Mahindra+finance

Mahindra & Mahindra Financial Services ltd

A

COMPARATIVE ANALYSIS OF MUTUAL FUND SCHEMES

WITH REFERENCE TO

Mahindra & Mahindra Financial services Ltd, BANGALORE

A project report submitted to College name in partial fulfillment for the award of

POST GRADUATIUON DIPLOMA IN BUSINESS MANAGEMENT

In

MARKETING

Submitted by:

NAME REG. NO

UNDER THE ESTEEMED GUIDANCE OF

Faculty Name

Management Faculty

College logo

College Name

Address

Sajith GS Page 1


A COMPARATIVE ANALYSIS OF MUTUAL FUND SCHEMES

WITH REFERENCE TO

Mahindra & Mahindra Financial services Ltd, BANGALORE

A project report submitted to College Name in partial fulfillment for the award of

POST GRADUATIUON DIPLOMA IN BUSINESS MANAGEMENT

In

MARKETING

Submitted by:

Name Reg No.

UNDER THE ESTEEMED GUIDANCE OF

NAME

Head- HR & Corporate Relations

COLLEGE LOGO

Place

YEAR

Sajith GS Page 2


CERTIFICATE

This is to certify that the project work titled

‘A COMPARATIVE ANALYSIS OF MUTUAL FUND SCHEMES’, submitted by name is his

original and bonafide work submitted in partial fulfillment of the requirement for the

award of Post graduation Diploma in Business Management of COLLEGE NAME

The said student has submitted a ‘project report’ that has been verified and

found satisfactory.

FACULTY NAME

Head- HR & Corporate Relations

Sajith GS Page 3


DECLARATION

I, Sajith G.S. do hereby declare that the report titled

“A COMPARATIVE ANALYSIS OF MUTUAL FUND SCHEMES” has been

done by me under the guidance of Mr.NAME, HR and Corporate Relation,

COLLEGE NAME.

This report is submitted in partial fulfillment for awarding of degree of

Post graduation Diploma in Business Management in COLLEGE NAME. I

also declare that all facts included in this report are original and no part of this

work has been replicated or been submitted by me for the award of any other

degree or diploma elsewhere.

Place:

Date: 31-08-08 NAME

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ACKNOWLEDGEMENT

I would like to take this opportunity to extend my sincere gratitude to

Mr. Manager Name, state head distribution channel Mahindra and Mahindra

financial services ltd (finsmart) for providing me the opportunity to conduct a

project study in his esteemed organization.

I would like to express my most sincere gratitude to my Faculty Guide

and my Company Guide Mr. Name, cluster head investment products, Mahindra

financial services ltd for the constant guidance, encouragement and motivation

they extended for the project study.

I also regard my sincere thanks to my Parents, Friends, Well-wishers and all those

who are directly and indirectly have helped me in completion of this project.

Any task will not be completed successfully without sincere effort and effort of

various people who have sensibly, logically, systematically blended their thoughts

and efforts in achieving goals. I have been able to make this research in a very

short period of time that was at my disposal. Hence it gives me great pleasure to

my thanks and gratitude to those who have been instrumental directly as well as

indirectly in completion of the study

SAJITH GS

TABLE OF CONTENTS

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CONTENTS PAGE NUMBER

Abstract 02

Introduction 03

Objective 03

Methodology 05

Schedule 06

Company Profile 07

What is Mutual Funds 09

Evolution of Mutual Funds 12

Mutual Fund Types 17

Mutual Fund Classification 19

Various Plan of Mutual Funds 21

Risk Hierarchy of Mutual Funds 24

Structure of Mutual Funds 25

NAV and other terms 27

Advantage of Mutual Funds 31

Disadvantage of Mutual Funds 33

Structure of Organization 34

Gap Analysis 35

Problem Statement 36

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SWOT Analysis 38

Mutual Fund scheme analysis 39

Chronicle Order of Companies 42

Asset Under Management 43

Marketing Experience 45

Finding and Observation 47

Conclusion 48

Suggestion 49

Bibliography 51

ABSTRACT

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Being such a hot and much talked about financial product in the recent times, I take it as a great

opportunity to study and analyze the Indian mutual fund Industry and give my observation on it. It will not only

help building my career but it will also help Mahindra finance in certain aspect.

The Indian Mutual Funds Industry has witnessed a sea change since UTI was first established in 1963.

From a single player the number of players has increased to more than 30 and the number of schemes has

spiraled to more than 3500. The last decade has been a period of rapid growth for the MF industry. The industry is

in nascent stage at present. It has come a long way and still has lots of potential for growth.

My project in Mahindra finance mainly deals with selling through several financial channels available in

the market. And my main aim is to attain profit for the company and give them good business. For selling I have

done various surveys to get the database and then I have done proper market segment based on their income etc.

Because no two clients are same so we have to deal everyone according to their needs. And after that we do

telephonic calls and try to get appointment with the person so to give them knowledge about the product and

then try to sale the product to them.

And in these project my main aim to see which schemes are giving better returns and at a reasonable

risk. But risk itself is a very subjective terms that depend on person to person. And also how asset management

companies are performing and how their ranking in investment terms is.

And during the course of the project I have not only learnt about mutual fund industry but also try to

understand customer behavior and also who can be the potential client for the company.

INTRODUCTION

The definition of 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, and/or other securities. In a

mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or losses, and

collects the dividend or interest income. The investment proceeds are then passed along to the individual

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http://en.wikipedia.org/wiki/Collective_investment_scheme

http://en.wikipedia.org/wiki/Income

http://en.wikipedia.org/wiki/Interest

http://en.wikipedia.org/wiki/Dividend

http://en.wikipedia.org/wiki/Capital_gain

http://en.wikipedia.org/wiki/Fund_manager

http://en.wikipedia.org/wiki/Security_(finance)

http://en.wikipedia.org/wiki/Money_market

http://en.wikipedia.org/wiki/Bond_(finance)

http://en.wikipedia.org/wiki/Stock


investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated

daily based on the total value of the fund divided by the number of shares currently issued and outstanding.

PURPOSE

The purpose of the study at the Mahindra finance is to get the insight knowledge into mutual fund

industry and also try to gain some knowledge in equity market

I also have to see analysis of mutual fund of various fund houses available in the market

Try to understand consumer behavior and then do their market segment and then try to sell their

product

PROJECT OBJECTIVE

1) To gain knowledge about the various investment

2) To understand the selling techniques of mutual fund

3) It will help me to improve my communication skills and as well manners as to how to remain in front of client.

4) It will help me to understand stock market better.

5) To have the feel of real life work experience.

6) It will help me to learn commitment as well as discipline.

7) It will make me more confident and interactive.

8) To generate revenue for the company.

9) To understand behavior of the client.

10) To gain insight knowledge of mutual fund and how it benefit the investors.

LIMITATION

1) Sometime stock market are not performing well so people are not interested to invest

2) Sometime because of negative sentiments in the market people are not ready to invest for e.g. the subprime

crisis in US affected the stock market in India.

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http://en.wikipedia.org/wiki/Net_asset_value


3) Many people have good knowledge of the equity market by themselves so they don’t want to invest in mutual

fund

4) Many are looking for the short term benefits for which sometime mutual fund is not the best option

5) Many people who want to have high risk high return are not suitable for mutual fund

6) Some people are not ready to invest in mutual fund because of the lack of knowledge about the product

7) Most of the time people are busy in their schedule and so they don’t want to listen to anything on the

telephone calls.

8) In small towns people are not willing to purchase mutual fund because of lack of knowledge they rather prefer

to invest in real state

9) It is also difficult to measure economic factor associated with time constrain

10) Time constrain

IMPLEMENTATION OF THEORY IN THE PROJECT-

Whatever I have learnt in the 1st and 2nd semester theory most of all the concept are put into practice firstly I

can say market segmenting in this whole process of investing I have segmented various customer based on their

income , occupation etc . And also try to understand consumer behavior either meeting them directly or at field

work. I have also done lot of telephone calls that help me to know their responses and to know that how much

people know investing in the mutual fund or either they are having no knowledge for that. When I meet customer

I have to tell them about net asset value and annualized return for that I have to use all the concept of my

financial management. And since I am taking specialization as marketing this project would help me in shaping

and building my career and also this work experience would help me a lot.

METHODOLOGY -

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Firstly I did survey and based on that I collect the database and then did the telephonic call and get the

customer information and then try to fix appointment with them so to give them knowledge about our product

and how to invest. After calling to customer and at the time of meeting I did market segmentation based on

income etc because no two client are same so for every client we have to deal him differently for e.g. A low

earning person who don’t have to give tax for him scheme such as equity linked saving scheme which is related to

tax is of no use so for every client there is a different investment option so we have to recognize that and based

on the need we have to offer different schemes of different mutual fund as well as different asset management

company product to him by this way we help them to get into good schemes according to their needs. And

sometimes i also tried to contact HR manager of small firms and try to convince about our product and if he feels

satisfied then we take permission to give corporate presentation to his employees and then try to convince and

then sell the product. We also provide them after sale service by sending them statement every month and also

the factsheet of the various AMC so they can know there return exactly and also know properly that where their

money is invested. And then I also have prepared questionnaire for the person whom I meet to recognize the

factors which they take into account while investing in mutual fund and then also I see various factors like age ,

occupation , income group , locality and then see how this factor affect while investing in various schemes.

