A PROJECT REPORT ON MUTUAL FUNDS FOR INDIVIDUAL INVESTORS IN INDIA CONDUCTED FOR METLIFE INDIA INSURANCE CO. LTD SUBMITTED IN PARTIAL FULLFILLMENT OF MASTER IN MARKETING MANAGEMENT SUBMITTED BY RAJESH B. SURASE MMM-1 Neville Wadia Institute of Management Studies and Research , Pune - 411001
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A
PROJECT REPORT ON
MUTUAL FUNDS FOR INDIVIDUAL INVESTORS IN INDIA
CONDUCTED FOR
METLIFE INDIA INSURANCE CO. LTD
SUBMITTED IN
PARTIAL FULLFILLMENT OF
MASTER IN MARKETING MANAGEMENT
SUBMITTED BY
RAJESH B. SURASE
MMM-1
NEVILLE WADIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH
PUNE-411 001(2010-11)
Neville Wadia Institute of Management Studies and Research , Pune - 411001
ACKNOWLEDGEMENT
I take immense pleasure in completing this project and submitting the summer project
report. The last 90 days with Metlife India Insurance Co.Ltd. has been full of learning
and sense of contribution toward the organization. I would like to thank Metlife India
Insurance Co.Ltd. for giving me an opportunity of learning and contributing through
this project. I also take this opportunity to thank all those people that made this
experience a memorable one.
A successful project can never be prepared by the single effort of the person to whom
project is assigned, but it also demand the help and guardianship of some conversant
person who helped the undersigned actively or passively in the completion of
successful project.
In this context as a student of Neville Wadia Institute of Management Studies and
Research. I would first of all like to express my gratitude to Mr.Santosh Dastane
(Director) Prof. Vikas Dole, Pro. Radha Dogra (Co-ordinator). Who provide me good
opportunity to work with Metlife India Insurance Co.Ltd.
During the actual project work, Mr. Sohan Singh (Sales Manager) has been a source of
inspiration through his constant guidance; personal interest; encouragement and help. I
convey my sincere thanks to him. In spite of his busy schedule he always finds time to
guide me through the project. I am also grateful to Mr. Nitin Baviskar (AM) for
reposing confidence in my abilities and giving me the freedom to work on my project.
Last but not least, I would like to thanks all of my friends and well wishers for giving
me their support during this project knowingly or unknowingly.
RAJESH SURASE
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 2
INDEX
CHAPTER NO. CONTENTSPAGE
NO.I Introduction
I.I What is Mutual Fund? 12I.II Growth of Mutual Fund. 13I.III Phases of growth. 13I.IV Types of Mutual Fund. 15I.V Mutual Fund In India. 19I.VI How long to keep Investment. 20I.VII Return Expected. 21I.VIII Advantage of Mutual Fund. 22I.IX Drawbacks of Mutual Funds. 24I.X Association of Mutual Fund. 25I.XI Future of Mutual Fund. 27I.XII Regulatory aspects 29I.XIII How to judge Mutual Fund. 33I.VIX History of Mutual Fund. 35I.XV Structure of Mutual Fund. 36I.XVI AMC’s operating currently. 37
II Problem Statements and Objectives of Study.II.I Problem Statements. 40II.II Objectives of Study. 41
III Research Methodology.III.I Methodology of Study. 43III.II Research Methodology. 43III.III Assumptions. 43III.VI Literature Survey. 44III.V Probability Sampling. 44III.VI Sampling Size. 45III.VII Execution of Project. 45
IV Limitations.IV.I Limitations. 47
V Analysis of Mutual Fund.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 3
V.I Analysis on the basis of Schemes. 49V.II Comparison between Bank and MF Industry. 50
VI Data collectionVI.I Questionnaire 53VI.II Personal Visits. 54VI.III Telephonic Information. 54
VII Interpretation of Data.
VII.IPercentage of Investment to Total Income.
56
VII.II Investment in Financial Product in Percentage. 57VII.III Awareness of Mutual Fund. 58VII.IV Perception of Mutual Fund. 59VII.V Comparison between Risk Investment and Returns. 60VII.VI Identification of Mutual Fund Industry. 61VII.VII Comparison on the basis of place. 62VII.VIII Risk taken ability by different Age Groups. 63VII.VIX Percentage of total Income Invest in Mutual Fund. 64
VIII Project Findings and Recommendations.VIII.I Project Findings. 66VIII.II Recommendations. 66
IX Bibliography. 67
EXECUTIVE SUMMARY:-
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 4
The project titled “MUTUAL FUNDS FOR INDIVIDUAL INVESTORS IN
INDIA” being carried out for METLIFE INDIA INSURANCE CO. LTD.
