SUMMER TRAINING PROJECT REPORT on ‘STUDY OF MUTUAL FUND’ S.I.P., NOIDA SUBMITTED FOR PARTIAL FULFILLMENT OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION [2014-2015] By CHAURASIA DIPESH RAMDULARE (Roll No.: 1368670033) EXTERNAL SUPERVISOR INTERNAL SUPERVISOR Amitabh Ghosh RAJNISH KHARE HR Manager ASSIATANT PROFESER Mahindra Finance Ltd., AIAM, GRATER NOIDA 1
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SUMMER TRAINING PROJECT REPORT
on
‘STUDY OF MUTUAL FUND’S.I.P., NOIDA
SUBMITTED FOR PARTIAL FULFILLMENT OF THE DEGREE OF
Today, the group have a growing network of more than 300 branches and more than 580
business partners spread across more than 300 cities/towns in India and a fully operational
international office at London. However, our target is to have 500 branches and 1000
business partners in India and 7 International offices by March 2008.
Unlike a traditional broking firm, Religare group works on the philosophy of partnering for
wealth creation. We not only execute trades for our clients but also provide them critical and
timely investment advice. The growing list of financial institutions with which Religare is
empanelled as an approved broker is a reflection of the high- level service standard
maintained by the company.
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MUTUAL FUNDS OPERATION FLOW CHART
Passed back to Pool their money with
Invest in
Generates
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Investors
Return Fund Manager
Securities
2.2 GENESIS OF MUTUAL FUNDS
The goal of security industry is to create a nation of shareholding capitalists to make
every man and woman a participant in the corporate activities. A small investor is
unsophisticated so far as corporate investment is concerned. With the limited
resources, he cannot buy shares of ‘blue chip companies’. He may not, in the most
cases get allotment of the shares, applied for, in the Primary Market. On the other
hand, he will get full allotment of some dud shares. His investments would, therefore,
be not balanced and diversified. He is not thereby able to minimize his risks by
spreading his limited funds over different industries. He has limited access to price
sensitive information of the stock exchanges.
He may not even know the developments that take place in the share markets and
corporate bodies. ‘Mutual Funds’ have come to a boon to the small investors and they
have emerged as the popular medium through which small and medium investors can
reap the benefits of good investing. The Institution of Mutual Funds collectively
manages the funds from different small investors. It mobilizes savings from the public
and provides them attractive returns, security and liquidity by investing in Capital
Market.
Mutual Funds emerged in the UK and US as ‘investment management institutions’ in
the early Twentieth century, during the 1920s. The origin of Mutual Funds may
however be traced back to the days ancient Greek where ‘merchants’ banded together
to take shares in the commercial undertakings. Similar arrangements existed in Rome
and Europe also when merchants in colonial America used to take shares in voyages
which when completed would be liquidated and assets divided among themselves.
The Scottish American Investment Trust was formed in 1873 to hold portfolio of
American Railroads bonds shares in trust were issued to the interested citizens of
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Dundee. Most of these schemes were a closed type and the shares were sold and
purchased at the market rates and the ‘law of demand’ and supply set the price
The concept of Mutual Fund was experimented in the US from 1920s and the
institutional business was becoming popular in the late 1940s. As the financial climate
during the early 1980s enhanced the competitiveness of certain investment products the
Mutual Funds Industry responded to investors demand by increasing the number and
type of Mutual Funds
In the UK, during the 1920s ‘the accepting houses’ emerged as a major force in the
business of investment management agencies. Investment management has its genesis
in the deployment of the large fortunes made by some of the Victorian merchant
bankers. But only in 1950, the accepting houses rapidly built up on their existing skills
and knowledge to deal with increasing capital. The investment trust was superseded by
the Unit Trust as small savers means of access to professional managemen
The foundation for the Mutual Fund operation in India was laid by the Parliament in
1963 with the enactment of the Unit Trust of India (UTI) Act. At that time, the then
Finance Minister Mr. T.T. Krishnamachari, who initiated the Act, made it clear to the
Parliament that “UTI would provide an opportunity for the middle and lower income
groups to acquire without much difficulty, property in the form of shares or units. This
institution is intended to cater mainly to the needs of individuals whose means are
small.’
