Indexrp = average monthly return of fundrf = risk free return

The sharp ratio is the return generated over the risk free return,

per unit of risk. Risk in this case is to taken as funds standard

deviation. As standard deviation represents the total risk

experienced by the fund, the sharps ratio generate the return

generated by undertaking the all possible risks. A higher sharps

ratio is better as it represent the higher return generated per

unit of risk.

BETA-A measure is of the volatility or systematic risk of a

S = R P – R f /σ p



security or a portfolio in comparison to the market as a whole. A

beta of 1 indicates that the security’s price will move with the

market. A beta of less than then 1 means that the security will

be less volatile than the market. A beta of greater than

1indicates that the security price will be more volatile than the

market. For example, if a stock beta is 1.2, it’s theoretically

20% more volatile than the market.

Beta is ascertained mathematically by finding the covariance of

the returns of the scrip to those of the market and then dividing

it by the variance of the market returns. As a market

professional one is aware of his or her investment objective and

how much risk he or she can assume and can best descried

whether to use monthly, weekly or daily pricing information for

the calculation of beta.

ALPA- To analyze the performance of the investment manager

you must not look only the overall return of the portfolio , butalso the risk of that portfolio For example they are two mutual

funds both are having the return of 12%, a rational investor will

want the fund which is less risky. Jensen’s method is one of the

way which help us in determining if a portfolio is earning proper

return for its level of risk. If the value is positive then the

portfolio is earning excess return.

Covariance (Portfolio’s NAV, market index)

BETA(β)=

Variance (Market Index)



R- Squared-R- Squares value ranges from 0 to 1. An r-square of

1 means that all the movement of the securities is completely

explained by the movement in the index. A high R-square

between (0.85 and 1) indicates the funds performance patterns

have been in the line with the index. A fund with the low R-

square (.70 or less) doesn’t act much like index.

P/B Ratio- This ratio is used to compare stocks market value

with it’s book value. It is calculated by dividing the current

closing price of the stock by the latest quarter’s book value per

share. A low P/B ratio means that the stock is undervalued.

However it could be means that something is fundamentally

wrong with the company.

P/E Ratio-A valuation ratio of a company’s current share price

compared to its pre-earning share.

ADVANTAGES OF INVESTING IN MUTUAL FUNDS

Stock Price

P/B Ratio=

Total asset – Intangible asset and liability

Market value per share

P/E Ratio=

Earning per share



Diversification: A single mutual fund can hold securities from

hundreds or even thousands of issuers, far more than most

investors could afford on their own. This diversification sharply

reduces the risk of a serious loss due to problems in a particular

company or industry.

Professional management: Few investors have the time or

expertise to manage their personal investments every day, to

efficiently reinvest interest or dividend income, or to investigate

the thousands of securities available in the financial markets.

They prefer to rely on a mutual fund's investment adviser. With

access to extensive research, market information, and skilled

securities traders, the adviser decides which securities to buy

and sell for the fund.

Liquidity: Shares in a mutual fund can be bought and sold any

business day, so investors have easy access to their money.

While many individual securities can also be bought and sold

readily, others aren't widely traded. In those situations, it could

take several days or even longer to build or sell a position.

Convenience: Mutual funds offer services that make investingeasier. Fund shares can be bought or sold by mail, telephone,

or the Internet, so you can easily move your money from one

fund to another as your financial needs change. You can even

schedule automatic investments into a fund from your bank

account, or you can arrange automatic transfers from a fund to

your bank account to meet expenses. Most major fund



companies offer extensive recordkeeping services to help you

track your transactions, complete your tax returns, and follow

your funds' performance.

DISADVANTAGES OF INVESTING IN MUTUAL

FUNDS:

No Guarantees: No investment is risk free. If the entire stock

market declines in value, the value of mutual fund shares willgo down as well, no matter how balanced the portfolio.

Investors encounter fewer risks when they invest in mutual

funds than when they buy and sell stocks on their own.

However, anyone who invests through a mutual fund runs the

risk of losing money.

Fees and commissions: All funds charge administrative fees to

cover their day-to-day expenses. Some funds also charge sales

commissions or "loads" to compensate brokers, financial

consultants, or financial planners. Even if you don't use a broker

or other financial adviser, you will pay a sales commission if you

buy shares in a Load Fund.

Taxes: During a typical year, most actively managed mutual

funds sell anywhere from 20 to 70 percent of the securities in

their portfolios. If your fund makes a profit on its sales, you will

pay taxes on the income you receive, even if you reinvest the

money you made.



Management risk: When you invest in a mutual fund, you

depend on the fund's manager to make the right decisions

regarding the fund's portfolio. If the manager does not perform

as well as you had hoped, you might not make as much money

on your investment as you expected. Of course, if you invest in

Index Funds, you forego management risk, because these funds

do not employ managers.

WHAT IS ENTRY AND EXIT LOAD?

Some Asset Management Companies (AMC’s) have sales

charges, or loads, on their funds (entry load and/or exit load) to

compensate for distribution costs. Funds that can be purchased

without a sales charge are called no-load funds. Entry load is

charged at the time an investor purchases the units of a

scheme. The entry load percentage is added to the prevailingNAV at the time of allotment of units. Exit load is charged at the

time of redeeming (or transferring an investment between

schemes). The exit load percentage is deducted from the NAV

at the time of redemption (or transfer between schemes). This

amount goes to the Asset Management Company and not into

the pool of funds of the scheme.

OPTIONS FOR STRUCTURING RETURNS TO AN INVESTOR

DIVIDEND OPTION-Investors, who choose a dividend option on

their investments, will receive dividends from the mutual funds,

as and when such dividends are declared. Dividends are paid in

the form of warrants, or are directly credited to the investors’

bank accounts. There are further choices in the distribution of



dividend. In a normal dividend plan, periodicity of dividend is

left to the fund managers, who may pay annual and/or an

interim dividend. Though investors know that they would earn a

dividend income from their further investment, the timing of the

payout is decided by the fund managers. The variants to the

normal dividend plan are pre-specified distributions schedules.

Mutual funds provide investors the option of receiving dividends

at pre-determined frequencies, which can vary from daily,

weekly, monthly, quarterly, half-yearly and annually. Investors

can choose the frequency of dividend distribution that suits

their requirements. Not all mutual funds provide all of these

frequencies as choices, though. Investors can choose an income

distribution frequency from the choices available in a particular

mutual fund product.

GROWTH OPTION-Investors who do not require periodic income

distributions can choose the growth option, where the income

earned are retained in the investment portfolio, and allowed to

grow, rather than being distributed to the investors. Investors

with longer-term horizons, and limited requirements for income,

chosen this option. The return to the investor who chooses a

growth option is the rate at which initial investment has grown

over the period for which he was invested in the fund. The NAV

of the investor choosing this option will vary with the value of

the investment portfolio, while the number of units held will

remain constant.