Metlife operates in various financial products and services like, Consultancy, Mutual
Fund, Registrar and Transfer Agent, Research, Mapin etc.
The evaluation of financial planning has been increased through decades, which is best
seen in customer rise. Now a day’s investment of saving has assumed great importance.
According to the study of the markets, it is being observed that markets are doing well
in Mutual fund. In near future a proper financial planning is required to invest money in
all type of financial product because there is good potential in market to invest.
In this project the great emphasis is given to the investor’s mind in respect to
investment in Mutual Fund .The needs and wants of the client is taken into
consideration.
I hope Metlife, Pune will recognize this as well as take more references from this
project report.
The main objective of this project is to know the Mutual Funds for individual investors
in India and also to know the investing pattern of people in different Financial Project.
IT sector has been given more emphasis for the study of the project because it is the
only sector where all type of Age group, Income class and different level of people are
represented.
After analyzing the feedback the conclusion has been made that the Indian financial
market is having lots of potential customer the only thing is to give a proper guidance to
the prospective customers.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 5
COMPANY PROFILE
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 6
COMPANY PROFILE
MetLife Inc. is a leading provider of insurance and other financial services to
millions of individual and institutional customers throughout the United States.
Through its subsidiaries and affiliates, MetLife Inc. offers life Insurance, annuities,
automobile and homeowner’s insurance and retail banking services to individuals, as
well as group insurance, reinsurance and retirement and savings products and services
to corporations and other institutions. Outside the U.S., the MetLife Companies have
direct insurance operations in Asia Pacific, Latin America and Europe.
MetLife is one of the largest insurance and financial services companies in the
U.S. The company’s unparalleled franchises and brand names uniquely position it to be
the pre eminent provider of protection and savings and investment products in the U.S.
In addition, MetLife’s international operations are focused on emerging markets where
the demand for insurance and savings and investment products is expected to grow
rapidly in the future.
MetLife’s well recognized brand names, leading market positions, competitive
and innovative product offerings and financial strength and expertise will help drive
future growth and enhance shareholders value, building on a long history of tradition
and integrity.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 7
Their services are widely networked across India. Their services have
increasingly offered customer oriented convenience, which they provide to a spectrum
of investors, high-net worth or otherwise, with equal dedication and competence.
But true to their spirit, this success is not their final destination, but just a
platform to launch further enhanced quality services to provide investors the latest in
convenient, customer-friendly products.
Over the years they have ensured that the trust of their customers is their biggest
returns. Factors such as their success in the Electronic custody business has helped
build on their tradition of trust even more. Consequentially their retail client base
expanded very fast.
To empower the investor further they have made serious efforts to ensure that
their research calls are disseminated systematically to all their clients through various
delivery channels like email, chat, SMS, phone calls etc.
In the future, their focus will be on the emerging businesses and to meet this
objective, they have enhanced their manpower and revitalized their knowledge base
with enhances focus on Futures and Options as well as the commodities business.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 8
CHAPTER:-I
INTRODUCTION:-
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 9
INTRODUCTION
Financial planning is the process of identifying one’s wealth accumulation and
protection goals and developing a coordinated plan to help priorities one’s future
financial decision. Financial planning should be taken as seriously as a medical
prescription, as it deals with ones financial health. It should be seen not just as a means
of achieving financial security, but as making a vital contribution to one’s overall
happiness and peace of mind.
Financial planning can be manageable or overwhelming depending upon how one
approaches it. Without guidance; it’s hard to know what one needs and when one needs
it. With right information, tools and timeline, the choices become much easier.
In fact too many people are investing in MUTUAL FUNDS. After all it’s common
knowledge that investing in mutual fund is {or at least should be} better than simply
letting your cash waste in a saving account, but for most people that’s where the
understanding of funds end. It doesn’t help that mutual fund sale people speak a strange
language that, that sounding sort of English, is interspersed with jargon like NAV,
load/no-load, etc.
Originally MUTUAL FUNDS were heralded as a way for the little guy to get a piece of
a market. Instead of spending all the free time buried in the financial pages of
ECONOMIC TIMES all one has to do is buy a mutual funds and be set on his way to
financial freedom. But it’s not that easy. MUTUAL FUNDS are in excellent idea in
theory but in reality they haven’t always delivered. Not all mutual funds are created Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 10
equal, and investing in mutual fund isn’t easy as throughing one’s money at the first
sales person who solicits business.