The statement of objects and reasons to the Unit Trust of India Act brings out critically
the objects and rule of Mutual Fund. The statement stated:
‘The question of establishing an institution in the public sector for carrying on the
business which is transacted by Unit Trust of India or Mutual Funds in other countries
has been under consideration for sometimes. It is now proposed to establish such an
institution to be known as the Unit Trust of India with an initial capital of five crores of
rupees.
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The unit Trust of India will encourage saving by providing for various classes of
investors the facility of investing their money in units of the Trust. The Trust will invest
the initial capital and the capital obtained by the sale of the units in shares and other
securities and will distribute every year not less than 90 per cent of the net income
accruing to the unit holders. It is expected that the risk of losses or depreciation on
account of the investment will be reduced or eliminated as a result of the proposed
arrangement. The Trust will also be in.
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MEANING OF SYSTEMATIC INVESTMENT PLAN (SIP )
When we all strive to organize and systematic our activities, then why not do the
same with investments. SIP is a way to invest in regular and disciplined manner while
taking care of volatility, systematic is the word that describes you, organized well manner
planned in all your activities. Whether it is earning, saving or spending every thing is
done in a disciplined manner.
One never had enough money or sometimes it was shortage of time. If this is the
case then its time you had a look at the SIP of mutual funds .A SIP is nothing but a
planned investment program which takes a small sum of money from people and in
invests it in a mutual fund at regular interval. The minimum amount can be as small as
Rs. 500 and the frequency of investment is usually monthly or quarterly.
This simple program has a number advantage.
First if saving is an arduous task for the person, then SIP can do this for. Money
deducted from the account (Through post dated cheques) and invested is money one can
not spend. And a rupee saved is a rupee earned.
Even if each investment is small, over time this can add up to a neat kitty. And
the power of compounding can do wonders in due course of time, a small amount can
grow into a significant amount More importantly a sip does away with the need or effort
to time the market.
When the market is falling person may feel then it may decline further and that investor
should wait a while. Often stock market recover, notice the opportunity is lost.
When market are rising it is scary to invest money is not better should wait for a
correction and then make an investment. But if the correction does not come about then
even this opportunity is missed. And if markets are going nowhere then what is the point
in investing at all.
So trying to find out which is the best time to invest can be tough task. And that’s
why it is said that the timing the market is futile. If one could take advantage of the ups
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and downs that markets encounter, it would be great and this is where SIP fits in. By the
process of regular investing one gets to invest in the high as well as the lows, and this
help in averaging out the volatility in the market.
Thus, an SIP imparts discipline to investing, whether it is the regular act of saving or
investing, an SIP does both automatically. While there are certain benefits of an SIP
please remember it is no wonder drug that cures all investment related ailments.
An SIP does not guarantee returns or positive returns. I one opt for an SIP in a
falling market and the market continues to fall, then their investment will suffer a loss on
the whole.
An SIP can be useful for a debt funds well …to help build a pool of savings. It can
be though of something similar to a recurring deposit where a part of your savings is
automatically deducted from account. Overall, and SIP is a simple device that helps you
to save and invest in a disciplined manner without having to time the mark
SIP is a process of consecutive investment in capital market through mutual fund: -
The short of investment plan, to some extent, reduces the risk of market fluctuation
since it is invested in stretched time but over all risk remains in full source .
As the inherent nature of capital market your investment may or may not grow and even
it can reach far below your initial investment .But recurring deposit in any Bank assures
you a fixed sum at its maturity.
Though it is not high enough but it is fully risk free. In view of the frequent volatility in
the equity markets, systematic investment plan are seen as the best option to invest in
equity schemes.
Undoubtedly, SIP is reasonably a good avenue for retail investors It insulates them from
extreme volatility. It helps protecting downside risk .On the other hand it enforces the
disciplined approach of saving in an investor’s mentality
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Under an SIP option, one can invest fixed amounts at a regular frequency. It prompts
investors to take a disciplined approach of saving instead especially for the salaried class.
There are two statistical forces in SIP which work for investors: rupee cost averaging and
power of compounding.
Investors will get fewer units when the price is high and vice versa. SIP averages out the
cost, while the rupee cost averaging does not assure investors profit.
