Karvy Srm Recovered)

8/7/2019 Karvy Srm Recovered)

1/37

A Project Report On:

Need of financial advisors for

mutual fund investors

(With special reference to KARVY)

INTERIM R EPORT SUBMITTED BY:

Corporate Guide: Academic guide:

Mr. Vipin kumar Dr. Sharat Sharma

Product Head (MF), SRM University,

KARVY, GHAZIABAD NCR-Campus

AASIANSIAN SCHOOLSCHOOL OF BUSINESS MANAGEMENT,OF BUSINESS MANAGEMENT,

BHUBANESWARBHUBANESWAR


2/37

CONTENTS:

serial

no Topic

Page

no.

1 certificate by organization 4

2 certificate by faculty guide 5

3 Acknowledgement 6

4 executive summary 7

5 company overview 817

6 karvy at eastern zone 1720

7 mutual funds basics 21--318 concept of benchmarking 31

9 financial planning for investors 32

10

why has it becomethe largest financial

intermediary? 32-34

11 how investors choose between funds? 34-36

12 most popular stocks among fund managers 37

13 most lucrative sectors among fund managers 38-39

14 Systematic Investment Plan (in details) 39-41

15 does fund ranking and performance persist? 42-43

16 portfolio analysis tools 44-49

17 research report 50

2


3/37

DECLARATION

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

FINANCIAL ADVISORS FOR MUTUAL FUND INVETORS is a

genuine research work undertaken by me and it has not been published

anywhere earlier.

D ate:

Place:

Jyoti Verma

ASBM, Bhubaneswar

3


4/37

Mr. Rohit Vyas

Product Head (MF),

Eastern zone, KARVY

Certificate by the organization:

This is to certify that Ms. Jyoti verma, pursuing PGPM at Asian

School of Business Management, Bhubaneswar has worked under my

supervision and guidance on her dissertation entitled Need offinancial advisors for Mutual Fund investors at

Karvy Stock Broking Limited, Kolkata from April 10th2008 to June 4th 2008. To the best of my knowledge this is an

original piece of work.

4


5/37

Prof. P.Mahapatra

Asian School of Business Management,

Bhubaneswar

Certificate by the faculty guide :

This is to certify that the project report entitled Need of

financial advisors for Mutual Fund Investors at

Karvy Stock Broking Limited is a bonafide record of work

done by Jyoti Verma, and submitted in partial fulfillment of the

requirements of PGPM program of Asian School of Business

Management, Bhubaneswar.

5


6/37

Acknowledgement

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

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

overwhelmed me during the project.

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

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

opportunity to work with karvy stock broking limited.

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

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

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

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

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

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

project, special mention of Ms. Debarati dey, Ms. Nidhi dhingra, Mr. Debasish panda and

Mr. Jyotirmoyee Bhattacharjee.

6


7/37

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

helped me throughout this project.

Executive summary:

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

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

parts:

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

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

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

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

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

largest financial intermediaries? How investors do chose between funds? Most

popular stocks among fund managers, most lucrative sectors for fund managers, a

special report on Systematic Investment Plan, does fund performance persists and the

topping of all the servings in the form of portfolio analysis tool and its application.

7


8/37

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

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

analyzed with the help of charts and graphs.

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

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

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

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

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

approach more and more people and indulge them for taking their advices.

Organization overv iew

8


9/37


10/37

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

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

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

Mission statement:

Our mission is to be a leading and preferred service

provider to our customers, and we aim to achieve this

leadership position by building an innovative,

enterprising , and technology driven organization which

will set the highest standards of service and business

ethics.

The success ladder:

Company overview :

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

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

into financial and accounting services during the year 1981-82 with a capital of Rs.150000. it

achieved its first milestone after its first investment in technology. Karvy became a known

name during the year 1985-86 when it forayed into capital market as registrar.

10


11/37

Evolution of KARVY :

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

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

karvy of 2008. Karvy blossomed with the setting up of its first branch at Mumbai during

the year 1987-88. The turning point came in the year 1989 when it decided to enter into one

of the not only emerging rather potential field too i.e.; stock broking. It added the feather of

stock broking into its cap. At the same time it became the member of Hyderabad Stock

Exchange through associate firm karvy securities ltd and then karvy never looked

back..it went on adding services one after another, it entered into retail stock broking in

the year 1990. Karvy investor service centers were set up in the year 1992. Karvy which

already enjoyed a wide network through its investor service centers, entered into financial

product distribution services in the year 1993. One year more and karvy was now dealing

into mutual fund services too in the year 1994 but it didnt stopped there, it stepped into

corporate finance and investment banking in the year 1995.