I.I WHAT ARE MUTUAL FUNDS:-
Needs for capital growth, income and/or income preservation. And a mutual fund
brings the benefit of diversification and money management to the individual investors,
providing an opportunity The popularity of MUTUAL FUNDS over the past few years
has soared. The reasons MUTUAL FUNDS make it easy and less costly for investors to
satisfy therefore financial success that was once available only to the very rich.
A MUTUAL FUND is a body corporate registered with the Securities and Exchange
Board of India (SEBI) that pools up the money from individual/ corporate investors and
invests the same on behalf of the investors / unit holders in equity shares, govt.
securities, Bonds call money market etc. and distributes the profits. In other words a
mutual fund allows an investor to indirectly take a position in a basket of asset.
UNIT TRUST OF INDIA is the first mutual fund set up under a separate Act, UTI Act
in 1963 and started its operation in 1964 with the issue of unit under the scheme US-64.
Currently public sector banks like SBI, Canara bank, Bank of India, and Institution like
IDBI, GIC, and LIC HDFC Foreign institution like Alliance Morgan Stanley,
Templeton, Principle HSBC and private financial Co. like first India mutual fund DSP
Merrill Lynch, Sundaram, Kotak etc.have floated their own mutual funds.
Presently there are 33 mutual funds in India and close to 400 mutual fund schemes.
Currently the total fund under the mutual fund management in India are a little over Rs.
1,39,000 crores. The private funds account for around 77 percent.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 11
ONE CAN MAKE MONEY FROM MUTUAL FUND IN THREE WAYS:-
Income is earned from dividends and interest on bonds. A fund pays out nearly
all income it receives over the year to fund owners in the form of a distribution.
If the fund sell securities that have increased in price, the fund have a capital
gain most fund also pass on this gain to investor in a distribution.
If fund holding increases in price but are not sold by the fund manager, the fund
shares increase in price. One can sell then this mutual fund shares the profit.
I.II GROWTH OF MUTUAL FUNDS: -
The Mutual Fund industry in India has been on a roll as the Asset under Management
continues to see strong spurt in growth. The asset under management swelled to Rs.
1,67,978 cr. by May 31st 2005 from Rs 1,01,565 cr. in January 2000. This apart the
industry has also seen a spurt in the number of schemes on offer, which amount to 460
at present, catering to varied needs of investors.
A booming economy, soaring stock market, and a conductive regulatory environment,
amongst a slew of other factor have added to the growth of the industry.
Given a huge opportunity in sub-urban and ruler markets, which lie hitherto untapped,
and growing income level in the country, the industries future looks bright.
I.III THE PHASES OF GROWTH: -
The Indian Mutual Fund industry has come a long way since the inception of UTI in
1963. According to AMFI the evolution of industry can be broadly divided into four
phases, which mark its transaction from the period when UTI ruled the roost to a period
of competition and increased awareness among investors.
FIRST PHASE (1964-87)
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 12
UTI remained the only Mutual Funds player in the country till 1987. UTI started its
operation in July 1964 with a view to encouraging savings and investments and
participation in the income, profits and gains accruing to the cooperation from the
Acquisition, holding, management and disposal of securities. UTI witnessed a slow and
steady growth over the 1970s and 1980s and by the end of 1988 it had an AUM of Rs.
67bn. It still continues to be the largest player in the Domestic Mutual Fund industry
with a AUM of Rs.23500 cr. as on March 31st, 2005.
SECOND PHASE (1987-93)
Public Sector Mutual Funds set up by public sector banks, Life Insurance Corporation
of India and the General Insurance Corporation of India entered the market in 1987.The
first known UTI mutual fund was the SBI mutual fund established in June 1987,
followed by Canara Bank mutual fund in December 1987, Punjab National bank mutual
fund in August 1989,Indian Bank mutual fund in November 1989,Bank of India mutual
fund in June 1990 and Bank of Baroda mutual fund in October 1992.LIC set up its
mutual fund in June 1989 while GIC established its mutual fund in December 1990.
During this period, the total asset of the industry grew to about Rs.610 bn with the total
No. of schemes increasing to about 167 by the end of 1994.
