Development of Mutual Funds in India

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases

FirstPhase-1964-87Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

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

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets under management of

Rs.47,004 crores.

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

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The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other

mutual funds.

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 Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. The graph indicates the growth of assets over the years.

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[Growth in Assets Under Management]

[Source: www.amfiindia.com]

Mutual Funds – Organisation

There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:

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[Assets Under Management By Fund Type][Source: www.amfiindia.com]

[Assets Under Management By AMC][Source: www.amfiindia.com]

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REGULATORY BODIES

Financial System is basically responsible for the major up and downs in the economy. So, there are some regulatory bodies on it which ensures effectiveness in the management of fund of the investors and transparency in the transactions.

Ministry of Finance

SEBI RBI Dept. of IT

Stock Brokers Commercial PAN R & T Agent Banks TAN Mutual Fund NBF Co. e-TDS

[Regulatory bodies]

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MAJOR COMPETITORS

1. Bajaj Capital

It was established in 1964 at Delhi. In 1965 it innovates a new financial instrument ‘Companies Fixed Deposits’ and becomes the first company to raise Fixed Deposits. The objective of company is to provide professional guidance to investors on where, when and how to invest and to assist the corporate sector in its resource raising activities. Bajaj Capital became the first company to set up ‘Investment Centers’ all over India for this purpose. Today, Bajaj Capital has 90 offices in over 40 important Indian Cities and has a team of around 500 employees nationwide.

Services provided

Merchant bankingBuying and Selling of Money Market Investments Distribution of financial productsInvestment Advisory Service

» Company fixed deposits» Bonds» Mutual funds» Life insurance» General insurance» Pension schemes» Post office schemes» Tax saving schemes» Insurance linked investment schemes» Initial public offerings» Housing loans» NRI schemes» Car insurance

Financial Planning  

» Investment planning» Retirement planning

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» Insurance planning» Children's future planning» Tax planning» Short-term cash flow planning

2.MCS Ltd.

It is established in 1985 in Delhi. It is one of the largest Data Processing House employing more than 600 people.

MCS Ltd. has 8 branches all over India. Volumes Handled

Share registry activities for over 100 corporate servicing over 10 million investors. Mutual fund operations for 25 funds, servicing over 4.5 million investors. Billing & settlement plan for Indian operations of IATA Geneva for 1.2 million tickets per annum covering (26 airlines & over 1200 agents).

Services Offered:

Registrars and Transfer AgentsRegistrars to IPO’s /Right Issues Registrars to Open Offers Registrars to Mutual Funds Data Processing for Airlines Print Shop Services

MCS is a major player in these activities in the Country with a market share of about 25%. MCS today provides these services to over 140 Corporate and Mutual Funds for a total investor base of 15 million. 3. N.J.India Investments Pvt. Ltd.

NJ India Invest (formerly known as NJ Capital stocks) was started in 1994 to cater to the growing financial services sector. NJ India Invest evolved out as a client focused need based investment advisory firm. NJ regards mutual fund as one of the best investment avenue available to satisfy any kind of investment need.

4. ICICI Securities Ltd.

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ICICI Securities Limited (i-SEC) is a wholly owned investment-banking subsidiary of ICICI Limited. ICICI is the only non-Japanese Asian financial institution to be listed on the New York Stock Exchange (NYSE). ICICI Securities was formed on 22nd Feb. 1993, when ICICI's Merchant Banking Division was spun off into a new company; ICICI Securities today is India's leading Investment Bank and one of the most significant players in the Indian capital markets.

ICICI Brokerage Services Limited (IBSL) set up in March 1995, IBSL is a 100% subsidiary of i-SEC. It commenced its securities brokerage activities in February 1996 and is registered with the National Stock Exchange of India Limited and The Stock Exchange, Mumbai.

ICICI has started a website ICICIdirect.com which is the most comprehensive website, which allows you to invest in Shares, Mutual funds, Derivatives (Futures and Options) and other financial products.

ICICI has a large network of branches all over India.

Services offered:Merchant BankingDemat ServiceStock Broking

5. HDFC

HDFC is the leading financial company in India. IT has large network of branches all over India. HDFC Securities which is fully subsidiary of HDFC provides demat service.

