Soaib Finalk Doc

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INTRODUCTION OF MUTUAL FUNDS

Mutual funds have become a very popular way to take some of the risk out of investing in individual

stocks by investors. Mutual funds are a collection of stocks selected by mutual fund seller and sold

to investors as shares in a fund. There are several types of funds that you can invest in. Some of the

more popular types are technology funds, growth funds, security funds, and income funds. Mutual

funds are very popular because they allow you to invest in a numbers of stocks therefore greatly

reducing the risks associated with putting you money in an individual stock. Mutual funds have

become one of the most attractive ways for the average person to invest their money. A mutual

fund pools resources from thousands of investors and then diversifies its investment into many

different holdings such as stocks, bonds, or government securities in order to provide high relative

safety and returns. Mutual Funds now represents perhaps the most appropriate opportunity for

most investors. It is no wonder that birthplace of mutual funds - the U.S.A.- the fund industry has

already overtaken the banking industry. The Indian industry has already started opening up many of

the exciting investment opportunities to Indian investors. Though not insured like banks, mutual

funds generally provide more return than the current one to two percent obtainable through banks

while still being one of the safest ways to grow your money. There are an endless variety of mutual

fund investment choices depending on the degree of risk you feel comfortable with. Mutual Funds

have emerged as professional intermediaries. Besides providing the expertise in stock market

investing, these funds allow investing in small amounts and yet holding a diversified portfolio to a

limit.

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 and started its operations in 1964 with the issue of units under the scheme US-64. The

history of mutual funds in India can be broadly divided into four distinct phases: - First Phase- 1964-

87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. 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 NationalBank 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 LTI 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 Fourth Phase - since February 2003


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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 October 31, 2003, there were 31 funds, which manage

assets of Rs. 126726 crores under 386 schemes. Erstwhile UTI was bifurcated into UTI Mutual Fund

and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets

under management of the Specified Undertaking of the Unit Trust of India has therefore been

excluded from the total assets of the industry as a whole from February 2003 onwards. Currently

Public Sector Banks like SBI, Canara Bank, Bank of India, institutions like IDBI, GIC, LIC Foreign

Institutions like Alliance, Morgan Stanley, Templeton and Private financial companies like HDFC,

Prudential ICICI, DSP Merrill Lynch, Sundaram, Kotak Mahindra etc. have floated their own mutual

funds.

WHAT IS MUTUAL FUND? A Mutual Fund is a vehicle for investing in stocks and bonds. It is not an

alternative investment option to stocks and bonds; rather it pools the money of several investors

and invests this in stocks, bonds, money market instruments and other types of securities. Buying a

mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a

proportional share of the fund's gains, losses, income and expenses. A Mutual Fund is a body

corporate registered with the Securities and Exchange Board of India (SEBI), that 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. In

other words, a mutual fund allows an investor to indirectly take a position in a basket of assets. A

mutual fund pools together sums from individual investors and invests it in various financial

instruments. Each mutual fund has its own investment objective. Mutual funds have become one of

the most attractive ways for the average person to invest their money. A mutual fund poolsresources from thousand of investors and then diversifies its investment into many different

holdings such as stock, bonds, and securities in order to provide highly relative safety and returns.

Each Mutual Fund with different type of schemes is managed by respective Asset Management

Company (AMC). An investor can invest his money in one or more schemes of Mutual Fund

according to his choice and becomes the unit holder of the scheme. The invested money in a

particular scheme of a Mutual Fund is then invested by fund manager in different types of suitable

stock and securities, bonds and money market instruments. Each Mutual Fund is managed by

qualified professional man, who use this money to create a portfolio which includes stock and

shares, bonds, gilt, money-market instruments or combination of all.

DISTINGUISHING CHARACTERISTICS OF MUTUAL FUND


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The traditional, distinguishing characteristics of the mutual fund may include the following:

#> Investors purchase mutual fund shares from the fund itself (or through a broker for the fund)

instead of from other investors on a secondary market

#> The price that investors pay for mutual fund shares is the fund's per share net asset value (NAV)plus any shareholder fees that the fund imposes at the time of purchase (such as sales loads).

#> Mutual fund shares are "redeemable," meaning investors can sell their shares back to the fund

(or to a broker acting for the fund).

#> Mutual funds generally create and sell new shares to accommodate new investors. In other

words, they sell their shares on a continuous basis, although some funds stop selling when, for

example, they become too large.

#> The investment portfolios of mutual funds typically are managed by separate entities known as

"investment advisers" that are registered with the SEBI. MAJOR RIGHTS AS A UNIT HOLDER IN A

MUTUAL FUND Some important rights are mentioned below:

Unit holders have a proportionate right in the beneficial ownership of the assets of the scheme

and to the dividend declared.

They are entitled toreceive dividend warrants within 42 days of the date of declaration of the

dividend.

They are entitled to receive redemption cheques within 10 working days from the date of

redemption.

75% of the unit holders with the prior approval of SEBI can terminate AMC of the fund. 75% of

the unit holders can pass a resolution to wind-up the scheme

REGULATORY BODY FOR MUTUAL FUNDS Securities Exchange Board of India (SEBI) is the regulatory

body for all the mutual funds mentioned above. All the mutual funds must get registered with SEBl.

The only exception is the UTI, since it is a corporation formed under a separate Act of Parliament.

Broad Guidelines Issued by SEBI for a MF: - SEBI is the regulatory authority of Mutual Funds. SEBl has

the following broad guidelines pertaining to mutual funds:

Mutual Funds should be formed as a Trust under Indian Trust Act and should be operated by AssetManagement Companies (AMCs)

. Mutual Funds need to set up a Board of Trustees and Trustee Companies. They should also have

their Board of Directors.

The net worth of the AMCs should be at least Rs.5 crore.

AMCs and Trustees of a Mutual Fund should be two separate and distinct legal entities

The AMC or any of its companies cannot act as managers for any other fund

AMCs have to get the approval of SEBI for its Articles and Memorandum of Association


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All Mutual Funds schemes should be registered with SEBI. Mutual Funds should distribute

minimum of 90% of their profits among the investors

There are other guidelines also that govern investment strategy, disclosure norms and advertising

code for mutual funds

ROLE OF A FUND MANAGER Fund managers are responsible for implementing a consistent

investment strategy that reflects the goals and objectives of the fund. Normally, fund managers

monitor market and economic trends and analyze securities in order to make informed investment

decisions. Thus the role of fund manager is very crucial.

ACCOUNT STATEMENT

When the units are bought or get allotted a statement will be issued mentioning the number of units

allotted/bought and redeemed by you. The recording of entries would be similar to the passbook

entries in the bank. In mutual fund terminology it is called Account Statement. After investing in a

mutual fund investor gets an account statement, which shows his holding and the price at which

bought units. The account statement is computer generated and cannot be traded or transferred.

The account statement shows the: -

S holding detail

s #> holding details

#> the number of units outstanding

#> value of the holdings All transactions relating to purchase units, redemption of units, dividend,

reinvestment, etc are shown in the account statement.