THIRD PHASE (1993-2003)
This phase marked the entry of private sector funds. The phase also signaled the
intensification of the competition. Both domestic and foreign players entered the
market, offering a wide variety of schemes to investors. Kothari Pioneer Mutual Fund
was the first private sector fund to be established in association with the foreign funds.
The opening up of the market to private players saw the international players like
Morgan Stanley, Jar dine Fleming, JP Morgan, George Soros and Capital International
entering the market.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 13
FOURTH PHASE (SINCE FEB 2003)
In February 2003 the Unit Trust of India Act 1963 was repealed and UTI was bifurcated
into two separate entities: Specified undertaking of the Unit Trust of India, which is still
under the government of India, and the UTI Mutual Fund Limited. This was done in the
wake of the severe payment crisis that the UTI suffered on account of its assured return
schemes of US – 64 that finally resulted in an adverse impact on the Indian capital
markets .US - 64 was the first scheme launched by UTI with the significant equity
exposure and the returns of which are not linked to the market.
I.IV TYPES OF MUTUAL FUNDS : -
Mutual Funds have specific investment objectives such as growth of capital, safety of
principal current income or tax exempt income, one can select one fund or any number
of different funds to help one meets ones specific goals. In general mutual fund fall
under 3 general categories : -
Equity fund invest in shares of common stocks.
Fixed income funds invest in government or corporate securities which offer
fixed rate of returns.
Balanced fund invest in a combination of both stocks and bonds.
AGGRESSIVE GROWTH FUNDS :-
These funds seek to provide maximum growth of capital with secondary emphasis on
dividend or interest income. They invest in common stocks with a high potential for
rapid growth and capital appreciation.
Aggressive growth funds are suitable for those investors who can afford to assume the
risk of potential loss in value of their investment in the hope of achieving substantial
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 14
and rapid gains. They are not suitable for investors who must conserve their principal or
who must maximize their current income.
GROWTH FUNDS:-
Like aggressive growth funds, growth fund generally invests in stocks for growth rather
than income. They are considered more conservative in their approach because they
usually invest in established companies to achieve long-term growth. Growth fund
provides low current income but the investor principal is more stable then it would be in
an aggressive growth fund. While the growth potential may be less over the short term,
many growth funds have superior long-term performance records.
These funds are suitable for growth oriented investors but not investors who are unable
to assume risk or who are dependent on maximizing current income from there
investments.
GROWTH AND INCOME FUNDS:-
Growth and income funds seek long-term growth of capital as well as current income.
The investments strategies use to reach these goals vary among funds.
Growth and income funds have low to moderate stability of principal and moderate
potential for current income and growth. They are suitable for investors who can
assume some risk to achieve growth of capital but want to maintain a moderate level of
current income.
FIXED INCOME FUNDS:-
The goal of fixed income fund is to provide high current income consistent with the
level of capital. Growth of capital is of secondary importance.
Fixed income funds offer a higher level of current income than money market funds,
but a lower stability of principal. Fixed income funds are suitable for investors who
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 15
want to maximize current income and who can assume a degree of capital risk in order
to do so.
EQUITY FUNDS:-
Funds that invest in stocks represent the largest category of mutual fund. Generally the
investment objective of this class of fund is long-term capital growth with some
income. There are however many type of equity funds.
BALANCED FUNDS :-
The Balanced funds aims to provide both growth and income. These funds invest in
both shares and fixed income securities in the proportion indicated in their offer
documents. It is an idea for investors who are looking for the combinations of income
and moderate growth.
MONEY MARKET FUNDS/ LIQUID FUNDS:-
For the cautious investors these funds provide a very high stability of principal while
seeking a moderate to high current income. They invest in highly liquid; virtually risk
free, short-term debt securities of agencies of the Indian government, banks and
corporation and treasury bills. Because of their short-term investments, money market
mutual funds are able to keep a virtually constant unit price; only the yield fluctuates.
Money market funds are suitable for those investors who want high stability of
principal and current income with immediate liquidity.
SPECIALITY / SECTOR FUNDS:-These funds invest in securities of a specific industry or sector of the economy such as
health care, technology, leisure, utilities or precious metals. The funds enable investor
to diversify holding among many companies within an industry, a more conservative
approach than investing directly in one particular company.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 16
Sector funds offer a opportunity for sharp capital gains in cases where the fund’s
industry is “in favor” but also entail the risk of capital losses when the industry is out of
favor. While sectors funds restrict holdings to a particular industry, other specialty
funds such as index funds gives investors a broadly diversified portfolio and attempt to
mirror the performance of various market averages.