HDFC and its subsidiary provides following services.

Demat ServiceLife InsuranceBanking ServiceHousing FinanceVehicle FinanceEducation LoanPersonal LoanMutual Fund

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6. Kotak Securities Ltd. Kotak Securities needs no introduction as one of the largest stock broking houses in the country and a leading distributor of primary market offerings. Kotak Securities limited is a joint venture between Kotak Mahindra Bank and Goldman Sachs, the international investment banking and brokerage firm.

Kotak Securities is a corporate member of both the BSE and the NSE. It is also a depository participant with the National Securities Depository Limited (NSDL) for trading and settlement of dematerialized shares.

Services offered:

Stock BrokingFinancial Product DistributionDemat ServicesInvestment Advisory Services

7. Motilal Oswal Securities Ltd.

Motilal Oswal Securities Ltd (MOSt) is one of the leading equity research and broking houses of India. MOSt has a 20-member research team, which is engaged round the clock in analyzing the Indian economy and corporate sectors to identify equity investment ideas. Asia Money Broker's Poll 2002 has rated MOSt as one of the best Indian broking house, for research, for the second time since 2000.

Motilal Oswal is member of NSDL and CDSIL for DP. It has wide network of branches. It has 158 branches all over India.

Services Offered:

Demat ServicesStock BrokingInvestment Advisory Service

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PRODUCT DETAILS

Mutual funds serve as a link between the saving people and the capital market in that they mobilize saving from investors and bring them to borrowers in the capital markets. In short, it is a common pool of money into which investors place their contribution that is to be invested in accordance with a stated objective.

A mutual fund uses the money collected from the investors to buy those assets, which are specially permitted by its stated investment objective. When an investor subscribes to a mutual fund, he/she buys a part of asset or the pool of funds that are outstanding at that time.

A mutual fund is constituted as an investment company and an investor buys into the fund, means he buys the share of the fund and is known as a unit holder. Since each unit holder is a part of owner of a mutual fund, it is necessary to establish the value of his part. Since the unit held by an investor evidences the ownership of the fund’s assets, the value of the total asset of the fund when divided by the total number of units issued by the mutual fund gives us the value of one unit. This is called as Net Asset Value (NAV).

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STRUCTURE OF INDIAN MUTUAL FUNDS

Mutual fund industry is highly regulated by the government keeping in view of the protection of investor’s interest as well as to maintain operational transparency.

In India SEBI Regulations Act, 1996, guides the formation and operation of Mutual Funds. A Mutual Fund comprises of 4 separate entities.

1. Sponsor2. Board of Trusties3. Asset Management Company4. Custodian and Depositories5. Distributors

1. Sponsor:“Sponsor” is defined under SEBI regulation as any person who, acting alone or in combination with another body corporate, establishes a mutual fund. The sponsor gets the fund registered with SEBI. The sponsors form a trust and appoint a Board of Trustees.

The sponsor must contribute at least 40% of the net worth of the AMC.The sponsor must posses a sound financial track record over 5 years prior to registration.

2. Board of Trustees:

Mutual funds are managed by Board of Trustees. Trust is created by a document called the Trust Deed that is executed by fund sponsor in favour of trustees.

The trustees appoint the AMC and custodian with the prior approval of SEBI.They also approve all the schemes floated by the AMC.They have right to dismiss the AMC, with the approval of SEBI.Half of the trustees should be independent persons. Neither the AMC, nor its employees can act as trustee.

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A trustee can not be appointed as a trustee of two or more mutual funds until and unless he is an independent person or has permission from the Mutual Fund where he is trustee.Trustees can be removed only by prior approval of SEBI.

3. Asset Management Company:

The role of an AMC is to act as the investment manager of the Trust under the Board supervision and direction of the Trustees.The AMC is required to be approved and registered with SEBI.

The AMC of a Mutual Fund must have a net worth of at least Rs. 10 crore at all time.The AMC can not act as a trustee of any other Mutual Fund.They will float schemes only after obtaining the prior approval of the Trustees and SEBI.The director of AMC should be a person of reputed of high standing and at least have five years experience in relevant field.AMC can be terminated with 75% unit holders or majority of trustees.