RE- INVESTMENT OPTION-Mutual funds also provide another

option to investors in the form of re-investment. Investors re-

invest the dividends that are declared by the mutual fund, back



into the fund itself, at NAV that is prevalent at the time of re-

investment. In this option, the number of units held by the

investor will change with every re-investment. The value of the

units will be similar to that under the dividend option.

ULIPS



Introduction to ULIPS

Unit-linked insurance plans, popularly known as Ulips are life

insurance policies which offer a mix of investment and

insurance similar to traditional life insurance policies such as

endowment, money-back and whole-life, but with one major

difference. Unlike traditional policies, in Ulips investment risk

lies with the insured (i.e., policy holder) and not with the

insurance company. Put another way, in case of adverse market

conditions, you can even lose your capital invested.

The returns in a ULIP depend upon the performance of the fund

in the capital market. ULIP respondents have the option of

investing across various schemes, i.e, diversified equity funds,

balanced funds, debt funds etc. It is important to remember

that in a ULIP, the investment risk is generally borne by the

investor.

In a ULIP, respondents have the choice of investing in a lump

sum (single premium) or making premium payments on an

annual, half-yearly, quarterly or monthly basis. Respondents

also have the flexibility to alter the premium amounts during

the policy's tenure. For example, if an individual has surplus



funds, he can enhance the contribution in ULIP. Conversely an

individual faced with a liquidity crunch has the option of paying

a lower amount (the difference being adjusted in the

accumulated value of his ULIP). ULIP respondents can shift their

investments across various plans/asset classes (diversified

equity funds, balanced funds, debt funds) either at a nominal or

no cost.

Brief History of Insurance

The insurance sector in India dates back to 1818, when Oriental

Life Insurance Company like Bombay life Assurance Company, in

1823 and Tritons Insurance Company, for General Insuran.. ce,in 1850 were incorporated. Insurance ACT was passed in 1928

but it was subsequently reviewed and comprehensive legislation

was enacted in 1938 the nationalization of life insu rance

business took place in 1956 when 245 Indian and Foreign

insurance societies were first merged and then nationalized. It

paved the way towards the establishment of life insuranceCorporation (LIC) and since then it has enjoyed a monopoly

over the life insurance business in India. General Insurance

business.

Subsequently in 1973, non-life insurance business was

nationalized and the General Insurance Business

(Nationalization) ACT, 1972 was promulgated. The



General Insurance Corporation (GIC) in its present form was

incorporated in 1972 and maintains a very strong hold over the

non-life insurance business in India. Due to concerns of

relatively low spread of insurance in the country.

The efficient and quality functioning of the Public Sector

Insurance Companies. The untapped potential for mobilizing

long-term contractual savings funds for infrastructure. The

(Congress) government set up Insurance set u an Insurance

Reforms committee in April 1993. The committee submitted its

report in January 1994, recommended a phased program of

liberalization, and called for private sector entry and

restructuring of the LIC and GIC.

TRADITIONAL LIFE – AN OVERVIEW

The basic and widely used form of design is known

as Traditional Life Platform. It is based on the concept of

sharing. Each of the policy holder contributes his contribution

(premium) into the common large fund is managed by

the company on behalf of the policy holders.

Administration of that common fund in the interest of

everybody was entrusted to the insurance company .It was the

responsibility of the company to administer schemes for benefit



of the policyholders. Policyholders played a very passive roll. In

the course of time, the same concept of sharing and a common

fund was extended to different areas like saving, investment

etc.

Structure of ULIPs

ULIPs offered by different insurers have varying charge

structures. However the insurers have the right to revise or

cancel the fees and charges over a period of time

Broadly the different types of fees and charges are given below:

1. Premium Allocation Charge: This is a percentage of the

premium appropriated towards charges from the premium

received. The balance known as allocation rate constitutes that

part of premium which is utilized to purchase (investment) units

for the policy. The percentage shall be explicitly stated and

could vary interalia by the policy year in which the premium is

paid, the premium size, premium payment frequency and the

premium type (regular, single or top-up premium). This is a

charge levied at the time of receipt of premium. This charge

may also include an initial management charge, which is levied

on the units created from the first years’ premium, for a

specified period.

Example: If premium = Rs.1000 & Premium Allocation Charge:

10% of the premium; then the charge is: Rs.100 and Balance

amount of premium is Rs.900 and is utilized to purchase units.

2. Fund Management Charge (FMC): This is a charge levied as a

percentage of the value of assets and shall be appropriated by



adjusting the Net Asset Value This is a charge levied at the time

of computation of NAV, which is usually done on daily basis.

Example:

If Fund Management charge (FMC) is 1% p.a. payableannually; Fund as at 31.3.2004 before FMC is Rs.100/- and Fund

after this charge is Rs.99/-.

3. Policy Administration Charge: This charge shall represent the

expenses other than those covered by premium allocation

charges and the fund management expenses. This is a charge

which may be expressed as a fixed amount or a percentage of

the premium or a percentage of sum assured. This is a charge

levied at the beginning of each policy month from the policy

fund by canceling units for equivalent amount. This charge

could be flat throughout the policy term or vary at a pre-

determined rate.

Example: Rs.40/- per month increased by 2% p.a. on every

policy anniversary.

4 Surrender Charge: This is a charge levied on the unit fund at

the time of surrender of the contract. This charge is usually

expressed either as a percentage of the fund or as a

percentage of the annualized premiums (for regular premium

contracts).

5. Switching Charge: This a charge levied on switching of

money from one fund to another available within the product.



Example: Rs.100 per switch.

6. Mortality charge: This is the cost of life insurance cover. It is

exclusive of any expense loadings levied either by cancellationof units or by debiting the premium but not both. This charge

may be levied at the beginning of each policy month from the

fund. The method of computation shall be explicitly specified in

the policy document. The mortality charge table shall invariably

form part of the policy document.

7. Rider premium charge: This is the premium exclusive of

expense loadings levied separately to cover the cost of rider

cover levied either by cancellation of units or by debiting the

premium but not both. This charge is levied at the beginning of

each policy month from the fund.

8. Partial withdrawal charge: This is a charge levied on the unitfund at the time of part withdrawal of the fund during the

contract period.

9. Miscellaneous charge: This is a charge levied for any

alterations within the contract, such as, increase in sum

assured, premium redirection, change in policy term etc. The

charge is expressed as a flat amount levied by cancellation of

units. This charge is levied only at the time of alteration.

Example: Rs.100/- for any alteration such as increase in sum

assured, change in premium mode etc.



Table 1.1 ULIPS Vs. Traditional Life Insurance

Plans:-



S. No Features ULIP’S Traditional Plan

1 Premium Invested by Policy

Holder.

Invested by

Insurer’s.

2 Return Depends Upon Market

moments

Fixed

3 Loans Not Provided Provided

4 Bonus No bonuses, except

loyalty addition in

some cases.