OPEN ENDED SCHEMES:-
Open-ended schemes do not have a fixed maturity period. Investors can buy or sell
units at NAV- related prices from and to the mutual fund on any business day. These
schemes have unlimited capitalization, open-ended schemes do not have a fixed
maturity, there is no cap on the amount you can buy from the fund and the unit capital
keep growing. These funds are not generally listed on any exchange.
Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem
units any time during the life of schemes. Hence unit capital of open-ended funds can
fluctuate on a daily basis. The advantages of open ended schemes are: -
1. Any time exit option
2. Any time enter option.
CLOSE ENDED SCHEMES:-
Close-ended schemes have fixed maturity periods. Investors can buy into these funds
during the period when these funds are open in the initial issue. After that such scheme
cannot issue new units except in case of bonus or right issue. However after the initial
issue you can buy or sell units of the schemes on the stock exchange where they are
listed. The market price of the unit could vary from the NAV of the schemes due to
demand and supply factor
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 17
I.V MUTUAL FUNDS IN INDIA:-
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017
Mutual Funds in India
UTI Private sector Public
JV’s with foreignPartners
Foreign Houses Indian Houses
Birla Capital Prudential ICICIAlliance CapitalKothari Pioneer
TempletonAllianceMorgan Stanley
TATA JM
BanksSBICANARAPNBBOI etc.
InstitutionsGICLIC etc.
18
I.VI HOW LONG TO KEEP INVESTMENT TO GET MAXIMUM RETURNS:-
Get desired returns technically open-ended funds you can withdraw your investments
even within a week, but to positive time frame is required are:
Funds Time Period
Equity Funds 3 Years (plus)
Balanced Funds 18 months to 3 Years
MIP’s 1 Year (plus)
Income Funds 6 months to 1 Year
Liquid Funds few days to 6 months
I.VII WHAT RETURNS CAN I EXPECT IF I KEEP MY MONEY FOR SUGGESTED TIME FRAMES:-
Funds Returns
Sector funds 22% to 25% p.a
Balance funds 15% to 18% p.a
MIP’s Pension Plans 12% to 15% p.a
Income Funds 10% to 12% p.a
Liquid Funds 7% to 9% p.a
The above-mentioned returns in the table are indicative and not assured. All
investments in MUTUAL FUNDS are securities and are subject to market risk and the
NAVs of the schemes may go up and down depending upon the factors and forces
affecting the security market including the fluctuations in the internal rates .The past
performance of the MUTUAL FUNDS is not indicative of future performance.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 19
THE RISK RETURN GRAPHS FOR VARIOUS FUNDS:-
The above Graph shows the Risk and Returns generated by different Funds. Liquid
Funds are less Risky and also generate less Returns where as Sector Funds are more
Risky but generate more Returns by the example of above two Funds it is clear that
Risk and Returns are directly proportional to each other. Other Funds like Equity
Funds, Balanced Funds and Income Funds are also gives the same percentage of
Returns as the Risk involved.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017
Liquid Funds
Income Funds
Balanced Funds
Equity Funds
Sector Funds
RISKS
RETURNS
20
I.VIII ADVANTAGE OF MUTUAL FUND:-
The advantages of investing in a Mutual Fund are:
Diversification: The best mutual funds design their portfolios so individual
investments will react differently to the same economic conditions. For example,
economic conditions like a rise in interest rates may cause certain securities in a
diversified portfolio to decrease in value. Other securities in the portfolio will
respond to the same economic conditions by increasing in value. When a
portfolio is balanced in this way, the value of the overall portfolio should
gradually increase over time, even if some securities lose value.
Professional Management: Most mutual funds pay topflight professionals to
manage their investments. These managers decide what securities the fund will
buy and sell.
Regulatory oversight: Mutual funds are subject to many government regulations
that protect investors from fraud.
Liquidity: It's easy to get your money out of a mutual fund. Write a check, make
a call, and you've got the cash.
Convenience: You can usually buy mutual fund shares by mail, phone, or over
the Internet.
Low cost: Mutual fund expenses are often no more than 1.5 percent of your
investment. Expenses for Index Funds are less than that, because index funds are
not actively managed. Instead, they automatically buy stock in companies that
are listed on a specific index.
Transparency: Mutual Fund schemes are said to be Transparent because they
show the clear allocation of Funds to Investors.
