Il&Fs Project Report

ACKNOWLEDGEMENT

An endeavor over a period can be successful only with the advice and support of

well-wishers. I take this opportunity to express my gratitude and appreciation to all those

who encouraged me to complete this project.

I am deeply indebted to Prof: L.R.S.MANI, Dean MATS School Of Business

Belgaum for my successful completion of the project.

I express my profound and sincere thanks to Dr. ESHWARN Dean who acted as

a mariner’s compass and steered me through out my project voyage through his excellent

guidance and constant inspiration.

I shall be failing in my duty if I don’t acknowledge my debt to Mr. Nagraj,

Relationship manager of IL&FS INVESTSMART, Belgaum for his valuable guidance

and support, which helped me in giving a shape to my study.

I extend my hearty thanks to Mr. Nithin Londe, Manager of IL&FS

INVESTSMART, Belgaum for giving me an opportunity to take up the project work and

providing all the facilities for the same.

I also extend my hearty thanks to all other faculty members of MATS School Of

Business Belgaum for their eternal support and guidance.

I acknowledge with profound gratitude and reverence the help and guidance of

one and all in my endeavor for gainful project work I undertook at IL&FS

INVESTSMART, Belgaum

Place: Belgaum Mahantesh c kolaki

STUDENT’S DECLARATION

I here by declare that Summer Training Report submitted as a

requirement of fulfillment of my PGDBM(IB) course is my original work and not

submitted for the award of any other degree, diploma, fellowship or other similar title or

prizes.

Mahantesh Kolaki

PGDBM(IB) 2ND SEM

Executive summary

The project titles “Analysis and Interpretation of Mutual Funds is undertaken in

IL&FS INVESTSMART LTD. The project is related to the study of the Technical

Analysis of Equity Diversified schemes in different Mutual Fund companies.

The project title “Analysis and Interpretation of Mutual Funds “is mainly divided in to 5 phases:

Study of Security Market.

Company profile.

Study of Mutual Funds.

Methodology.

Findings& suggestions.

In security market the study is on Primary market, Secondary Market, types of

investment alternatives. Mutual fund is one of the best investment alternatives as

compared to other alternatives.

IL&FS Investsmart Limited (IIL) is one of India’s leading financial services

organizations providing individuals and corporate with customized financial management

solutions.

Mutual Fund is an investment company or trust that pools the recourses from

through of it shareholders or unit holders, who share common investment goal. There are

vast varieties of schemes available each day for in nature in much respect. Basic

difference comes from the objective of each scheme. The schemes are classified on the

basis of Operational, Portfolio and Geographical.The Study with main objectives of

evaluate investment performance of Mutual Funds in the terms of risk and return and To

find out the financial performance of mutual fund schemes…

Introduction

1.1 Definition and Overview

1.2 Problem identification

1.3 Objective of the study

PART - I

1.1 Introduction:

The money you earn is partly spent and the rest saved for meeting future

expenses. Instead of keeping the savings idle you may like to use savings in order to get

return on it in the future, which is known as ‘investment’. There are various investment

avenues such as Mutual funds, Equity, Bonds, Insurance, Bank Deposit etc. The project is

related to the study of the Technical Analysis of Equity Diversified schemes in different

Mutual Fund companies.A there are various factors which affects investments such as

annual income, government policy, natural calamities, economical changes etc

1.2 Problem identification:

Analyzes and interpretation of mutual funds and to create awreness of mutual

fund and the company IL&FS INVESTSMART LTD, and the popularity of different

products provided by IL&FS INVESTSMART LTD for investment.

1.3 Objectives of Study

The research is undertaken with an objective to know the following aspects:

To study the concept mutual funds.

To Study individual saving patterns.

To know the awareness level of mutual funds

To know the parameters the people look in while investing in mutual fund.

To study the investor perception towards mutual fund.

To find whether investment in mutual fund is better than other investments.

To create strategies to increase sales of mutual fund

Industry Profile

2.1 Introduction.

2.2.Retail broking.

2.2 securities

2.3 .SEBI

2.4.Mutual Funds.

2.4.1 .Charactristics of mutual fund.

2.4.2.Mutual fund industry.

2.4.3.Regulatory structure.

2.4.4.Concept and role of mutual fund.

2.4.5.Types of mutual fund.

2.4.6.Major mutual fund companies.

2.4.7.Five easy steps to invest in mutual fund.

2.4.8.Tax rules for mutual fund investers.

2.4.9.Advantages and disadvantages.

2.4.10.Who can invest in mutual fund.

PART - II

Introduction

An investment means employment of funds on assets (i.e. securities or mutual

funds or any of the investment avenues) with the aim of earning of income as well as

capital appreciation. There are mainly two attributes while investing to any of the means,

i.e. time and risk. There are mainly four objectives, which the investments activities will

carry on those are:

Return

Risk

Liquidity

Hedge against inflation

Safety

There are many alternatives which investment avenues are open to the investors

to suit their needs and nature .The selection of investment alternatives are depends up on

the required level of return and the risk tolerance level. These alternatives range from

financial securities to traditional non-securities investment.

Following are the various investment alternatives.

1) Negotiable and fixed income securities 2) Equity shares

3) Preference share 4) Debentures

5) Bonds 6) Indira vikas patra

7) Government securities 8) Money market securities

Non-negotiable securities

1) Bank deposit 2) Post office deposit

3) NBFC deposit 4) Tax saving schemes

5) Public provident fund scheme 6) National saving scheme

7) Life insurance 8) Mutual funds

9) Real estate

• Retail broking, highly fragmented industry

–Over 2000 brokers, 10000 sub brokers and 1

crores investors

–New aggressive players

–Falling brokerages

–Value added services

–Online trading and offline trading.

Present Scenario

The inevitable shake out..