4. Custodian and Depositories:

As per SEBI Regulations Mutual Funds shall have a custodian who is not any way associated with the AMC. It carry outs the activity of safe keeping the securities or participating, in any clearing system. The custodian should be independent from sponsors and AMC and should have a sound track record and adequate relevant experience.

As Indian capital markets are moving away from having physical certificates to ownership of these securities in “dematerialized” form with Depository. Mutual Fund’s “dematerialized” securities are hold by depository participant.

5. Distributors:

For a fund to sell units across a wide retail base of individual investors, an established network of distribution agents is essential. AMCs usually appoint Distributors or Brokers, who sell units on behalf of the fund. A broker usually acts on behalf of several mutual funds simultaneously and may have several sub-brokers under him for the purpose of distribution of units.

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MUTUAL FUND – A GLOBALLY PROVEN INVESTMENT

Worldwide, the mutual fund has a long and successful history. The popularity of mutual fund has increased manifold. In developed financial market, like US mutual funds have almost overtaken bank deposits and total assets of over US $ 3 trillion.

In India, Mutual Fund industry started with the setting up of UTI in 1964. Public sector banks and financial institution began to establish Mutual Funds in 1987. The private sector and foreign institutions were allowed to set up Mutual Fund in 1993.

WHAT IS MUTUAL FUND?

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

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Critical View About Mutual Fund

Advantages:

1. Portfolio Diversification:

Each investor in a fund is a part owner of all the funds assets, thus enabling investor to hold a diversified investment portfolio even with a small amount of investment, which would otherwise require big capital.

2. Professional Management:

Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyze the performance and prospect of companies and selects suitable investments to achieve the objectives of the scheme.

3. Diversification:

Mutual Fund invests in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because all stock can not go through a downtrend at the same time and in the same proportion. You achieve this diversification through a mutual fund with powerless money that you can do on your own.

4. Reduction of Transaction Cost:

The investors bear all the cost of investing such as brokerage or custody of securities. When going through the fund investor has the benefit of economies of scale; the funds pay lesser cost because of larger volumes, a benefit passed on to its investors.

5. Liquidity:

By investing in Mutual Funds the investors can cash their investment by selling their units to the fund if open-ended, or selling them in the stock market if the fund is close ended.

6. Convenience & Flexibility:

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Mutual Funds Companies offer investor to transfer their holding from one scheme to other.

7. Tax Benefits:

The investors are totally exempt from paying any tax on the income they receive from the Mutual Funds.Investment up to 10000 in ELSS qualifies for tax rebate of 20%.

8. Regulatory oversight:

Mutual funds are subject to many government regulations that protect investors from fraud.

9. Convenience:

You can usually buy mutual fund shares by mail, phone, or over the Internet.

Limitations:

1. No Control over Costs:

An investor in a mutual fund has no control over the overall cost of investing. He/she has to pay investment management fees as long as he/she remains with the fund. Fees are payable even while the value of the investment may be declining.

2. No Tailor made Portfolios:

Investors who invest on their own can build their own portfolios of shares and bonds and other securities. Investing through fund means he/she delegates this decision to the fund managers.

3. Managing a Portfolio of Funds:

Availability of a large number of funds can actually mean too much choice for the investor. He/she may again need advice on how to select a fund to achieve his/her objectives, quite similar to the situation when he/she has to select individual shares or bonds to invest in.

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4. Entry and Exit Cost:

When large bodies like a fund invest in shares, the concentrated buying or selling often result in adverse price movements i.e. at the time of buying, fund has to pay high and vise-versa. But now SEBI has confirmed that no AMC can charge entry load on new mutual fund.

5. No Guarantees:

No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go 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.

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MUTUAL FUND CYCLE

[Mutual Fund Cycle][Source: amfiindia.com]

From above cycle, it can be observed clearly that how the money from the investors flow and they get returns out of it. With a very small amount of fund, investors pool their money with fund managers.

After studying the market, the fund manager invests money of the investors in various securities like shares, bonds, debentures, government securities etc. to achieve goal of the investors.

With ups and downs in the market returns are generated and they are passed on to the investors in form of dividend or capital gain or lost. The above cycle is very clear and also very effective.