MUTUAL FUND STRUCTURE The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as

a fund established in the form of a trust by a sponsor to raise monies by the Trustees through the

sale of units to the public under one or more schemes for investing in securities in accordance with

these regulations. These regulations have since been replaced by the SEBI (Mutual Funds)

Regulations, 1996. The structure indicated by the new regulations is indicated as under.

THE SPONSOR: The Sponsor is the creator of the fund, establishes the mutual fund and gets it

registered with SEBI and will typically hold a number of voting shares (perhaps 100) in the fund, but

these are not entitled to any distributions or share in the equity. All of the equity belongs to theinvestors, typically in the form of non-voting "preferred redeemable shares" The voting shares

generally control management of the fund, apart from limited major decisions. The sponsor is the

Settlor of the Trust that holds Trust property on behalf of investors who are the beneficiaries of the

Trust. The sponsor is also required to contribute at least 40% of the capital of the asset management

company, which is formed for managing the assets of the Trust. THE BOARD OF TRUSTEES: The

mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be

in the form of a deed registered under the provisions of the Indian Registration Act, 1908. The

supervisory role is fulfilled by the Board of Trustees of the Investment Company. The board of

trustees manages the MF and the sponsor executes the trust deeds in favour of the trustees. It is the


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job of the MF trustees to see that schemes floated and managed by the AMC appointed by the

trustees are in accordance with the trust deed and SEBI guidelines.

THE ASSET MANAGEMENT COMPANY (AMC): The company that manages a mutual fund is called an

AMC. For all practical purposes, it is an organized form of a "money portfolio manager". An AMC

may have several mutual fund schemes with similar or varied investment objectives.

The AMC hires a professional money manager, who buys and sells securities in line with the fund's

stated objective.

All Asset Management Companies (AMCs) are regulated by SEBI and/or the RBI (in case the AMC is

promoted by a bank). In addition, every mutual fund has a board of directors that represents the

unit holders' interests in the mutual fund.

This entity that undertakes the designing and marketing of schemes, raises money from the public

under the schemes and manages the money on behalf of its owners. To segregate the collected

funds from this entity's own funds, the corpus is placed in a legal vehicle. It is the character of this

legal vehicle that determines the character of the Fund itself. Irrespective of the nature of the

structure, what is more fundamental is that in view of the fiduciary role of the AMC or the fund

manager towards the public, there is a need for supervision of the activities of the AMC or fund

manager by a separate body.

The assets of the Trust comprise of properties of the schemes, which are floated by the asset

management company with the approval of the Trustees Schemes may have different characteristics

- they may be open or closed ended or may have a particular investment focus or portfolio

composition.

Finally, the safe custody of assets of the Trust is entrusted to one or more custodians. THE

CUSTODIAN: Custodian holds the fund's cash and investment assets. Commonly, parts of the fund's

assets are held by one or more brokers who execute trades on behalf of the fund Custodial Fees can

also be a fixed fee or a percentage of NAV. Where a broker acts as de facto custodian, it usually

charges on a transactional basis.

Apart from these four there is registrar or a transfer agent who acts as a key party

THE ADMINISTRATOR: Administrator acts as registrar and transfer agent, keeps the books and

records of the fund, and calculates the NAV. Depending on the complexity of the fund, theadministrator's fees could be as little as a few thousand dollars a year or as much as 0.5 to 0.65 % of

the NAV per annum. Sometimes the administrator's fees are included within the management fee. In

certain situations, the administrator subcontracts a part of the work, particularly the NAV

certification, to the investment manager

REGULATIONS OF MUTUAL FUNDS IN INDIA In India SEBI and RBI act as regulators of mutual fund.

#> SEBI (Mutual Fund) REGULATIONS,1996 The provisions of this regulations pertaining to AMC are:

All the schemes to be launched by the AMC need to be approved by the trustees and copies of

offer document of such schemes are to be filed with SEBI.


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The offer document shall contain adequate disclosure to enables the investor to make informed

decision.

Advertisement in respect of schemes should be in conformity with the SEBI prescribed

advertisement code, and discloses the method and periodicity of the valuation of investment sales

and repurchase in addition to the investment objectives.

The listing of close ended schemes is mandatory and every close ended scheme should be listed on

a recognized stock exchange with in six months from the closure of subscription. However, listing is

not mandatory in case the scheme provides for monthly income or caters to the special classes of

persons like senior citizen, women, children, and physically handicapped. If the scheme discloses

detail of repurchase in the offer document: if the schemes opens for repurchase with in six months

of closure of subscription.

Units of a close ended scheme can be opened for sale or redemption at a predetermined fixed

interval if the minimum and maximum amount of sale, redemption, and periodicity is disclosed inthe offer document.

Units of a close ended scheme can also be converted into an open ended scheme with the consent

of majority of the unit holder and disclosure is made in the offer document about the option and

period of conversion.

Units of a close ended scheme may be rolled over by passing resolution by a majority of the

shareholders.

No scheme other than unit linked schemes can be opened for more than 45 days.

The AMC must specify in the offer document about the minimum subscription and the extent of

over subscription, which is intended to be retained. In the case of over subscription, all applicants

applying up to 500 units must be given full allotment subjected to over subscription.

The AMC must refund the application money if minimum subscription is not received and also the

excess over subscription with in the six weeks of closure of subscription.

Guaranteed returns can be provided in a scheme if such returns are fully guaranteed by the AMC

or sponsor. In such cases, there should be a statement indicating the name of the person, and the

manner in which the guarantee is to be made must be stated in the offer document.

A close ended scheme shall bewound up on redemption date, unless it is rolled over, or if 75% of

the unit holders of a scheme pass a resolution of winding up of the scheme : if the trustee on

happening of any event, requires the scheme to be wound up: or if SEBI, so directed in the interest

of investors. #> Investment objectives and valuation policies :- The price at which the units may be

subscribed or sold and the price at which such units may at any time repurchase by mutual fund

shall be made available to the investor.

#> General obligation

Every asset management company for each scheme shall keep and maintain proper books ofaccount, records and document, for each scheme so as to explain its transaction and to disclose at


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any point of time the financial position of each scheme and in particular give true and fair view of

state of affairs of the fund and intimate to board the place where such books of account, record, and

document are maintained.

The financial year for all the schemes shall end as on march 31 of each year. Every mutual fund or

the asset management company shall prepare in respect of scheme and the fund as specific in

eleventh schedule.

Every mutual fund shall have the annual statement of account audited by an auditor who is norin

any way associated with the auditor of the asset management company.

#> Procedure in case of default On and from the date of suspension of the certificate or the approval

as the may be, the mutual fund trustees or asset management company, shall cease to carry on any

activity as a mutual fund, trustee or asset management company , during the period of suspension,

and shall be subjected to the directions of the board with regard to any records, documents, or

securities that may be in its custody or control, relating to its activities as mutual fund, trustee, orasset management company

. #> SEBI Guidelines (2001-02) Relating to Mutual Fund:-

A common format is prescribed for all mutual fund schemes to disclosed their entire portfolio of

half yearly basis so that the investors can get meaningful information on the deployment of funds.

Mutual funds are also required to disclose the investment in various types of instruments and

percentage of in each script to the total NAV illiquid and non performing assets, investments in

derivatives and in ADRs and GDRs.

