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CHAPTER 1
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INTRODUCTION
Investment in share markets are influenced by the analysis & reasoning which
help in predicting the market to some extent. Over the past years a number of technical &
theories for analysis have evolved, these combined with modern technology guides the
investor. The big players in the market, like Foreign Institutional Investors, Mutual
Funds, etc. have the expertise for various analytical tools & make use of them. The small
investors are not in a position to benefit from the market the way Mutual Funds can do.
Generally a small investors investments are based on market sentiments, inside
information, through grapevine, tips & intuition.
The small investors depend on brokers and brokerage house for his investments.
They can invest through the Mutual Funds who are more experienced and expert in this
field than a small investor himself. In recent years a large number of players have entered
into his market. The project has been carried out to have an overview ofMutual Fund
Industry and to understand investors perception about Mutual Funds in the context of
their trading preference, explore investors risk perception & find out their preference
over Top Mutual fund.
Indian Stock market has undergone tremendous changes over the years.
Investment in Mutual Funds has become a major alternative among Investors. The project
has been carried out to have an overview of Mutual Fund Industry and to understand
investors perception about Mutual Funds in the context of their trading preference,
explore investors risk perception & find out their preference over Top Mutual funds. The
methodology used was data collection using Schedule. Secondary data was collected
from Internet and Books. Primary Data was collected through survey among existing
clients along with the other investors. The procedure adopted to select sample was simple
random sampling The research design is analytical in nature. A questionnaire was
prepared and distributed to Investors. The investors profile is based on the results of aquestionnaire that the Investors completed. The Sample consists of 100 investors from
various brokers premises. The target customers were Investors ho are trading in the stock
market. The area of survey was restricted to people residing in NASHIK.
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1.2
SELECTION OF THE TOPIC
Until a decade ago, an investor would have invested only in banks Fixed deposits,
company Fixed deposits , post office savings and the assured return scheme of banks.
Today the time has changed; investors became more aware about the various investment
avenues, conscious about the return on investment.
Indian economy is growing rate with high disposable income & huge saving.
Thus it is very necessary to channelise these saving properly. There are many investment
opportunities available, but there are vary few which give high return. One such
investment avenue is in stock market but its highly volatile. Safety is the prime concern
of all investors but liquidity preferences vary & investor generally tries to get maximum
return consistently with reasonably safety & their liquidity preferences.
The study commissioned to the researcher envisaged to find the brand selection
parameters and preferences which investors follow while deciding upon a firm and
mutual fund schemes for investment services. Integrated Enterprises India Ltd with its
wide range of financial services and products ranging from, Life insurance, Mutual
Funds, Fixed deposits, Research & advisory services, Government bonds, has provided
an excellent platform to conduct such a research.
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The study will help to formulate strategies which are in tune with the market
realities and which will help to understand investors perceptions, expectations, and
understandings about investment and a financial service provider.
1.3
OBJECTIVE OF THE STUDY
To study the Mutual Fund industry structure, various types of Mutual Fund.
To study the investment preferences of an individual investor.
To study the various motives behind the selecting particular investment avenue.
5
Major Objectives Purpose behind the objective
1. To study the investment
preferences of an individual
investor. ( Investment
Preferences)
To study which type of investment investors
prefers from available and/or known
investment avenues Equity Market Fixed Deposits Mutual Funds
Precious Metals (Gold, Silver, etc.) Real
Estate
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To study various influences that drives the mind of the prospect in investment
Decisions.
To study investment habits of people who are interested to investment.
To understand buying behavior of people among various financial product.
To be able to apply the theoretical knowledge obtained at the institute in practical
manner in the actual business environment.
To get the knowledge about organization problems, perceptions and challenges
and suggest remedies if possible.
To get an opportunity of real life business experience and interact with the
managers of the company and gain knowledge
1.4
RESEARCH METHODOLOGY
I decided to do the project in two parts. The first part of the project is comprised
of the study of Mutual Funds as a whole and the second part deals with the investors
perception regarding their investment preferences about investment in Mutual Funds.
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The first part of the project i.e. descriptive study is comprising an overall study of
Mutual funds as what it is ,why to invest and where to invest, risk factor associated with
it ie,an overview of whole Mutual fund industry.