Handful brokers and growing

investor base

Strong Competition Banks Vs

Securities firms

Retail broking in India.

Securities

Companies raise funds to finance their projects through various methods. The

promoters can bring their own money or barrow from the financial institutions or

mobilizes capital by issuing securities. The funds may be raised through issue of fresh

share at per or premium. Preference shares debenture or global depository receipts. These

are mainly two markets which any company can raise their funds; those are primary

market and secondary market .the companies raise funds for the following purposes:

To promote a new company.

To expand an existing company.

To diversify the production.

To meet the regular working capital requirement.

To capitalize the reserves.

Security and exchange board of India (SEBI):

Security and exchange board of India has started its operation with the objectives

of protect the interests of the investors insecurities and to promote the development and

regulate the security market. The main functions of security market are:

Regulate the business in stock exchange and any other security market.

Registering and regulating the work of stockbrokers, and sub-brokers and transfer

agent, brokers to the issue. Merchant bankers, underwriters, portfolio managers,

investment advisers and such others intermediaries who are associated with

security market.

Registering and regulating the work of collective investment schemes including

Mutual Funds.

Prohibiting insider trading in securities.

Regulating substantial acquisition of shares and take-over of companies.

SEBI has legal and investigation departments. It has got separate

committees for primary and secondary market to assist the policy formulation. It has

regulated:

Primary market

Secondary market

Mutual Funds

Foreign institutional investment.

Mutual funds:

A mutual fund is a form of collective investment that pools money from many

investors and invests their money in stocks, bonds, short-term money market instruments,

other securities etc. In a mutual fund, the fund manager trades the fund's underlying

securities, realizing capital gains or losses, and collects the the dividend or interest

income. The investment proceeds are then passed along to the individual investors.

A mutual fund is created when investor put their money together. It is therefore

a pool of the investor’s funds.

The term mutual means that investors contribute to the pool and also benefit

from the pool. There are no other claimants to funds. The pool of funds help mutually by

investors is the mutual fund.

A mutual fund business is to invest the funds thus collected according to the

wishes of the investors who created the pool the invested appoints professional

investment mangers, to mange their funds.

IMPORTANT CHARACTERISTICS OF THE MUTUAL FUND

1. A mutual fund actually belongs to the investors who have pooled their funds.

The ownership of the mutual fund is in the hand of the investor

2. A mutual fund is managed by investment professional and other service

providers who earn a fee for their services from the fund

3. The pool of funds is invested in a portfolio of marketable investments. The

value of the portfolio is updated every day.

4. The investor’s share in the fund is denominated by “UNIT”. The value of the

unit changes with changes in the portfolio value every day the value of the

unit of investment is called as the Net Assets Value or NAV.

5. The investment portfolio of the fund is created according to the stated

investment objectives of the fund.

About Mutual Fund Industry

Mutual Funds are financial intermediaries which pool the savings of numerous

individuals and invest the money, thus related in a diversified portfolio of securities,

including equity, bonds debentures and other money market instruments, thus spreading

and reducing risk. The objective of mutual fund is to maximize the return to the investor

who participates in equity indirectly through mutual funds.

Even though the mutual fund industry grown in asset value from Rs.7000

Crores to 2,00,000/- Crores today, this is just the tip of the iceberg. According to most

Fund Managers, the real boom is yet to come.

The sum of Rs. 2,00,000/- Crores represents just 3% - 4%

of the total market capitalization of 25,00,000 Crore. This compares poorly with the US,

where the mutual funds have nearly $ 6.8 billion of market capitalization of roughly

Rs.70000 Crore, barely 3% - 4% of total market capitalization.

This is not expected, because mutual fund history in India, which dates back to

1964, when the first open-ended mutual fund scheme Unit-64 was launched by Unit Trust

of India, is still dominated by it. The focus initially was income earning securities, with

only 20 % of the Corpus going into equity. The early 80’s saw other schemes like the

growing income, fixed income, and monthly income being introduced by the UTI. But it

was only in 1986 that the first pure Growth equity scheme Master share was launched.

The 1989-90 was another landmark year in the history of mutual funds. For the

fist time, the monopoly of UTI over the industry was broken. The government allowed

public sector banks and insurance companies to enter this sector to bring in some

competition. But it was only in 1993, when the private sector was given the green signal

to float mutual funds, that excitement and competition came. Not only did the

Government allowed Indian companies to float mutual funds, it even allowed foreign

funds to set in shop in India and float funds. Thus, in one stroke, this sector was truly

privatized.

Today there are about 12-14 private players in the market including foreign

funds such as Morgan Stanley, besides the nine public sector players and UTI. Together,

these funds have mobilized around Rs.6500 Crore from the market. The collections could

have been better, had not the public sector funds been busy complying with the SEBI

guidelines pertaining to the formation of asset management companies etc.

But the best is yet to come. A number of companies have plans to float mutual

funds at various stages of implementation. Some of the major names which are likely to

come to the market are Tata Sons in collaboration with Kleinwort Benson, ITC Classic

with Thread needle UR, Oppenheimer of US, plus a host of others. And according to

conservative guesstimates, mutual funds are set to collect over Rs.10000 Crore from the

market this year.

The reason for such confidence is that with SEBI firm about the small investor

taking the mutual fund route to investments in the stock market, and the regulatory

changes making it much more difficult to get allotments in primary markets, small

investors will not be left with many opportunities.

Regulatory Structure of Mutual Fund in India

The structure of mutual fund in India is governed by SEBI (MUTUAL FUND)

regulations 1996. These regulations make it mandatory for mutual funds to have a three-

tier structure of SPONSOR-TRUSTEE-ASSET MANAGEMENT COMPANY (AMC).

Concept and role of Mutual Fund

A Mutual Fund is common pool of money into which Investor place their

contributions that are to be invested in accordance with a stated objective. The ownership

of the Fund is thus joint or “mutual”; the fund belongings to all investors.