To enable the investor to make informed investment decision, mutual funds have been directed to

fully revise and update offer document and memorandum at least once in two years.

#> Mutual funds are also require to:- i. Bring uniformity in disclosure of various categories of

advertisements, with a view to ensuring consistency and comparability across schemes of various

mutual funds. ii. Reduce initial offer period from a maximum of 45 days to 30 days. iii. Dispatch

statement of account once the minimum subscription amount specified in offer document is

received even before the closure of the issue. iv. Invest in mortgaged backed securities of

investment grade given by credit rating agency. v. Identify and make a provision for non performing

asset (NPAs) according to criteria for classification of n NPAs and treatment of income accrued on

NPAs to disclose NPAs in half yearly portfolio reports. vi. Disclose information in a revised format on

unit capital, reserves, performance in terms of dividend and rise/fall in NAV during the half year

period annualized yield over the last 1, 3, 5 years in addition to percentage of management fee,

percentage of recurring expenses to net asset, investment made in associate companies, payment

made to associate companies, payment made to associate companies for their services, and detail of

large holding, since their operation. vii. Declare their NAVs and sale/repurchase prices of all schemes

updated on regular basis on the AMFI website by 8.00 PM and declare NAVs of their close ended

schemes on every Wednesday.

The format for unaudited half yearly result for the mutual funds has been revised by SEBI. These

results are to be published before the expiry of one month from the close of each half-year as


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against two month period provided earlier. These results shall also be put in their websites by

mutual fond.

All the schemes by mutual fund shall be launched with in six months from the date of the letter

containing observation from SEBI on the scheme offer document. Otherwise, a fresh offer document

along with filing fee shall be filled with SEBI.

Mutual funds are required to disclose large unit-holding in the scheme, which are over 25% of the

NAV.

#> RBI as supervisor of bank owned Mutual

The first non-UTI mutual funds were started by public sector banks. Banks come under the

regulatory jurisdiction of RBI. So Bank owned mutual funds are regulated by RBI, but it has been

clarified that all the mutual funds, being primarily capital market players come under the regulatory

framework of SEBI. Thus, the bank owned fund continue to be under the joint supervision of both

RBI and SEBI. It is generally understood that all market related and investor related activities of the

fund are to be supervised by SEBI, while any issue concerning the ownership of the AMC by bank fall

under the regulatory ambit of RBI. But RBI on bank fund should not conflict with SEBI guidelines. #>

RBI as supervisor of money market mutual funds RBI is the only Government agency that is charged

with the sole responsibility of overall entities that operates in money market. So money market

mutual funds were regulated by RBI guidelines till 23.11.1995. Recently it has been decided that

money market mutual funds of registered mutual fund will be regulated by SEBI through the same

guidelines issued for other mutual funds, i.e. SEBI (MF) regulations, 1996. However RBI does retain

the right to decide whether mutual funds will be allowed to access inter-call money market.

Accordingly, RBI has placed certain restrictions through latest credit policy, with the intention ofmoving toward a pure inter bank money market

. CALCULATION OF NAV Net asset value on a particular date reflects the realizable value of a mutual

fund's portfolio in per share or per unit terms. It is the worth of an investment with an open-end

mutual fund quoted in terms of its net asset value. That is also the amount an investor can expect if

he or she were to sell his or her units back to the issuer. Daily closing prices of all securities held by

the fund are used as a starting point. Subtract this amount for liabilities (including expenses and

commissions). And divide the result by the number of outstanding shares. If the realizable worth of

the portfolio is Rs 12 million, divided it by shares outstanding, let's say one million units, then the

NAV is Rs 12 (12/1). If a fund's NAV a year ago was Rs 10.5 and is currently Rs 12, then your pre-taxreturn is 14.28 percent((12-10.5)/(10.5)*100). An NAV signifies nothing more than the current worth

of a portfolio. The NAV of a fund only starts to make sense when compared to a benchmark index.

First, it tells you the extent to which the securities that comprise the fund's portfolio have

outperformed or under performed the index. Second, the use of certain statistical measures can also

tell you whether a fund was able to derive above-average, risk-returned schemes.

Having said this, a fund's historical NAV performance is not the best indicator of its future

performance. For equity funds, this NAV changes almost everyday with fluctuations in stock prices.

While the NAV of a fixed-income fund is driven more by changes in rate of interest. On its own, a

rising NAV only means that assets, which form a part of the fund's portfolio, are rising and vice-versa.


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TYPES OF MUTUAL FUNDS Mutual fund schemes may be classified on the basis of its structure and

its investment objective.

ON THE BASIS OF STRUCTURE; On the basis of structure mutual fund can be either open-ended or

close-ended. Most mutual funds are open-end funds, which means the fund sells and redeems its

shares. As more shares are sold, the fund grows. Sometimes open-end funds are closed to new

investors when the funds become too large to be managed effectively-though current shareholders

can continue to invest money. When a fund is closed this way, the investment company offering the

fund often creates a similar fund to capitalize on investor interest. Closed-end fund are traded on

the major exchanges, as stocks are. There are a fixed number of shares available because a closed-

end fund raises its money all at once and does not buy back shares investors want to sell. Closed-end

fund shares often trade at a discount, or less than their net asset value, but you may pay a premium,

or more than the NAV, if the fund is in demand. Their prices change constantly throughout the

trading day, unlike open-end funds whose prices are set only once, at the end of the day.

DIFFERENCE BETWEEN THE TWO

The difference between the two is in the way each operates after the initial public offering. A close-

ended scheme operates like any other public entity whose shares are traded on the stock market.

Thus, to buy or sell the shares of a close-ended scheme, you have to transact on the BSE or on the

NSE. That's why the market price of its shares is also determined by > supply and demand for its

shares (apart from quality and performance of its portfolio). On the contrary, open-ended funds

continue to price, sell and repurchase shares after the initial offer on the basis of the NAV. The

mutual fund is ready to sell additional shares of the fund at the NAV (at par or adjusted for

expenses), or buy back (redeem) shares of the fund at the NAV (at par or adjusted for expenses).

That's why the unit capital of open-ended funds can fluctuate on daily basis. But a close-ended fund

may or may not offer more shares after its listing. It may or may not also repurchase its shares. That

is up to the issuing company to decide.

So we can say that in an open-ended mutual fund there are no limits on the total size of the corpus.

Investors are permitted to enter and exit the open-ended mutual fund at any point of time at a price

that is linked to the net asset value (NAV). In case of closed-ended funds, the total size of the corpus

is limited by the size of the initial offer. OTHER SCHEMES

: TAX SAVING SCHEME Equity Linked Savings Schemes (ELSS): Equity Linked Saving Schemes (ELSS)

are open-ended funds investing predominantly in equity-oriented instruments. Under Section 88 ofthe Income Tax Act, 1961 investments up to Rs. 10000 in equity linked savings schemes (ELSS)

qualifies for the tax rebate of 20% or 15%. (Investors with gross total income of up to Rs.1.50 Lacs

can claim a rebate of 20% while investors with gross total income of Rs. 1.5 Lacs to Rs.5 Lacs can

claim a rebate of 15%). The funds launched under this plan are largely diversified equity funds. The

investment strategy for most of the funds is similar to investment strategy followed by the fund

under diversified equity funds.