SCOPE:

This project provides me with learning insight about mutual fund and also little bit about equity market. The

Mutual fund industry in India comprises of a large number of fund houses and schemes, however the project is

limited to study of a few fund houses and schemes which are performing well in the current market scenario. The

analysis will mainly be carried on mainly by the data collected from client and from the internet

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SCHEDULE

ACTIVITY TIME PERIOD

Training on mutual fund- learns about the concept of mutual

fund and the different schemes related to different mutual

fund. And also Something about taxation and Financial

planning04-07-08 to 10-07-08

Then class on asset management and also done survey by asking

People to fill questionnaire

11-07-08 to 20-08-08

Marketing of mutual fund by telephonic 11-07-08 to 27-08-08

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Call and try to fix appointment with them and then give them

product knowledge and then try to close the deal

For marketing of mutual fund I have visited to Tech- Mahindra

for 7 days to give them the product knowledge and also try to

sale the product.

15-08-08 to 22-08-08

Submission of project proposal report 17-08-08 to 19-08-08

Submit of project interim report 21-08-08 to 26-08-08

Submission of project final report 29-08-08 to 31-08-08

Total project period 04-07-08 to 31-08-08

COMPANY PROFILE-

Mahindra & Mahindra Financial Services Limited, a subsidiary of Mahindra & Mahindra Limited, was

established in the year 1991 with a vision to become the number one semi urban and rural Finance Company. In

a short span of 12 years, it has become one of the India’s leading non-banking finance company providing finance

for acquisition of utility vehicles, tractors and cars. It has more than 350 branches covering the entire India and

services over 6, 00,000 customer contracts.

The Mahindra group is a US$4.5 billion conglomerate and a leading manufacturer of multi –utility

vehicles .The Group celebrated its 60th anniversary in 2005-06.It has a leading presence in key sectors of the Indian

economy, including trade and financial services. (Mahindra intertra de, Mahindra & Mahindra Financial Services

Ltd.) , automotive components, information technology & telecom (Tech Mahindra), and infrastructure

development. Mahindra group is among top ten industrial houses in India.

Mahindra and Mahindra financial services ltd operates in various location of the country to have a faster

response to the needs of all customer for finance and in particular the dealer and customer for M&M products.

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Recently it has received the necessary permission from Reserve Bank of India (RBI) to start the

distribution of Mutual Fund products through its network. Hitherto the company was only participating in the

liability requirements of its customers and with mutual fund distribution business, it can also participate in

their asset allocation. When it comes to investing everyone has unique needs based on their own objective and

risk profile.

Even though many investment avenues such as fixed deposit, bonds etc exists, equities typically

outperform these investments, over a longer period of time. We are of the opinion that, systematic investment in

equity will allow you to create Wealth. Hence only through proper allocation of your portfolio, you can get the

maximum return with moderate risk. Investing in equity is not as straight forward as investing in bonds or bank

deposits. It requires expertise and time. Our Investment Advisory services will help you to invest your money in

equity through different Mutual Fund Schemes. For instance there are some products of Mutual Fund, which

allows you to manage your cash flow by providing liquidity (liquid Funds) as well give you tax free return.

SHARE MARKET

A Share market is the place where buying and selling of shares takes place. Nowadays due to internet and

advanced technology buying and selling of shares takes place anywhere in India and also from foreign country;

there is no need to be physical present in exchanges like NSE and BSE. These share market has a great impact on

the mutual fund because of the schemes of mutual fund most of the investment of mutual fund goes into equity

market either scheme can be in the form of index fund, or equity diversified or either money can be invested in

small cap, large cap, mid cap so we can say that sensex movement had a great correlation with the increase or

decrease of net asset value of mutual fund so we can easily say that mutual funds are heavily depended on share

market. Financial markets like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) are countries

economic barometer (a guide to economic growth). Stock markets like NSE and BSE enable trading of a company's

stock.

BSE Sensex (sensitive index) is the prime and old indicator of stock market trend in India. It consist of 30 stocks

representing wide spread industries. It is also calculated using well attested method called free float market

capitalization method (market capitalization of all shares in free float). Free float shares are those that are

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available for trading in open market. The rest may me promoters holding, FDI holdings, locked in shares, ESOPS

etc. market Capitalization takes into consideration only those shares issued by the company that are readily

available for the trading in the market.

Market capitalization = Price of its stock * No. of stocks issued by the company

Free float market capitalization rate = market capitalization * free float factor

BSE determines the free float factor for each company based on detailed information submitted by the companies

in the prescribed format. Free-float factor is the multiple with which the total market capitalization of a company

is adjusted to arrive at the Free-Float market capitalization. Once the free float of a company is determined, it is

rounded of to the higher multiple of 5. A Free-Float factor of say 0.55 means that only 55 % of market

capitalization of the company will be considered for index calculation.

SENSEX = Free Float market capitalization of 30 companies

Index Divisor

MAIN TEXT:

WHAT IS MUTUAL FUND?

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The

money thus collected is then invested in capital market instruments such as shares, debentures and other

securities. The income earned through these investments and the capital appreciations realized 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

basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

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Mutual Fund Operation Flow Chart

A mutual fund is the ideal investment vehicle for today’s complex and modern financial scenario. Markets

for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have

become mature and information driven. Price changes in these assets are driven by global events

occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and

time to keep track of events, understand their implications and act speedily. An individual also finds it

difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified and experienced

staff that manages each of these functions on a full time basis. The large pool of money collected in the

fund allows it to hire such staff at a very low cost to each investor. In effect, the mutual fund vehicle

exploits economies of scale in all three areas - research, investments and transaction processing. While the

concept of individuals coming together to invest money collectively is not new, the mutual fund in its

present form is a 20th century phenomenon. In fact, mutual funds gained popularity only after the Second

World War. Globally, there are thousands of firms offering tens of thousands of mutual funds with

different investment objectives. Today, mutual funds collectively manage almost as much as or more

money as compared to banks.

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Thus a mutual fund is the most suitable investment for the common man as its offers an opportunity to invest in a

diversified, professionally managed portfolio at a relatively low cost. Thus the mutual fund is packed product

which consists of following attributes:-

Professionally manage portfolio Diversification Convenience Tax benefits u/s 80c Liquidity Lesser risk

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Mutual fund scheme is prepared by fund manager of that company where offer document contains

Load structure (exit load /exit load) Type of fund Investment objective Asset allocation Plans and options Minimum application Bench mark index

EVOLUTION OF MUTUAL FUNDS IN INDIA

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the

Government of India and Reserve Bank. The objective then was to attract the small investors and introduce them

to market investment. The history of mutual funds in India can be broadly divided into four distinct phases

Phase 1- 1964-87: Growth of Unit Trust of India

In 1963, UTI was established by an act of Parliament. The first scheme launched by UTI was Unit Scheme 1964.

Later in 1970’s and 80’s, UTI started innovating and offering different schemes to suit the different classes of

investors. Unit Link Insurance Plan (ULIP) was launched in 1971. Six new schemes were introduced between 1981

and 1987. The asset under management of UTI was increased from Rs. 600 crores in 1984 to Rs. 6700 cr. by the

end of 1987.

Phase 2- 1987-1993: Entry of public sector funds

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1987 marked the entry of public sector mutual funds. With the opening up of the economy, many public sector

banks and financial institutions were allowed to establish mutual funds. State Bank of India established the first

non UTI mutual fund- SBI Mutual Fund in November 1987. This was followed by Canbank Mutual Fund, LIC Mutual

Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. From 1987-

88 to 1992-93, the asset under management increased from Rs.6700 cr. to Rs.47004 cr.

Phase 3-1993-1996: Emergence of Private Funds

A new era of mutual fund industry began in 1993 with the permission granted for the entry of private sector

funds. This gave the Indian investors a broader choice of ‘fund families’ and increasing competition to the existing

private sector funds. Foreign fund management companies entered joint ventures with Indian companies to start

the mutual fund business in India. These private funds have bought in with them the latest product innovation,

investment management techniques and investor-servicing technology that make the Indian mutual fund industry

today a vibrant and growing financial intermediary. During the year 1993-94, five private sector mutual funds

launched their schemes followed by six others in 1994-95. Due to the SEBI regulatory in Indian mutual fund

industry, the fund industry began to witness much greater investor confidence in due course. The erstwhile

Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July

1993.