Bonuses are payable

5 Loss Likely Unlikely

6 Benefits Variable Pre- Determined

7 Gains Gains likely

depending on market

movements

Gains unlikely

except through

bonuses

8 Potential for

better returns

100% investment in

Debt or Equity acc. to

wish.

At least 85%

investment in debt

which result low

return9 Greater

transparency

Here we know were

over money is

invested.

Not known where

money is to be

invested.10 Flexibility in

investment

Flexibility provided to

customer.

No Flexibility

provided to

customer.11 Flexibility in

insurance

coverage

Option to choose

coverage & to

increase risk cover

No option to choose

coverage

12 Higher Liquidity Exit option available. No exit option



Types of Funds under ULIPs

Most insurers offer a wide range of funds to suit one’sinvestment objectives, risk profile and time horizons. Different

funds have different risk profiles. The potential for returns also

varies from fund to fund.

The following are some of the common types of funds available

along with an indication of their risk characteristics.

Table 1.2: Types of fund under ULIPs

General Description Nature of Investments Risk Category

Equity Funds

Primarily invested in

company stocks with

the general aim of

capital appreciation

Medium to High

Income, Fixed

Interest and Bond

Funds

Invested in corporate

bonds, govt. securities

and other fixed income

instruments

Medium

Cash Funds

Sometimes known as

Money Market Funds -invested in cash, bank

deposits and money

market instruments

Low

Balanced Funds

Combining equity

investment with fixed

interest instruments

Medium





for life cover to the investors , while UTI , as a mutual

was taking care of investing the unit holders money in the

capital market and giving them a fair return .

Subsequently in the year 1989 , another Unit Linked Product

was launched by the LIC Mutual Fund called by the name of

“DHANARAKSHA” which was more or less on the line of ULIP of

UTI . Thereafter LIC itself came out with a Unit Linked Insurance

Product known by name “BIMA PLUS “ in the year 2001-

02 .

Presently a number of private life insurance companies have

launched Unit Linked Insurance Products with a variety of new

features

TYPES OF ULIP

There are various unit linked insurance plans available in the

market However, the key ones are pension, children, group

and capital guarantee Plans.

The pension plans come with two variations — with and without

life cover and are meant for people who want to generate

returns for their sunset years

The children plans, on the other hand, are aimed at taking care

of their educational and other needs.

Apart from unit-linked plans for individuals, group unit linked

plans are also available in the market. The Group linked plans

are basically designed for employers who want to offer certain



benefits for their employees such as gratuity, superannuation

and leave encashment.

The other important category of ULIPs is capital guarantee

plans. The plan promises the policyholder that at least the

premium paid will be returned at maturity. But the guaranteed

amount is payable only when the policy's maturity value is

below the total premium paid by the individual till maturity

However, the guarantee is not provided on the actual premium

paid but only on that portion of the premium that is net of

expenses (mortality, sales and

marketing, administration).

Type I vs Type II ULIPs

There are basically two types of ULIP plans. Type-I plans pays

the higher of the sum assured and fund value to the nominees

upon the death of life assured whereas in case of Type II plans

both the sum assured and fund value are paid.

It is always preferable to opt for Type 2 policies which are more

protection (the core aim of insurance) oriented -- although a bit

expensive then Type-I policies due to high mortality charges --

because in case of Type-I policies risk exposure/sum at risk(sum assured minus fund value) keeps on decreasing in the

later years as your fund value increases which amounts to

having inadequate insurance coverage

How ULIPs work

ULIPs work on the lines of mutual funds. The premium paid by



the client (less any charge) is used to buy units in various funds

(aggressive, balanced or conservative) floated by the insurance

companies. Units are bought according to the plan chosen by

the policyholder. On every additional premium, more units are

allotted to his fund. The policyholder can also switch among the

funds as and when he desires. While some companies allow any

number of free switches to the policyholder, some restrict the

number to just three or four. If the number is exceeded, a

certain charge is levied.

Individuals can also make additional investments (besides

premium) from time to time to increase the savings component

in their plan. This facility is termed "top-up". The money parked

in a ULIP plan is returned either on the insured's death or in the

event of maturity of the policy. In case of the insured person's

untimely death, the amount that the beneficiary is paid is the

higher

of the sum assured (insurance cover) or the value of the units

(investments) However, some schemes pay the sum assured

plus the prevailing value of the investments.

ULIP - KEY FEATURES

• Premiums paid can be single, regular or variable. The

payment period too can be regular or variable. The

risk cover can be increased or decreased.



• As in all insurance policies, the risk charge (mortality rate)

varies with Age

• The maturity benefit is not typically a fixed amount and

the maturity period can be advanced or extended.

• Investments can be made in gilt funds, balanced funds,

money market funds, growth funds or bonds.

• The policyholder can switch between schemes, for

instance, balanced to debt or gilt to equity, etc

• The maturity benefit is the net asset value of the units.

• The costs in ULIP are higher because there is a

life insurance component in it as well, in addition to the

investment component.

• Insurance companies have the discretion to decide on their

investment portfolios.

• Being transparent the policyholder gets the entire

episode on the performance of his fund.

• ULIP products are exempted from tax and they provide life

insurance.

• Provides capital appreciation.

• Investor gets an option to choose among debt, balanced

and equity funds.

USP of ULIPS



Insurance cover plus savings-ULIPs serve the purpose of

providing life insurance combined with savings at market-linked

returns. To that extent, ULIPS can be termed as a two-in-one

plan in terms of giving an individual the twin benefits of life

insurance plus savings.

Multiple investment options-ULIPS offer a lot more variety than

traditional life insurance plans. So there are multiple options at

the individual’s disposal. ULIPS generally come in three broad

variants.

Aggressive ULIPS (which can typically invest 80%-100% in

equities, balance in debt)

Balanced ULIPS (can typically invest around 40%-60% in

equities)

Conservative ULIPS (can typically invest up to 20% in equities)

Although this is how the ULIP options are generally

designed, the exact debt/equity allocations may vary across

insurance companies. Individuals can opt for a variant based on

their risk profile.

Flexibility- The flexibility with which individuals can switch

between the ULIP variants to capitalize on investmentopportunities across the equity and debt markets is what

distinguishes it from other instruments. Some insurance

companies allow a certain number of ‘free’ switches. Switching

also helps individuals on another front. They can shift

from an Aggressive to a Balanced or a Conservative

ULIP as they approach retirement. This is a reflection of the



change in their risk appetite as they grow older.

Works like an SIP- Rupee cost-averaging is another important

benefit associated with ULIPS. With an SIP, individuals invest

their monies regularly over time intervals of a month/quarter

and don’t have to worry about ‘timing’ the stock markets

Fund Switching Option- There is nil or negligible cost involved.

Besides, there is no tax involved. And most of all, it is hassle

free. The day mutual funds also start providing this fund

switching facility, the only real edge Ulips have over

mutual funds will be lost.