The second part of the project that is related to investors perception about
investment in Mutual funds available in market. Indian Stock market has undergone
tremendous changes over the years. Investment in Mutual Funds has become a major
alternative among Investors. The project has been carried out to understand investors
perception about Mutual Funds in the context of their trading preference and explore
investors risk perception.
The methodology used for market research, to study the behavior of the investors
towards various investment avenues (mutual fund) is presented in the following research
plan.
1. Information required
The information required for the study was:-
The factors affecting investment decision.
The awareness about mutual fund.
The funds and schemes preferred
The reasons for investing in mutual fund.
The views and experience of investors on mutual fund.
Future investment intension.
The current investment opinion.
Investors interest in knowing and investing in mutual fund.
2. Research Design
A Research Design is a specification of methods & procedures for acquiring the
information. A research design is a master plan or model for the conduct of formal
investigation. Research design is purely & simply the framework. Its a blueprint that is
followed in completing a study.
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3.Sources of data collection
A) Primary sources
To fulfill the objectives of the study, the primary data was collected, by conducting a
survey with the help of a questionnaire. Primary data is the first hand information
collected directly from the respondents. This data was later used for analysis.
B) Secondary Sources
The main source secondary data is information collected through internet, books, and
the most important is the Valuable information given by the guides both internal and
external forms is the key points.
4. Research Approach
The study necessarily required the information, which was primary in nature. It was
felt that survey was the best option. As the objective involved studying the opinion of
the investors and understanding their investment needs, preferences, behaviors
towards investment, the survey method was found to be most adequate and useful.
5. Research Instruments
The research instrument was a structured questionnaire. The questionnaire was useful
to know opinion of the investors and their investment needs, preferences, behaviors,
expectation and some other parameters from their investment.
6. Sample size:
The sample size selected for the study was 100 respondents from the entire segment.
1.5
SCOPE OF THE STUDY
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The scope of my project was to study the investors perception in mutual funds
investment. For that Integrated Enterprises India Ltd had assigned me and gave me this
opportunity. In todays area as, the mutual fund investment is really important element of
investment as compare to other investment options and Services.
While working on Investors perception, I understand the various factors like,
Nature, purpose, conditions, investment needs, preferences, and behaviors, expectation of
customers and income level of each and every customer.
Firstly I need to understand what products and services offered by the various
mutual fund companies to their customers and accordingly I need to take the steps
towards the designing the questionnaire for to know about investors perception, motive
behind investment option, expectations of the individual customers. (Which includes,
salary earner, businessman, self employed etc..)
1.6
LIMITATIONS OF THE STUDY
The study is restricted to Nashik City Area Only. The sample are chosen is purely
on the basis of convenience & limited due to time restricted time factor.
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The truthfulness of responses given by respondents has its effect on the study
because some people were not willing to disclose there investment profile.
As the time span of project was limited to 2 months, the number of customers
covered was only a small percentage of the total population. Hence the sample
may not reflect the true picture.
The collected data is subject to customers perception & views and only from the
limited sources.
Being a service industry, the quality is main concern in differentiation and it is not
exactly measurable.
Some Respondents were not willing to share the information & spend time for
filled the questionnaire so some information was filled just by observation. It may
lead to some error.
Changing the mentality of people for investing in a particular Financial Product is
a very difficult task.
The area of sample was decided after taking into consideration the major factors
like
Availability of investors
Approachability and Time available with investor for interaction, etc
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CHAPTER 2
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2.1
HISTORY OF THE ORGANIZATION
With service excellence always at the fore, Integrated Enterprises is one of India's
market-leading financial solutions provider serving over 6 lac investor families.
Integrated Enterprises commenced operations in 1974; Shri P.Vaidyanathan is the
chairman and founder of the company. He is the architect of the companys growth and
success. He has more than 35 years experience in Financial Services Industry and has
been the driving force for the company to reach great heights. When there were very few
companies to offer the services that we covered. Now, with a strong presence of 121
branches all over the country and a comprehensive suite of products and services, we take
care of the needs of the investor community as a whole.
Our services include distribution of financial products - Mutual Funds, IPOs,
Fixed Deposits, Government Bonds, Life Insurance and Post office Schemes. Integrated
also provides demat services and has built a strong customer base of more than 2 lac
demat account holders. Our processing services include PAN, TAN applications, e-TDS
returns.We undertake merchant banking activities and also act as share transfer agent and
registrar to an issue.