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

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

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

establishing its own BPO units and at a gap of just 1 year it took the path of e-Business

through its website www.karvy.com. Then it entered into insurance services in the year

2001 with the launch of its retail arm karvy- the finapolis: your personal finance advisor.

Then in the year 2002 it launched its PCG (Private Client Group) which looks after its High

Net worth Individuals .and maintain their portfolio and provides them with other financial

services. In the year 2003, it commenced secondary debt and WDM trading.

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

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

services limited after entering into a joint venture with Computershare, Australia in the year

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

comtrade.

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

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

11
http://www.karvy.com/http://www.karvy.com/http://www.karvy.com/


12/37

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

KSBL. In the year 2006, karvy entered into one of the hottest sector of present time i.e real

estate through Karvy realty& services (India) ltd. hence , we can see now karvy being

established as the lagest financial service provider of the country.

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

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

Registered with SEBI as Category I Registrar, is Number 1 Registrar in the Country. Theaward of being Most Admired Registrar is one among many of the acknowledgements we

received for our customer friendly and competent services.

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

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

services and private client goups.

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

includesinclude leading corporates, State Governments, foreign institutional investors, public

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

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

Karvy Insurance Broking Limited both life and non-life insurance products are provided to

retail individuals, high net-worth clients and corporates.

12


13/37

5. : The company provides investment, advisory and brokerage services in

Indian Commodities Markets. And most importantly, it offer a wide reach through our

branch network of over 225 branches located across 180 cities.

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

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

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

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

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

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

and property services offering:

Buying/ selling/ renting of properties

Identifying valuable investments opportunities in the real estate sector

Facilitating financial support for real estate and investments in properties

Real estate portfolio advisory services

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

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

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

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

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

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

13


14/37

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

affairs, group human resources, finance & accounting, training & development, technology services

and corporate quality.

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

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

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

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

desk. And finally the BPO services are managed by karvy global services ltd. Summarizing it in a

diagram, it can be presented as:

Spectrum of services offered by karvy:

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

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

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

thinking why to get the mutual funds from karvy instead of getting it directly from AMCs???we have

great reasons for it: the first one being ; if we avail the services of karvy then we can get the

information about all the AMCs and their products at a single place along with expert

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

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

remote areas too.

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

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

depository services ltd), karvy can have access to both. Its wide network also facilitates it indistribution of retail financial products.

Karvy believes in being updated always. So it is always ready to use latest technologies so that its

clients always be in touch with the latest happenings along with karvy. It offers e-business through

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

through SMSes.

14
http://www.karvy.com/http://www.karvy.com/


15/37

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

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

cant ignore any of the aspects of our business.so theres a offering for everybodyeveryones

welcome at karvy.

Why should investors choose for karvy?

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

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

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

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

2. Large volume processing capability: being the largest financial service provider in the country, ithas the unique distinction of operating its activities on a large scale which benefits all the parties

cordially.

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

task within the stipulated time schedule.

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

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

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

5.Expertise in managing independent entities such as banks, post-office etc.: the work culture of

karvy and the ethics followed inside karvy makes its workforce compatible with everybody, so the

karvy people establishes good coordination with independent entities too.

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

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

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

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

How karvy achieve d it?

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

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

clientele:

15


16/37

1. Professionally managed by qualified and trained manpower.

2. Uniquely structured in-house software and hardware department

3. Query handling within 48 hrs.

4. Strong secretarial, accounting and audit systems.

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

6. Unmatched network spreading all over India.

How Achievement s sounds synonymous to karvy :

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

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

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

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

what it is todaygradually it achieved the following landmarks and now it has became what

we call the karvy group, now it is:

1.largest independent distributor for financial products.

2.amongst the top 5 stock broker.

3.among the top 3 depository participants.

4.largest network of branches & business associates.

5.ISO 9002 certified operations by DNV.

6.Amongst top 10 investment bankers.

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

8.full- fledged IT driven operation.