A single investor’s ownership of the fund is in the same proportion as the

amount of the contribution made by him or her bears to the total amount of the fund.

A Mutual fund uses the money collected from investors to buy those assets,

which are specifically permitted by its stated investment objective. Thus, an Equity Fund

would buy mainly Equity assets-ordinary shares, preference shares, warrants etc. A bond

fund would mainly buy debt instruments such as debentures, bonds or government

securities. It is these assets, which are owned by the investors in the same proportions as

there contribution bears to the total contribution of all investors put together.

When an investor subscribes to a mutual fund, he or she buys a part of these

assets or the pool of funds that are outstanding at that time. It’s no different from buying

“shares” of a joint stock company, in which case the purchase makes the investor a part

owner of the company and its assets. In fact, in the USA, a Mutual fund is constituted as

an investment company and an investor “buys into the fund”, meaning he buys the shares

of the fund. In India, a mutual fund is constituted as a Trust and the investor subscribes to

the “units “ issued by the fund, which is where the term unit Trust comes from.

Types of Mutual Funds Schemes

Schemes floated by the various mutual funds are essentially of two types,

namely open-ended and close-ended. The basic characteristics of these two types of

mutual fund schemes are given below:

OPEN ENDED SCHEMES:

Open-ended schemes are available for subscription all the year round

excluding the period of book-closing. They may or may not have a specified redemption

period. The sale and repurchase prices are fixed by the mutual fund concerned from time

to time. Repurchases are generally allowed al specified rated.

Each open-ended scheme must have a minimum corpus of Rs.50 crore. In case

the fund manager is not able to raise this amount at the time of issue, or 60 % of the

targeted amount whichever is higher, the entire subscription must be returned to the

investor.

CLOSE-ENDED SCHEMES

These are open for subscription only during a specified period. Generally the

redemption dates are also specified when the investor can redeem their units. The

duration of this scheme varies: normally it is 5-7 years. Repurchase during the

intervening period may or may not be allowed. Some of the schemes though have a

repurchase facility after a certain period. Many of these schemes are listed in stock

exchanges, except for some of the close-ended income schemes .

Equity Oriented Schemes:

These schemes, also commonly called Growth Schemes, seek to invest a

majority of their funds in equities and a small portion in money market instruments. Such

schemes have the potential to deliver superior returns over the long term. However,

because they invest in equities, these schemes are exposed to fluctuations in value

especially in the short term.

Equity schemes are hence not suitable for investors seeking regular income

or needing to use their investments in the short-term. They are ideal for investors who

have a long-term investment horizon. The NAV prices of equity fund fluctuates with

market value of the underlying stock which are influenced by external factors such as

social, political as well as economic. HDFC Growth Fund, HDFC Tax saver and HDFC

Index Fund are examples of equity schemes.

Debt Based Schemes :

These schemes, also commonly called Income Schemes, invest in debt

securities such as corporate bonds, debentures and government securities. The prices of

these schemes tend to be more stable compared with equity schemes and most of the

returns to the investors are generated through dividends or steady capital appreciation.

These schemes are ideal for conservative investors or those not in a position to take

higher equity risks, such as retired individuals. However, as compared to the money

market schemes they do have a higher price fluctuation risk and compared to a Gilt fund

they have a higher credit risk.

INCOME SCHEMES : These schemes provide returns in the form of

dividends. The returns may be cumulative or non-cumulative on a monthly,

quarterly, or yearly basis. Mutual Funds carry market risks and are prohibited

by SEBI from declaring any guaranteed rate of returns. The money under such

schemes are predominantly invested in fixed income securities like

debentures, bonds, Government securities etc.

Liquid Income Schemes: Similar to the Income scheme but with a shorter

maturity than Income schemes. An example of this scheme is the HDFC

Liquid Fund.

Money Market Schemes: These schemes invest in short term instruments

such as commercial paper (“CP”), certificates of deposit (“CD”), treasury bills

(“T-Bill”) and overnight money (“Call”). The schemes are the least volatile of

all the types of schemes because of their investments in money market

instrument with short-term maturities. These schemes have become popular

with institutional investors and high net worth individuals having short-term

surplus funds.

Gilt Funds:

This scheme primarily invests in Government Debt. Hence the investor usually

does not have to worry about credit risk since Government Debt is generally credit risk

free. HDFC Gilt Fund is an example of such a scheme.

HYBRID SCHEMES :

These schemes are commonly known as balanced schemes. These schemes

invest in both equities as well as debt. By investing in a mix of this nature, balanced

schemes seek to attain the objective of income and moderate capital appreciation and are

ideal for investors with a conservative, long-term orientation. HDFC Balanced Fund and

HDFC Children’s Gift Fund are examples of hybrid schemes.

Interval Schemes:

These schemes combine the features of open-ended and closed-ended schemes.

They may be traded on the stock exchange or may be open for sale or redemption during

pre-determined intervals at NAV based prices.

From the investments point of view the existing schemes can be further divided into 4

major categories :

1. GROWTH SCHEMES : These are usually close-ended schemes. The aim of

such schemes is to provide capital appreciation to their investors and accordingly

a substantial part of the Corpus is invested in equities an convertible debentures.

Such schemes are usually listed in the major stock exchanges and the capital

appreciation is reflected in their market value i.e. NAV. They may or may not

declare dividends even though the declaration of annual dividends represents the

health of a scheme.

2. EQUITY-LINKED SCHEMES (ELSS) : These are popularly known as tax-

planning schemes . They are essentially close-ended growth schemes in nature.

They are floated by almost all the public sector mutual funds in the last quarter of

each financial year, some of the essential characteristics are :

a. Investment up to a ceiling of Rs.1,00,000/ come under Section 80C of the

Income Tax Act.

b. Repurchase is allowed after a specified period- usually 3 years.

c. During the lock-in period of 3 years their units cannot be traded, pledged

or transferred.