Our core competence lies in reaching out to all prospective investors and
satisfying their financial needs by providing them with the best product that suits them.
We achieve this with the help of well-experienced manpower with vast domain
knowledge and varied skill sets.
Integrated Enterprises provide innovative and tailored solutions to all financial
needs of its customers. Integrated is a 35-year old company, engaged in a variety of
financial services and products.
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CREDENTIALS
35 years of experience as Total Financial Solutions Provider.
Wide spectrum of products and services to cater to the diversified needs of
investors.
Serving over 6 lac investor families.
Investors have the facility of choosing all services under one roof.
Wide network of 121 branches across the country.
State-of-the-Art infrastructure is being used to provide effective service to the
clients.
Highly competent workforce with professional knowledge and expertise.
Largest Depository Participant in India with a strong customer base of more than
2 lakh demat account holders.
More than 20 lakh PAN applications have been made through us
Category 1 Merchant Banker approved by SEBI
Category 1 Registrar & STA approved by SEBI with more than 200 major client
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To be India's first Multinational providing complete financial services solution across the
global.
OUR VISION AND VALUES
A fully diversified financial services company providing quality service to corporate and
retail investors with absolute integrity. Integrated has grown over the last decades based
on a foundation of core values and vision. This has been our vantage point in building a
strong customer relationship and reaching new heights in the future.
INTEGRITY
We are trustworthy of customers and provide high quality services to their utmost
satisfaction. We follow an honest and ethical approach in all our dealings with the
customers.
COMMITMENT
We have a strong commitment to serve our customers. We understand individual
customer needs and make them choose the right product that suits them.
WORKFORCE
Our people are our greatest strengths. We have a well-managed workforce who have
domain knowledge and are expertise in their field of operation
CUSTOMER FOCUS
We are driven by our customers. We provide them with outstanding service by catering
to all their financial needs under one roof. We continuously strive to understand and
exceed customer expectations and ensure long-term satisfaction
TEAMWORK
Our efforts are based on teamwork and collaboration. We create a work culture that is
conducive to innovative ideas and thoughts. We achieve our goals through efficient
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teamwork, partnership and joint effort. We work towards a unified approach in providing
financial solutions to all investors.
MILESTONES
Integrated begins operations
Investors start investing in companies through us
Accepts company deposits, post office schemes and bonds
Expansion of Integrated Branch Network across the country
Starts offering Merchant Banking services. Approved by SEBI as Category 1 MerchantBanker
Starts acting as Share Transfer Agent approved by SEBI as Category I RTI/STA
Diversifies its activities as a Depository Participant offering demat services to itscustomers
Integrated expands its product range to include tax related services such as PAN, TAN ande-TDS filing
Adds E-Return filing to its array of services
Opens its 100th branch.
Entry into Share Broking Services through its subsidiary company
Integrated becomes a one-stop shop offering wide range of financial services
Personalizes Financial Planning to Retail Investors
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Asset Under Management in Mutual Funds crosses 1200 crores
Processes 15 lakhs PAN card applications
Files 10 lakhs e-TDS returns
2.2
PRODUCTS AND SERVICES
PRODUCTS-
Mutual Fund
Life Insurance ICICI Prudential
E-share (Demat) Services
Stock Broking
PAN cards
Government Bonds
Fixed Deposits
SERVICES-
No Services Description
1 Investments Marketing Corporate Fixed Deposits, Debentures,
2 Demat Services Opening of Depository Accounts, Demat
3 Share Broking Services Facilitating Buying & Selling of Securities through NSE
4 Insurance Marketing Life, Health & General Insurance Schemes
5 Corporate Services Merchant banking, Registrar to an issue
6 Tax Related Services Processing of PAN, TAN, e-TDS, e-TCS
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2.3
ORGANIZATION FLOW CHART
17
Information
Technology
CHAIRMAN
PRESIDENT
DIRECTOR
VICE
PERSON
East Zonal
Manager
AdministrationSale
West Zonal
Manager
Human
Resource
Finance Marketing
North Zonal
Manager
South Zonal
Manager
Regional
Manager
Regional
Manager
Regional
Manager
Regional
Manager
Branch
Manager
Branch
Manager
Branch
Manager
Branch
Manager
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CHAPTER 3
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Relation
Executive
Relation
Executive
Relation
Executive
Relation
Executive
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INTRODUCTION
WHAT IS MUTUAL FUND?