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

Clientele of karvy:

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

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

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

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

16


17/37

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

more than 12000 terminals, more than 290000 accounts are maintained and commands over

3.14% market share of NSE. The distribution services has access to more than Rs. 40 billion

Assets Under Management. Karvy being a depository participant with both NSDL and

CDSL, manages more than 700000 accounts from more than 380 locations. Talking about

the registry services, it manages over 750 public/ right issues.at the same time, it is managing

over 16 million portfolios as registrar.

If we took a

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

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

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

Bank, Bharti Televenture, Infosys Technologies, Wipro, Infotech, IPCL,TATA consultancy services,

UTI mutual fund etc. Thus in total karvy serves over 16 million investors and 300 corporates.

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

is a special reference to working of karvy at

eastern zone and mutual funds in particular.

KARVY at eastern zone:

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

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

eastern zone. Talking about the zonal offices, Karvy has zonal offices at Kolkata, south Bengal, north

Bengal, North east, Jharkhand, Bihar, Orissa and Chhattisgarh. Each zonal office has got its own

zonal heads. Karvy is a member of three stock exchanges of India: National Stock Exchange (NSE),

Bombay Stock Exchange (BSE) and Hyderabad Stock Exchange (HSE).

17


18/37

Hierarchical Structure in diagram:

The above diagram shows the hierarchy of Karvy stock broking ltd. It can be easily depicted from

the diagram that the regional head (presently Mr. Alok Chaturvedi) is the supreme in the eastern

region, under whom the various zonal heads operate and under these zonal heads, the branch heads

operate. Between each level o the hierarchy, there exists a coordinator, who acts as the facilitator

between the different heads.

Karvy at Kolkata:

Now if we look at karvys branch offices at Kolkata, then there exist ten branches of karvy at

Kolkata, which are as follow:

1. Lake Town.

2. Burra bazaar.

3. Shyam bazaar.

4. Dalhousie.

5. New Alipore.

6. Behala.

7. Jatin Das Road.

8. Phoolbagan.

9. Salt Lake.

10. Howrah.

Structure according to the Products offered by Karvy:

18

REGIONAL HEADS

PRODUCT HEADS

HEA


19/37


20/37

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

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

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

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

directly or through sub-brokers.

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

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

commission. Karvy has 70 branches and 3 franchisees in the eastern region. All the work of mutual

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

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

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

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

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

Recruitment:

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

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

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

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

direct interviews and GDs as per their requirement.

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

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

20


21/37


22/37

its all about mutual funds:

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

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

and/or other securities.in other words we can say that A Mutual Fund is a trust registered with the

Securities and Exchange Board of India (SEBI), which pools up the money from individual /

corporate investors and invests the same on behalf of the investors /unit holders, in equity shares,

Government securities, Bonds, Call money markets etc., and distributes the profits.

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

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

and outstanding.The value of all the securities in the portfolio in calculated daily. From this, allexpenses are deducted and the resultant value divided by the number of units in the fund is the funds

NAV.

NAV = Total value of the fund.No. of shares currently issued and outstanding

Advantages of a MF

Mutual Funds provide the benefit of cheap access to expensive stocks

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

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

from investment analysts.

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

to crucial corporate information, which individual investors cannot access.

History of the Indian mutual fund industry:

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

initiative of the Government of India and Reserve Bank. The history of mutual funds in India can bebroadly divided into four distinct phases.

First Phase 1964-87

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

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

In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took

22


23/37

over the regulatory and administrative control in place of RBI. The first scheme launched by UTI

was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life

Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual

Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual

Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89),

Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in

June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual

fund industry had assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

1993 was the year in which the first Mutual Fund Regulations came into being, under which all

mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now

merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised

Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)

Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total assets of Rs.

1,21,805 crores.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into

two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under

management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of

US 64 scheme, assured return and certain other schemes

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered withSEBI and functions under the Mutual Fund Regulations. consolidation and growth. As at the end of

September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

23


24/37

Categories of mutual funds:

Mutual funds can be classified as follow:

Based on their structure: Open-ended funds: Investors can buy and sell the units from the fund, at any point of time.

Close-ended funds: These funds raise money from investors only once. Therefore, after the

offer period, fresh investments can not be made into the fund. If the fund is listed on a stocksexchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently,

most of the New Fund Offers of close-ended funds provided liquidity window on a periodic

basis such as monthly or weekly. Redemption of units can be made during specified

intervals. Therefore, such funds have relatively low liquidity.