Flexibility: Mutual funds are flexible because they change time to time and also
if an Investors wants his money back before the maturity of the Fund He/she can
easily redeem it.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 21
I.IX DRAWBACKS OF MUTUAL FUNDS:-
Mutual funds have their drawbacks and may not be for everyone:
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 22
No Guarantees:
No investment is risk free. If the entire stock market declines in value, the value of
mutual funds shares will go down as well, no matter how balanced the portfolio.
Investors encounter fewer risks when they invest in mutual funds than when they
buy and sell stocks on their own. However, anyone who invests through a mutual
fund runs the risk of losing money.
Fees and commissions:
All funds charge administrative fees to cover their day-to-day expenses. Some
funds also charge sales commissions or "loads" to compensate brokers, financial
consultants, or financial planners. Even if you don't use a broker or other financial
adviser, you will pay a sales commission if you buy shares in a Load Fund.
Taxes:
During a typical year, most actively managed mutual funds sell anywhere from 20
to 70 percent of the securities in their portfolios. If your fund makes a profit on its
sales, you will pay taxes on the income you receive, even if you reinvest the money
you made.
Management risk:
When you invest in a mutual fund, you depend on the fund's manager to make the
right decisions regarding the fund's portfolio. If the manager does not perform as
well as you had hoped, you might not make as much money on your investment as
you expected. Of course, if you invest in Index Funds, you forego management risk,
because these funds do not employ managers.
I.X ASSOCIATION OF MUTUAL FUNDS IN INDIA:-
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 23
With the increase in mutual fund players in India, a need for mutual fund association in
India was generated to function as a non-profit organization. Association of Mutual
Funds in India (AMFI) was incorporated on 22nd August 1995.
AMFI is an apex body of all Asset Management Companies (AMC), which has been
registered with SEBI. Till date all the AMCs are that have launched mutual fund
schemes are its members. It functions under the supervision and guidelines of its Board
of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry
to a professional and healthy market with ethical lines enhancing and maintaining
standards. It follows the principle of both protecting and promoting the interests of
mutual funds as well as their unit holder
The objectives of Association of Mutual Funds in India :-
The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has certain defined objectives, which juxtaposes the guidelines of its Board of Directors. The objectives are as follows:
This mutual fund association of India maintains high professional and ethical
standards gin all areas of operation of the industry.
It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in the
activities of mutual Fund and asset management. The agencies that are by any
means connected or involved In the field of capital markets and financial
services also involved in this code of conduct Of the association.
AMFI interacts with SEBI and works according to SEBIs guidelines in the
mutual fund Industry.
Association of Mutual Fund in India do represent the Government of India, the
Reserve Bank of India and other related bodies on matters relating to the Mutual
Fund Industry.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 24
It develops a team of well qualified and trained Agent distributors. It implements
a programmer of training and certification for all intermediaries and other
engaged in the mutual fund industry.
AMFI undertakes all India awareness programmed for investor’s in order to
promote Proper understanding of the concepts and working of mutual funds.
At last but not the least association of mutual fund of India also disseminate
Information’s on Mutual Fund Industry and undertakes studies and research
either directly or in association with other bodies.
I.XI FUTURE OF MUTUAL FUND IN INDIA:-
By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is
estimated that by 2010 March-end, the total assets of all scheduled commercial banks
should be Rs 40,90,000 crores.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 25
The annual composite rate of growth is expected 13.4% during the rest of the decade. In
the last 5 years we have seen annual growth rate of 9%. According to the current
growth rate, by year 2010 the asset will be double.
Let us discuss the following table:
Aggregate deposits of Scheduled Com Banks in India (Rs.Crore)
Private foreignKotak Mahindra Asset Management Company
Private IndianKothari Pioneer Asset Management Company
Private Indian
Morgan Stanley Asset Management Company Pvt Ltd Private foreignPunjab National Bank Asset Management Company Ltd Bank
Reliance Capital Asset Management Company Private IndianState Bank of India Funds Management ltd.
BankShriram Asset Management Company Ltd.
Private IndianSun F and C Asset Management Company Ltd.