Mutual Fund is saving or investment vehicle, akin to, but different from bank
deposits, shares etc., It is an entity wherein people / institutions pool small amounts of
money into larger amounts for investment and achieve returns with minimum risk, which
otherwise is not possible by a common man.
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 invested by the fund
manager in different types of securities, capital market instruments such as shares,debentures and other securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned
through these investments and the capital appreciations realized by the scheme are 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 portfolio at a relatively low cost. The
small savings of all the investors are put together to increase the buying power and hire a
professional manager to invest and monitor the money. Anybody with an ingestible
surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual
Fund scheme has a defined investment objective and strategy.
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THE FLOW CHART BELOW DESCRIBES BROADLY THE WORKING OF
MUTUAL FUND
The structure of Mutual Funds in India is governed by SEBI (Mutual Fund)
Regulations, 1996.
It is mandatory to have a three tier structure of Sponsor Trustee Asset Management
Company.
The trust is established by a Sponsor or more than one sponsor who is like a promoter
of a company. He appoints the Trustees who are responsible to the investors of the fund.
The Trustees of the mutual fund hold its property for the benefit of the unit holders.
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Asset Management Company (AMC) approved by SEBI is the business face of the
mutual fund as it manages all the affairs of the fund by making investments in various
types of securities.
Custodian, who is registered with SEBI, holds the securities of various schemes of the
funds in its custody.
3.1
HISTORY OF INDIAN MUTUAL FUNDS INDUSTRY
The mutual fund industry in India started in 1963 with the formation of Unit Trust
of India, at the initiative of the Government of India and Reserve Bank the. 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 UnitScheme 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 Can bank 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.
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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. 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
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September, 2004, there were 29 funds, which manage assets of Rs.153108 Crores under
421 schemes.
STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY
The largest categories of Mutual Funds are the ones floated by the private sector
and by Foreign Asset Management Companies. The largest of these are Prudential ICICI
AMC and Birla Sun Life AMC. The aggregate corpus of assets managed by this category
of AMCs is in excess of Rs.350 bn.
Earlier the Indian Mutual Fund industry was dominated by the Unit Trust of India
which has a total corpus of Rs.700 bn collected from more than 20 million investors. The
UTI has many funds/schemes in all categories i.e. equity, balanced, income etc. with
some being open-ended and some being closed-ended. The Unit Scheme 1964 commonly
referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of
about Rs.200 bn.
UTI was floated by financial institutions and is governed by a special Act of
Parliament. Most of its investors believe that the UTI is government owned andcontrolled, which, while legally incorrect, is true for all practical purposes.
The second largest categories of mutual funds are the ones floated by nationalized
banks. Can bank Asset Management floated by Canara Bank and SBI Funds Management
floated by the State Bank of India are the largest of these. GIC AMC floated by the
General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are
some of the other prominent ones. The aggregate corpus of funds managed by this
category of AMCs is about Rs.200 bn.
How are the Mutual Funds Structured?
The Mutual Funds are structured in two forms: Company form and Trust form.
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Company Form: These forms of mutual funds are more popular in US.
Trust Form:In India, mutual funds are organized as Trusts. The Trust is either
managed by a Board of Trustees or by a Trustee Company. There must be at least 4
members in the Board of Trustees and at least 2/3 of the members of the board must be
independent. Trustee of one mutual fund cannot be a trustee of another mutual fund.
Unit Trusts Constituents:
A Mutual Fund is set up in the form of a Trust which has the following constituents:-
1. Fund Sponsor
2. Mutual Fund as Trust
3. Asset Management Company
4. Other Fund Constituents
4.1. Custodian and Depositors
4.2. Brokers
4.3. Transfer Agent
4.4. Distributors
FUND SPONSOR
What a promoter is to a company, a sponsor is to a mutual fund. The sponsor
initiates the idea to set up a mutual fund. It could be a financial services company, a bank
or a financial institution. It could be Indian or foreign. It could do it alone or through a
joint venture. In order to run a mutual fund in India, the sponsor has to obtain a license
from SEBI. For this, it has to satisfy certain conditions, such as on capital and profits,
track record (at least five years in financial services), default-free dealings and a general
reputation for fairness. The sponsor must have been profit making in at least 3 years ofthe above 5 years. The Sponsor appoints the Trustees, Custodian and the AMC with the
prior approval of SEBI and in accordance with SEBI Regulations.