Based on their investment objective:

24


25/37

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

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

fluctuations in the market, generally smoothens out in the long term, thereby offering higher

returns at relatively lower volatility. At the same time, such funds can yield great capital

appreciation as, historically, equities have outperformed all asset classes in the long term.

Hence, investment in equity funds should be considered for a period of at least 3-5 years. It

can be further classified as:

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

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

weightages.

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

sectors and stocks.

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

companies offering high dividend yields.

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

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

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

invest in banking stocks.

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

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

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

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

balanced funds classes:

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

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

Debt fund:They invest only in debt instruments, and are a good option for investors averse to idea

of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments

like bonds, debentures, Government of India securities; and money market instruments such as

certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of

these debt funds depending on your investment horizon and needs.

25


26/37

i) Liquid funds- These funds invest 100% in money market instruments, a large portion being

invested in call money market.

ii)Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.

iii)Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which

have variable coupon rate.

iv)Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing between

cash market and derivatives market. Funds are allocated to equities, derivatives and money markets.

Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities.

v)Gilt funds LT- They invest 100% of their portfolio in long-term government securities.

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term debt

papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-

30% to equities.

viii)FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.

Investment strategies:

1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a

month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer

units when the NAV is high and more units when the NAV is low. This is called as the benefit ofRupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give

instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund.

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

withdraw a fixed amount each month.

26


27/37


28/37


29/37

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

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

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

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

the fund in its custody.

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

must be independent.

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

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

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

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

Documents required (PAN mandatory):

Proof of identity :1.photo PAN card

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

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

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

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

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

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

document consists of the following:

Standard Offer Document for Mutual Funds (SEBI Format)

Summary Information

Glossary of Defined Terms

Risk Disclosures

Legal and Regulatory Compliance

Expenses

Condensed Financial Information of Schemes

Constitution of the Mutual Fund

Investment Objectives and Policies

Management of the Fund

Offer Related Information.

29


30/37

Which feature of the mutual funds allure you most?

Diversification 42

Professional management 29

Reduction in risk and transaction cost 34

Helps in achieving long term goal 30

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

Young unmarried stage 55

Young Married with children stage 32

Married with older children stage 21

Pre retirement stage 27

Are you availing the services of personal financial advisors?

Yes 87

No 48

30


31/37

Which expertise of the personal financial advisor is demanded most?

Portfolio review & investment

recommendation

43

Planning to achieve specific financial goals 35

Managing assets in retirement 30

Access to specialists in areas such as tax

planning

27

What is the major reason for using financial advisors?

Want help with asset allocation 42Dont have enough time to make own

decision

23

To explain various investment options 37

Want to have surety about financial goals 33

What is the major reason for not using financial advisor?

Have access to all resources needed 18

Believe advisors are too expensive 53

31


32/37

Unsure how to find a trustworthy advisor 21

Want to be in control of own investments 43

Research findings and conclusions:

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

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

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

power and great communication skills.

Now, when those 65 people were asked about the reason of not investing in mutual funds,

then most of the people held their ignorance responsible for that. They lacked knowledge and

information about the mutual funds. Whereas just 10 people enjoyed investing in other

option. For 18 people, the benefits arousing from these investments were not enough to drive

them for investment in MFs and 12 people expressed no trust over the fund managers

decision. Again the financial advisors can tap upon these people by educating them about

mutual funds.

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

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

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

knowledge about MFs.

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

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

have the maximum reach so they should try to make those investors aware f the happenings,

even the AMCs should follow it.

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

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

term goals respectively.

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

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

investing due to increased expenses. But again the number rose to 27 at pre-retirement stage.

32


33/37


34/37


35/37


36/37


37/37

www.rediffmoney.com

www.bseindia.com

www.nseindia.com

www.investopedia.com

journals & other references:

Karvy the finapolis

Karvy- business associates manual

The Economic Times

Business Standard

The Telegraph

Business India

Fact sheet and statements of various fund houses.

37
http://www.rediffmoney.com/http://www.bseindia.com/http://www.nseindia.com/http://www.investopedia.com/http://www.rediffmoney.com/http://www.bseindia.com/http://www.nseindia.com/http://www.investopedia.com/