Phase 4-1996-1999: Growth and SEBI regulation

Since 1996, the mutual fund industry in India saw tighter regulation and higher growth. It scaled new heights

in terms of mobilization of funds and number of funds. Deregulation and liberalization of the Indian economy had

introduced competition and provided impetus to the growth of industry. Measures were taken both by SEBI to

protect the investor and by the Government to enhance investors’ returns through tax benefits.

A comprehensive set of regulations for all mutual funds operating in India was introduced with SEBI (mutual fund)

Regulations, 1996. These regulations set uniforms standards for all funds. The budget of Union Government in

1999 took a big step in exempting all mutual fund dividends from income tax in hands of investors. During this

phase, both SEBI and AMFI launched investor awareness programmes aimed at educating all investors about

investing through mutual funds.

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Phase 5-1999-2004: Emergence of a large and uniform industry

The other major development in the fund industry has been the creation of a level playing field for all mutual

funds operating in India. This happened in February 2003, when the UTI Act was repealed. Unit Trust of India no

longer has a special legal status as a trust established by an Act of Parliament. Instead, it has also adopted the

same structure as any other fund in India- a Trust and an Asset Management Company. UTI Mutual Fund is the

present name of the erstwhile Unit Trust of India. UTI Mutual Fund is now under the SEBI’s (Mutual Fund)

Regulations, 1996 like all other Mutual Fund in India. UTI Mutual Fund is still the largest player in the Indian Fund

industry.

The emergence of a uniform industry with the same structure, operations and regulations made it easier for

distributers and investors to deal with any fund house in India. 1999 marked the beginning of a new phase in the

history of the mutual fund industry in India, a phase of significant terms of both amounts mobilized from investors

and asset under management. Between 1999 and 2005, the size of the industry has doubled in terms of asset

under management which has gone up from Rs. 68000 cr. to Rs. 1, 50,000cr. Within the growing industry, the

relative share of different players in terms of amount mobilized and asset under management have also

undergone changes.

2003-2004: A retrospect :

This year was extremely eventful for mutual funds. The aggressive competition in the business took its toll and

two more mutual funds bit the dust. Alliance decided to remain in the ring after a highly public bidding war did

not yield an acceptable price, while Zurich has been sold to HDFC Mutual. The growth of the industry continued to

be corporate focused barring a few initiatives by mutual funds to expand the retail base. Large money brought

with it the problems of low retention and consequently low profitability, which is one of the problems plaguing

the business. But at the same time, the industry did see spectacular growth in assets, particularly among the

private sector players, on the back of the continuing debt bull run. Equity did not find favor with investors since

the market was lack-luster and performances of funds, barring a few, were quite disappointing for investors. The

other aspect of this issue is that institutional investors do not usually favor equity. It is largely a retail segment

product and without retail depth, most mutual funds have been unable to tap this market.

Impact of local and international developments

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During the year we had two major political developments that affected the mutual fund industry. The standoff

between India and Pakistan at the beginning of the financial year saw the debt market being extremely volatile.

Investors pulled out of funds and this also put pressure on fund managers to hold returns and at the same time

meet redemption commitments. The equity markets were equally subdued but the industry did not react greatly

to this since equity funds were in any case not a significant part of the mobilization in the last few years. With the

stand down on the Indian side, the debt markets recovered and with that the inflow of funds into our industry

soared once again. But at the end of the year the industry was hit by another war – the impending US attack on

Iraq and consequent oil price pressures once again made the debt market volatile. It is a mark of the maturing of

the Indian investor that redemptions were only need based and the industry did not see as much outflows as one

feared.

Product innovations

With the bond yields plateauing and with the mutual fund industry trying to attract people to the equity market,

the year also saw some remarkable products flavors for Indian investors. Birla Sunlife Mutual Fund led the pack

with an equity fund focused on dividend yield stock, a bond index fund and a bond-for-units swap product. Some

of the other innovative products were the series of exchange-traded funds from Benchmark, including a liquid

index traded fund. Prudential-ICICI also launched an exchange-traded fund, the SPICE, in association with BSE.

The industry focused also on making existing products more attractive by adding on a number of service features

and cost control measures. Same day redemption in liquid funds, “institutional” plans which would reduce the

overall cost of investment and bonus units in lieu of dividend were some of these features.

A new Emphasis on Risk Management

The year also saw a tremendous emphasis on risk management. A number of mutual funds were already taking

steps to mitigate risks not only in operations as in the past, but also in the area of management of funds. A

committee constituted by AMFI carried the initiative taken under the FIRE (Financial Institutions Reform and

Expansion) Project forward and developed a risk management framework for the industry. The subsequent

circular by SEBI is perhaps one of the most comprehensive attempts to address the issue of risk in the mutual fund

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business and carries with it the added advantage of phase wise escalation starting with mandatory items and

moving towards best practices.

GROWTH IN ASSETS UNDER MANAGEMENT

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The graph of total asset under management is given above

AMFI and its role

One of the most effective industry bodies today is probably the Association of Mutual Funds in India (“AMFI”). It

has been a forum where mutual funds have been able to present their views, debate and participate in creating

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their own regulatory framework. The association was created originally as a body that would lobby with the

regulator to ensure that the fund viewpoint was heard. Today, it is usually the body that is consulted on matters

long before regulations are framed, and it often initiates many regulatory changes that prevent malpractices that

emerge from time to time. This year some of the major initiatives were the framing of the risk management

structure, a code of conduct and registration structure for mutual fund intermediaries, which were subsequently

mandated by SEBI. In addition, this year AMFI was involved in a number of developments and enhancements to

the regulatory framework. AMFI works through a number of committees, some of which are standing committees

to address areas where there is a need for constant vigil and improvements and other which are ad hoc

committees constituted to address specific issues. These committees consist of industry professionals from among

the member mutual funds. There is now some thought that AMFI should become a self-regulatory organization

since it has worked so effectively as an industry

Phase 6: From 2004 0nwards: Consolidation and Growth

The industry has lately witnessed a spate of mergers and acquisitions, most recent ones

being the acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund by Principal, and

PNB Mutual Fund by Principal. At the same time, more international players continue to enter India, including

Fidelity, one of the largest funds in the World. The stage is now set for growth through consolidation and the

entry of new international and private sector players. As at the end of August 2008, there were 32 funds.

Number of schemes

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MUTUAL FUND TYPES

All mutual funds would be either close-end or open-end, and either load or no-load. These classifications

are general. For example all open-end funds operate the same way; or in case of a load fund a deduction is made

from investors’ subscription or redemption and only the net amount used to determine his number of shares

purchased or sold.

Once we have reviewed the fund classes, we already to discuss more specific fund types. Funds are

generally distinguished from each other by their investment objectives and types of securities they invest in. we

now look at major types of fund available under the general classifications as discussed above. It may be noted

some of the following fund types are not yet available popular in India at present.

a) Broad fund types by nature of investments Mutual funds may invest in equities, bonds or fixed income securities, or short-term money

market securities. Some have equity, bond or money market or liquid funds. All these invest in financial

assets. But there are funds that invest in physical assets. For example, there is Gold or other precious

metal funds and there are real estate funds.

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b) Broad fund types by investment objectiveInvestors and hence the mutual funds pursue different objectives while investing. Thus, growth funds

invest for medium to long term capital appreciation. Income funds invest to generate regular income and

less for capital appreciation. Value funds invest in equities that are considered undervalued today, whose

value will be unlocked in future.

c) Broad fund types by risk profile

The nature of a fund’s portfolio and its investment objective imply different levels of risk under

taken. Funds are therefore, often grouped in order of risk. Thus, equity funds have a greater risk of

capital loss than a debt fund that seeks to protect the capital while looking for income. Liquid funds are

exposed to less risk than bond funds. Since they invest in short-term fixed income securities, as

compared to longer-term portfolios of bond funds.

Fund managers often try to alter the risk profile of funds by suitably changing the investment objective.

For example, a fund house may structure an “Equity Income Fund” investing in shares that don’t

fluctuate much in value and offer steady dividends-say power sector companies, or a real estate income

fund that invests only in income-producing assets. A balanced fund seeks to produce a lower risk

portfolio by mixing equity investments with debt investments. Investors and their advisors need to

understand both the investment objective and the level of risk of the different types of funds.

MUTUAL FUND CLASSIFICATION

Open-end Vs Closed-end Funds

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An open-end fund is one that sells and repurchases units at all times. When the fund sells units, the investor

buys them from the fund. When the investor redeems the units, the fund repurchases the units from the investor.

An investor can buy units or redeem units from the fund itself at a price on the net asset value (NAV) per unit.NAV

per units is obtaining by dividing the amount of market value of the fund’s asset (plus accrued income minus the

fund liabilities) by the number of units outstanding. The number of units outstanding goes up or down every time

the fund sells new units or repurchases existing units. In other words, the ‘unit capital’ of an open- end mutual

fund is not fixed but variable. When sale of unit exceed repurchase, the fund increases in size. When the

repurchase exceeds sale, the fund shrinks.