ON THE BASIS OF INVESTMENT OBJECTIVE: When it comes to investing in mutual funds, investors

have literally thousands of choices. Before investing in any given fund, decide whether the

investment strategy and risks of the fund are a good fit for you. The first step to successful investingis figuring out financial goals and risk tolerance. Once you know what you're saving for, when you'll


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need the money, and how much risk one can tolerate, one can more easily narrow your choices.

Most mutual funds fall into one of three main categories equity funds (also called "stock" funds),

debt funds (also called "bond" funds) and balanced funds (also called "hybrid" funds). Each type has

different features and different risks and rewards. Generally, the higher the potential return, the

higher the risk of loss. The schemes or funds (often used synonymously) can be classified as:

SCHEMES

Equity Funds Debt Funds Balanced funds

#> EQUITY FUNDS: They are also known as growth funds. They focus on stocks that may not pay a

regular dividend but have potential for large capital gains. They promise pure capital appreciation

with equity shares. They buy shares in companies with high potential for growth (some of which

might not pay dividends). The NAV of such a fund will tend to be erratic, since these so-called growth

shares experience high price volatility. They also make quick profits by investing in small cap shares

and by investing in initial public offerings of small companies. However, growth strategy may differ

from one fund to another. Not all growth funds operate similarly. Some of the common equity funds

are:

#> Sector funds: The goal is once again pure capita! appreciation, but the strategy is to buy into

shares of only one industry. And not diversify like a growth fund. Such funds forgo the principle of

asset allocation for high returns. That's why they are also the riskiest.

#> Tax planning funds: Also known as equity linked savings schemes, they operate like any other

growth fund (and that's why are as risky). However, an investor in these schemes gets an income-tax

rebate of 20 per cent (for a maximum of Rs 10,000) under Section 88 of the Income Tax Act.

Essentially an incentive for the investor (who is otherwise investing in fixed-income instruments likethe Public Provident Fund primarily for saving tax on his or her annual salary or business income) a

chance to participate in capital appreciation that can be delivered by investing in equity shares.

That's also why these schemes also come with a three-year lock-in period. Also while other tax

planning schemes guarantee returns, an ELSS offers no such assurance.

#> Index fund: Their goal is to match the performance of the markets. They do not involve stock

picking by so called professional fund managers. An index fund essentially buys into the stock market

in a way determined by some market index (BSE Sensex or S&P CNX Nifty) and does almost no

further trading. Index funds are optimally diversified portfolios and only carry along with it the due

to economy-wide factors.

#> DEBT FUNDS: They aim to provide safety of principal and regular (monthly, quarterly or semi

annually) income by investing in bonds, corporate debentures and other fixed income instruments.

The AMC in this case will also be guided by ratings given to the issuer of debt by credit rating

agencies. Wherever a debt instrument is not rated, specific approval of the board of the AMC is

required. Since most of corporate debt is illiquid, the fund tries to provide liquidity by investing in

debt of varying maturity. Some of the common debt funds are: #> Money market funds: Also known

as liquid plans, these funds are a play on volatility in interest rates. Most of their investment is in

fixed-income instruments with maturity period of less than a year. Since they accept money even for

a few days, they are best used to park short-term money, which otherwise earns a lower return in asavings bank account. #> Gilt funds: They are aimed at generating returns commensurate with zero


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credit risk, which is by investing securities created and issued by the central and/or the state

government securities and/or other instruments permitted by the Reserve Bank of India. Since they

ensure zero risk, instant liquidity, tax-free income, their return is lower than an income fund. #>

BALANCED FUNDS:

The idea is to get the best of both the world's equity shares and debt. These are also known as

hybrid funds. Investing in equities is supposed to bring home capital appreciation, while that in fixed

income is to impart stability and assure income for distribution. The proportion of the two asset

classes depends on the fund managers' preference for risk against return. But because the

investments are diversified, investors reduce their market risk. Normally about 50 to 65 per cent of a

portfolio's assets are invested in equity shares.

TYPES OF LOADS

The AMC that manages your mutual fund has to bear a number of expenses. So it recovers part of

these expenses from its investors, for whom it is doing the favour of managing funds. It is brokeninto two parts: annual management fee (up to 1.25 per cent for funds less than Rs 1 billion and one

per cent for funds above Rs. 1 billion) and entry & exit loads.

ENTRY LOAD: Loads normally apply to only open-ended schemes. An entry load is also called the

sales load. which is mainly to help the AMC recover expenses relating to sales literature, distribution,

advertising and agent/broker commissions. The price at which an investor buys into the fund is a

function of both the NAV and sales load. An entry load is an additional cost that an investor pays at

the point of entry. Assume that your proposed investment is Rs. 10, OOO/-. Also assume that the

current NAV of the fund is Rs. 12.00 and that the entry load is Rs.0.50. Then you will receive

10000/12.50 = 800 units. The entry load could be different for each scheme; it would also depend onthe amount of investment and the time period of investment.

EXIT LOAD: On the other hand, exit load (if you withdraw within a specified period) is charged while

redeeming your units. The latter is for more logical reasons, especially with income or money market

funds, where a quick withdrawal by too many investors can put pressure on the fund's asset

maturity profile. So to ensure that longer-term investors are not penalized, short-term investors are

charged an exit load. An exit load is levy that an investor pays at the point of exit. This is levied to

dissuade investors from exiting the fund. Assume that the current NAV of the fund is Rs. 12.00 and

that the exit load is Rs.0.50. Now if you sell 800 units then you stand to receive 800X11.5 = Rs. 9200.

The exit load could be different for each scheme. It would also depend on the amount of investmentand the time period of investment.

VARIOUS PLANS OF MUTUAL FUNDS That depends on the strategy of the concerned scheme. But

generally there are 3 broad categories that any Mutual Fund scheme offers: - #> A Dividend Plan

entails a regular payment of dividend to the investors.

#> A Reinvestment Plan is a plan where these dividends are reinvested in the scheme itself.

#> A Growth Plan is one where no dividends are declared and the investor only gains through capital

appreciation in the NAV of the fund. The term 'growth' is often used in a very generic sense to

denote every equity mutual fund. Also 'growth' in fixed income funds, comes from reinvesting

dividends. That's why in such fixed income funds, investors have an option, and they can choose


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either growth through reinvestment of dividends, or regular income by ticking on the income option.

HOW TO CHOOSE A PLAN It depends on investment object of the investor, which again depends on

his income, age, financial responsibilities, risk taking capacity and tax status. For example a retired

government employee is most likely to opt for monthly income plan while a high-income youngster

is most likely to opt for growth plan. SYSTEMATIC INVESTMENT PLAN Besides these three plans

there is one another plan whish is becoming popular that is systematic investment plan. A

systematic investment plan is one where an investor contributes a fixed amount every month and at

the prevailing NAV the units are credited to his account. Today many funds are offering this facility.