The fund manager while investing on behalf of investors takes into consideration various factors like time, risk; amount etc. so that he/she can make proper investment decision.

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Types of Mutual Fund

[Fig.10: Types of Mutual Funds]

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Types of Mutual Fund

By Objective

By Duration

By Load

Equity Fund Debt Fund Balanced Fund Money Market Gilt Fund

Open Ended Close Ended Interval

Load Fund No Load Fund

Other Fund

Tax Saving Index Fund Sector Fund Comm. Fund Offshore

1. By objective:

Investment goals vary from person to person. While somebody wants security, others might give more weightage to returns alone. Somebody else might want to plan for his child’s education while somebody might be saving for the proverbial rainy day or even life after retirement. With objectives defying any range, it is obvious that the products required will vary as well. So, Mutual funds can be classified based on the objectives of the investor.

(a). Equity Fund:Equity funds invest a major portion of their corpus in equity shares issued by companies. NAV of equity funds are fluctuated by fluctuation in price of shares that it holds. So there is a high risk as well as high return in equity fund. Potential to earn in such funds is higher when they are invested for long term.

The leading example of such funds are

Prudential ICICI Growth Plan,Tata Pure Equity Fund,Reliance Vision,Franklin India Prima Fund etc.

(b). Debt Fund:

Debt funds invest in debt instruments debt instruments issued by governments, private companies, banks and financial institutions. By investing in debt, these funds target low risk and stable income investors. These funds are low risk low return funds.

The leading examples are:

Birla Income Plus,Principal Income Fund,HDFC Income Fund,UTI Bond Fund etc.

(c). Balanced Fund:

A balanced fund is one that has a portfolio comprising debt instruments as well as preference and equity shares. The idea is to reduce volatility of funds, while

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providing some upside for capital appreciation. They are best suitable for the people looking for a combination for capital appreciation and regular income and best time spend for such investment is more than 3 years.

The leading examples are

Prudential ICICI Balanced Fund,Birla Balance Fund,Franklin India Balance Fund,Sundaram Balance Fund etc. (d). Money Market Fund:

Money market funds invest in securities of a short-term nature, which generally means securities of less than one-year maturity such as Treasury Bills issued by governments, Certificates of deposit issued by banks and Commercial paper issued by companies.

The major strength of money market funds are the liquidity and safety of principal that the investors can normally expect from short term investments.The leading examples are

Prudential ICICI Liquid Plan,Templeton India Liquid Fund,Grindlays Cash Fund etc.

(e). Gilt Fund:

These funds are sort of government funds wherein the investments are made in debt instrument of government, which carry no risk of non payment of interest as the RBI manages the payment of interest and principal on the investments. These funds are best suited for regular income and long term investment objectives.

The leading examples are

Prudential ICICI Gilt Fund,Tata Gilt Securities Fund,Templton India Government Securities Fund etc.

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2. By Duration:

(a). Open-ended Fund:An open ended fund is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at NAV related prices which are declared daily basis. The key feature of this fund is liquidity.

(b). Close-ended Fund:A close ended fund has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of initial public issue and thereafter they can buy or sell units on stock exchange where the units are listed at NAV. These mutual fund schemes disclose NAV generally on weekly basis.

(c). Interval Fund:

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

Risk Return Grid

Risk Tolerance/Return Expected

Focus Suitable Products Benefits offered by MFs

Low Debt Bank/ Company FD, Debt based Funds

Liquidity, Better Post-Tax returns

Medium

Partially Debt, Partially Equity

Balanced Funds, Some Diversified Equity Funds and some debt Funds, Mix of shares and Fixed Deposits

Liquidity, Better Post-Tax returns, Better Management, Diversification

High EquityCapital Market, Equity Funds (Diversified as well as Sector)

Diversification, Expertise in stock picking, Liquidity, Tax free dividends

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[Table11: Risk Return Grid of various MF]

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3. By Load:

(a). Load Fund:

Marketing of new mutual fund scheme involves initial expenses. These initial expenses may be recovered from the investors by entry or exit load.But now SEBI has confirmed that AMC can not charge entry load on new mutual fund.