A closed-end fund is a one-time sale of fixed number of units and it is fixed. After the offer closes, closed-end

funds don’t allow investors to buy or redeem units directly from the funds. However, to provide the much-needed

liquidity to investors, closed-end funds list on a stock exchange. Trading through stock exchange enables investors

to buy or sell units of a closed-end mutual fund from each other, through a stockbroker, in the same fashion as

buying or selling shares of a company. The fund’s units may be traded at a discount or premium to NAV based on

investor’s perceptions about the fund’s future performance and other market factors affecting the demand for or

supply of the fund’s units. The number of outstanding units of a closed-end fund does not vary on account of

trading in the fund’s units at the stock exchange. Sometimes, closed-end funds do offer “buy-back of fund

shares/units”, thus offering another avenue for liquidity to closed-end fund investors. In this case, the mutual

fund actually reduces the number of outstanding units. In India, SEBI regulations ensure that the closed end

scheme investors are given at least one of the two exit avenues.

Load and No-load Funds:

Sajith GS Page 27


Marketing of a new mutual fund scheme involves initial expenses. These expenses may be recovered from

the investors in different ways at different times. Three usual ways in which a fund’s marketing expenses may

recover from the investors are:

At the time of investor’s entry into the fund/scheme, by deducting a specific amount from his

contribution

By charging the fund/scheme with a fixed amount each year, during a specified number of years.

At the time of investor’s exit from the fund/scheme, by deducting a specified amount from the

redemption proceeds payable to the investor.

These charge imposed on the investors to cover distribution/sales/marketing expenses are often

called “loads”. The load charged to the investor at the time of entry into a scheme is called a “front-end load or

entry load”. This is the first case. The load amount charged to the scheme over a period of time is called a

“deferred load”. This is the second case above. The load that the investor pays at the time of his exit is called a

“back-end load or exit load”. This is the third case above. Some fund may also charge different amount of loads to

the investors, depending upon how many years the investor has stayed with the fund; the longer the investors

stay with the fund, less the amount of ‘exit load’ he is charged. This is called “contingent deferred sales charge”.

Fund that charge front-end, back-end or deferred loads are called load funds. Funds that make no such charges or

loads for sales expenses are called no-load funds.

Tax-exempt Vs Non Tax-exempt Funds

When a fund invests in tax-exempt securities, it is called a tax-exempt fund. In India, any income received by

mutual funds is tax-free. After the 1999 Union Government Budget, all of the dividend income received from any

of the mutual fund is tax free in the hands of the investor. However, funds other than open-end equity oriented

funds have to pay a distribution tax, before distributing income to investors. In other words, open-end equity

oriented mutual fund schemes are tax exempt, while other funds are taxable for distributable income.

Sajith GS Page 28


VARIOUS PLAN OF MUTUAL FUND:

Growth Plan:

Dividend is not paid-out under a Growth Plan and the investor realizes only the capital appreciation on the

investment (by an increase in NAV).

Income Plan:

Dividends are paid-out to investors under an Income Plan to the investors. However, the NAV of the

mutual fund scheme under an Income Plan falls to the extent of the dividend payout.

Dividend Re-investment Plan:

Here the dividend accrued on mutual funds is automatically re-invested in purchasing additional units in

open-ended funds. In most cases mutual funds offer the investor an option of collecting dividends or re-

investing the same.

Retirement Pension Plan:

Some schemes are linked with retirement pension. Individuals participate in these plans for themselves,

and corporate participate for their employees.

Insurance Plan:

UTI and LIC Mutual Funds have some schemes that offer insurance cover to investors.

Systematic Investment Plan (SIP):

Here the investor is given the option of preparing a pre-determined number of post-dated cheques in favor

of the fund. The investor is allotted units on the date of the respective cheques at the applicable NAV.

Systematic Withdrawal Plan:

As opposed to the Systematic Investment Plan, the Systematic Withdrawal Plan allows the investor the

facility to withdraw a pre-determined amount / units from his fund at a pre-determined interval. The

investor's units will be redeemed at the applicable NAV as on that day.

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BY INVESTMENT OBJECTIVE

1) Growth Funds

The aim of growth fund is to provide capital appreciation over the medium to long term. Such

schemes normally invest a majority of their corpus in equities. It has proved that return from stock, have

outperformed most other kinds of investment held over the long term. Growth schemes are ideal for

investors having a long term outlook seeking growth over a period of time. Growth funds invest in

companies whose earnings are expected to rise at an above average rate. These companies may be operating in

sectors like technology considered having a growth potential. Growth funds are therefore, less volatile than funds

that target aggressive growth.

2) Income Funds (Debt Funds)

The aim of income fund is to provide regular and steady income to investors. Such schemes

generally invest in fixed income securities such as bonds, corporate debentures and government securities.

Income funds are ideal for capital stability and regular income. These funds do not target capital

appreciation but look for current income, and therefore distribute a substantial part of their surplus to

investors. Income funds targets high return and can face more risk.

3) Balanced fund

The aim of balanced fund is to provide both growth and regular income. Such schemes

periodically distribute a part of their earning and invest both in equities and fixed income securities in the

proportion indicated in their offer document. By investing in a mix of nature, balanced funds seek to

attain the objectives of income, moderate capital appreciation and preservation of capital and are ideal for

investors with a conservative and long-term orientation. In a rising stock market, the NAV of these

schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors

looking for a combination of income and moderate growth.

4) Money market funds (Liquid Funds)

The aim of money market fund is to provide easy liquidity, preservation of capital and moderate income.

These schemes generally invest in safer short term instrument such as treasury bills, certificate of deposit,

commercial papers and inter-bank call money. Return on these schemes may fluctuate depending upon the

interest rates prevailing in the market. These are ideal for corporate and individual investors as a means to park

their surplus fund for short periods.

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5) Gilt Funds

Gilt funds are government securities with medium to long term maturities, typically of over one

year. In India, we have Government securities or Gilt Funds that invest in government paper called dated

securities. Since the issuer is the Government of India or States, these funds have little risk of default and

hence offer better protection of principal. However, Gilt Securities, like all debt securities, face interest

rate risk. Debt Securities price fall when interest rate level increase (and vice versa). Investors have to

understand the potential change in NAV s of gilt funds on account of changes in interest rates in the

economy.

6) Equity Linked Tax Saving schemes

These scheme offer tax rebates to the investors under specific provision of the Indian income tax

laws as the government offers tax incentive for investment in specified avenues. Investment made in the

equity linked saving schemes (ELSS) and pension schemes are allowed as deduction u/s 88 of the income

tax act, 1961. The act also provides opportunity to investors to save capital gains u/s 54EA and 54EB by

investing in mutual funds.

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RISK

TYPE OF FUND

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Money Market Fund

Debt Fund

Gilt Fund

Hybrid Fund

Equity Fund

Aggressive Growth Fund

Flexible Asset Allocation Fund

Growth Funds

High Yield Debt Funds

Diversified Equity Fund

Index Fund

Value Funds

Money Market Funds

Equity Income Funds

Focused Debt Funds

Diversified Debt Fund

Balanced FundsGilt Funds

RISK HIERARCHY OF MUTUAL FUNDS

Growth and Income Funds


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STRUCTURE OF MUTUAL FUND:

SEBI

Trustee Sponsor

AMC

FUND MANAGER MKT/SALES

MUTUAL FUND DISTRIBUTOR

SCHEMES

INVESTOR

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THE STRUCTURE CONSISTS OF:

The Fund Structure

Sponsor is defined as any person who, acting alone or in combination with another body corporate, establishes a

mutual fund. The sponsor of a fund is akin to the promoter of a company as he gets the fund registered with SEBI.

The sponsor will form a Trust and appoint a Board of Trustees. The sponsor will also generally appoint an Asset

Management Company as fund managers. The sponsor, either directly or acting through the Trustees, will also

appoint a Custodian to hold the fund assets. As per the SEBI regulation, for a person to qualify as a sponsor, he

must contribute at least 40% of the net worth of AMC and possess a sound financial track record over five years

prior to registration.

TRUST

The mutual fund in India is constituted in the form of a Public Trust created under the Indian Trust Act, 1882. The

fund sponsor acts as the settler of the Trust, contributing to its initial capital, and appoints a Trustee to hold the

assets of the Trust for the benefit of unit holder, who are the beneficiaries of the Trust. The fund then invites

investors to contribute their money in common pool, by subscribing to “units” issued by various schemes

established by the trust. Under the Indian Trusts Act, the Trust or the Fund has no independent legal capacity

itself, rather it is the Trustee or Trustees who have the legal capacity and therefore all acts in relation to the trust

are taken on its behalf by the Trustees. The Trustee hold the unit-holders money in a fiduciary capacity, i.e., the

money belongs to the unit-holders and is entrusted to the fund for the purpose of investment.