The sponsor should inspire confidence in you as a money manager and,
preferably, be profitable. Financial muscle, so long as it is complemented by good fund
management, helps, as money is then not an impediment for the mutual fund- it can hire
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the best talent, invest in technology and continuously offer high service standards to the
investors. In the days of assured return schemes, sponsors also had to fulfill return
promises made to the unit holders. All things considered, choose sponsors who are good
money managers, who have a reputation for fair business practices and who have deep
pockets.
TRUST
The Mutual Fund is constituted as a Trust in accordance with the provisions of the
Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian
Registration Act, 1908. The Trust appoints the Trustees who are responsible to the
investors of the fund.
TRUSTEES
Trustees are like internal regulators in a mutual fund, and their job is to protect the
interests of the unit holders. Trustees are appointed by the sponsors, and can be either
individuals or corporate bodies. In order to ensure they are impartial and fair, SEBI rules
mandate that at least two-thirds of the trustees be independent, i.e., not have any
association with the sponsor. Trustees appoint the AMC, which subsequently, seeks their
approval for the work it does, and reports periodically to them on how the business being
run. Trustees float and market schemes, and secure necessary approvals. They check if
the AMCs investments are within defined limits and whether the funds assets are
protected. Trustees can be held accountable for financial irregularities in the mutual fund.
Rights of the Trustees:
Trustees appoint the AMC in consultation with the sponsor and according to the SEBI
Regulations.
All Mutual Fund Schemes floated by the AMC have to be approved by the Trustees.
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Trustees can seek information from the AMC regarding the operations and compliance
of the mutual fund.
Trustees can seek remedial actions from AMC, and in cases can dismiss the AMC.
Trustees review and ensure that the net worth of the AMC is according to the
stipulated norms, every quarter.
Obligations of the Trustees:
Trustees must ensure that the transactions of the mutual fund are in accordance with
the trust deed.
Trustees must ensure that the AMC has systems and procedures in place.
Trustees must ensure due diligence on the part of AMC in the appointment of
constituents and business associates.
Trustees must furnish to the SEBI, on half yearly basis a report on the activities of the
AMC.
Trustees must ensure compliance with SEBI Regulations.
ASSET MANAGEMENT COMPANY (AMC)
An AMC is the legal entity formed by the sponsor to run a mutual fund. The
AMC is usually a private limited company in which the sponsors and their associates or
joint venture partners are the shareholders. The trustees sign an investment agreement
with the AMC, which spells out the functions of the AMC. It is the AMC that employs
fund managers and analysts, and other personnel. It is the AMC that handles all
operational matters of a mutual fund from launching schemes to managing them to
interacting with investors. The people in the AMC who should matter the most to you are
those who take investment decisions. If a schemes corpus is up to Rs.100 crores it pays
1.25% of its corpus a year; on over Rs.100 crores, the fee is 1% of the corpus. So, if afund house has two schemes, with a corpus of Rs.100 crores and Rs.200 crores
respectively, the AMC will earn Rs.3.25 crore (1.25+2) as fund management fee that
year.
Regulatory requirements for the AMC:
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Only SEBI registered AMC can be appointed as investment managers of mutual
funds.
AMC must have a minimum net worth of Rs.10 crores at all times.
An AMC cannot be an AMC or Trustee of another Mutual Fund.
AMCs cannot indulge in any other business, other than that of asset management
At least half of the members of the Board of an AMC have to be independent.
The 4th schedule of SEBI Regulations spells out rights and obligations of both trustees
and AMCs.
Obligations of the AMC:
Investments have to be according to the investment management agreement and SEBI regulations.
The actions of its employees and associates have to be as mandated by the trustees.
AMCs have to submit detailed quarterly reports on the working and performance of the mutual fund.