HURDLES OF ULIP

No standardization- All the costs are levied in ways that do

not lend to standardization. If one company calculates

administration cost by a formula, another levies a flat rate. If

one company allows a range of the sum assured (SA), another

allows only a multiple of the premium. There was also the

problem of a varying cost structure with age.

Lack of Flexibility in Life cover-ULIP is known to be more flexible

in nature than the traditional plans and, on most counts, they

are. However, some insurance companies do not allow the

individual to fix the life cover that he needs. These rely on a

multiplier that is fixed by the insurer.

Overstating the Yield-Insurance companies work on illustrations.



They are allowed to show you how much your annual premium

will be worth if it grew at 10 per cent per annum But there are

costs, so each company also gives a post-cost return at the 10

per cent illustration, calling it the yield. some companies were

not including the mortality cost while calculating the yield. This

amounts to overstating the yield.

Internally made Sales Illustration-During the process of

collecting information, it was found that the sales

benefit illustration shown was not conforming to the Insurance

Regulatory and Development Authority (Irda) format. in

many locations30 per cent return illustrations are still

rampant.

Not all Show the Benchmark Return- To talk about returns

without pegging them to a benchmark is misleading the

customer. Though most companies use Sensex, BSE 100 or the

Nifty as the benchmark, or the measuring rod of

performance, some companies are not using any benchmark at

all.

Early exit Options- The Ulip product works over the long term.

The earlier the exit, the worse off is the investor since he endsup redeeming a high-front-load product and is then

encouraged to move into another higher cost product at that

stage. An early exit also takes away the benefit of compounding

from insured.

Creeping Costs-Since the investors are now more aware than



before and have begun to ask for costs, some companies

have found a way to answer that without disclosing too

much. People are now asking how much of the premium will go

to work. There are plans that are able to say 92 per cent will be

invested, that is, will have a front load of just 8 per cent. What

they do not say is the much higher policy administration cost

that is tucked away inside (adjusted from the fund value). While

most insurance companies charge an annual fee of about Rs

600 as administration costs, that stay fixed over time, there are

plans that charge this amount, but it grows by as much as 5 per

The Insurance Players…

• HDFC Standard Life Insurance Company Limited

• Birla Sun Life Insurance Company Limited

• TATA AIG Life Insurance Company Limited

• Max New York Life Insurance Company Limited

• Kotak Mahindra Old Mutual Life Insurance Limited

• SBI – Cardiff Life Insurance Company Limited

• ING Vysya Life Insurance Company Limited

• Bajaj Allianz Life Insurance Company Limited

• ICICI Prudential Life Insurance Company Limited

• MetLife Life Insurance Company Limited

• Aviva Life Insurance Company Limited

• Reliance Life Insurance Company Limited

• Sahara India Life Insurance Limited

Comparison between ULIPS and Mutual fund

Unit Linked Insurance Policies (ULIPs) as an investment avenue



are closest to mutual funds in terms of their structure and

functioning. As is the case with mutual funds, investors in ULIPs

are allotted units by the insurance company and a net asset

value (NAV) is declared for the same on a daily basis.

Similarly ULIP investors have the option of investing across

various schemes similar to the ones found in the mutual funds

domain, i.e. diversified equity funds, balanced funds and debt

funds to name a few. Generally speaking, ULIPs can be termed

as mutual fund schemes with an insurance component.

However it should not be construed that barring the insurance

element there is nothing differentiating mutual funds from

ULIPs.

Points of difference between the two:

1. Mode of investment/ investment amounts-Mutual fund

investors have the option of either making lump sum

investments or investing using the systematic investment

plan (SIP) route which entails commitments over longer

time horizons. The minimum investment amounts are laid out

by the fund house

ULIP investors also have the choice of investing in a

lump sum (single premium) or using the conventional route,i.e. making premium payments on an annual, half-yearly,

quarterly or monthly basis. In ULIPs, determining the premium

paid is often the starting point for the investment activity.

This is in stark contrast to conventional insurance

plans where the sum assured is the starting point and

premiums to be paid are determined thereafter.



ULIP investors also have the flexibility to alter the premium

amounts during the policy's tenure. For example an individual

with access to surplus funds can enhance the contribution

thereby ensuring that his surplus funds are gainfully

invested; conversely an individual faced with a liquidity crunch

has the option of paying a lower amount (the difference

being adjusted in the accumulated value of his ULIP). The

freedom to modify premium payments at one's convenience

clearly gives ULIP investors an edge over their mutual

fund counterpart

2. Expenses-In mutual fund investments, expenses charged

for various activities like fund management, sales and

marketing, administration among others are subject to pre-

determined upper limits as prescribed by the Securities and

Exchange Board of India.

For example equity-oriented funds can charge their investors

a maximum of 2.5% per annum on a recurring basis for

all their expenses; any expense above the prescribed limit is

borne by the fund house and not the investors Similarly funds

also charge their investors entry and exit loads (in most cases,

either is applicable). Entry loads are charged at the

timing of making an investment while the exit load ischarged at the time of sale.

Insurance companies have a free hand in levying expenses

on their ULIP products with no upper limits being

prescribed by the regulator, i.e. the Insurance Regulatory

and Development Authority. This explains the complex and at

times 'unwieldy' expense structures on ULIP offerings.



The only restraint placed is that insurers are required to notify

the regulator of all the expenses that will be charged on their

ULIP offerings.

Expenses can have far-reaching consequences on

investors since higher expenses translate into lower amounts

being invested and a smaller corpus being accumulated. ULIP-

related expenses have been dealt with in detail in the article

"Understanding ULIP expenses”.

3. Portfolio disclosure-Mutual fund houses are required

to statutorily declare their portfolios on a quarterly basis,

albeit most fund houses do so on a monthly basis. Investors

get the opportunity to see where their monies are being

invested and how they have been managed by studying the

portfolio.

There is lack of consensus on whether ULIPs are required to

disclose their portfolios. During our interactions with

leading insurers we came across divergent views on this

issue.

While one school of thought believes that disclosing portfolios

on a quarterly basis is mandatory, the other believes that there

is no legal obligation to do so and that insurers are required todisclose their portfolios only on demand.

Some insurance companies do declare their portfolios on a

monthly/quarterly basis. However the lack of transparency

in ULIP investments could be a cause for concern

considering that the amount invested in insurance policies is

essentially meant to provide for contingencies and for long-



term needs like retirement; regular portfolio disclosures on

the other hand can enable investors to make timely

investment decisions.

4. Flexibility in altering the asset allocation-As was stated

earlier, offerings in both the mutual funds segment and ULIPs

segment are largely comparable. For example plans that

invest their entire corpus in equities (diversified equity funds), a

60:40 allotment in equity and debt instruments (balanced

funds) and those investing only in debtinstruments (debt

funds) can be found in both ULIPs and mutual funds.

If a mutual fund investor in a diversified equity fund wishes to

shift his corpus into a debt from the same fund house, he

could have to bear an exit load and/or entry load.