TRUSTEE

Trustee is usually a company (corporate body) or a board of Trustees (body of individuals) .The main responsibility

of the Trustee is to safeguard the interest of the Unit holders and inter alias ensure that the AMC functions in the

interest of investors and in accordance with the Securities and Exchange board of India (MUTUAL FUNDS)

Regulations. Most of the funds in India are managed by Board of Trustees. The Trustees do not directly manage

the portfolio of securities. The Trustee being the primary guardian of the unit-holders’ funds and assets, a Trustee

has to be a person of high repute and integrity.

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ASSET MANAGEMENT COMPANY (AMC)

The AMC is appointed by the trustee as the investment manager of the mutual fund. The AMC is required to be

approved by the Securities and Exchange Board of India (SEBI) to act as Asset Management Company of the

mutual fund. The AMC would, in the name of the Trust, float and then manage the different investment

“schemes” as per SEBI regulations and as per the investment management agreement it signs with the Trustees.

The Asset Management Company of a mutual fund must have a net worth of at least Rs. 10 crores at all times.

Directors of the AMC, both independent and non-independent, should have adequate professional experience in

financial services and should be individuals of high moral standing. At least 50% of the directors of the AMC are

independent directors who are not associated with the Sponsor in any manner.

NAV-:

Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the

net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

How is NAV calculated?

The value of all the securities in the portfolio in calculated daily. From this, all expenses are deducted and

the resultant value divided by the number of units in the fund is the fund’s NAV.

Expense Ratio

AMCs charge an annual fee, or expense ratio that covers administrative expenses, salaries, advertising

expenses, brokerage fee, etc. A 1.5% expense ratio means the AMC charges Rs1.50 for every Rs100 in assets

under management.

A fund's expense ratio is typically to the size of the funds under management and not to the returns

earned. Normally, the costs of running a fund grow slower than the growth in the fund size - so, the more assets

in the fund, the lower should be its expense.

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Entry load and an exit load

Some Asset Management Companies (AMCs) have sales charges, or loads, on their funds (entry load

and/or exit load) to compensate for distribution costs. Funds that can be purchased without a sales charge are called

no-load funds. Entry load is charged at the time an investor purchases the units of a scheme. The entry load

percentage is added to the prevailing NAV at the time of allotment of units. Exit load is charged at the time of

redeeming (or transferring an investment between schemes). The exit load percentage is deducted from the NAV at

the time of redemption (or transfer between schemes). This amount goes to the Asset Management Company and not

into the pool of funds of the scheme.

How does "entry load" affect the investment returns?

A 2.25% entry load sounds small. But it still bites a chunk off the returns over a long period of time. For

instance, Rs 1 lakh invested directly in the no-load option of an equity fund that grows at a rate of 15% over

a period of 20 years yields around Rs 16.36 lakh against Rs 15.99 lakh that a load fund would return—a

difference of Rs 36,820. This is because even a small sum of 2.25% gets compounded over the years.

The pinch remains the same even in a systematic investment plan (SIP). As SIPs entail investments on a

regular basis, say every month, you end up paying entry loads on all your investment installments. Assume

you had invested Rs 5,000 in Reliance Vision Fund (RVF) on January 1, 2003 through a monthly SIP. If

you had withdrawn your entire investment after five years, on December 31, 2007, you would have got

back Rs 11.52 lakh in the no-load option and Rs 11.25 lakh in a load option, a difference of a cool Rs

25,914.

Are investments in mutual fund units risk-free or safe?

This depends on the underlying instrument that a mutual fund invests in, based on its investment

objectives. Mutual funds that invest in stock market-related instruments cannot be termed “risk-free or

safe” as investment in shares are inherently risky by nature, whereas funds that invest in fixed-income

instruments are relatively safe and those that invest only in government securities are the safest.

Sajith GS Page 37


Why Mutual Funds are an investment option?

Firstly, we are not all investment professionals. We go to a doctor when we need medical advice or a

lawyer for legal guidance, similarly mutual funds are investment vehicles managed by professional fund

managers. And unless you rate highly on the Investment IQ Quiz, we recommend you use this option for

investing. Mutual funds are like professional money managers, however a key factor in their favor is that

they are more regulated and hence offer investors the ability to analyze and evaluate their track record.

Secondly, investing is becoming more complex. There was a time when things were quite simple - the

market went up with the arrival of the first monsoon showers and every year around Diwali. Since India

started integrating with the world (with the start of the liberalization process), complex factors such as an

increase in short-term US interest rates, the collapse of the Brazilian currency or default on its debt by the

Russian government, have started having an impact on the Indian stock market. Although it is possible for

an individual investor to understand Indian companies (and investing) in such an environment, the process

can become fairly time consuming. Mutual funds (whose fund managers are paid to understand these

issues and whose asset management company invests in research) provide an option of investing without

getting lost in the complexities.

Lastly, and most importantly, mutual funds provide risk diversification: Diversification of a portfolio is

amongst the primary tenets of portfolio structuring (see The Need to Diversify). And a necessary one to

reduce the level of risk assumed by the portfolio holder. Most of us are not necessarily well qualified to

apply the theories of portfolio structuring to our holdings and hence would be better off leaving that to a

professional. Mutual funds represent one such option.

How to select a mutual fund scheme?

What's strategy got to do with selecting a mutual fund? Shouldn't you just go and invest in the best

performing fund? The answer is no. Mutual fund investing requires as much strategic input as any other

investment option. But the advantage is that the strategy here is a natural extension of your asset

allocation plan (use our Asset Allocator to understand what your optimum asset allocation plan should be,

based on your personal risk profile). The following processes are important to select a mutual fund

scheme.

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Identify funds whose investment objectives match your asset allocation needs

Just as you would buy a computer that fits your needs and budget, you should choose a mutual fund

that meets your risk tolerance (need) and your risk capacity (budget) levels (i.e. has similar investment

objectives as your own). Typical investment objectives of mutual funds include fixed income or equity,

general equity or sector-focused, high risk or low risk, blue-chips or turnarounds, long-term or short-

term liquidity focus. The investment objectives match yours are

Evaluate past performance, look for consistency. Although past performance is no guarantee of future

performance, it is a useful way of assessing how well or badly a fund has performed in comparison to its

stated objectives and peer group. A good way to do this would be to identify the five best performing

funds (within your selected investment objectives) over various periods, say 3 months, 6 months, one

year, two years and three years. Shortlist funds that appear in the top 5 in each of these time horizons

as they would have thus demonstrated their ability to be not only good but also, consistent

performers. .

Are investments in mutual fund units risk-free or safe?

This depends on the instrument mutual fund invests in, based on its investment objectives. Mutual funds

that invest in stock market-related instruments cannot be termed “risk-free or safe” as investment in

shares are inherently risky by nature, whereas funds that invest in fixed-income instruments are

relatively safe and those that invest only in government securities are the safest.

Role of a Fund Manager:

Fund managers are responsible for implementing a consistent investment strategy that reflects the goals

and objectives of the fund. Normally, fund managers monitor market and economic trends and analyze

securities in order to make informed investment decisions.

How are mutual funds regulated?

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

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

holders’ interests in the mutual fund.

Sajith GS Page 39


ADVANTAGE OF MUTUAL FUND:

Mutual funds provide the services of experienced and skilled professionals, backed by a dedicated investment

research team that analyze the performance and prospect of companies and select suitable investments to

achieve the objective of the scheme.

If mutual fund is emerging as the favorite investment vehicles, it is because of the many advantages it has over

other forms and avenues of investing, particularly for the investor who has limited resources available in terms of

capital ability to carry out detailed research and marketing monitoring. The following are the major advantages

offered by mutual funds to all investors:

Portfolio Diversification: Mutual Fund normally invests in a well-diversified portfolio of securities.

Each investor in a fund is an owner of the fund’s assets. This enables him to tell a diversified investment

portfolio even with a small amount of investment, which would otherwise require big capital.

Professional Management: Even if an investor has a big amount of capital available to him, he

benefits from the professional management skills bought in by the fund in the management of the

investor’s portfolio. The investment management skills, along with the needed research into available

investment options, ensure a much better return that what an investor can manage own his own. Few

investors have the skills and resources of their own to succeed in today’s fast-moving, global and

sophisticated markets.

Reduction/Diversification of Risk: An investor in a mutual fund acquired a diversified portfolio; no

matter how small is his investment. Diversification reduces the risk of loss, as compared to investing

directly in one or two shares of debentures or other investments. When an investor invests directly, all the

risk of potential loss is his own. While investing in the 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 mutual funds.

Liquidity: Often, investors hold shares or bonds they cannot directly, easily or quickly sell.