AMCs have to make the necessary statutory disclosures on portfolio, NAV and price to the investors.
Restrictions on the AMC:
AMCs cannot launch a scheme without the prior approval of the trustees.
AMCs have to provide full details of the investments by employees and Boar members in all cases where the investment exceeds Rs.1 lakh.
AMCs cannot take up any activity that is in conflict with the activities of the mutual fund.
Conditions under which two AMCs can be merged:SEBI Regulations require the following:-
SEBI and Trustees of both the funds must approve of the merger.
Unit holders should be notified of the merger, and provided the option to exit at NAV without load.
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Index Funds: Index schemes are a type of mutual fund in which the portfolio weightage
for each stock will be similar to the index, which they are mirroring, like BSE Sensex or
the NSE 50. The portfolio of these schemes will consist of only those stocks that
constitute the index. Index funds are expected to provide a rate of return over time that
will approximate or match, but not exceed, that of the market, which they are mirroring.
BENEFITS OF MUTUAL FUND INVESTMENT:
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Professional Management
Mutual Funds provide the services of experienced and skilled professionals,
backed by a dedicated investment research team that analyses the performance and
prospects of companies and selects suitable investments to achieve the objectives of the
scheme.
Diversification
Mutual Funds invest in a number of companies across a broad cross-section of
industries and sectors. This diversification reduces the risk because seldom do all stocks
decline at the same time and in the same proportion. You achieve this diversification
through a Mutual Fund with far less money than you can do on your own.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with brokers and
companies. Mutual Funds save your time and make investing easy and convenient.
Low Costs and Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher
return as they invest in a diversified basket of selected securities. Mutual Funds are a
relatively less expensive way to invest compared to directly investing in the capital
markets because the benefits of scale in brokerage, custodial and other fees translate into
lower costs for investors.
Liquidity
In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the Mutual Fund. In closed end schemes, the units can be sold
on a stock exchange at the prevailing market price or the investor can avail of the facility
of direct repurchase at NAV related prices by the Mutual Fund.
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BANKS V/S MUTUAL FUNDS:
Mutual Funds are now also competing with commercial banks in the race for
retail investors savings and corporate float money. The power shift towards mutual
funds has become obvious. The coming few years will show that the traditional saving
avenues are losing out in the current scenario. Many investors are realizing that
investments in savings accounts are as good as locking up their deposits in a closet. The
fund mobilization trend by mutual funds indicates that money is going to mutual fund in
a big way.
India is at the first stage of a revolution that has already peaked in the U.S. The U.S.
boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund
assets are not even 10 per cent of the bank deposits, but this trend is beginning to change.
This is forcing a large number of banks to adopt the concept of narrow banking wherein
the deposits are kept in Gilts and some other assets which improves liquidity and reduces
risk. The basic fact lies that banks cannot be ignored and they will not close down
completely. Their role as intermediaries cannot be ignored. It is just that mutual funds are
going to change the way banks do business in the future.
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The debt servicing ability (may it be interest payments or repayment of principal)
of a company through its cash flows determines the Credit Risk faced by you. This credit
risk is measured by independent rating agencies like CRISIL who rate companies and
their paper. An AAA rating is considered the safest whereas a D rating is considered
poor credit quality. A well-diversified portfolio might help mitigate this risk.
INFLATION RISK
Things you hear people talk about: Rs.100 today is worth more than Rs.100
tomorrow. Remember the time when a bus ride costed 50 paisa? Mehangai Ka
Jamana Hai.
The root cause, Inflation. Inflation is the loss of purchasing power over time. A lotof times people make conservative investment decisions to protect their capital but end
up with a sum of money that can buy less than what the principal could at the time of the
investment. This happens when inflation grows faster than the return on your investment.
A well-diversified portfolio with some investment in equities might help mitigate this
risk.
INTEREST RATE RISK
In a free market economy interest rates are difficult if not impossible to predict.
Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise
the prices of bonds fall and vice versa. Equity might be negatively affected as well in a
rising interest rate environment. A well-diversified portfolio might help mitigate this risk.
POLITICAL RISK
Changes in government policy and political decision can change the investment
environment. They can create a favorable environment for investment or vice versa.