3. VALUE-ADDED SCHEMES : they are in addition to the growth/income

schemes. Some of the mutual funds schemes have provision for ‘value addition’.

This is usually in the nature of personal insurance cover for accidents, etc. GIC

Mutual Fund was the first to introduce this concept.

Major Mutual Fund Companies in India

1) ABN AMRO Mutual Fund. 2) Birla Sun Life Mutual Fund

3) Bank of Baroda Mutual Fund. 4) HDFC Mutual Fund

5) HSBC Mutual Fund. 6) ING Vysya Mutual Fund

7) Prudential ICICI Mutual Fund. 8) Sahara Mutual Fund

9) State Bank of India Mutual Fund. 10) TATA Mutual Fund

11) Kotak Mahindra Mutual Fund . 12) UTI Mutual Fund

13) Reliance Mutual Fund. 14) Standard Chartered Mutual Fund

15) Franklin Templeton India Mutual Fund. 16) Morgan Stanley Mutual Fund

17) Escorts Mutual Fund 18) Alliance Capital Mutual Fund

19) Benchmark Mutual Fund. 20) Canbank Mutual Fund

21) Chola Mutual Fund. 22) LIC Mutual Fund

5 Easy Steps to Invest in Mutual Funds

1) Search: “Where to look for if we want to invest in MF”

Contacting an Investment advisor in a bank or a brokerage house or an

Independent Financial Advisor is the first step to gathering information.

Mutual funds units can also be bought over the Internet.

Mutual funds are much like any other product, in that there are manufacturers

who provide the product and there are dealers who sell them.

2) Evaluation: “Evaluation: choosing the right mutual fund for you

As an investor one may

for the short term or long term want to invest

want regular income or growth

want to target lower risk or higher returns

be convinced of a particular sector and want to invest in it

3) Purchase:

Systematic Investment Plan (SIP): Allows you to save a part of your income

regularly. Also used to reduce risk when investing in schemes targeting

aggressive growth.

Systematic Withdrawal Plan (SWP): Allows you to withdraw a part of your

investment regularly. Used when you want to withdraw your investment for a

specific regular payment, like insurance premium payments of monthly/quarterly

frequency.

Automatic debit: Saves the hassle of writing a cheque when making an

investment. Your account is debited automatically for the amount invested.

Dividend Plan :

Dividend Payout: Under this plan investor can redeem his/her dividend at

specific times.

Dividend Reinvestment: Under this plan investor’s dividend is reinvested

back to it’s principal amount which therefore increase the number of units

investor is holding.

Growth: Under this plan income generated from investment will put back

to it’s invested amount which therefore increases the value of each unit

customer is holding.

4) Post Purchase Monitoring:

Once you have invested in an ongoing fund, expect a period of two to three days

before you receive an account statement on the address mentioned by you in your

application form.

The Account Statement :Your account statement indicates your current holding

in the scheme that you have invested.

The transaction slip: The transaction slip at the end of the account statement can

be used for additional purchases, redemptions or to intimate the mutual fund on

any change in bank mandates/address.

NAV: The NAVs of all the open-ended schemes are published at the fund's

website, financial newspapers and AMFI (Association of Mutual Funds) web-site

www.amfiindia.com.

5) EXIT:

Every AMC advice that every investor should monitor the his/her units NAV

periodically but AMC also recommend their unit holders to not get swayed by short term

considerations in deciding their exit.

Redemption: In case of open ended funds investor can redeem his/her invested amount.

Most funds take 1-3 days to credit your account with your redemption proceeds.

5 Pointers to Measure Mutual Fund Performance

MEASURES DESCRIPTION IDEAL RANGE

STANDARD

DEVIATION

Standard Deviation allows to evaluate the

volatility of the fund. The standard deviation of a

fund measures this risk by measuring the degree

to which the fund fluctuates in relation to its mean

return.

Should be near to it’s mean

return.

BETABeta is a fairly commonly used measure of risk. It

basically indicates the level of volatility associated

with the fund as compared to the benchmark.

Beta > 1 = high risky

Beta = 1 = Avg

Beta <1 = Low Risky

R-SQUARE R- square measures the correlation of a fund’s

movement to that of an index. R-squared

describes the level of association between the

fund's volatility and market risk.

R-squared values range

between 0 and 1, where 0

represents no correlation and

1 represents full correlation.

ALPHA Alpha is the difference between the returns one

would expect from a fund, given its beta, and the

return it actually produces. It also measures the

unsystematic risk .

Alpha is positive = returns

of stock are better then

market returns.

Alpha is negative = returns

of stock are worst then

market.

Alpha is zero = returns are

same as market.

SHARPE

RATIO

Sharpe Ratio= Fund return in excess of risk free

return/ Standard deviation of Fund. Sharpe ratios

are ideal for comparing funds that have a mixed

asset classes.

The higher the Sharpe ratio,

the better a funds returns

relative to the amount of risk

taken.