Investment in a mutual fund, on the other hand, is more liquid. An investor can liquidate the investment

Sajith GS Page 40


by selling the units to the fund if it is an open end fund, or by selling the units in the stock market if the

fund is a closed-end fund, since closed end funds have to be listed on a stock exchange, in any case, the

investor in a closed end fund receives the sale proceeds at the end of a period specified by the mutual fund

or the stock exchange.

Convenience and Flexibility: Mutual fund management companies offer many investor services that

a direct market cannot get. Within the same fund family, investor can easily transfer or switch their

holdings from one scheme to another. They can also invest or withdraw their money at regular investors

in most open end schemes. Mutual fund investment process has been made further more convenient with

the facility offered by funds for investors to buy or sell their units through the internet or email using

other communication means. The investors also get updated market information fro the funds. The

information about the share is also shared by the fund managers in a transparent manner, with all material

facts required by regulators to be disclosed to the investors.

Safety: Mutual fund industry is well regulated. All funds are registered with SEBI which lays down

rules to protect the investors. Thus, investors also benefit from the safety of a regulated investment

environment.

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DISAGVANTAGE OF MUTUAL FUND:

While the benefits of investing through mutual fund far outweigh the disadvantages, an investor and his advisor

will do well to be aware of a few shortcomings of using the mutual fund as an investment vehicle.

No control over cost: An investor in a mutual fund has any control over the overall cost of investing.

He pays the investment management fees as long as he remains with the fund, albeit in return for the

professional management and research. Fees are usually payable as a percentage of the value of his

investment, whether the fund value is raising or declining. A mutual fund investor also pays fund

distribution cost, which he would not incur in direct investing. However, this shortcoming only means

that there is a cost to obtain the benefits of mutual fund services, and this cost is often less than the cost of

direct investing by the investors. Besides the regulators have prescribed a ceiling on the maximum

expenses that the fund managers can charge to the schemes, thus limiting the investors’ expenses of

investing through mutual funds.

No Tailor-made Portfolio: Investors who invest on their own portfolios of shares, bonds and other

securities. Investing through funds means he delegates this decision to the fund managers. High-net-worth

individuals or large corporate investors may find this to be a constraint in achieving their objectives.

However, most mutual funds help investors overcome this constraint by offering families of schemes-a

large number of different schemes- within the same fund. In each schemes there are various plans and

options. An investor can choose from different investment plans and options. An investor can choose

from different investment schemes/plans/options and construct an investment portfolio that meets his

investment objectives.

Managing a Portfolio of Funds: Availability of a large number of options from mutual funds cam

actually mean too much choice for the investor. He may again need advice on how to select a fund to

achieve his objectives, quite similar to the situation when he has to select individual shares or bonds to

invest in. Fortunately, India now has a large number of AMFI registered and tested fund distributers and

financial planners who are capable of guiding the investors.

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Structure of the organization

Company’s structure

Structure of the company consists of following entities:-

Country head State head distribution channel Cluster heads of investments Individual brokers Back office operation Sales team

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State head looks after all the operation in Karnataka region like Bellary, Mysore and other cities of Karnataka and

coordinates with asset management companies i.e. AMCs and reports to country head, and cluster heads of

investments are responsible for sales team and report to state head distribution channel and sales people who

directly interact with investors for the investments report to cluster head investment. Sales team is supported by

back office operations, like role of back office operation

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Gap analysis

Customers expect different levels of services from different organizations for example the level of customer

services from different organizations. For example, the level of customer services expected from a fast food outlet

differs from that of a restaurant at a star hotel. Therefore, an organization should understand customer

expectations and deliver the service in a way that matches these expectations. Some of the gaps that MAHINDRA

FINANCE (finsmart) should minimize to improve the quality of services delivered to their customer are:-

Gap 1. Consumer Expectation----------------------Management Perception Gap

This gap arises as service marketers may not always understand what consumers expect in a service. This

type of gap has an impact on the consumer’s evaluation of service quality

Gap 2.Management Perception ------------ Service Quality Specification Gap

This gap arises from the fact that many services provider fail to set appropriate service standards required

to deliver the service expected by the customer

Gap 3.Service Quality Specification ----- Actual Service Delivery Gap

This gap results from the employee’s inability to deliver the service according to the standards set. This may

be due to unclear standards or due lack of empowerment

Gap 4.Service Delivery--------------- External Communications Gap

This gap arises due to poor external communications that affect consumer expectations about a service

and his perception of the delivered service

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Problem statement:-

As described above in structure the main four entities that are responsible for providing good/bad services

are as follows

Sales team

Back office

Cams

AMCs

Sales team generates new clients with the help database given by the company, then sales team

interacts them as per the appointments, now investor decides about the investments then sales executive

provides them the application form of respective schemes then after filling the application form, application

form comes to back office where application gets processed then application reaches to CAMs and ,later

respective AMCs receive that application form, from the CAMs and then AMCs will send the account statement

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along with a folio number of that mutual fund schemes through which investor comes to know about units

purchased by him and NAV of his mutual fund scheme

Here the entire process takes around 3-4 days, so because of the share market performance the

NAV of that fund fluctuates because mutual funds are dependent on share market so once customer agrees on

particular NAV, any change at the time of purchase effects the profitability of investor

Because allotment of NAV is subject to realization of the cheque so as number of units this generally does not

matches with the investor’s expectation not only this investors do not get their account statements on prescribed

date so investor has to enquire about the account statement time and again

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SWOT analysis of the company and its competitor

STRENGTH

BRANDNAME KNOWN TO BE ETHICAL SUPPORT FROM OTHER DIVISIONS OF

MAHINDRA PRESENCE IN ALL OVER INDIA EXPERIENCED PEOPLE IN THE COMPANY UNBIASNESS

WEAKNESS

COMPANY IS JUST 1YR OLD LACK OF MANPOWER NOT HAVING NECESSARY

INFRASTRUCTURE STRONG ASSOCIATION WITH ITS

AUTOMOBILE SECTOR ( MAHINDRA SCORPIO )