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COMPETITION IN MUTUAL FUNDS INDUSTRY
The most important trend in the mutual fund industry is the aggressive expansion
of the foreign owned mutual fund companies and the decline of the companies floated by
nationalized banks and smaller private sector players. Many nationalized banks got into
the mutual fund business in the early nineties and got off to a good start due to the stock
market boom prevailing then. These banks did not really understand the mutual fund
business and they just viewed it as another kind of banking activity. Few hired
specialized staff and generally chose to transfer staff from the parent organizations. The
performance of most of the schemes floated by these funds was not good. Some schemes
had offered guaranteed returns and their parent organizations had to bail out these AMCs
by paying large amounts of money as the difference between the guaranteed and actual
returns. The service levels were also very bad. Most of these AMCs have not been able to
retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions,
they have serious plans of continuing the activity in a major way.
The experience of some of the AMCs floated by private sector Indian companies
was also very similar. They quickly realized that the AMC business is a business, which
makes money in a long term and requires deep-pocketed support in the intermediate
years. Some have sold out to foreign owned companies, some have merged with others
and there is general restructuring going on. The foreign owned companies have deep
pockets and have come in here with the expectation of a long haul. They can be credited
with introducing many new practices such as new product innovation, sharp improvement
in service standards and disclosure, usage of technology, broker education and support
etc. In fact, they have forced the industry to upgrade itself and service levels of
organizations.
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ABN AMRO Mutual Fund
Birla Sun Life Mutual Fund
HDFC Mutual Fund
HSBC Mutual Fund
ING Vysya Mutual Fund
Prudential ICICI Mutual Fund
Sahara Mutual Fund
State Bank of India Mutual Fund
Tata Mutual Fund
Kotak Mahindra Mutual Fund
Unit Trust of India Mutual Fund
Reliance Mutual Fund
Standard Chartered Mutual Fund
Franklin Templeton India Mutual Fund
Morgan Stanley Mutual Fund India
LIC Mutual Fund
GIC Mutual Fund
Fidelity Investments
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Age Group Number of People PercentageUp to 25 23 23%
25-35 40 40%
35-45 23 23%
45-55 6 6%
Above 55 8 8%
Age Group of Investor
23%
40%
23%
6% 8% Upto 25
25-35
35-45
45-55
Above 55
Interpretation:-
From the above data it can be said that the younger generation is keen to have
knowledge about mutual funds. Here 40% of sample size interviewed is belongs to the
age group of the 25-35.
INVESTMENT IN MUTUAL FUNDS
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Investment In Mutual
Fund
Number of people Percentage
Yes 63 63%
No 28 28%
Earlier Now Stopped 9 9%
Investment In Mutual Fund
63%
28%
9%Yes
No
Earlier Now
Stopped
Interpretation:
The major part of the sample taken has invested in the Mutual Funds. The demand
for the mutual funds have increased in the past few years with many Foreign players
entering in the Indian market, Fidelity, Franklin Templeton, DSP Merrill Lynch to name
few. There are 63% who are invest in Mutual Fund and 28% are not investing their
money in Mutual Fund. There are 9% respondents who are earlier investing in Mutual
Fund but now they stopped investing.
EXPERIENCE IN THE MARKET
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Experience In the
Market
Number of People Percentage
Less Than a Year 26 26%
1-4 Years 21 21%
More Than 4 53 53%
Experience In The Market
26%
21%
53%
Less Than a Year
1-4 Years
More Than 4
Years
Interpretation:-
The experience in the market was the main factor which influenced the
investments. There are very few who have experience of less than a year. These are those
investors who entered into the market after noticing the rise in the market. The
achievement of 12,000 marks by SENSEX is motivational force in this. Major part was
having vast experience that is of more than 4 years. These are the ones who have been in
the market and saw it rising to conquer the 10,000 peak.
There are 26% investors who having experience less than a year, 21% who having
1-4 year and 53% investors who having more than 4 years experience in the market
AVERAGE INVESTIMENT PERIOD OF INVESTORS
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Investment Period Number of People PercentageLess Than 6 Months 23 23%
6-12 Months 10 10%
1- 2 Years 42 42%
More Than 2 Years 25 25%
23%
10%
42%
25%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Investment Period
Average Investment Period
Series1 23% 10% 42% 25%
Less
Than 6
6-12
Months
1-2
Years
More
Than 2
Interpretation:-
The investment period is very important to increase the profits. The timing must
be right enough to benefit from fluctuations. The investors decide it in advance for how
much time he would be keeping his money in the market and when he should leave up.