It has worked out well for millions of investors through out the world. The power of
compounding acts over along term. If an investor invests Rs 1,000 every month in such
funds, it would give better returns over 5 years as against 3 years
For Example:
Franklin India Bluechip: - Fund gives 32.82 per cent returns in 5 years as against 22.05
per cent in 3 yrs.
Franklin India Prima Plus gives 35.92 per cent in 5 years as against 25.24 per cent.
Franklin India Prima Fund yields 28.84 percent against 8.21 percent.
Actually, the returns on SIP depend on market conditions.
Investors avoid participation in equity markets because of the fear of volatility impacting
their returns. An SIP offers investors the safety of mitigating volatility risk, thus
encouraging participation in the equity markets.
If an investor has the discipline to invest during difficult periods, such investments
usually deliver the best value over the long term.
For an SIP between 1997 and 2006, 70-75 per cent of wealth creation was attributable to
investments during lackluster phases in the market
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KOTAK 30 performance as on 30, 2008
SIP Returns-
1 year 3 year 5 year
Amount Invest Rs60,000 Rs180,000 Rs 3,00,000
Investment value Rs63753 Rs2,85,881 Rs809602
XIRR 11.86% 32.53% 41.02%
Record Date Dividend Per Unit Rs
28-Feb-2008 6.00
11-Jan-2008 6.00 20-July-2007 3.00
27-Dec-2006 5.50
27-Dec-2005 1.00 3-Jun-2005 1.00
5-Nov-2004 1.50
31-Jan-2004 5.00
20-Oct-2003 2.00
28-Dec-2001 1.00
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DEBATABLE VIEW
There can be little debate that SIP promotes traits that are invaluable to financial planning –
Regular investing that makes market timing redundant
Rupee cost averaging that beats investing lump-sum
Some demerits relevant with SIP: -
Despite the pros, investors would be well advised to note some demerits
associated with SIP, Although its not like the negatives bring down the entire
structure on which the argument for SIP is based on the other hand they are
significant too.
1- Exit is not as cheap as people thought:-
Most SIP investors probably are not aware that there is an exit load slapped on
premature redemption since the entry load is waived off on SIP, in a lot of cases
12 month is the minimum time period for which investors have to be invested to
escape without an entry load .
So investor assure that they can redeem the entire amount in the 13month after
investment
While this assumption is flawed, it is not necessarily the investor who is to be
blamed. Often, investment agent in there enthusiasm to promote SIP forget to
mention exactly how the redemption schedule for SIP works.
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Redemption schedule:
Cheque date sip no. earliest redemption
1-Jan-07 sip1 1-Jan-o8
1-Feb-2007 sip2 1-Feb-08
1-Mar-07 sip3 1-Mar-08
1-Apr-07 sip4 1-Apr-08
The earliest redemption of Sip1 can be made only in the 13th month since the
cheque date Likewise in the 14th month, the investor can redeem SIP2, Notice
each sip has minimum investment time frame of 12 months not just SIP1 .So
one go without incurring a sales load, you will be able to do only in June 2008.
Rupee-cost averaging does not always work:-
How many time we have heard elaborate presentation and seen fancy tables and
graph that show how rupee-cost averaging one very important reason to take
SIP rout to mutual fund investing.
However, rupee cost-averaging does not always work. It certainly does not
work in a rising market. This is because a market that shows a consistently
rising trend will ensure that every subsequent Sip in and equity fund is at a
higher NAV than the previous SIP.
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WHEN RUPEE-COST AVERAGING FAILS
Cheque NAV Rs SIP amount Rs No. of units
Date
1-Aug-08 11.72 1,000 85.3
1-Sep-08 12.53 1,000 79.8
1-Oct-08 14.03 1,000 71.3
1-Nov-08 14.12 1,000 70.8
1-Jan-08 18.68 1,000 53.5
Average NAV 14.48
It is obvious that the SIP mode of investing wasn’t such a great idea.