A systematic investment plan (SIP) offers 2 major benefits to an investor: #> It avoids lump sum

investment at one point of time #> In a scenario of falling prices, it reduces your overall cost of

acquisition by a process of rupee-cost averaging. This means that at lower prices you end up getting

more units for the same investment.

HOW MUTUAL FUND WORKS

For retail investor who does not have the time and expertise to analyze and invest in stocks and

bonds, mutual funds offer a viable investment alternative. One can purchase shares in some mutual

funds by contacting the fund directly or other mutual fund shares are sold mainly through brokers,

banks, financial planners, or insurance agents. All mutual funds will redeem (buy back) the shares on

any business day and must send the payment within seven days. One can invest by approaching a

registered broker of Mutual funds or the respective offices of the Mutual funds in that particular

town/city. An application form has to be filled up giving all the particulars along with the cheque or

Demand Draft for the amount to be invested.

The mutual fund issues shares of stock and bonds (just like any other corporation) to investors in

exchange for cash. It is interesting to note that funds do not issue a pre-determined amount of

stock, as do most corporations; new shares are issued as each new investment is made. Investors

thus become part owners of the fund itself, and thereby the assets of the fund. The fund, in turn,

uses investors' cash to purchase securities, such as stocks and bonds. The primary assets of a fund

are the securities it invests in (other assets, such as equipment, are a relatively small part of the total

assets of a fund). Following are the various descriptions needed for the working of mutual fund: How

mutual funds work Buy shares Receive incc-me in a fund Invest in securities Returns increase fund

value

STOCKS BONDS

PRICING AND VALUATION DESCRIPTION. The value of the shares of an open-end mutual fund is

readily determined Each day, the accounting staff of a fund simply adds up the value of all the

securities in the portfolio, adds in other assets, deducts liabilities, and comes up with a net overall

value. It is then a simple matter to divide the net assets by the number of shares outstanding. This is

called the net asset value, and is the price at which investors buy and sell shares from the fund. The

net asset value is listed in the financial section of many major newspapers.' LOAD AND NO-LOAD

FUNDS DESCRIPTION

A load, or loaded, fund is one that has a sales charge. A no-load fund has no sales charge. As noted

above, not all funds have sales charges. Those that do simply add them on to the net asset value ofthe fund, thus coming up with a new, higher offering price per share It is important to note that the


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underlying value of the fund's shares do not change, and further, that an investor selling shares will

still receive only the net asset value A no-load fund is simpler. The net asset value is used for both

the purchase price and the selling price. Therefore, the two prices are always identical. In the case of

a load fund, the broker usually takes care of the details for you. In the case of a no-load fund,

investors usually deal directly with the fund in question.

BUYING AND SELLING FUND SHARES DESCRIPTION. When you buy shares, you pay the current NAV

per share plus any fee the fund assesses at the time of purchase, such as a purchase sales load or

other type of purchase fee. When you sell your shares, the fund will pay you the NAV minus any fee

the fund assesses at the time of redemption, such as a deferred (or back-end) sales load or

redemption fee. A fund's NAV goes up or down daily as its holdings change in value.

FUND OBJECTIVES AND PROSPECTUS DESCRIPTION A fund's objective, described in the prospectus,

gives broad indications of the types of investments a fund may make. The most important aspect of

a fund is its investment objective. The fund's objective tells investors the goals the fund seeks to

achieve, and a good deal about how it intends to achieve them. A balanced fund will generally hold

stocks and bonds. A fund seeking growth fund will utilize stocks. A fund seeking income with little or

no concern for growth will generally hold bonds. The objective of a fund is so fundamental that it

generally determines the category into which a fund will be assigned. Listed below are some

examples of major investment objective categories: - > Preservation of Capital & LiquidityAchieved

by investing in very short-term bonds > IncomeAchieved by investing in bonds > Balanced

Achieved by investing in bonds and stocks > GrowthAchieved by investing in stocks The

prospectus: The Securities and Exchange Commission (SEC) requires all mutual funds to publish a

plain English prospectus and issue a copy to all potential investors either before they buy or along

with the confirmation of their initial investment. The prospectus must explain the programs and

policies the management follows to achieve the fund's investment goals. The prospectus includes:

#> Statement of objective

#> Investor programs

#> Fund fees and expenses

#> Fund performance history

#> Results of investment

#> How to purchase and redeem shares

#> Shareholder services

HOW MUTUAL FUNDS CAN EARN MONEY

A mutual fund can earn money in three different ways.

Dividend Payments A fund may earn income in the form of dividends and interest on the

securities in its portfolio. The fund then pays its shareholders nearly all of the income (minus

disclosed expenses) it has earned in the form of dividends. Capital Gains Distributions They are

paid from any profits the fund realizes from selling investments. The price of the securities a fund

owns may , increase. When a fund sells a security that has increased in price, the fund has a capital


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gain. At the end of the year, most funds distribute these capital gains DISTRIBUTIONS (minus any

capital losses) to investors. Increased NAV If the market value of a fund's portfolio increases after

deduction of expenses and liabilities, then the value (NAV) of the fund and its shares increases. The

higher NAV reflects the higher value of your investment. With respect to dividend payments and

capital gains distributions, funds usually will give a choice: the fund can send a check or other form

of payment, or the dividends or distributions reinvested in the fund to buy more shares (often

without paying an additional sales load. A fund may sell investments for a number of reasons: > To

capitalize on an investment's increased value

> To achieve performance targets

> To free up money to make new investments

> To prevent additional losses in a security that is losing value

> To have enough cash to redeem shares its investors want to sell back to the fund

INFORMATION NEEDS TO EVALUATE MUTUAL FUNDS

There are three key pieces of information that help to evaluate a mutual fund.

PAST PERFORMANCE: It measures the fund's historical returns, whether the returns are

consistent, and how they stack up against the returns of comparable funds. While there's no

guarantee that a fund's future performance will equal its current or past record.

RISK: It measures how likely you are to earn money or lose it. Risk isn't bad if you're investing for

the long term and you can tolerate some setbacks without selling in a panic if the fund drops in

value. But if you're investing to meet short-term goals or preserve capital, you may want a fund that

poses less risk to principal.

COST: It measures how much you pay in sales charges or commissions, fees, and annual asset-

based expenses. Since these costs directly affect your return, you may want to compare the expense

ratios and sales charges of various funds as part of your evaluation process. Higher fees may

correlate with higher risk if the fund manager takes added risk to help reduce the impact of fees on

return.

FACTORS TO CONSIDER

Thinking about long-term investment strategies and tolerance for risk can help to decide what type

of fund is best suited. But one should also consider the effect that fees and taxes will have on the

returns over time.

DEGREES OF RISK Mutual fund investments are not totally risk free. In fact, investing in mutual

funds contains the same risk as investing in the markets, the only difference being that due to

professional management of funds the controllable risks are substantially reduced. A very important

risk involved in mutual fund investments is the market risk. When the market is in doldrums, most of

the equity funds will also experience a downturn. However, the company specific risks are largely

eliminated due to professional fund management All funds carry some level of risk. One can losesome or all of the money invests principal -because the securities held by a fund go up and down in


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value. Dividend or interest payments may also fluctuate as market conditions change. Before

investing, be sure to read a fund's prospectus and shareholder reports to learn about its investment

strategy and the potential risks. Funds with higher rates of return may take risks that are beyond

your comfort level and are inconsistent with your financial goals. Financial theory-states that an

investor can reduce his total risk by holding a portfolio of assets instead of only one asset. This is

because by holding all your money in just one asset, the entire fortunes of your portfolio depend on

this one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced.