OPPORTUNITY

ZERO BASE LACK OF PROPER SERVICES AVAILABLE IN

THE MARKET ABSENCE OF LEADER IN THE MARKET, IN

DISTRIBUTION ( MUTUAL FUNDS) HUGE POTENTIAL OF MUTUAL FUND

MARKET GROWTH OF MUTUAL FUND MARKET INCREASE IN INCOME LEVEL OF PEOPLE

THREATS

INDIVIDUAL BROKERS ITS COMPETITOR’S

PROMOTIOAL ACTIVITIES

ITS COMPETITOR’NEW BUSINESS PLANS ATTRITION LACK OF MANPOWER NOT HAVING NECESSARY

INFRASTRUCTURE

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A COMPARATIVE ANALYSIS OF MUTUAL FUND SCHEMES

Equity Diversified Scheme

Scheme NAV 1 year annualized

3 year annualized

5 year annualized

Since Inception

Birla Sun Life Frontline Equity Fund 58.39 -0.53 26.659 34.53 36.58

DBS Chola Opportunities Fund-Cumulative

34.98 09.83 25.7 33.17 12.39

DSP Merrill Lynch Equity Fund-Growth 10.96 05.36 N.A N.A 8.56

DSP Merrill Lynch India T.I.G.E.R Fund –Growth

37.63 -04.33 29.13 N.A 38.34

DSP Merrill Lynch Top 100 Equity Growth Fund

69.38 06.92 30.923 37.71 44.36

DWS Alpha Equity Growth Fund 62.76 08.23 29.07 38.283 39.77

DWS Investment Opportunity Fund 31.20 11.23 30.27 N.A 29.07

Fidelity Equity Fund –Growth 23.15 -04.41 23.47 N.A 29.49

HDFC Growth Fund-Growth 60.53 08.61 28.24 34.63 31.77

HSBC Equity Fund- Growth 85.34 08.91 25.19 41.81 46.15

ICICI Prudential Dynamic Plan-Growth 72.81 01.98 27.67 31.78 29.76

ICICI Prudential Infrastructure Fund-Growth

25.17 17.82 N.A N.A 34.26

IDFC Imperial Equity fund-Growth 16.27 06.82 N.A N.A 17.48

Kodak 30-Growth 81.09 05.78 26.67 39.29 45.02

Kodak Opportunities-Growth 35.71 08.57 26.61 39.28 41.39

Reliance growth fund-growth 331.5 06.97 26.72 47.17 31.91

Reliance Regular Saving Fund-Equity- 20.86 18.41 26.56 N.A 22.62

Sajith GS Page 49


Growth

SBI Magnum Sector Umbrella-Contra Fund-Growth

34.73 09.11 16.74 22.78 17.64

Sundaram BNP Paribas CAPEX opportunities Fund-Growth

19.18 -06.67 N.A N.A 20.18

Sundaram BNP Paribas Select Focus-Growth

71.01 13.47 30.40 36.91 40.29

Tata Equity PE Fund-Growth 31.91 02,87 22.71 N.A 32.81

Tata Infrastructure Fund-Growth 29.56 04.78 32.06 N.A 36.26

Templeton India Growth Fund-Growth 82.19 10.51 24.84 N.A 32.63

UTI Dividend Yield Fund-Growth 19.68 06.28 21.49 N.A 22.68

UTI Contra Fund-(G) 10.64 02.12 16.49 N.A 18.82

ELSS

Scheme Name NAV 1 Year Annualized

3 Year Annualized

5 Year Annualized

Since Inception

DWS Tax Saving Fund 12.34 1.59 N.A N.A 8.52

Fidelity Tax Advantage Fund 14.23 -1.43 N.A N.A 14.48

Franklin India Taxshield-Growth 112.2 08.39 14.23 27.32 26.56

HDFC Long Term Tax Adv. Fund 68.49 05.29 12.38 18.45 24.32

HSBC Tax Saver Equity Fund 12.56 1.62 16.86 N.A 17.86

Kodak Tax Saver Scheme 14.43 -10.13 22.49 N.A 15.64

Principal Personal Tax Saver 82.40 -5.85 24.51 33.74 26.49

Reliance Tax Saver-Growth 17.64 3.06 12.73 N.A 13.45

Sundaram BNP Paribas Tax Saver 32.61 7.63 22.50 40.94 29.56

Tata Tax Advantage Scheme 19.41 3.57 13.57 17.83 17.78

Sajith GS Page 50


Balance


3 Year Annualized

5 Year Annualized

Since Inception

Birla Sun Life Balanced Fund 29.34 -2.82 14.42 21.39 13.21

DSP Merrill Lynch Balanced Fund-Growth

46.82 7.19 22.72 22.72 18.38

FT India Balanced Fund-Growth 36.62 0.36 18.52 25.78 18.62

HDFC Balanced Fund-Growth 34.27 5.61 14.72 21.62 17.82

Kodak Balance Fund 20.53 2.75 17.78 28.43 17.77

Tata Balanced Fund-Growth 56.82 0.08 18.79 26.78 19.72

UTI Children’s Career Balanced 12.45 1.24 09.57 16.84 15.22

MIP


3 Year Annualized

5 Year Annualized

Since Inception

Baroda Pioneer MIP Fund 14.96 5.67 12.78 N.A 12.93

Birla Sun Life Savings MIP 2 Savings-Growth

14.54 13.54 22.37 N.A 18.59

DBS Chola MIP Regular-Growth 15.55 5.54 10.74 14.43 10.89

FT India Monthly Income Plan 22.46 3.84 7.72 9.22 09.73

HSBC MIP Savings-Growth 1.4 3.56 8.78 N.A 10.99

LICMF MIP-Growth 27.67 7.65 10.67 09.78 09.49

Principal MIP-MIP Growth 15.36 9.67 11.64 N.A 08.96

Reliance MIP 15.68 8.11 10.76 19.89 16.56

Tata Monthly Income Fund (G) 21.45 5.61 13.41 17.41 17.72

Sajith GS Page 51


Gilt Fund


3 Year Annualized

5 Year Annualized

Since Inception

Birla Sun Life Gilt Plus Regular Plan – Growth

31.40 07.33 10.68 14.78 12.93

DSP Blackrock G Sec Plan A Long Duration – Growth

31.98 06.91 11.28 13.65 12.06

DWS Gilt Fund - Regular – Growth 10.99 08.11 16.67 26.41 21.02

Fidelity Flexi Gilt Fund – Growth 11.87 08.98 15.99 29.10 26.09

ICICI Prudential Gilt Fund Investment Plan - Growth

31.65 05.82 11.67 18.54 12.91

Mirae Asset Gilt Fund - Investment Plan - Provident Fund

10.36 9.61 18.51 24.61 19.71

Reliance Gilt Securities Fund -Retail – Growth

11.92 10.17 19.71 32.76 29.62

Templeton India Govt. Securities Fund - Composite Plan –Growth

32.66 08.45 13.41 18.34 14.72

Debt (Income) Fund


3 Year Annualized

5 Year Annualized

Since Inception

Birla Sun Life Income Fund - Growth

33.11 06.47 09.89 10.78 10.18

Birla Sun Life Income Plus - Growth

41.41 05.68 09.18 11.68 11.28

Canara Robeco Income Scheme - Growth

18.99 09.73 09.87 10.78 10.20

Sajith GS Page 52


ICICI Prudential Income Fund –Growth

29.42 06.44 09.74 08.99 09.18

IDFC Dynamic Bond Fund - Plan A - Growth

18.71 07.61 07.99 09.98 09.64

Kotak Bond Regular Plan – Growth

25.64 08.61 10.61 11.45 10.23

Reliance Income Fund - Retail - Growth Plan – Growth

30.89 07.81 09.78 11.28 10.93

Sajith GS Page 53


CHRONICLE ORDER OF COMPANIES GIVING MOST RETURN.

Fund Category 5 YrReturn

DSPML T.I.G.E.R. Fund Equity: Diversified 45.45

Tata Infrastructure Equity: Diversified 44.92

Magnum Contra Equity: Diversified 44.81

Kodak Opportunities Equity: Diversified 44.57

UTI Infrastructure Equity: Diversified 43.14

Reliance Growth Equity: Diversified 42.88

Magnum Multiplier Plus Equity: Diversified 42.76

Sundaram BNP Paribas Select Midcap Equity: Diversified 40.64

HDFC Top 200 Equity: Diversified 39.29

BoB Growth Equity: Diversified 38.57

Principal Child Benefit Hybrid: Equity-oriented 36.79

Magnum Balanced Hybrid: Equity-oriented 31.24

HDFC Prudence Hybrid: Equity-oriented 29.68

Birla Sun Life Income Debt: Medium-term 8.29

ABN AMRO Flexi Debt Plan Debt: Medium-term 7.78

ICICI Prudential Long-term Debt: Medium-term 7.55

Birla Dynamic Bond Retail Debt: Medium-term 7.51

Kotak Flexi Debt Debt: Medium-term 7.47

Sundaram BNP Paribas S... Equity: Diversified 43.35

ICICI Prudential Dynamic Equity: Diversified 43.26

Sajith GS Page 54


DWS Investment Opportunity Equity: Diversified 43.07

DSPML Equity Fund Equity: Diversified 42.89

DSPML Top 100 Equity Reg Equity: Diversified 41.96

Kotak 30 Equity: Diversified 41.33

Sajith GS Page 55


Assets Under Management (AUM) as at the end of July-2008 (Rs in Lakhs)

Average AUM for the month

Mutual Fund Name Excluding Fund Of Funds

1. ABN AMRO Mutual Fund 640038.55

2. AIG Global Investment Group MF 313127.37

3. Benchmark Mutual Fund 331997.2

4. Bharti AXA Mutual Fund N/A

5. Birla Sun Life Mutual Fund 3590604.4

6. BOB Mutual Fund 7239.32

7. Canara Robeco Mutual Fund 288506.51

8. DBS Chola Mutual Fund 237199.85

9. Deutsche Mutual Fund 1291156.7

10. DSP Merrill Lynch Mutual Fund 1667547.7

11. Escorts Mutual Fund 14333.34

12. Fidelity Mutual Fund 835886.21

13. Franklin Templeton Mutual Fund 2684222.2

14. HDFC Mutual Fund 4477316.8

15. HSBC Mutual Fund 1488820.1

16. ICICI Prudential Mutual Fund 5432187.1

17. ING Mutual Fund 860829.61

18. JM Financial Mutual Fund 1294474.3

19. JPMorgan Mutual Fund 217099.25

20. Kodak Mahindra Mutual Fund 1807062.8

21. LIC Mutual Fund 1405616.2

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22. Lotus India Mutual Fund 792523.55

23. Mirae Asset Mutual Fund 110713.84

24. Morgan Stanley Mutual Fund 320501.42

25. Principal Mutual Fund 1320730.2

26. Quantum Mutual Fund 6353.84

27. Reliance Mutual Fund 9093794

28. Sahara Mutual Fund 17870.15

29. SBI Mutual Fund 2917896.1

30. Standard Chartered Mutual Fund 1273348.5

31. Sundaram BNP Paribas MF 1256370.5

32. Tata Mutual Fund 1967893.3

33. Taurus Mutual Fund 32016.93

34. UTI Mutual Fund 4898281.3

Grand Total 52893559

Assets under Management (AUM) is a term used by financial services companies in the mutual fund and

money management, investment management, wealth management, and private banking businesses to

gauge how much money they are managing. Many financial services companies use this as a measure of

success and comparison against their competitors; in lieu of revenue or total revenue they use total assets

under management.