Rupee-cost averaging did not work its charm for the investor who had the
option to enter the equity fund through a one-time, lump-sum investment on at
least four occasions from August1, 2007 till Nov1, 2007 to beat the average
NAV of Rs 14.48, but yet choose the SIP way. If he had taken the opportunity
to enter lump-sum on any one of these occasions he would have been better off
than opting for the SIP route
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Of course, that is not to say that rupee-cost averaging is a failure, but it works
particularly well if you have taken an SIP over a longish time horizon of 12-18
months to benefit from a falling market.
The exit load could really pinch one:-
Some investors opt, for SIP thinking that despite the drawback it is however
a smart way to invest as opposed to one time lump-sum investment. This right
but SIP work best only if you last clients to go in for SIP because the entry load
is waived off. Their argument is that since the entry load is waived off, then
even if the client withdraws prematurely, the 2.00% exit load (approximately) is
not really damaging as it’s just a charge for not paying the entry load. This
argument is flawed because the entry and exit loads are charged on different
amounts.
For example from the above real life illustration it’s easy to understand how the
exit, load can be particularly high on premature redemptions from an SIP. Take
the first SIP at an NAV of Rs11.72 .
If the investor had entered one time at that level at 2.00% entry load it would
have cost him Rs0.23(2% of Rs11.72) But since he has opted for the SIP rout let
us understand how a premature redemption work for him. Say, the investor
wants to redeem his units by January1, 2008 because the NAV has climbed
significantly and he wants to capitalize on the opportunity. He will be slapped
with a 2.00% exit load since the entry load was waived off on the SIP.
However, the 2.00% exit load will be calculated on Rs18.68, which amount to
Rs0.37. Compare this with the Rs0.23 he would have had to pay if he had
entered lump-sum.
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Of course, these illustrations are on hindsight and the investor has no way to
know this in advance. That is understandable and as we have outlined we are
not out to debunk SIP. However, SIP need to be promoted by the investment
agent/distributor community after explaining all the merits and demerits to the
investor so as to enable him to take an informed decision.
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TOP 25 MUTUAL FUND ACROSS ALL CATEGORIES COMPANY SCHEME Reliance Mutual Fund + Reliance Liquid Fund –Treasury Plan –institutional Option plan- Dividend –Monthly DBS Chola Mutual Fund. +DBS Chola Monthly Income Plan- Regular –Growth. UTI Mutual Fund +Gold Exchange Traded Fund- Growth. Benchmarch Mutual Fund. +Gold Benchmark Exchange Traded Scheme –Growth Kotak Mahindra Mutual Fund. +Kotak Gold ETF-Growth Canara Rebeco Mutual Fund +Canara Robeco Income –Bonus & Dividend and Growth Canara Rebeco Mutual Fund Canara Robeco Gilt PGS -Growth And Dividend.
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EQUITY LINKED TAX SAVING SCHEME
Enjoy Tax Benefits:- These scheme are becoming more popular as traditional ways of tax saving
becoming less intresting with declining intrest rates.
WHO SHOULD INVESTMENT:- Equity linked saving scheme is an ideal way to save on tax as
well as staying invested in equity mutual funds.
HOW THEY PERFORMED:- In last one year and above these fund have given above average
returns to keep you more & more interested in saving tax as well as counting return on your
investment.
Absolute Return (in %) as on May 18, 2008
Equity Tax saving
Assets size Rs(cr)
NAV 1 year 2year 3year
SBI MagnumTax gain (G****)
3,561.99 53.81 16.5 59.5 157.6
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1- Diversification:- Mutual fund reduces the risk by investing in all the investor. Instead of putting all your`money in one sector or company its better to invest in various good performing sectors as one reduces the risk of getting involved in a particular company which may perform or may not.
WHO SHOULD INVEST:- This is an ideal category for those who want to participate in stock market & knows that risk involved in stock market with lesser amount of risk than stock markets. HWO THEY PERFORMED:-Though the short term out look is volatile in long-term equity diversified fund have outperformed other categories & stock market with lesser amount of risk than stock market.