23% people consider the investment for 6 months, 10% people consider the
investment for 6 to 12 months. 42% investors things Investment for 1 year to 2 years as a
right option, while 25% investors want to invested for more over 2 years.
FACTORS INFLUENCING THE INVESTMENT DECISION OF
INVESTORS
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Type of Schemes Number of People PercentageOpen Ended Fund 44 44%
Close Ended Fund 56 56%
Types Of Schemes
56%
44%
Closed Ended Funds Opened Ended Funds
Interpretation:-
The schemes offered in the market are of two types, closed ended and open ended.
The more demand was for the Close ended funds with a locking period of around 3 years.
The exit load refrain the person from quitting earlier. 56% are demand for close ended
fund while 44% are interested for open ended fund.
BRAND NAME EFFECTIVENESS
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Influence Number of People PercentageBy Returns 56 56%
By NAV 23 23%
Both 21 21%
56%
23% 21%
0%
10%
20%
30%
40%
50%
60%
By Returns By NAV Both
Investors Influence
Interpretation:-
From the data collected it is clear that most of people look at the returns that the
Mutual funds are providing, while some look at the current NAV not at returns However
there is some class of people who look at both of the parameters.
56% of the people are in favour to look at the returns that are given by Funds, this
and only 23% people are there who consider the current NAV of the fund before
investing into a Mutual Fund. While 21% of respondents who look both of the parameters
before investing. Experience was the main factor that made a Person invests in mutual
funds.
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After analyzing the collected data from the market survey which was carried out
to find the investment preferences of an individual investor, various motives behind theselecting particular investment avenue and various influences that drives the mind of the
prospect in investment decisions during the month of June-July in the Nashik City the
following points can be drawn:
The younger generation is keen to have knowledge about mutual funds, Investors
prefer Medium Term of the Investment Horizon. Followed by short term horizon, they
cant bear High Risk on their Investment, they wants to be safe, bearing lower risk on the
investment. Investor expects realistic returns on their investment. 48% people wishes
return of upto15%, while 32% peoples expect 15-25% return will satisfactory for them.
Almost 100 percent of the respondents felt the timely service provided by the firm
is most important with the fees charged for it following with the quality of service, values
and principles, convenience provided to them, and support from the customer care
people.
While doing my project I had a chance to look into the vast field of Mutual Fund
Industry and consumer behavior. I could only touch a small part of the topic. But after
going through the whole process I firmly believe that before going for any investment
decision there is a need to classify the investor type according to the risk appetite of the
investor his/her financial need and the time horizon of the investment to be made. It is
also true that there is a bias towards a new fund offer by the Mutual Fund Advisors. Nut
its always better to invest in the fund with good past record.
5.1
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CHAPTER 6
RECOMMENDATIONS AND SUGGESATIONS
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WHAT I RECOMMEND FIRSTLY THERE SHOULD BE
1) First Aid Kit for New Entrant into Investment Market.
This will be a new step towards a good service provider in this field. After all, this
market depends on the after sales service. After seeing such a boost in the share market,
not only our Adult generation but also the young generation is also so much excited to
enter the Investment market. Now the actual problem starts specially with the young ones
in excitement initially they invests the money & due to lack of experience they loose big
block of money in one go & later they blames the company about the loss. So, to make
them train in the field we should provide them the initial precautions that they should
take while enter into the market.
The More You Care For Your Customer More the Faith Will Get Develop From
Customer Side
2) Provision for Class Room training for the new investors for the above reason.
same thing to boost theremoral and to give them some thing related to the market will
help them. Also some tips can also be given to this investor during the session as
precautions.
3) Customers generally want to call to the respective branch for asking some
problems or give orders, a customer can save the money by dialing on the toll free
number. It gives a feeling to the customer that company care for them.
4) Customer Care for general query handle initially customer want to solve his or her
problem at the moment as it arises. Our relationship manager many times dont have that
much time to discuss all that details on phone, they may sometime get busy with the
meeting with client. So for general query handle we can have a separate section.
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