On the other hand most insurance companies permit their

ULIP inventors to shift investments across various plans/asset

classes either at a nominal or no cost (usually, a couple of

switches are allowed free of charge every year and a cost has to

be borne for additional switches).

Effectively the ULIP investor is given the option to invest across

asset classes as per his convenience in a cost-effective manner.

This can prove to be very useful for investors, for examplein a bull market when the ULIP investor's equity component

has appreciated, he can book profits by simply transferring

the requisite amount to a debt-oriented plan.

5. Tax benefits-ULIP investments qualify for deductions under

Section 80C of the Income Tax Act. This holds good,



irrespective of the nature of the plan chosen by the

investor. On the other hand in the mutual funds domain, only

investments in tax-saving funds (also referred to as

equity-linked savings schemes) are eligible for Section 80C

benefits.

Maturity proceeds from ULIPs are tax free. In case of equity-

oriented funds held for a period over 12 months, the

gains are tax free; conversely investments sold within a 12-

month period attract short-term capital gains tax @ 10%.

Similarly, debt-oriented funds attract a long-term capital

gains tax @ 10%, while a short-term capital gain is taxed at the

investor's marginal tax rate.

Despite the seemingly similar structures evidently both

mutual funds and ULIPs have their unique set of advantages

to offer. As always, it is vital for investors to be aware of the

nuances in both offerings and make informed decisions

Mutual fund’s

• Primary objective investment

• Cost even costs through the term

• Investment duration: works out for medium term, long-

term investor. Risky for short term Investors.

• Flexibility: very flexible. Plenty of scope to correct yourmistake if you made any wrong

Investment decision. You can easily shuffle your portfolio

in MFs.

• Liquidity: very liquidity. You can sell your MFs units any

time (except ELSS or specified Lock in period scheme)

• Investment objective: MFs can be used as your vehicle



for investment to achieve different objectives. (E.g. buying

a car three years from now, down payment for a home five

years from now. Children’s marriage 15 years from now.

Retirement planning 25 years from now

• Tax implication: all investment in MFs does not qualify

for section 80c. Only investment in ELSS qualifies for

section 80c. MFs returns on equity MFs are exempt from

long-term capital gains tax. Unless tax laws change in the

future.

• Strings attached: nothing too substantial. At most pay a

small exit load if any.

ULIPS

• Primary objective: Protection + investment

• Costs: upfront costs over the first few years – high, but

over the policy term, ULIPs are comparing better.

• Investment duration: work out only for long-term

investor.

• Flexibility: flexibility is limited to moving across the

different funds offered with your policy. Correcting

mistakes can turn out to be expensive. Moving funds from

ULIP of a different fund house can be expensive.• Liquidity: limited liquidity. Need to stay invested for the

minimum number of years specified before you can

redeem.

• Investment objective: ULIPs can ideally be used for

achieving only long term goals (children’s marriage,

education, retirement planning) as the charges are usually



higher in the initial years and it is more of a longer term

product.

• Tax implication: ULIPs provides tax benefit under section

80c. We are moving from EEE to EET. No clarity if ULIPs

will be taxed under EET.

• Strings attached; some strings attached for your policy

to be in effect. Minimum number of premiums needs to be

paid.

In case of MFs there r only 3 types of charges applicable

–

1. Entry Load - It can be avoided if u invest directly to ur MF

bypassing ur MF agent.

2. Exit Load - It can also be avoided by remaining invested for

certain time period in that particular plan.

3. Fund Management Charge - It`s charged as a %age of

total assets under the plan. Normally it varies from 0.25% to

2.5% depending upon type of funds (Debt to Eq.) as well as

expertise of fund co. for a same set of MF plans, lower FMC Plan

is always advisable for investment.

In case of ULIP following 4 types of charges r applicable.1. Prem. allocation Charge - It may vary from as low as 1% to

as high as 65-70% of ur first year prem. & reduced year after

year or may remain same at a constant level say 4% or 5%.

2. Mortality Charges - It`s the basic cost of insurance & again

it varies among Ins. cos.

3. Policy admin charges - Some ULIPs charge as low as 20 Rs.



per month where as some charge as high as 200-300 Rs. per

month. Again not constant among Ins. cos.

4. Fund Management charges - From 0.5% to 2.5%

depending upon the type of Fund (debt to Equity).

Need of study

As we now that there was a big controversy between SEBI and

IRDA whether ulips is insurance product or not. Finally this

controversy is solved and ulips is an insurance product. So it is

very important to determine the difference between ulips and

mutual fund and preference of investors regarding this

investment option.

1) This study has been conducted to find out the difference

between ulips and mutual fund because all the AMC are

targeting the same customers for both ulips & mutual fund

2) The requirement of this research is to know the behavior

of investors who have invested in ulips & mutual fund

3) This study tries to know their Current scenario for these

two investment options



OBJECTIVES OF THE STUDY



Objectives of the study

1. To know the customers awareness about Ulips and Mutual

Fund.

2. To compare the investment in ULIPS plan with the Mutual

fund.



3. To study the degree of risk involved in both.

4. To analyze the future prospective of these investment option.

RESEARCH METHODOLOGY



RESEARCH METHODOLOGY



Research can be defined as systematic investigation to

establish facts.

Research methodology is defined as a highly

intellectual human activity used in the investigation of

nature and matter and deals specifically with the

manner in which the data is collected, analyzed and

interpreted.

CONCEPTUAL FRAMEWORK The main theme of the research has been

conceptualized within a framework to avoid disorder &

ambiguity in the process of conducting the present

study. The aim of the research project is to compare the

Investment Portfolio of business and service class

investors and to know their current portfolio with theirrisk bearing capability.

The study is conducted with the help of a Non-Disguised

structures Questionnaire. The study made use of

various factors like Demographic factors, Financial

Attributes, risk tolerance level & preference for

Investment products.

RESEARCH DESIGN

Research design is a blueprint for any kind of research.

Research design provides the glue that holds the

research project together. A design is used to structure

the research, to show how all of the major parts of the

research project- the samples or groups, measures,

treatments or programs, and methods of assignment-



work together to try to address the central research

questions. A research design lays the foundation for

conducting the project.

TYPES OF RESEARCH DESIGN

1)Exploratory Design.

2)Descriptive Design.

3)Causal Design.

EXPLORATORY DESIAs its name implies, the objective of exploratory

research is to explore or search through a problem or

situation to provide insights and understanding.

Exploratory research is characterized by flexibility and

versatility with respect to the methods because formal

procedures are not employed. This design can be used

for following purposes:-

Formulate a problem or define a problem more

precisely.

Identify alternative course of action.

Develop hypothesis.

Isolate key variables and relationships for further

examinations.

Gain insights for developing an approach to the

problem.

For exploratory research these methods can be used:-

• Experience Survey



• Pilot Study

• Statistical Data

• Literature

From above given methods PILOT STUDY is done to

know the expectations of the market and is undertaken

by the company before launch of a product.