Private foreignSundaram Newton Asset Management Company ltd Private foreign
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 36
Tara Asset Management Company Ltd.Private Indian
Credit Capital Asset Management Company LtdPrivate Indian
Templeton Asset Management Company LtdPrivate foreign
Unit Trust Of IndiaInstitution
CHAPTER:- II
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 37
PROBLEM STATEMENT AND OBJECTIVE OF THE
STUDY:-
II.I PROBLEM STATEMENT:-
Due to the falling Rate of Interest on Bank deposits, it is obvious that Investment in
Mutual Fund will grow in year to come. However lack of knowledge of Mutual
Funds is a hindering factor in expected growth of Mutual Funds Business. Under
noted problems are envisaged in this area:
Difficulty in convincing people for investment.
Difficulty to change mind of the investor according to age and
Profession.
Difficulty to make an approach to investors.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 38
Difficulty to take an appointment with professional people.
Difficulty to get the documents required for formalities from investors
Difficulty to overcome an impassionate person who wants return in less time.
Difficulty in follow up the people whose names are being stored in a data.
Difficulty to remove the fear of risk from the minds of investors.
II.II OBJECTIVE OF STUDY:-
In view of the problem cited above, the study aims at analyzing the following major issues: MUTUAL FUNDS FOR INDIVIDUAL INVESTORS IN INDIA.
To know the different Asset management companies involve in MUTUAL FUND.
To know the different aspects of MUTUAL FUND according to different age,
profession etc.
To see the interest of people in investing in MUTUAL FUNDS.
To know the future of MUTUAL FUNDS in India.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 39
To know the different attitudes of people regarding risk, rate of return, period of
investment etc.
To study the diversification of mutual fund.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 40
CHAPTER :- III
RESERCH METHODOLOGY:
III.I METHODOLOGY OF STUDY:-
Research can be defined as systemized effort to gain new knowledge. A research is
carried out by different methodologies which have their own pros and cons. Research
methodology is a way to solve research in studying and solving research problem along
with logic behind them are defined through research methodology. Thus while talking
about research methodology we are not only talking of research methods but also
considered the logic behind the methods. We are in context of our research studies and
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 41
explain why it is being used a particular method or technique and why the others are not
used. So that research result is capable of being evaluated either by researcher himself
or by others
III.II Research Methodology:-
Research has its special significance in solving various operational and planning
problem of business and industry. Research methodology is the way to systematically
solve the research problem.
III.III ASSUMPTIONS:-
1. It has been assumed that sample of 100 respondents represents the whole
population.
2. The information given by the customer is unbiased
III.IV Literature Survey:-
The project is based on pure findings of facts. Development of Working Hypothesis:-
The Hypothesis could be developed by discussing with the concerning department
heads and guides about this exploratory research and reached to the conclusion that the
data is to be collected by personal interaction with the customers, asking them about the
services and the improvement required. First of all they are aware of mutual funds or
not and then analyzing the findings to reach to the objectives of research.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 42
Collection of Data:-There was secondary data available for the study and also primary
data collected by carrying out by the survey which has been carried out to through
personal interviews of the customers. The sample size was roughly 100.
a. Sampling methods: - A sample is the representative of the population which
will predict the behavior of the whole universe.
b. The sampling size put under two categories: Probability sampling and non
probability sampling.
III.V Probability sampling:-
This is the process of selecting the elements or group of elements from as well defined
population by such procedure which gives every element in the population an equal
chance of being selected for observation. The sampling method use for this survey is
the area sampling which is a sub type of probability sampling.
III.VI Sampling size:-
Large sample gives reliable result than small sample. However, it is not feasible to
target entire population or even a substantial portion to achieve a reliable result. So, in
this aspect selecting the sample to study is known as sample size. Hence, for my project
my sample size was 100.The Sample Size of 100 is not enough to draw a conclusion but
as per the time assigned it was difficult to take a sample size more than 100.The Sample
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 43
Size consist of both the Professional and Business class people. IT peoples, Doctors,
Jewelers, Timber Merchants & Real estate Agents are taken as Sample .
III.VII Execution of the project:-
It is the very important step in the research process accuracy findings depends on how
systematically the study has been carried out in time so that it can make some sense
when required. I have executed the project after prior discussion with the guide and
structured in following steps:
a. Preparation of questionnaire.
b. Collection of list of some of the clients interview of the customer so that
more interaction is impossible and the variety of responses can be registered
to have a good data for analysis.
c. Visiting the corporate and asking about their feedback on the mutual funds
services they are availing. Try to find out their satisfaction level with the
existing mutual fund.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 44
CHAPTER :- IV
LIMITATIONS:
IV.I Limitations:-
Every work has its own limitation. Limitations are extent to which the process should
not exceed. Limitations of this project are:-
1. Duration of Project was not enough to make a conclusion on such a vast subject
time constraint has become a big limitation.