Equity Diversified Assets
size(cr) NAV 1 year 2 year 3year
Reliance RSF Equity*****
692.03 23.31 44.3 100.4 ------
ICICI Pru Infrastructure*****
4,682.85 28.64 39.4 109.4 -------
DSP ML India TIGER-RP(G)*****
3,880.59 43.99 21.3 75.4 202.9
Tata Infrastructure *****
2,646.58 33.68 34.3 80.6 201.5
DETAIL OF COMMONLY USED INVESTMENT OPTIONS AVAILABLE FOR INVESTORS
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RESEARCH METHODOLOGY
The marketing research process involves certain step wise activities which are here in a defined order.
Define the Problem and Research Objectives.
Develop the Research Plan
Collect the Information
Analyze the information.
Present the findings.
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QUESTIONNAIRE
Name: - Mr. /Ms. ………………………………..
Gender: - Male……… Female: -…………
Address: - ………………………………….
Contact No: -……………………………….
E-mail: -………………………………
What is your occupation?
Where are you employed/Types of company?
Annual income slab.
Investment horizon.
For you saving should be.
Where do you invest your saving?
Do you know about mutual fund?
Class of mutual funds.
According to you investment in mutual funds are
Would you like to invest in mutual fund.
Criteria for selecting a particular mutual fund.
In which sector would you prefer to invest?
Know Mahindra Finance as a?
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FINDINGS
There is great opportunity for Mutual Fund companies as there is a rise in a
number of people who want to invest in share market but do not have time and
knowledge to do so, also these people wants to take less risk.
The survey shows that significant part of the investment portfolio of the retail
investors consists of Mutual Fund Scheme. But still, Insurance and Post Office
Scheme have a significant share because of the safety factor associated with
them.
With booming market and falling interest rate of bank deposits, people see
mutual funds as an attractive financial tool which provide a high return rate at
lower risk as compared to equity market.
Most of the investors prefer Mutual Fund route for equity investment than direct
stock market investment.
Young people these days are particularly more interested in mutual funds
because they see mutual fund as safe bet .Also these people have large
disposable incomes and risk taking capability too. According to the study of
major part of the investors are showing interest in the Equity Based Schemes to
meet out their need for capital appreciation.
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The bad part is people are still ignorant about mutual funds and different
schemes about mutual funds. Hence it is very necessary to educate them
about mutual funds.
Another significant finding of the study is that investors are lured by the
returns Mutual Funds are showing. However at the same time they want to
minimize their risk.
The investment horizon, which is most liked by the investors, is 2 to3 years.
An investor equity fund portfolio largely depends on his/income level and
age.
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RECOMMENDATIONS
The retail investor base is increasing at a faster pace but there is a lack of
information about the suitable investment modes among the investors. There is
a need of proper awareness programs to keep the investors updates about the
latest investment opportunities.
India is passing through a tremendous growth phase with an average
growth rate of 7-8% per annum. With this growth in each and every funds but
are apprehensive towards the risks associated with them. Well diversified equity
schemes should be introduced to minimize the volatility of the funds.
It has been seen that there is a major increase in the percentage of young
investors who have large amount of disposable income with them and want to
invest, these types off prospective clients should be tapped at an early stage.
Small town, villages are still untapped and can also act as a business area
of very huge potential.
Now, even co-operative society can invest up to 10% of their capital in
mutual funds which open the door to new and very important client base. More
flexible option can be provided to investor like Systematic Investment Plan
(SIP) and switching options. Hedging options are also prevailing these days.
Professional management of Mutual Fund is a value added feature of
Mutual Fund schemes. AMCs should utilize this feature to attract retail
investment.
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CONCLUSIONS
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In my project I have taken a good experience by how a company, survive
in the market. It was really wonderful working with a brand known as the
Mahindra group.
I was guided by this group in an excellent way to get know how about the
corporate world and how to tackle with the clients, how to interact with them.
With their full support and help I completed my project with a great
success. I am concluding my project with my best understanding and finding
which I found during this project.
People generally not aware of mutual funds the relate mutual fund with
stock market.
In this way they expect high return like stock market.
Mostly people want to invest for resourceful life.
People wise to for short term to medium term time horizon.
People invest in mutual fund on the basis of return and mostly prefer
To go with some brand names of AMC’s.
People mind set is to earn maximum return in short term while it should
be minimized.
People generally prefer SIP. Because of it’s services as amount deducted
from account automatically.
SIP also easy to manage because it is a low amount which is not heavy to