(i). Entry Load or Front-end Load:If initial expenses recovered from investors at the time of investor’s entry into the fund, by deducting a specific amount from his initial contribution it is called Entry Load. But now it has been banned by SEBI.

(ii). Exit Load or Back-end Load:If initial expenses recovered at the time of the investor’s exit from the scheme, by deducting a specified amount from the redemption proceeds payable to the investor it is called exit load.

(iii). Deferred Load:

The load amount charged to the scheme over a period of time is called a deferred load.

(b). No Load Fund:

Funds that don’t charge entry, exit, or deferred load or any other charges for sales expenses are called no load funds.

Now, generally all Mutual Fund companies charge 2 to 2.5% entry load on equity fund.

Generally there is no exit load on equity and sectoral funds to maintain liquidity of that funds.

Generally there is no entry load on gilt scheme and income fund.

There is 0.25 to 1% exit load on gilt and income fund if investors exit from fund before specified time which is generally 3 to 6 months.

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4. Other types of fund:

(a) Tax Saving Funds:

These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. E.g. Equity Linked Saving Scheme (ELSS). Pension schemes also offer tax benefits.

The leading examples are

Prudential ICICI Tax Plan,Templeton India Pension Plan,Franklin India Taxshield etc.

(b) Index Funds:

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weightage comprising of an index. NAV of such funds are changed accordance with the change in the index.

The leading examples are

Birla Index Fund,HDFC Index Fund,Prudential ICICI Index Fund,UTI Index Fund etc.

(C) Sector Funds:

These are the funds which invest in the securities of only those sectors or industries as specified in the offer documents. E.g. Pharmaceuticals, Software, Petroleum etc. These types of funds are more risky compared to diversified funds.

The leading examples are

Birla IT Fund,Pru. ICICI FMCG Fund,

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Franklin India Pharma Fund etc.

(d) Commodity Funds:

Commodity funds invest into the different commodities directly or through shares of commodity companies. E.g. Commodity fund invest in gold or shares of gold mines. Commodity funds have not yet developed in India.

(e) Off Shore Funds:

These funds invest in equities in one or more foreign countries there by achieving diversification across the country’s borders. However they also have additional risks such as the foreign exchange rate risk and their performance depends on the economic conditions of the countries they invest in.

INDUSTRY DETAILS

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Following are list of Mutual Fund companies in India.

Sr. No. Mutual Fund Name No. of Schemes

1 Alliance Mutual Fund 362 Benchmark Mutual Fund 53 Birla Mutual Fund 744 Bank of Baroda Mutual Fund 175 Can Bank Mutual Fund 256 Chola Mutual Fund 457 Deutsche Mutual Fund 408 DSP Merrill Lynch Mutual Fund 409 Escorts Mutual Fund 1510 Franklin Templeton Investments 13011 GIC Mutual Fund 512 HDFC Mutual Fund 7913 HSBC Mutual Fund 3214 IL & FS Mutual Fund 4315 ING Vysya Mutual Fund 5516 JM Mutual Fund 5517 Kotak Mutual Fund 5618 LIC Mutual Fund 3519 Morgan Stanley Mutual Fund 120 Punjab National Bank Mutual Fund 421 Prudential ICICI Mutual Fund 12422 Principal Mutual Fund 6823 Reliance Mutual Fund 7424 Sahara Mutual Fund 1225 State Bank of India Mutual Fund 5926 Standard Chartered Mutual Fund 10027 Sundaram Mutual Fund 5228 SUN F&C Mutual Fund 129 Tata TD Mutual Fund 10030 Taurus Mutual Fund 931 Unit Trust of India 4232 UTI Mutual Fund 66

RESEARCH OBJECTIVES

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Any activity done without an objective in a mind cannot turn fruitful. An objective provides a specific direction to an activity. Objectives may range from very general to very specific, but they should be clear enough to point out with reasonable accuracy what researcher wants to achieve through the study and how it will be helpful to the decision maker in solving the problem.

The objective of any research is basically divided into two categories.

Primary Objective:

To find out market potential of various companies. Secondary Objectives:

Following are secondary objectives.

To assess an awareness of mutual funds .To find out how many people are interested in dealing of mutual fund.