CAUSAL DESIGN

Causal design is used to obtain evidence of cause and

effect relationships. This kind of research is done in a

controlled environment where one variable remains

constant or fixed and it is tested against othervariables. This design is basically used to know the

degree of relationship between different variables.

Causal research is appropriate for the following:-

• To understand which variables are the causes and

which are the effects of a phenomenon.

• To determine the nature of the relationshipbetween the causal variables and the effect to be

predicted.

DESCRIPTIVE RESEARCH DESIGN

Descriptive research also known as statistical research,

describes data and characteristics about the population

or phenomenon being studied. It basically deals with



everything that can be counted and studied.

Descriptive research is pre planned and structured. A

descriptive design requires clear specification of the

WHO, WHAT, WHEN, WHERE, WHY and WAY (the sixWs) of the research.

The objective is to know the Percentage (%) of

phenomenon in population.

All perceptual studies are come under Descriptive

study.

Where Comparison between two variables is done

that is descriptive research.

In this design the variables are being predicted.

In conducting this research study the Descriptive

research design has been used.

DATA COLLECTION

There are two types of data collection methods which

are as following:-

1)Primary Research

2)Secondary Research

PRIMARY RESEARCH

Primary Research (also called Field Research) involves

the collection of data that does not already exist. This

can be through numerous forms, including

Questionnaires & Telephone Interviews amongst others.



SECONDARY RESEARCH

Secondary research (also called desk research) involves

the summary, collation and/or synthesis of existingresearch rather than primary research, where data is

collected from, for example, research subjects or

experiments.

In doing this research the both methods are being

used.

The Questionnaires are being prepared and filledby the people who are investing in ulips & mutual

fund

The Secondary data is being collected from

different magazines, newspaper & Journals. For the

Literature of review certain online journals has also

been collected.

In doing this research the Questionnaire is used

to collect the data.

SAMPLE

A subgroup of the elements of the population selected

for participation in the study.



SAMPLING UNIT

It is a basic unit containing the elements of the

population to be sampled. The sampling unit in this research is all the people of

Ludhiana who invest in ulips or mutual fund

SAMPLE SIZE

It refers to the number of elements to be studied in a

study/research.

The Sample Size for this study is 100.

SAMPLING TECHNIQUES

In doing this research Convenience Sampling Technique

is used.

A Convenience Sampling refers to a technique thatattempts to obtain a sample of convenient elements.

The selection of sampling units is left primarily to the

Interviewer.

So, in doing this research the walking clients & the

investors who comes to BAJAJ CAPITAL are used for

Convenience Sampling Technique.

DATA ANALYSIS &

INTERPRETATION



Table 4.1 Percentage of people who have invested in ULIPS, in Mutual fund

and both.



Fig 4.1 Percentage of people who have invested in ULIPS, in Mutual fund

and both

Analysis- It is clear from the above table that 30% of the respondents

invest in ULIPs, 51% in mutual fund & 19% in both.

Interpretation- Mutual funds are more preferred investment avenue

comparative to ULIPS because more number of people prefer mutual fund

comparative to ULIPs and there are only few people who are investing in

both ULIPs and Mutual fund.

Investment option No. of respondents Percentage (%)

ULIPS 30 30

Mutual Fund 51 51

Both 19 19

Total 100



Table 4.2:- Annual income of the investors.

Fig 4.2:- Annual income of the investors

Analysis:- Among the people who invest only in ULIPs 17% belongs to

income group of below 2 lacs, 20% belongs to the income group of 2 lacs

-4 lacs, 40% belongs to income grpup of 4lac- 6 lacs & 23% above 6 lacs.

In the case of mutual fund 14% belongs to the income group of below 2

lacs, 16% to the income group of 2 lacs- 4 lacs, 37% to the income group 4

lacs- 6lacs & 33% to the income group of above 6 lacs. People who invest

in both ulips and mutual fund 5% belongs to the income group of below 2

lacs, 11% to the income group of 2 lacs- 6 lacs, 26% to the income group

of 4 lacs- 6 lacs & 58% to the income group of above 6 lacs.

Interpretation- Income vise investment is almost same in both ULIPS and

Mutual Fund people with high income group are more likely to invest their

Annualincome

ULIPS

No. of

PercentageResponses

Mutual fund

No. of

PercentageResponses

Both

No. of

PercentageResponses

Below- 2lac

5 17% 7 14% 1 5%

Rs 2 lac- 4lac

6 20% 8 16% 2 11%

Rs 4 lac- 6lac

12 40% 19 37% 5 26%

Above 6 lac 7 23% 17 33% 11 58%

Total 30 51 19



money comparative to the low income group. But it is clear from the graph

that people who are investing in both ULIPS and Mutual fund are having

income above than 6 lakhs.

Table 4.3:- Factors consider by investors before investing in ULIPS and

Mutual fund.

Factors No. of Responses PercentageSafety of Principal 39 39%High Return 42 42%Maturity Period 12 12%

Terms and Conditions 7 7% Total 100

Fig 4.3:-Factors consider by investors before investing in ULIPS and Mutual

fund

Analysis- As seen in the above table among the various factors

considered by investors before investing their money in ULIPs and Mutual

fund 42% people feel that high return is more important, 39% of the

respondents consider safety of principal, 12% to the maturity period & 7%

to the terms and condition.



Interpretation- The most important factor which is highly considered by

the investors before investing their money in ULIPS or Mutual fund is the

return earned by them and after return the second factor is the safety of

the principal. So we can say that people wants their investment to get the

good return along with the safety of principal.

Table 4.4:- Information Sources helpful to the investor in makinginvestment decision.

Fig 4.4:- Information Sources helpful to the investor in making investment

decision

Sources No. of responses Percentage

Journals 5 5%

Reference Group 21 21% Television 5 5%

Brokers 66 66%

Newspaper 3 3%

Total 100



Analysis- 66% people feel that their investment decision are made with

the help of brokers, 21% people feel that reference group plays an

important role while making their investment decision, 5% gets the

information from the journals, 5% from the television & 3% of the

respondents feel that they get the information from the news paper.

Interpretation- People feel that brokers plays an important role while

making their investment decision and after broker people think that their

investment decision are made with the help of reference groups. The

reason for this may be that there is mostly push selling in case of Ulips &

in case of mutual fund broker may provide better information regarding

various schemes.

Table 4.5:- Preference of investor regarding different types of funds.

Types of fund No. of responses Mean

Equity based fund 45 0.215

Debt based fund 24 0.115

Balanced fund 56 0.268Open ended fund 64 0.306

Close ended funds 20 0.096

Total 209



Fig 4.5:- Preference of investor regarding different types of mutual funds

Analysis- As clear from the above table the mean score of the open ended

fund is very high comparative to other types of mutual fund and the mean

sore of equity & balanced based fund is also good, but it is very less fordebt based & close ended funds.