HOW SAFE ARE MUTUAL FUNDS:

As financial intermediaries, they do not come without risk. Also when defined in terms of losing

money, the risk in mutual funds is not dramatically different than that present in other financial

instruments. Still, they are relatively safer and offer a more convenient way on investing. With

mutual funds you can control risk by choosing a fund that given your risk profile., you believe is the

best. On the other hand, picking stocks individually that will both meet your objectives and match

your profile can be tough.

A mutual fund portfolio is also easier to monitor than individual shares. They also come without

systemic risks (like bad deliveries). They offer quick liquidity Most private mutual funds can be

redeemed in three to four working days, unlike a fixed deposit that is more likely to be received a

month after its maturity, or an equity share after the end of its settlement period (or depending up

on your broker). This too cuts the overall risk associated with investing, often not so visible and

hence not accounted by many investors.

TAX CONSEQUENCES

When an individual stock or bond is bought and hold, income tax has to be paid each year on the

dividends or interest received. Mutual funds are different. When you buy and hold mutual fund

shares, you will owe income tax on any ordinary dividends in the year you receive or reinvest them.

And, in addition to owing taxes on any personal capital gains when you sell your shares, you may

also have to pay taxes each year on the fund's capital gains. That's because the law requires mutual

funds to distribute capital gains to shareholders if they sell securities for a profit that can't be offset

by a loss Tax Exempt Funds If you invest in a tax-exempt fund - - such as a municipal bond fund - -

some or all of your dividends will be exempt from federal (and sometimes state and local) income

tax. But if you receive a capital gains distribution, you will likely owe taxes even if the fund has

had a negative return from the point during the year when you purchased your shares. SEC rulesrequire mutual funds to disclose in their prospectuses after-tax returns. In calculating after-tax

returns, mutual funds must use standardized formulas similar to the ones used to calculate before-

tax average annual total returns. When comparing funds, be sure to take taxes into account.

RETURNS

As per SEBI Regulations, mutual funds are not allowed to assure returns. However, funds floated by

AMCs of public sector banks and financial institutions were permitted to assure returns to the unit

holders provided the parent sponsor was willing to give an explicit guarantee to honor such a

commitment. But in general, mutual funds cannot assure fixed returns to their investors. Investors

need to be clear that mutual funds are essentially medium to long-term investments Hence, short-term abnormal profits will not be sustainable in the long run. But in the medium to long run the


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mutual funds tend to outperform most other avenues of investments at the same time avoiding the

risk of direct investment accompanied with professional fund management.

ADVANTAGES AND DISADVANTAGES

Every investment has advantages and disadvantages. But it's important to remember that featuresthat matter to one investor may not be important to you. Whether any particular feature is an

advantage for you will depend on your unique circumstances. For some investors, mutual funds

provide an attractive investment choice because they generally offer the following advantages:

Professional Management Professional money managers research, select, and monitor the

performance of the securities the fund purchases. Diversification - - Diversification is an investing

strategy that can be neatly summed up as "Don't put all your eggs in one basket." Spreading your

investments across a wide range of companies and industry sectors can help lower your risk if a

company or sector fails. Some investors find it easier to achieve diversification through ownership of

mutual funds rather than through ownership of individual stocks or bonds. Affordability - - Some

mutual funds accommodate investors who don't have a lot of money to invest by setting relatively

low amounts for initial purchases, subsequent monthly purchases or both. Liquidity & flexibility

Mutual fund investors can readily redeem their shares at the current NAV plus any fees and charges

assessed on redemption at any time Through features such as regular investment plans, regular

withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds

according to your needs and convenience. Easy entry and exit -- Filling a mutual fund application or a

redemption form is all that it takes while entering or exiting a mutual fund. But with equity shares,

you need to have an account with a stockbroker (for buying & selling) and another with a depository

participant. Some investors may find this cumbersome. Tax benefitsSection 88 for Equity Linked

Saving Schemes, ability to reinvest your proceeds from capital gains into mutual funds under section

54EA & 54EB and tax-free status for equity oriented funds for three years starting from April 1, 1999

are popular benefits that investors in mutual funds can avail of. TransparencyOne get regular

information on the value of the investment in addition to disclosure on the specific investments

made by ones scheme, the proportion invested in each class of assets and the fund manager's

investment strategy and outlook. Well RegulatedAll Mutual Funds are registered with SEBI and

they function within the provisions of strict regulations designed to protect the interests of

investors. The operations of Mutual Funds are regularly monitored by SEBI.

But mutual funds also have features that some investors might view as Disadvantages, such as:

#> Costs Despite Negative Returns -- Investors must pay sales charges, annual fees, and other

expenses regardless of how the fund performs. And, depending on the timing of their investment,

investors may also have to pay taxes on any capital gains distribution they receive even if the fund

went on to perform poorly after they bought shares.

#> Lack of Control - - Investors typically cannot ascertain the exact make-up of a fund's portfolio at

any given time, nor can they directly influence which securities the fund manager buys and sells or

the timing of those trades.

#> Price Uncertainty - - With an individual stock, you can obtain real-time (or close to real time)

pricing information with relative ease by checking financial websites or by calling your broker. Youcan also monitor how a stock's price changes from hour to hour or even second to second. By


17/24

contrast, with a mutual fund, the price at which you purchase or redeem shares will typically depend

on the fund's NAV, which the fund might not calculate until many hours after you've placed your

order. In general, mutual funds must calculate their NAV at least once every business day.

OBJECTIVES OF STUDY

Following are the objectives of the study: 1

To know about investors' investment preferences.

2 To check awareness level of people about mutual funds.

3. To work out potential market for mutual funds.

4. To access the satisfaction level of mutual funds investors and to find out the reasons for

dissatisfaction

. 5. To check factors considered by investors while investing in mutual funds.

6. To work out the potential market for Mahindra & Mahindra Finsmart

RESEARCH METHODOLOGY

Research Methodology - is a way to systematically solve the research problem. The Research

Methodology includes the various methods and techniques for conducting a research Marketing

Research is the systemic design, collection, analysis and reporting of data and finding relevant

solution to a specific marketing situation or problem." D. Slesinger and M. Stephonson in the

encyclopedia of Social Sciences define research as "the manipulation of things, concepts or symbolsfor the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids

in construction of theory or in the practice of an art." Research is, thus, an original contribution to

the existing stock of knowledge making for its advancement.

The purpose of Research is to discover answers to he questions through the application of scientific

procedures. My project had a specific framework for collecting data in an effective manner. Such

framework is called ^'Research Design".