Tax Rules For Mutual Fund Investors*

Equity schemes Other schemes Dividen

d income

Dividend distribution tax

Short

Term

Capita

l Gains

Long

Term

Capita

l Gain

Short

Term

Capital

Gains

Long

Term

Capital

Gain

TDS All

Schemes

Equity

Schem

es

Liquid

Schemes

Other

Schemes

Resident

Individua

l

/ HUF

10% NIL AS PER

SLAB

10%

(20% with

indexation

)

NIL TAX

FREE

NIL 28.32%

(25%

+10%surcha

rge+educatio

n cess)

14.16%

(12.5%

+10%surcharg

e+3%educatio

n cess)

Partners

hip Firms

10% NIL 30% 10%

(20% with

indexation

)

NIL TAX

FREE

NIL 28.32%

(25%

+10%surcha

rge+educatio

n cess)

22.66%

(20%+10%

surcharge+3%

education cess)

AOP/BOI 10% NIL AS PER

SLAB

10%

(20% with

indexation

)

NIL TAX

FREE

NIL 28.32%

(25%

+10%surcha

rge+educatio

n cess)

22.66%

(20%+10%

surcharge+3%

education cess)

Domestic

Compani

es

10% NIL 30% 10%

(20% with

indexation

)

NIL TAX

FREE

NIL 28.32%

(25%

+10%surcha

rge+educatio

n cess)

22.66%

(20%+10%

surcharge+3%

education cess)

NRIs 10% NIL AS PER

SLAB

10%

(20% with

indexation

)

STCG-

30%LTCG-

20%

TAX

FREE

NIL 28.32%

(25%

+10%surcha

rge+educatio

n cess)

14.16%

(12.5%

+10%surcharg

e+3%educatio

n cess)

ADVANTAGES OF MUTUAL FUNDS:

POINTS:

Portfolio Diversification – Mutual Funds normally invest in a well-diversified

portfolio or securities where the investor can hold a diversified investment

portfolio even with a small amount of investment.

Professional Management – The investors does not have the skills and the

resources of their own to succeed in today’s fast moving, global and sophisticated

markets. Thereby they benefits from the professional management skills brought

in by the fund in the management of investor’s portfolio.

Diversification of Risk- Since the investor acquires a diversified portfolio, it

reduces a risk of loss as compared to investing directly in one or two shares or

debentures or other instruments. While investing in a pool of funds with other

investors any loss, on one or two securities is also shared with other investors.

This risk reduction is one of the most important benefits of a collective

investment vehicle like the mutual fund.

Reduction of Transaction Costs –When going through a fund the investor has

the benefit of economies of scale, funds pay lesser cost because of larger volumes,

and this benefit is passed onto its investors.

Liquidity - Investment in a mutual fund is more liquid as an investor can liquidate

the investment, by selling the unit to the fund if open-end, or selling them in a

market if the fund is close-end and collect funds at the end of the period specified

by the mutual fund or the stock market.

Convenience and Flexibility – Mutual Fund management companies offer many

investor services where in the investor can easily transfer their holdings from one

scheme to the other, get updated market information, and so on.

DISADVANTAGES OF MUTUAL FUNDS:

No Control over cost – An investor in Mutual Funds has no control over the

overall cost investing as he pays investment management fees as long as he

remains with the fund. He also pays fund distribution costs, which he would not

incur in direct investing.

No Tailor-made Portfolios –Investors who invest on their own can build their

own portfolios whereas investing through funds involves delegating this decision

to the fund managers.

Managing portfolio of fund - Availability of the large number of funds can

actually mean too much choice for the investor wherein he needs an advice on

selecting a fund to achieve his objectives, to suit the situation when he selects

individual shares or bonds to invest in.

Who Can Invest In Mutual Funds In India?

Mutual funds in India are open to investment by:

a) Residents including

1) Resident Indian Individuals

2) Indian Companies

3) Indian Trusts/Charitable Institutions

4) Banks

5) Non-Banking Finance Companies

6) Insurance Companies

7) Provident Funds

b) Non Residents including

1) Non-Resident Indians, and

2) Overseas Corporate Bodies (OCBs) and

c) Foreign entities, viz;

1) Foreign Institutional Investors (FIIs) registered with SEBI.

Foreign citizens/ entities are however not allowed to invest in Mutual funds in India.

Company Profile

3.1 Basic facts about IL&FS

3.2 Service profile of IL&FS

3.3 Product profile of IL&FS

PART III

3.1 Basic facts about IL&FS

IL&FS INVESTSMART LTD.

• One of the leading financial services companies in India

– Focused on retail broking (including margin financing), distribution of

financial products and IPO financing

– Significant growing presence in Merchant Banking, & Institutional

Brokerage Businesses

• Pan India presence with a network of 259 outlets (including business associates)

spread across 124 major cities in India

• Total Income in FY 06 of Rs. 2170 mn. and net profit of Rs. 691 mn.

Promoter History -

IL&FS

Promoted by Infrastructure Leasing and Financial Services Ltd.

Shareholders of IL&FS include SBI, ORIX-Japan, IFC-Washington, Credit

Commercial de France, Indivest Pte Ltd (an Affiliate of Govt. of Singapore).

Business operations of the promoter

Infrastructure and Development Services: Sectors such as Surface

Transport and Transportation Systems, Water Supply, Hydro Power,

Special Economic Zone, Port and Environment & Social Management

Group.

Investment Banking: Strategy, Asset Financing, Corporate Advisory,

Capital Markets, Project Financing.

I L & F S3 0 %

S A I F1 0 %E * T R A D E

2 7 %

F I I s & P u b l i c3 3 %

Shareholding Pattern

Made contributions to the following trusts: IL&FS Infrastructure Equity

Fund, IL&FS Investment Trust –I, II, IV.

The Indian Innovation Award-2005: Awarded to IL&FS by President of India

VISION STATEMENT:

To become the preferred long term financial partner to a wide base of customers whilst

optimizing stakeholders value!

MISSION STATEMENT

To establish a base of 1 million satisfied customers by 2010. We will create this by being

a responsible and trustworthy partner

CORPORATE ACTION:

An Approach to Business that reflects Responsibility, Transparency and Ethical

Behaviour. Respect for Employees, Clients & Stakeholder groups.