RESEARCH METHODOLOGY

1. Research Design:

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A research design is a pattern or an outline of a research project’s working. It is a statement of only the essential elements of a study, those that provide the basic guidelines for the details of the project. It comprises a series of prior decision that taken together provide master plans for executing a research projects.

A research design serves as a bridge between what has been established i.e., the research objectives and what is to be done, in conduct of the study to relish those objectives. If there were no research design, the research would have only foggy notions as about what is to be done.

I have used ‘Exploratory Type’. The research is of both qualitative as well as quantitative type.

2. Unit of Analysis:

Middle class, Upper Middle class and HNIs people.

Characteristics of interest:

People’s knowledge about Mutual FundPeople’s knowledge about KarvyPeople’s interest in getting knowledge of Mutual FundPeople’s willingness to deal in Mutual Fund with Karvy

3. Sources of Data:

a. Primary Source:

The primary data is collected using sampling method and by survey using questionnaire.

b. Secondary Source:

Secondary data includes information regarding present market scenario, Information regarding Mutual Funds and competitors are collected by Internet, Magazines and News papers and books.

4. Sample Planning:

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Sample Size: 50 unitsSample Extent: Delhi

Sampling Design:

A Sample Design is a definite plan for obtaining a sample from a given population. It refers to the technique or method the researcher would adopt in selecting items for the sample.

I have used both ‘Convenience Sampling Method’.

5. Data Collection Method:

I have used ‘Survey Method’ to collect data. I have collected data using questionnaire.

Questionnaire Plan

I have used ‘Structured Questionnaire’ for gathering the required data through contacting respondent personally.

Type of Information:

I have collected Fact, Awareness, Attitude, Future action plan and reason using questionnaire.

Type of Questions:

‘Close-ended questions’ of ‘Dichotomous’ and ‘Multiple Choice’ type are asked in the questionnaire for data collection.

6. Data Analysis & Interpretation:

Data Analysis is based on the data collected by way of Questionnaires. From the collected data findings are extracted. The data is tabulated and frequency distribution chart is prepared.

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RESEARCH ANALYSIS AND INTERPRETATION

1. Percentage of investors

Inference : Graph shows that 30% of people are investing in mutual fund. That mean it is a good opportunity for the company as they can grap the rest unaware people to being them investor in mutual fund by making them aware about mutual fund.

2. Reason for Investment

Inference : Graph shows that 50% (above among all) people are interested in investing in mutual fund. That mean company can increase investors for investing in mutual fund by giving them equity based mutual fund.

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3. Frequency of Investment

Inference: Graph shows that 40% people are investing in mutual fund once a month. So company suggests people about SIP and company suggest rest of the people about the benefits of SIP.

4. Awareness about scheme offered for Mutual Fund

Inference: Graph shows that 66% of people have few knowledge about mutual fund and 10 % of people do not know about mutual fund. That means company can make fully aware about mutual fund to people and tell them benefit associated with mutual fund so that they will invest in Mutual fund.

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5. Awareness of tax advantage by Mutual Fund

Inference: Graph shows that 38 % of people don’t know about tax

benefit associated with mutual fund and 34 % of people are not sure about tax benefit through mutual fund. This is the good opportunity for company to increase investors of mutual fund by making aware them tax benefit associated with mutual fund in such schemes like ELSS.

6. External advisor for Investors

Inference: Graph shows that 38 % of people invest in mutual fund on the suggestion of their friends. So they are potential investors for the company. Company can take care of these investors by suggest them to invest on professional advisory.

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7. Types of Mutual Funds in which they invest

Inference: Graph shows that most of the people (58 %) invest in equity based mutual funds. They are risk taker. Company can take care of these investors by suggesting them balanced and debts funds.

8. Why they are not investing in mutual funds.

Inference: Graph shows that 48% of people are not investing in Mutual fund because of bitter past experience. 14% have not knowledge about mutual funds. 22 % do not believe on this service. 6 % are not able to select the best scheme for them.Company assumes that these investors have lack of advisory. So company should suggest them for investing on basis of professional advisor.

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9. People those interested to know more about mutual fund.