Sajith GS Page 57


By this table I want to show which company has how much money to handle. Asset under management

means the total amount of money that asset management company has to manage in different schemes

that they are having for which they appoint fund manager who has to invest money according to the

objective of the scheme and try to keep portfolio which can give maximum returns to the investors. By

looking at this table we can see total asset under management is 52893559 lakhs. So after looking at this

huge amount we can say lot of people is now started investing in mutual fund.

RANKING OF THE COMPANY

By looking at this table we can rank various asset management companies on the basis of asset under

management. They are as follows:

1) Reliance mutual fund

2) ICICI prudential mutual fund

3) UTI mutual fund

4) BIRLA sun life mutual fund

5) SBI mutual fund

By looking at this rank we can say that in India people prefer to invest in reliance

scheme and they are having great faith on Reliance Company.

Sajith GS Page 58


MARKETING EXPERIENCE:

The project has been a great learning experience. It has provided me with practical learning opportunities in

selling and marketing. And these training would be a great help for me to give shape to my career.

The first phase in this project was to learn about the product it means to have good knowledge about the mutual

fund for that we were given proper training in the company by the big people from ABN AMRO bank, Kodak Life

Insurance etc.

The second phase was to do lot of telephonic calls and try to take appointment from the people. Once he is ready

to give appointment then try to meet him at any suitable place after meeting him try to give him full knowledge

about the product because lot of people have don’t have any idea of the investment in mutual fund then we try to

recognize his needs and also income level because that help us to give him right product and design his portfolio

well because every person has different needs because some wants to save money for immediate future. Some

wants to save for their children’s education or marriage and some for tax benefits so we have to plan according to

the need of investors. And then I try to give them that product which are useful for them and try to close the deal.

Another approach that I tried is to meet the HR manager of small companies and try to give them knowledge

about the product by meeting them directly because as a marketing guy you have to think that anybody can be

customer for you so you have to be confident and try to talk to them properly and try to explain them merit of the

products and give them proper facts that would help you to close the deal

Another approached that I tried is that I began to use my personal network of friends and asked them to speak to

their acquaintances – personal and official and check if they might be interested in investments. Even here I got

great response from my friends and was able to fix many appointments to take things further.

And then I also have visited TECH MAHINDRA for two weeks and try to give them knowledge about the product

and help them to invest especially to save their tax.

And then I also try to increase my database in the way that I used to call the same person who has invested with

me previously and ask them whether if any of your friends or relatives is ready to invest and then try to take their

numbers and call them.

But overall it is a wonderful experience because what I learnt in theory during my 1 st and 2nd semester I am

applying them in the real life situation. And I also want to thank my company guide Mr. T Raghunath sir

Sajith GS Page 59


because he was able to solve all our problems and also give us proper suggestion whenever needed and guide us

through any situation.

And one most important thing is that I have learnt from this training is that what I was expecting since I am doing

my MBA I would be given an executive job but it is not like that because everybody has to learn basic and start

from scratch. But all this things taught me a lot especially how to remain humble and honest.

Team playing capability

Here in Mahindra finance I have learned working in team with a common objective with my other

colleagues where I have learn coordination , time management , and work life balance and also I have developed

my convincing , interpersonal and selling skills also I have experienced what is the work pressure and how to

handle that with your consistent performance

Confidence to interact with company executives and others:-

I have joined Mahindra and Mahindra financial services Ltd. (Fin smart) on 04th July 2008; there first

we went through training about financial market and how to approach to the customer by making cold calls and

getting reference from them

My first appointment was pretty good where I learned that you should be fully equipped with the product you

want to sell because , after all you have to convince your client and that is your core job, where my superior

helped me in a big time in guiding me , educating me and providing necessary inputs. In my process here I

interacted with Director of the company Mindware, entrepreneurs, software professionals, etc… all together it

was different experience it working in real corporate world

Sajith GS Page 60


Final findings and observations

From the comparison of various mutual fund schemes, it is understand that the equity

diversified scheme is providing a good return for a longer period of investment. But the return is wholly

depending on the market. So the risk is higher compare to any other schemes. On the other hand the Gilt fund is

investing in Government securities, treasury bills, bonds, debentures etc. But in this case the return is low. But risk

is very low comparable to an equity diversified scheme. In the ELSS scheme, there is a locking period of 3 years.

Still most of the tax schemes give a good return through dividends also. But the MIP scheme is not giving a good

return. As this scheme is also investing in bonds and debentures, it gives a continuous return to the investors.

GAP ANALYSIS

Here I have seen in their operations, company follows a systematic way. Since the

company is in its growing stage and also I feel that company requires good marketing of its offerings to their

investors , so as to support its sales team other findings and observations are as follows :-

Company’s structure

Company is the distributor of different mutual fund.

It works as a bridge ,facilitator , and advisor between AMCs and investors

Work culture of the organization is excellent. Here I did not get unnecessary pressures from the high

authority.

Sajith GS Page 61


CONCLUSION

From the comparison of various mutual fund schemes, it is understand that the equity

diversified scheme is providing a good return for a longer period of investment. But the return is wholly

depending on the market. So the risk is higher compare to any other schemes. On the other hand the Gilt fund is

investing in Government securities, treasury bills, bonds, debentures etc. But in this case the return is low. But risk

is very low comparable to an equity diversified scheme. In the ELSS scheme, there is a locking period of 3 years.

Still most of the tax schemes give a good return through dividends also. But the MIP scheme is not giving a good

return. As this scheme is also investing in bonds and debentures, it gives a continuous return to the investors.

So if one has to decide what factors to be considered while giving services, following points to be considered

Ease of availability, value added services Reduction of risk , transaction cost Variety of funds and Cost involved

in the fund because a company should know its core business ,strengths and weakness here company’s core

business is providing value based services to their customer ,which can be the inferred from the research ,

marketing and promotional activities are need of the hour to make full-fledged market presence and target

market specific marketing is required for giving service effectively for example people in software company do

not have enough time to go for research decide upon investment option so company can provide information and

solution online with personalize service secondly if target customer is required some text in local language we

should provide the same.

Company has good chances to be no.1 in mutual fund distribution house provided what services is been

provided by the company , I think company in services sector cannot afford to have unhappy customer because

success of services sector company depends on word of mouth publicity of the people and one happy customer

will bring ten more customer and one unhappy customer will stop ten prospective customer , in case if there has

been the cases of service failure, company should take appropriate action while fixing the problem .

Sajith GS Page 62


SUGGESTION

Company should show its presence in the market by its strong marketing strategies which are as follows

1. Bill boards and hoardings

2. Ads in print and electronic Media

3. Corporate tie-ups

4. Road shows

5. Pamphlets

6. Contests

Company should provide consistent customer service by time

1. submission of application forms in prescribed time

2. proper follow-up

3. transparency in the process

4. Providing every possible information about the product

5. Company can also work service recovery process if any of this kind of problem occurs

Failure in Services delivery

In general, services delivery system failures consist of three types of failures

1. Unavailable service

2. Unreasonable slow services

3. Other core service failures

Sajith GS Page 63


Service recovery is concerned with the process of addressing the failure of the services here question comes how

that can be done or how Mahindra finance has done , for that there should be complain from investors side or it

should reflect in the research done by company

Bell and Zemke has proposed five ingredients for recovery which company can use for its

recovery.

Apology - a first person apology rather than a corporate apology

Urgent reinstatement – speed of action coupled with a gallant attempt to put things right even if it is not

possible to correct the situation

Empathy- a sincere expression of feeling for the customer’s plight

Symbolic atonement- a form of compensation that might include not charging for the service or offering

future service free or discounted

Follow up- an after recovery call to ascertain that the consumer is satisfied with the recovery process

A successful recovery include following four key elements

1. acknowledgement of the problem

2. explanation of the problem

3. apology where appropriate

4. compensation as required

Sajith GS Page 64


BIBILOGRAPHY

Marketing management by “ Philip Kotler ”

Sales Management By Still, Cundiff and Govoni

Business Policy And Strategic Management by Azhar kazmi

Research Methodology by Pannerselvam

Study material at Mahindra finance

AMFI Booklet

Broachers of various fund houses

Fund fact sheet of various fund houses

CRISIL report

WEBILOGRAPHY

www.mutualfundsIndia.com

www.moneycontrol.com

www.mahindrafinance.com

www.amfiindia.com

www.valueresearch.com

www.nseindia.com

www.bseindia.com

www.crisil.com

www.tatamutualfund.com

Sajith GS Page 65

http://www.tatamutualfund.com/

http://www.crisil.com/

http://www.bseindia.com/

http://www.nseindia.com/

http://www.valueresearch.com/

http://www.amfiindia.com/

http://www.mahindrafinance.com/

http://www.moneycontrol.com/

http://www.mutualfundsIndia.com/


Sajith GS Page 66

Mahindra+finance

Economy & Finance

mahindra finance

indian mutual fund industry

mahindrafinancial services

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various plan of mutual

risk hierarchy of mutual

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