3.2 Service profile of IL&FS

Product Portfolio

Key Milestones

1998–99

1999-2000

2000-2001

2004-2005

2003–2004

First full year of equity broking on NSE

Commenced retail operations at Bangalore, Chennai & Kolkata

First full year of equity broking on NSE

Commenced retail operations at Bangalore, Chennai & Kolkata

Commenced equity broking on BSE

ORIX & K Raheja joined as new shareholders

Commenced equity broking on BSE

ORIX & K Raheja joined as new shareholders

Commenced derivative broking on NSE

Launched investment advisory products

Registered as Portfolio Manager

Commenced derivative broking on NSE

Launched investment advisory products

Registered as Portfolio Manager

Acquired 4 branches of Tata TD Waterhouse

Acquired Insurance Training Business

Acquired 4 branches of Tata TD Waterhouse

Acquired Insurance Training Business

ETM as Strategic Investor and SAIF as financial partner

Commenced commodity broking

ETM as Strategic Investor and SAIF as financial partner

Commenced commodity broking

2001-2002

Merchant Banking and Debt on Net merges with IIL

Merchant Banking and Debt on Net merges with IIL

Completed IPOCompleted GDRStrategic

investment in ESOP Direct

Completed IPOCompleted GDRStrategic

investment in ESOP Direct

2005-2006

Acquired Apeejay Securities

Completed business restructuring

Received the Best Performing National Financial Advisor Award for 2006 by CNBC

Crossed over 250 retail outlets spanning 125 Indian cities

Acquired Apeejay Securities

Completed business restructuring

Received the Best Performing National Financial Advisor Award for 2006 by CNBC

Crossed over 250 retail outlets spanning 125 Indian cities

2006-2007

3.3 Product profile of IL&FS

Retail broking;

Largest network of branded broking outlets in the country servicing 100,000

clients

Pioneers of online trading in India…

Amongst the top online trading websites from India

Winner of ‘Best Performing National Financing Advisor-Retail Segment At

Cnbc TV 18 National Financial Advisory Awards 2006.

The services of IL&FS

1) Research Based Investment Advice.

2) Investment and Trading Services.

3) Integrated Demat Facility

4)

Technology Based Investment Tools

5) Training and Seminars

MANAGEMENT TEAM:

1. Mr.R.C.Bawa

Age : 52

Position: managing director and ceo

Brief profile:

Severed as deputy MD since August 2003.

Has more than 20 years of experience in Indian banking sector.

Holds a master degree in arts and post graduate diploma in industrial

relationship.

2. Mr Sandeep Presswala

Age: 39

Position: chief operating officer.

Brief profile:

Served as COO since October 1999

Has over 14 years of experience in Capital Markets

Holds a Bachelors Degree in Commerce from Bombay University and is

a Chartered Accountant.

3. Mr Sachin Joshi

Age: 40

Position: chief financial officer

Brief profile;

Served as CFO since October 1999

Has over 16 years of Financial Management experience

Holds a Bachelors degree in Commerce and is a LLB(Gen),

Chartered Accountant and Cost and Works Accountants

4. Mr. Girish Nadkarni

Age :37

Position: chief operating officer

Brief profile:

Has over 15 years of industry experience in financial services

Holds a PGDM from IIM-A, Bachelors in Commerce from Mumbai

University and is a Cost and Works Accountant

Data Analysis and Interpretation

4.1 Methodology

4.2 Data Analysis

PART IV

Methodology:

It was important to collect detailed information on various aspects for

effective analysis. As “Marketing today is becoming more of a battle based on

information than one based only on sales power”. In today’s information based society

companies with superior information enjoys a competitive advantage.

METHODOLOGY ADOPTED:

The information was collected through personal interview and interview was

conducted through the mode of questionnaire

DATA COLLECTION :

The data was collected through primary as well as secondary sources

Primary data:

Primary data was collected from 155 respondents using a schedule of

questions and a survey was conducted. The tabular and graphical data was Microsoft

Excel.

Secondary data:

Secondary data was collected mainly from the Internet, printed journals on

the capital markets of India, newspaper articles and books written on the Indian stock

markets.

SAMPLING

Judgmental , non-random sampling was used. Respondents were requested to

help with the schedules at their offices, homes or at the IL&FS office.

PROFILE OF RESPONDENTS

The respondents were asked to answer questions to a schedule. To get a

graphical idea of the respondents’ profile, please refer the tables and graphs.

AGE DISTRIBUTION OF CLIENTS

1 .6

46 29.3

48 30.6

38 24.2

14 8.9

10 6.4

157 100.0

157 100.0

<20

20-30

30-40

40-50

50-60

60-70

Total

Total

Frequency Percent

Age interval

30% of the respondents are in the age group of 30 to 40 years.

OCCUPATION DISTRIBUTION OF THE CLIENTS

60-70

50-60

40-50

30-40

20-30

<20

102 65.0

33 21.0

13 8.3

4 2.5

5 3.2

157 100.0

157 100.0

BusinessEmployeesRetired

Housewife

Student

Total

Total

Frequency Percent

Occupation

Employees dominated the respondent profile with 65 percent, followed by

21 percent business men .

INVESTMENT DISTRIBUTION OF RESPONDENTS

43 27.4

69 43.9

21 13.4

17 10.8

7 4.5

157 100.0

157 100.0

<100000

100000-500000

500000-1000000

1000000-5000000

5000000-20000000

Total

Valid

Total

Frequency Percent

investment intervals

69% percent of the respondents invest from 1 lakh to 5 lakhs . 43% percent

of them invest less than 1 lakh .

GENDER DISTRIBUTION OF RESPONDENTS

147 93.6

10 6.4

157 100.0

157 100.0

Male

Female

Total

Total

Frequency Percent

Gender

Female

Male

A massive 93%of the clients were men .