Inference: Graph shows that 86 % of people are interested to know more about mutual funds. This is the great opportunity for the company to increase the investors by making them aware about mutual funds and telling them benefits associated with mutual funds.

LIMITATIONS

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Due to limitation of time and cost constrains a sample size of only 50 respondents are chosen.

Data Analysis and interpretation done may not be that strong due to small sample and ‘Convenience Sampling Method’.

The sample extent for research is only INDIA.

Some of the respondents may be biased in giving responses.

My inexperience in research area might have affected results.

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GLOSSARY

Corporate advisory services

Merchant bankers offer customised solutions to solve the financial problems of their clients. Merchant bankers study the working capital practices that exist within the company and suggest alternative policies. They also advise the company on rehabilitation and turnaround strategies, which would help companies to recover from their current position. They also provide advice on appropriate risk management strategies.

Loan syndication

Arrangement of loans for clients, by analysing their cash flow pattern, so that the terms of borrowing meet the client’s cash requirements and offer assistance in loan documentation procedures.

Portfolio

Total number of all holdings held by a company is called portfolio. The portfolio mix is aimed at spreading the risk over different sectors. It consists of all assets of company.

NAV

Net Asset Value is the current market worth of the mutual fund shares. It is calculated daily by taking the funds total asset securities, cash and any accrued earning deducting liabilities, and dividing the reminder by the number of shares outstanding.

Depository

The principal function of a depository is to dematerialize securities and enable their transactions in book-entry form. A depository established under the Depositories Act can provide any service connected with recording of allotment of securities or transfer of ownership of securities in the record of a depository.

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Capital gain

The profit made from selling shares, mutual funds etc.

IPO

Abbreviation for Initial Public Offering. Generally associated with admission to listing of the share capital on the stock exchange.

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Questionnaire

1. Which are the investment tools you invest in?[ ] Bank Fixed Deposit[ ] RBI Bonds [ ] Mutual Funds[ ] Equities[ ] others (Please specify)

Re2. You primarily invest for (Rank according to your preference)[ ] Returns[ ] Liquidity[ ] Savings[ ] Tax Benefits

4. Rank the investments options according to you preference ofInvestment.[ ] Bank Fixed Deposit[ ] RBI Bonds[ ] Mutual Funds[ ] Equities[ ] Any other (Please specify)

5. What is the frequency of you investments?[ ] Once a Month[ ] Once in 6 Months[ ] Once a Year

6. Do you invest in Mutual Funds?[ ] Yes[ ] No

7. If the answer to question 9 is "Yes"

a.)Are you aware of the various schemes offered by Mutual Funds?[ ] Yes[ ] No[ ] Few

b.)Do you know that you can get Tax Advantages by investing in Mutual Funds?[ ] Yes[ ] No[] Not Sure

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c.)On whose external advice do you invest?[ ] Bank[ ] Distributor[ ] Agents[ ] Direct investments[ ] C.A.d.)Which types of Mutual Fund do you invest in?[ ] Debt[ ] Equities[ ] Balanced

8.If the answer to question 9 is "No"

You do not invest in Mutual Fund because of (you may give multiple answers)

[ ] Bitter past experience[ ] Lack of Knowledge[ ] Lack of confidence in service being provided [ ] Difficulty in selection of schemes[ ] In-efficient investment advisors

9. If Mutual Fund offer you Steady Returns, Tax Benefits, Liquidity, Diversification of Portfolio, Lesser Risk would consider it as an investment option in the future for you?[ ] Yes[ ] No[ ] May be

10. Would you be interested to know more about Mutual Funds?[ ] Yes[ ] No

Name : ……………..……………….

Age :……………………………….

Occupation:………………………………

Mobile No. :……………………………...

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BIBLIOGRAPHY

1. www.mutualfundsindia.com2. www.amfiindia.com3. www.themanagementor.com4. www.dewb-vc.com5. www.karvy.com6. www.indiacorporateadvisor.com7. www.nsdl.co.in8. www.incometaxdelhi.nic.in9. www.incometaxindia.gov.in10. D.C.Anjaria & Dhaivat Anjaria, “AMFI Workbook”, Ed. – 2 (Association of

Mutual Funds in India)

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