I follow the research process consisted of following steps:

A. Defining the problems and research objectives: It is said, " a problem well defined is half solved."The first step done was to define the project under study and decided the research objective. The

project undertaken by me was- Consumer awareness about Mutual Funds The objective of my

research was to know the customer awareness about the working of Mutual funds provided by

Mahindra & Mahindra and to work out the potential market for Mahindra & Mahindra. B Developing

the research plan: The second stage of my study consisted of developing the most efficient plan for

gathering the relevant data. The method adopted by me for carrying out study was as followed: #>

Sampling Plan: Sampling can be defined as the section of some part of an aggregate or totality on

the basis of which the judgment or an inference about aggregate or totality is made The sampling

plan helps in decision making in the following areas:


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- #> Sampling units- The population that was targeted consists of businessmen, service class,

students, housewives etc.

#> Sample size- The sample size for my study was -100.

#> Sampling procedure- Random sampling method was used. C. Data Collection: Information wascollected from both Primary and Secondary data

#> Primary sources- Primary data are those, which are collected afresh and for the first time, and

thus happen to be original in character. 1 had collected Primary data by conducting surveys through

Questionnaire, which include both open-ended and close-ended questions.

#> Secondary sources- Secondary data are those which have already been collected by someone else

and which already had been passed through the statistical processes. I had collected secondary data

through Magazines, Websites, Newspapers, Books, Journals, Mahindra & Mahindra monthly

magazine etc.

D. Analysis of Data:

After collecting the data the analysis of data had been through various statistical tools and

techniques. The analysis of data required a number of closely related operations such as

establishment of categories, the application of these categories to raw data through coding,

tabulation and then drawing the statistical inferences. The unwieldy data was condensed into few

manageable groups and tables for further analysis. Thus it helped to classify the raw data into some

purposeful and usable categories.

E. Interpretations:

After analysis Interpretations were done i.e. to explain the findings on the basis of analysis

Tabulation of data was done wherein classified data were to put in the form of tables. After

tabulation the analysis work of my project was based on the computation of various statistical

formulae- Percentages, Values, Pie charts and Graphs and Bar Diagrams.

LIMITATIONS

Besides following scientific methodologies the study has come across some limitations.

These are:

1. The sample size is small as compared to the population, so it may not he the true representative.

2. Due to limited time countrywide survey was not possible. Hence only BANGALORE city has been

taken for the study.

3. Some people were reluctant to fill the questionnaire. They were not willing to disclose their

investment plans.

4. The possibility of respondents being biased cannot be ruled out.

Q1. Do you know about various financial institutions


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#> The objective of this question is to know how many people are familier with them

Responses % Age of Respondents

Yes 60.2%

No 39.8%

Table No. 4.1 Percentage of Familier people Chart No.4.1 Percentage of Respondents Interpretation:

From the above data we can conclude that 60.2% people are aware of different financial institutions

while 39.8% are unaware about it.

Q.2 Monthly income invested. The objective of this question is to know that how much of the

monthly income people invest.


LESS than Rs.5, 000 42.67%

5,000 - 10,000 30%

More than 10,000 27.33%

Table No. 4.2 Monthly income invested Chart No. 4.2 Monthly income invested Interpretation: From

the above data we can conclude that 42.67% of people invest their monthly income less than Rs.5,

000, 30% of people invest Rs.5,000-10,000% whereas 27.33% of people invest their monthly income

more than 10, 000.

Q.3 Various options for investment and savings. The objective of this question is to find out where

people generally like to invest or save.

Various Instruments % Age of Responses

Savings 42.07%

RDs 6.76%

FDs 20.59%

RBI 0.59%

Shares 4.7%

Mutual Funds 3.53%

Post Office 21.76%

Table No. 4.3 Options for investing or saving

Chart No. 4.3 Options for investing or savins Interpretation: From the data we can conclude that

42.05% people like to invest in savings account, 6.76% in RDs, 20.59% in FDs. 0.59% in RBI Bonds,

4.7% in shares. 3.53% in Mutual Funds and 21.76% in Post Office Deposits.


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Q.4 Awareness about Mutual Fund as a source of investment. The objective of this question is to

know whether people are aware about that Mutual Fund is also an alternate source of investing

their money.

Response % Age of Respondents

Yes 37%

No 63%

Table No. 4.4 Awareness about Mutual Funds

CHART NO. 4.4 Awareness about Mutual Funds Interpretation: From the above data we can

conclude that only 37 % people are aware about this fact while remaining 63% people are unaware

of this

. Q5. Percentage of investors in Mutual Funds.

Response % Age of Respondents

Yes 32.14%

No 67.86%

Table No.4.5 Percentage of investors in Mutual FUNDS

Chart No. 4.5Percentage of investors in Mutual Funds Interpretation: From the above data we can

conclude that only 32.14% people have invested their money in Mutual Funds

. Q.6 Preferable type of mutual fund for investment. The objective of this question is to find out the

type of Mutual Fund in which the people generally invest.

Responses % Age of Responses

Open ended 87%

Close ended 13%

Table No. 4.6Percentage of investors in different types

Chart No. 4.6 Percentage of investors in different types Interpretation: From the above data we can

conclude that 87% of people invest in open-ended mutual funds whereas only 13 % of people invest

in close-ended mutual funds.

Q.7 a) Various factors persuade to invest in Mutual Funds. The objective of this question is to find

out the various factors that persuade the people to invest in Mutual Funds.

Factors % Age of Respondents

Liquidity and Flexibility 32%

Tax benefits 40%


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Less investment risks 8%

Safety 12%

Fixed & Regular income 8%

Table No. 4.7a) Various factors persuading to invest

Chart No. 4.7a) Various factors persuading to invest Interpretation: From the above data we can

conclude that 32% of people are influenced by liquidity and flexibility factor, 40% by tax benefits, 8%

by less investment risk and fixed and regular income both and 12% by safety factor.

Q4.7b) Reasons of dissatisfaction. The objective of this question is to know why people are not

satisfied with their Mutual Fund investment.

Factors % Age of Respondents

Irregular income 13%

Other alternatives 19%

Poor service 6%

Risks 49%

Any other reason 13%

Table No. 4.7b) Reasons of dissatisfaction

Chart No. 4.7b) Reasons of Interpretation:

From the above data we can conclude that 49% of people are not satisfied with their investment in

Mutual Funds because of risk involved. 19% because of other alternatives available, 6% because of

poor service and 13% because of irregular income and other reasons.

Q.8 Awareness regarding advisory services of Mahindra & Mahindra. The objective of this question is

to know whether people are aware that Mahindra & Mahindra acts as an advisory agent not only for

one particular mutual funds but also for other Mutual funds of various banks and institutions.


Yes 26.66%

No 73.34%

Table No. 4.8 Awareness regarding advisory services of Mahindra & Mahindra.

Chart No. 4.8 Awareness regarding advisory services of bank Interpretation: From the above data

we can conclude that only 26.66% people are aware of this fact of Mahindra & Mahindra while

73.34% are unaware about this.


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Q9 Interest of people about their investments taken cared by Mahindra & Mahindra. The objective

of this question is to know whether people are interested that Mahindra & Mahindra should take of

their investments.