Interpretation- Open ended funds are more popular among the investors

the reason for this may be that the Open-end funds do not have a fixed

maturity and it is available for subscription every day of the year. Open-

end funds also offer liquidity to investments, as one can sell units

whenever there is a need for money.

Table 4.6:-The reasons for investing in ULIPS.

Reason StronglyAgree(2)

Agree

(1)

Neutral

(0)

Disagree

(-1)

StronglyDisagree

(-2)

Total

Mean

TaxRebate

98 31 0 -7 -4

118 1.18

LifeInsurance

106 34 0 -3 -4

133 1.33

CapitalGrowth

76 34 0 -9 -5

96 .96

Investment of excessmoney

44 23 0 -29 -26

12 .12

4 3 7 2

5 3 8 3 2

3 3 14 9 5

2 2 13 13

11

29



Fig 4.6:- The reasons for investing in ULIPS

Analysis- Among the various reasons of investing in ULIPs respondents

agree that capital growth is the important reason for investing in ULIPs

,but tax benefit and life insurance are the most important reason for

investing in ulips because its mean lies between strongly agree & agree.

People are neutral for the reason investment of excess money.

Interpretation- It is clear from the above graph that most of the people

invest in ULIPS to get the insurance facility and the second important

reason is get the benefit of tax rebate. All the plans of ulips provide tax

rebate therefore it is one of the important reason of investing in ulips.

Table 4.7:- The reason for investment in Mutual Fund.



Fig 4.7:- The reason for investment in Mutual Fund.

Analysis- The mean of capital growth lies between strongly agree & agree.

So it the most important reason of investing in mutual fund. Tax rebate

lies between neutral & agree. Respondents are neutral for the reason

investment of excess money because its mean is 0.5.

Interpretation- It can be easily interpretated that people invest in mutual

fund for the appreciation of the capital invested by them and after this the

second important reason is investment of excess money which is kept with

them only few people think that they invest in mutual fund to get the

Reasons Strongly Agree(2)

Agree

(1)

Neutral

(0)

Disagree

(-1)

StronglyDisagree

(-2)

Total Mean

TaxRebate

58 26 0 -21 -32

31 .31

CapitalGrowth

96 39 0 -6 -4

125 1.25

Investment of excessmoney

64 28 0 -24 -18

50 .50

29 2 8 21 16

48 3 5

2 9

2

732

6

24



advantage of tax rebate the reason may be that all the mutual fund does

not provide tax deduction.

Table 4.8:- Preference of ULIPS or mutual fund on the basis of following

factors.

Fig 4.8:- Preference of ULIPS or mutual fund on the basis of followingfactors.

Analysis- From the above table it is clear that for the advantage of

diversification 38% people go for ULIPs & 62% for mutual fund. For

professional management 40% for ulips & 60% for mutual fund, for the

advantage of low cost 34% for ulips and 66% for mutual fund, for liquidity

Advantages ULIPS

Mutual fund

Diversification 38 62ProfessionalManagement

40 60

Low cost 34 66

Liquidity 17 83Flexibility 12 88



17% for ulips & 83% for mutual fund, for flexibility 12% of respondents

prefer ulips & 88% prefer mutual fund.

Interpretation- Mutual fund are preferred investment option comparative to

ulips the most important reason for this is flexibility and Liquidity provided

by the mutual fund plans. Investors feel that mutual funds are more liquid

and flexible comparative to ulips.

Table 4.9:- Investment in ULIPS and Mutual fund by risk profile.

.

Fig 4.9:- Investment in ULIPS and Mutual fund by risk profile.

Risk profile Ulips

No of responsesPercentage

Mutual fund

No. of responsesPercentage

Low risk 16 53% 6 12%

Moderaterisk

10 33% 31 61%

High risk 4 14% 14 27%

Total 30 51



Analysis- Among 30 respondents who invest in ULIPs 53% of respondents

feel that they take low risk profile, 33% feel that they take moderate risk

& 14 % fe l that they take moderate risk. From the 51 people who invest

in mutual fund 12% invest in low risk profile, 61% in moderate risk & 26%

in high risk profile.

Interpretation- It is clear from the above graph that if the risk taking

capability of an individual is low than he will prefer to invest in Ulips may

be because he is getting insurance plus investment facility, if the risk

taking capability is moderate or high than people prefer mutual fund.

Table 4.10:- Expected annual Return from both ULIPS and Mutual funds.

AnnualReturn

ULIPS

No. of responsesPercentage (%)

Mutual fund


Less than10%

2 7 1 2

11-15% 11 36 5 1015-20% 14 47 18 35

Above 20% 3 10 27 53

Total 30 51



Fig 4.10:- Expected annual Return from both ULIPS and Mutual fund

Analysis- From the 30 people who invest in ULIPs 7% expect the return of

less then 7%, 36% of the respondents expect the return of 11-15%, 47% of

the people expect the return of 15-20% & only 10% expect the return of 20-25%. Among the 51 respondents who invest in only mutual fund 2%

expect the annual return of less then 10%, 10% of the people are having

the expected return 0f 11-15%, 35% people expect the annual return of

15-20% & 53% expect 20-25% annual return.

Interpretation- It is clear from the graph that people who invest in mutual

fund are expecting high return than those who invest in ulips. So we can

say that the basic reason of investing in mutual fund is to generate good

return from the investment.

Table 4.11:- Preferred tenure of investment for ULIPS and Mutual Fund.

Duration ULIPS


Mutual fund


Short term 2 7 6 12

Mid term 7 23 19 37

Long term 21 70 26 51

Total 30 51



Fig 4.11:- Preferred tenure of investment for ULIPS and Mutual Fund

Analysis- Among the 30 respondents who invest in only ULIPs 7% of the

respondents invest for short term, 23% for midterm & 70% for the long

term. From the 51 repondents who invest in only mutual fund 12% invest

for short term, 37% for mid-term & 51% for the long term.

Interpretation- The tenure of investment preferred by investors is almost

same in both ulips and mutual fund that is long term but, still the

difference is that for tenure of short term and midterm mutual fund are

preferred comparative to ulips.

Table 4.12:- Awareness among peoples regarding the controversy of ULIPS.

Opinion No of Responses Percentage

Yes 59 59%

No 41 41%

Total 100



Fig 4.12:- Awareness among peoples regarding the controversy of ULIPS

Analysis- 59% of people are aware regarding the controversy of ulips and

among this 59% of people 65% of investors think that this controversy of

ulips will going to affect their investment decision.

Interpretation-As we can see that many people are aware regarding the

controversy of the of the ulips and among the people who are aware

regarding this controversy most of them feel that this is going to effect

their investment decision as from this controversy many people came to

know that negative points or about the lop holes of the Ulips.

Table 4.13:- Preferred investment option for investing their money in

future .



Fig 4.13:- Preferred investment option for investing their money in future

Analysis-69% of people will like to reinvest their money in mutual fund

and only 31% people will invest their money in ulips.