Respondents’ overall asset allocation

Assets Name % share in PortfolioSaving Acc & Fixed

Deposits 7%Bonds & Mutual Funds 30%Equity & Equity Funds 26%

Real estate 15%Insurance 18%

Others 4%Total 100%

7

3026

1518

4

05

1015202530

value (%)

Saving A

cc &

FDs

Bonds &

MF

Equity &

Efs

Real e

state

Insura

nce

Others

Overall asset allocation

It is evident from the chart that Mutual Fund has highest score of 30 percent share in

portfolio followed by Stocks (Equity and equity funds) i.e. 26 percent, whereas

Insurance, Saving accounts and Fixed deposits and Real Estate and other allocations have

more or less the same rating i.e. 18, 7, 15 and 4 percent respectively.

Top 3 income group asset allocation

6

27 30

1915

30

10

20

30

Val

ue(

%)

Asset allocation of top 3 income brackets

Now if we calculate from the top three income brackets it is seen that 30 percent of

their portfolio comprise Equity and equity funds followed by 27 percent in bonds and

mutual funds, thereby 19 percent in real estate, 15 percent in insurance and a very

negligible portion in saving accounts and others.

Assets Name % share in portfolioSaving Acc & Fixed

Deposits 6Bonds & Mutual Funds 27Equity & Equity Funds 30

Real estate 19Insurance 15

Others 3Total 100

Types of investment

Short Term Investment

21%

Long Term Investment

44%

Both35%

Types of Investment:

Types of investment Frequency

Short Term Investment 21

Long Term Investment 44

Both 35

Interpretation:

Among the total sample size 44 per cent investors are prefer to investing

in long term and 21 percent are prefer to investment in short term. Where as 35

per cent of investors are preferred to invest in both long terms as well as in short

term investment avenues.

Investment pattern affected by market movement:

Options Frequency

Yes 53

No 27

Factors influence on investment decision

Risk Involved

16%

Return they give30%Past

performance20%

Future Growth

24%

Other factor 10%

Risk Involved Return they give Past performance

Future Growth Other factor

Investment pattern affected by market movement

Yes 66%

No34%

Yes No

Interpretation:

From this we can come to know that 53 investors investment

pattern will affect if any market movement (BSE index, inflation rate etc). So

majority of the investor’s investment pattern will affect if any changes in the

market. Market movement is very important factor for changing in investment

pattern

8. Factors influence to choice various investment alternatives:

Factors influence Percentage

Risk Involved 16

Return they give 30

Past performance 20

Future Growth 24

Other factor 10

Interpretation:

By seeing this findings we can say 30% of investor investment decision is

depend on return on investment, second important factor is future growth and

past performance of the company. 16% of investor’s investment is based on risk

involved. Choice of factor is changing from investor to investor.

Comparisions

5.1. Comparison of Investment products

5.2. Five most common mistakes

5.3 .swot analysis

5.4. Risk factors

PART V

Comparison of Investment products

Investor tends to constantly compare one form of investment with another Investors

certainly look for the best returns for different option. However, to determine which

option is better, the comparison should be made in terms of other benefits that the

investor ought to look for in any investment.

Investment

Objective

Returns Risk

Tolerance

Investment

Horizon

Liquidity

Equity Capital

appreciation

High High Long term High

FI Bonds Income Moderate Low Med-long Moderate

Corporate

Debentures

Income Moderate High Med Low

Corporate

FDs

Income Moderate High Med Low

Bank

Deposits

Income Low Generally

low

Flexible High

PPF Income Moderate Low Long term Moderate

Life

Insurance

Risk cover Low Low Long term Low

Gold Inflation

hedge

Moderate Low Long term Moderate

Real Estate Inflation

hedge

High Low Long term Low

Mutual

Funds

Capital

growth &

Income

High High Flexible High

THE FIVE MOST COMMON MISTAKES MUTUAL FUND INVESTORS MAKE

Failing to stay invested for a longer period

Worrying about portfolio turnover or dividends it pays

Being affected by new in the market when you’re supposed to be investing for the

long term

Selling out during bad markets

Being impatient and losing confidence too soon.

SWOT ANALYSIS

Strengths:

Brand image.

Image of an Ethical player.

Brand Reach

Prompt service provider.

Good relationship with

distributors

Efficient Sales Staff

Fair understanding of market

and competition.

Weakness:

Inability to fully cover the

outstation market

Lack of manpower.

Opportunity:

Unexplored/ outstation

market.

Target export segment

aggressively

Threats:

Substitute products like bank

FDs, RDs etc.

New entrants

RISK FACTORS

Mutual Funds and Securities investment are subject to market risks and there can

be assurance or guarantee that the scheme objectives will be achieved.

As with any investment in securities, the Net Asset Value of Unit issued under the

Scheme may go up or down depending on the various factors and farces affecting

the capital markets.

Past performance of the Sponsors and their affiliates / AMC / Mutual Fund and its

scheme do not indicate the future performance of the schemes of the Mutual

Fund.

The Sponsors are not responsible or liable for any loss or shortfall resulting from

the operations of the scheme beyond the contribution of Rs 1 lakh each made by

them towards the corpus of the Mutual Fund.

As per SEBI circular ref. SEBI/IMD/CIR No. 10/22701/03 dated December 12, 2003

read with circular ref SEBI/IMD/CIR NO. 1/42529/05 dared June 14, 2005, it is specified

inter alias that each portfolio under a scheme should have a minimum of 20 investors and

no single investor should account for more than 25% of the corpus of such portfolio.

Summary and Findings

6.1 Findings

6.2 Suggestions

6.3 Limitation and scope for further research

PART VI

6.1 Findings

After having met more than 100 individuals the views expressed by these respondents

have been vary significant. Some of views express by them about the Mutual Funds.

From the respondents, 34% of the respondents lies in the income level of Rs.

150000 to Rs. 300000 and the majority of the respondents saving Rs. 1000 to

Rs.3000 regularly.

Majority of the respondents of the sample are invested their money in Bank

Deposits and Insurance.