Yes 28.9%

No 71.1%

Table No. 4.9 Investments taken cared bv Mahindra & Mahindra Yes No

Chart No. 4.9 Investments taken cared by bank

Interpretation: From the above data we can conclude that only 28.9% people are interested that

Mahindra & Mahindra should take care of their investments while 71.1% people not show any

interest. Q.10 Fear of risk involved in Mutual Funds The objective of this question is to know howrisky they find Mutual Funds are. Responses % Age of Respondents Very risky 65.33 Risky 12 Neutral

3.3 Low risk 2.6 No response 16.6 Table No. 4.10 Fear of risk Chart No. 4.10 Fear of risk

Interpretation: From the above data we can conclude that 65.33% people find Mutual funds very

risky, 12% find it risky, 3.33% find it neutral, only'2.6% find low risk while 16.6% gave no response. Q

11. Awareness regarding various tax schemes. The objective of this question is to know the

awareness level of people regarding the tax exemptions while investing. Responses % Age of

Respondents Yes 19.3% No 80.67% Visit www.mbahotspot.com for more For your personalize

project report emails us at: [email protected] or [email protected] 39

Table No. 4.11 Awareness regarding tax schemes YES NO Chart No. 4.11 Awareness regarding taxschemes Interpretation: From the above data we can conclude that only 19.3% people are aware of

the rebates in Mutual funds while 80.67% people do not have any knowledge. Q.12 Income

generated by investing in Mutual funds. The objective of this question is to know the awareness

level of people regarding income generated by investing in various mutual funds. Responses % Age

of Respondents Yes 26% No 74% Table No. 4.12 Income generation by Mutual funds Chart No.

4.12Income generation bv Mutual funds Interpretation: From the above data we can conclude that

26% people know that they can earn regular income while investing in Mutual funds.

Q.13 Satisfaction level of people. The objective of this question is to find the satisfaction level of the

people for the services provided by Mahindra & Mahindra

Responses % Age of Respondents Excellent 24 Very good 50 Good 21 Fair 5 . Table No. 4.13

Satisfaction level regarding services of Mahindra & Mahindra Chart No. 4.13 Satisfaction level

regarding services of Mahindra & Mahindra Interpretation: from the above data we can conclude

that half of the people i.e. 50% analyzed find the services of the Mahindra & Mahindra very good,

24% find it excellent, 21% find it good whereas 5% people are also their who are not satisfied with

the services of Mahindra & Mahindra

CONCLUSION From this study it is observed that few people like to invest in the Mutual Funds

because of ignorance, lack of knowledge or due to loss in faith. About half of the people invest more

than 10% of their income in various investments avenues. Saving accounts and fixed deposits are the


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most preferred investment avenues followed by the Post Office Savings Only 37.33% of the people

are aware of the fact that Mutual Fund is also a source of investing their money and only 32.14 % of

people have actually invested in Mutual Funds. Most of the people like to invest in the open-ended

type of Mutual Funds. The tax benefits and liquidity and flexibility factors involved persuade most of

the people to invest in Mutual funds along with the factors like fixed and regular income. About 65%

of the people considered that to invest in Mutual Funds is a very risky task. Only 28% of the people

know that they can avail rebate under sec. 88 and only 26% of the people have the knowledge that

they can earn regular income by investing in Mutual funds. About 27 % people know about this that

Mahindra & Mahindra acts as an advisory agent not only in Single Mutual Fund but also in other

mutual funds offered by Standard Chartered, Prudential 1C 1C I, Kotak Mahindra, Templeton Birla

etc1

From this survey it is clear that besides providing various facilities by Mahindra & Mahindra and

other private Brokers most of the people still have their faith in government banks. However most of

the people are satisfied with the working of the Mutual Funds.

SUGGESTIONS After the analysis of the consumer awareness level of the Mahindra & Mahindra

about mutual funds along with other products and services following suggestions can be given: - #>

The Mahindra & Mahindra should try to improve its market intelligence system. This would keep it

know its customer better and it will get more information about the competitors and the forces

affecting the market. #> The Mahindra & Mahindra should increase its advertising budget to get the

benefits of good advertising so that consumers should aware of their existing products and services

as well as new one. #> The Mahindra & Mahindra should increase its number of branches not only in

urban areas but also in rural and semi-urban areas for the ease of the public.

#> The customer should be fully satisfied and delighted so that they go a long way with Mahindra &

Mahindra

BIBLIOGRAPHY Bana Verma, " Mutual Fund Performance: Indian Studies", the ICFAI Journal of

Applied Finance Dian Vujovich & Michael Lippu, "Straight Talk about Mutual Fund", -McGraw Hill

Gordon & Natrajan, "Financial Markets and Services", Himalaya Publishing House, 2003 Huji Mehndi

Raja, "Mutual Fund Offer Wide Net for Investors", Safar, 2000 L. K Bansal, " Merchant Banking and

Financial Services", Unistar Books, 2003 WEBSITES: www.Mahindra &Mahindra.com www.

amfiindia.com

QUESTIONNAIRE

I NAME conducting a survey on the ' about Mutual Funds' Kindly cooperate in filling this

questionnaire. Your information will be kept confidential Q 1 Do you familier with Mahindra &

Mahindra#> a) Yes b) No Q 2 How much of your monthly income do you invest#> a) Less than

Rs.5,000 b) 5,000-10,000 c) More than Rs. 10,000 Q.3 In what type of instrument you generally

invest or save your money a) Savings e) Shares b) Recurring deposits f) Mutual Funds c) Fixed

deposits g) Post Office Deposits d) RBI Bonds h) Other (please specify).. ..

Q.4 Do you know Mutual fund is also a source of investing your money#> a)Yes b) No Q5.Have you

ever invested your money in Mutual Funds#> a) Yes b) No Q.6 In what type of Mutual Fund you have

invested#> a) Open ended b) Close ended Q.7 (a) Are you satisfied with your Mutual Fundinvestment#> If yes , then what factors persuade you to invest in mutual funds#>


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a) Liquidity and flexibility . I I d) Safety b) Fixed and regular income G e) More tax benefits c) Less

investment risks f) Any Other (specify) .. Q.7 (b) If no, then please state the reason why#> a) Low

income b) Other alternatives c) Poor service d) Risks e) Other (please specify) Q.8 Are you aware that

the advices made by Mahindra & Mahindra in Mutual Funds are made after understanding the

customer appetite of risk, return, safety and liquidity9 a) Yes b)No Q .9 Would you like that

Mahindra & Mahindra should take of your investments9 a) Yes b) No Q. 10 What do you think about

'fear of risk' in Mutual Fund a)Very Risky b) Risky c) Neutral d)Low e) Very low Q. 11 Are you aware

of the fact that you can avail rebate under sec.88 up to Rs 10, 000 by investing in Mutual Funds

under ELSS scheme9 a) Yes D b) No D Q. 12 Do you know that you can earn regular income in the

form of Dividends, MIP, Dividend Reinvestment Option by investing in various Mutual Funds

schemes#>

a) Yes D b) No D Q. 13 How do you find the services provided by the Mahindra & Mahindra#> a)

Excellent b) Very Good c) Good d) Fair e) Poor PERSONAL INFORMATION

NAME. AGE SEX.

OCCUPATION TEL. NO. . E-MAIL ID ..

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