Interpretation- So in coming years also mutual fund will preferred

investment option comparative to ulips. Future is good for mutual funds

comparative to ULIPs.

Investment option No. of Responses Percentage

Mutual fund 69 69%

ULIPS 31 31%

Total 100



RESULTS & FINDINGS

FINDINGS



People are aware regarding ulips &Mutual fund but, the

awareness regarding mutual fund is high comparative to

ulips. People with high income group are more likely to invest

their money but, people who invest in both ulips and mutual

fund mostly belongs to the income group of more than 6 lacs.

Broker and reference group plays an important role while

making an investment decision of an investor. Open ended

funds & closed funds are more popular among investors of

Bhubaneswar.

Insurance and tax rebate is the most important reason for

investing in ulips & people are investing in mutual fund for

the appreciation of the capital invested by them .among the

various advantages’ liquidity & flexibility plays the most

important role for the preference of mutual fund over ulips.

Low risk is taken in case of ulips & moderate risk in case of

mutual funds. The expected annual return is high for mutual

fund comparative to ulips. The preferred tenure of investment

is same for both ulips & mutual fund.

The recent controversy related to ulips will going to affect its

future demand &in future also more number of investors will

like to invest their money in mutual fund. So future is bright

for mutual funds.



CONCLUSION

A mutual fund is the ideal investment vehicle for today’s

complex and modern financial scenario. Markets for equity

shares, bonds and other fixes income instruments, real

estate, derivatives and other assets have become matureand information driven. Today each and every person is fully

aware of every kind of investment proposal everybody

wants to invest money, which entitled of low risk,

high returns and easy redemption. In my opinion before

investing in mutual funds, one should be fully aware of each

and everything.

At the same time Ulips as an investment avenue is good

for people who has interest in staying for a longer period of

time, that is around 10 years and above. Also in the coming

times, Ulips will grow faster. Ulips are actually being publicized

more and also the other traditional endowment policies are

becoming unattractive because of lower interest rate. It is

good for people who were investing in ULIP policies of

insurance companies as their investments earn them a

better return than the other policies.



RECOMMENDATIONS

The performance of the mutual fund depends on the previous

year’s Net Asset Value of the fund. All schemes are doing well.

But the future is uncertain. So, the AMC (Asset under

Management Companies) should take the following steps: -

1. The people do not want to take risk. The AMC should

launch more diversified funds so that the risk becomes

minimize. This will lure more and more people to invest in

mutual funds and ulips.

2. The expectation of the people from the mutual funds is

high. So, the portfolio of the fund should be prepared

taking into consideration the expectations of the people.

3. Try to reduce fund charges, administration charges and

other charges which help to invest more funds in the

security market and earn good returns.

4. Different campaigns should be launched to educate people

especially regarding SIP.

5. Companies should give regular dividends as it depicts



profitability.

6. Companies should give handsome brokerage to brokers so

that they get attracted towards distribution of the funds.

7. ULIPs are good for those who prefer investment plus

insurance.

Limitations of the Study

The study based on survey through pre-designed

questionnaires suffers from the basic limitations of the

possibility of difference between what is recorded and what

is the truth, no matter how carefully the questionnaire has

been designed and field investigation has been conducted.

This is because the persons may not deliberately report their

true responses and even if they want to do so, they are

bound to be differences owing to problems in the

communication process. In addition, there are some

limitations, which are as below:



• Data collection error may be there due to wrong response

from respondents as some time they are not the right

person who takes actual decisions.

• Some of the respondents can hide the real information.

• Some time people did not have time to fulfill

questionnaire, so they give only few information.

• A sample size cannot always represent the whole

population

BIBLIOGRAPHY



Bibliography

• Prabhakar Sinha (2010) “Govt's ULIP ruling to hit MFs

hard” Times of India, June 22



• Subramanian (2010) “NFOs make hay after Sebi bars

insurers from launching Ulips” Economic times. May,12

• Aggarwal Ashish(2010) “Back to the real issue: mis-

selling” Business standard

• Shankaran Sanjiv & Mathew Liz(2010) “Finance ministry

to call the shots on turf wars” Times of India

• Rosita “IRDA regulates ULIPS a relief for investors” 2009

Economic Times

• Kumar (2009),“Do Investors behave rationally in Stock

Market: A Behavioral Finance Perspective”, “Investors

India”, Oct.2009, Pg.16-20.

• www.amfiindia.com

• www.bajajcapital.com

• www.sebi.com

• www.economictimes.com

• www.investorsguide.com

• http://www.irda.gov.in

http://www.amfiindia.com/

http://www.bajajcapital.com/

http://www.sebi.com/

http://www.economictimes.com/

http://www.investorsguide.com/

http://www.amfiindia.com/

http://www.bajajcapital.com/

http://www.sebi.com/

http://www.economictimes.com/

http://www.investorsguide.com/



ANNEXURE



QUESTIONNAIRE

Name:-Contact No:-

Occupation:-1. In which of following plan you have invested?

a) ULIPS

b) Mutual Fund

c) Both

2. Income Group

a) Below- 2 lac b) Rs 2 lac- 4 lac

c) Rs 4 lac- 6 lac d) Above 6 lac

3. What factors do you consider before investing in ULIPS and

Mutual fund?

a) Safety of Principal b) High return

c) Maturity period d)Terms andCondition

4. Which of the following source helps you in making your

investment decision?

a) Journals b) Reference Group

c) Television d) Brokers

e) Newspaper

5. In which type of fund you would like to invest in? (You can

select more than one option)

a) Equity based Fund b) Debt based Fund

c) Balanced Fund d) Open ended Fund

e) Closed ended Fund



6. What are the reasons that will initiate you to invest in ulips?

a) Tax rebate

Strongly Disagree Disagree Neutral

Agree Highly Agree

b) Life Insurance


Agree Highly Agree

c) Capital Growth Rate


Agree Highly Agree

d) Investment of Excess Money

Strongly Disagree Disagree Neutral Agree

Highly Agree

7. What are the reasons that will initiate you to invest in

mutual fund?

a) Tax Rebate




Highly Agree

b) Capital Growth


Highly Agree

c)Investment of excess

Strongly Disagree Disagree Neutral AgreeHighly Agree

8. On the basis of following factors tick your preference

between ULIPS and Mutual fund?

ULIPS Mutual

fund

a) Diversification

b) Professional Management

c) Low cost

d) Liquidity

e) Flexibility

9. What is your risk taking capability?

a) High



b) Moderate

c). Low

10. What is the expected annual return according to you?

a) Less than 10% b) 11-15%

c)15-20% d)Above 20%

11. What is your preferred tenure of investment?

a) Short term

b) Mid term

c) Long term

12.Are you aware of the controversy regarding ULIPS?

a) Yes b) No

If Yes then will it affect your investment decision?

13. Where would you like to invest your money in future?

a) ULIPS b) Mutual Fund

Why?







































Documents

DEEP SAIKIA Summer Project 2003