From the respondents surveyed, 69% of the respondents are aware about the

concept of Mutual Fund and remaining are not aware of this. Friends and Print

Media create large part of this awareness of concept of Mutual Fund.

Among the 69 aware respondents 53% are invested their money in Mutual Funds

Schemes and the remaining respondents are not invested because of risk factor

involved in it and lack of information about the various scheme of Mutual Funds.

While investing in Mutual Funds people look in for some attributes they are:

Reputation of the Company: In this project I have found that the name of

Mutual Fund Company matters lot. If the company’s name is good then the

people will think that their money will be more secured in the reputed company.

Service: I found that wanted good services from the AMC i.e. information of

Mutual Funds Schemes, details of NAV should be available on phone calls.

Past performance of Funds: while investing in Mutual Fund majority of the

people will look for the past performance of the funds. If it is good people will

think that their money is safer and they can get good returns.

Portfolio of the Scheme: it is the very important parameter that the clients

consider because the returns of the schemes depended upon the portfolio.

Sector Portfolio: These portfolios consist of the company only one sector like

Auto sector, IT sector etc and they will invest in that sector funds, which is in

boom period.

Flexibility: the clients wanted an exit option whenever they required. They also

wanted option of shifting from one scheme to another.

The respondents those who are already invested in Mutual Funds gives mixed

opinion about investing there increased savings in Mutual Funds.

Those who are given positive opinion towards this are wanted some extra feature

like sufficient information about the various schemes and wanted agent’s service and

those who are not given the positive opinion are wanted to invest their money in bank

deposits and in Insurance (ULIP) because of the safety and the fluctuations in the stock

markets. And very few of investors are invested in the S.I.P (systematic investment

plans).

In this project I found that respondents preferred debt fund to equity fund because

of regular returns, less risk, and high fluctuation in the stock markets. And they

are having vague information about the Mutual Funds

Suggestions:

Client awareness program has to be conducted by IL&FS for Stock

Brokering Services and mutual fund, because most of the people in

Belgaum are unaware about it.

Since the intent and web based communication is getting popular IL&FS

should update web site frequently and provide information up to date

IL&FS can rethink on its Brokerage rate. Because the charges are

comparatively little higher than the service charged by its competitors and

also customers are expressing dissatisfaction towards its brokerage rate.

As investors’ investment decision is based on the study of different

sources, IL&FS should start giving advertisement in business newspaper

and in business magazine.

IL&FS should expand its business by setting up of new branches in

various places where they have lot of client for example Bijapure.

LIMITATIONS

While completing this study, there were some constraints. They were:

Time: To undertake a project of this magnitude, eight weeks is a short time.

To collect more data from a much larger, varied sample would take additional

time.

Sample size: Due to constraints on time, the sample size had to be limited at

155. This, by and large, may not represent the entire community of the Indian

investor.

The study is restricted to Belgaum only.

Learning Outcomes

7.1 Data Interpretation of Investors

PART VII

Data Interpretation of Investors:

From the given analysis we see that 75% of the investors do not deal in Mutual

funds but they still believe in the traditional mode of investment, which means

there still exists a high degree of Mutual Fund un-awareness among the people.

Therefore focus should be on Investors education.

There is a great diversity in the pattern of investment, majority of people who are

mostly the business class people invest for long term as they look for the high

returns and long term capital appreciation. These people have great capacity to

take risk they are called as Risk Takers , while rest invest for short term which

mostly comprise of service class people who go for regular/Monthly income

plans i.e. short term benefits.

Customers who are aware of the market situations perfectly find it futile to invest

through bank and generally had brokers who refund part of the commission to

them.

References and Bibliography

7.1 Articles

7.2 Books

7.3 Websites

7.4 Questioner

PART VIII

References & Bibliography:

7.1 Article

Capital Market Review 2003-04, Published by SHCIL

7.2 Books

Financial Management, PRASANNA CHANDRA, 6th edition

Financial Management, KHAN & JAIN, 3rd edition

Security Analysis and Portfolio Management , FISCHER & JORDAN

Research Methodology, David .R. Cooper and Schindler

7.3 Websites

www.shcil.com

www.icicidirect.com

www.nseindia.com

www.economictimes.com

QUESTIONNAIRE

Kindly fill up the following questionnaire.

1. Name :

2. Educational level

PUC Graduation Post-Graduation

Professional Others (Please Specify) …………..

3. Age

Less than 20 20 – 30 31 – 40 41 – 60

More than 60

4. Number of persons in the family

1 2 3 4 More than 4

5. Occupation

Employed

Private Sector

Public Sector

Self employed

Business

Profession (CA/Lawyer/Doctor/Others ……………)

Not employed

Retired

6. Annual income and savings

a. Annual income (in Rs.)

Less than 1 lakh

1 – 2 lakhs

2 – 3.5 lakhs

3.5 – 5 lakhs

More than 5 lakhs

b. Annual savings (in Rs.)

Less than 10,000

10,000 – 20,000

20,001 – 30,000

30,001 – 40,000

40,001 & above

7. Investment avenues that you like to choose

Equity FI Bonds Corporate Debenture

Company Fixed Deposits Bank Deposits

PPF Life Insurance Small / Post-office Savings

Gold Real Estate Mutual Funds

Others ………….

8. Average amount (in Rs.) invested in a year in the following avenues

Equity FI Bonds Corporate Debenture

Company Fixed Deposits Bank Deposits

PPF Life Insurance Small / Post-office Savings

Gold Real Estate Mutual Funds

Others ………….

9. Are you a short term or long term investor?

Short term Long term Both

10.State reason behind choice of your investment options

Self – Awareness Financial Advisors Broker’s Advice

Friends’ or Relatives’ Advice Media

11.What is your frequency of investments?

Weekly Monthly Quarterly

Half-yearly Yearly