2. The Sample Size being taken for drawing a conclusion was too small to get an
accurate result.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 45
3. Changing the Mentality of people for investing in a particular Financial Product
is a very difficult task.
All the above mentioned statements are the limitations of the project. Time, Sample
Size & Mentality of investor are the main limitations of the project. The study is
being done by taking and keeping all the limitations in mind. The project is
completed in prescribed time. To find the Awareness of Mutual Fund the Sample
Size is not at all enough because the population size is much bigger than the sample
size and the last limitation was to change the mentality of the investor to invest in a
particular type of the Investment Product. As the Indian Market is having a large
number of potential customers to draw a conclusion in such a small size may not be
reliable.
CHAPTER:- V Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 46
ANALYSIS OF MUTUAL FUNDS:-
V.I ANALYSIS OF MUTUAL FUNDS ON THE BASIS OF SCHEMES:-
The schemes have been divided into 10 different categories for the purpose of
meaningful comparison. The categories are as follows:
1. Equity diversified Funds.
2. Equity ELSS Funds.
3. Equity sectoral Funds.
4. Balanced Funds.
5. Income Funds.
6. Liquid Funds.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 47
7 .Gilt Funds.
8. MIPS (Monthly income plans)
9. Index Funds.
10. Hybrid Funds.
There are many asset management companies being involved in mutual fund but people
invest thing reputed mutual fund like ICICI PRUDENTIAL, FRANKLIN
TEMPLETON, HSBC, KOTAK, HDFC etc. All the companies have different mutual
fund schemes vary from different needs of a customer. Like in the month of June the
IPO of Kotak contra has been issued with different concept and also being accepted by
the investors. Where as, the IPO of SBI comma is been introduced in the July and till
now being appreciated by the investors. The mutual fund is been described by its
NAVs.
In this table as on 15/07/05 HDFC TAX SAVER is having highest NAV as compared
to FRANKLIN, SUNDARAM, UTI etc. These are the top eight best equity linked
saving schemes in the mid of July.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017
Sr No. SCHEME NAMENAV AS ON
15/06/091 HDFC TAX SAVER 85.7
2 FRANKLIN TAX SHIELD 78.25
3 SUNDARAM TAX SAVER 15.34
4 UTI EQUITY TAX SAVING 20.59
5 PRINCIPAL TAX SAVER 122.2ALLIANCE CAPITAL TAX RELIEF
6 96 141.14
7 PRU ICICI TAX PLAN 57.94
8 BIRLA EQUITY PLAN 43.08
48
V.II COMPARISAN BETWEEN BANKS AND MUTUAL FUNDS IN DIFFERENT ASPECTS:-
BANKS MUTUAL FUNDSReturns Low BetterAdministrative exp. High LowRisk Low ModerateInvestment option Less MoreNetwork High Penetration Low but improvingLiquidity At a cost BetterQuality of asset Not Transparent Transparent
Interest calculationMin. Balance between 10th and 31st of month. Everyday
Guarantee Max. Rs. 1Lakh on Deposit None
In the above table the Comparison is made between Banks and Mutual Funds with
different aspects. Now a day due to low Rate of interest people prefer to invest in those
products which give more Returns in less time without Risk. Now a days also nearly
40% of people keep there money in Banks because they are less Risky (reference with
chart 8.2). The Returns expected in Mutual Funds are high where as in bank it is low
but the Guarantee of money back is more than Mutual fund. Thus both Bank and
Mutual Fund are good enough in themselves. It is depend on the Investor what type of
investment they want to do.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 49
CHAPTER :- VI
DATA COLLECTION:
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 50
DATA COLLECTION:
Proceeding further after determines the Methodology and limitation of the study the
next step is to analyze the Data being collected for the study. Data is being collected
from various sources like:-
Questionnaire
Personal visit
Telephonic Information etc.
VI.I QUESTIONAIRE:-
Questionnaire is a written form being given to the prospective investor to give
feedback about the services provided to them and also to find the satisfaction
level of the investor for a particular investment product. After filling up of form
the next step is to evaluate the form in different dimensions and draw a
conclusion.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 51
It is difficult to get a Questionnaire filled by corporate because of time they don’t
have time to fill the Questionnaire so at the time of meeting them personally or
after that the Questionnaire is filled by us.
The Sample size taken for this study is 100 which is not enough to draw a conclusion
but due to time limitation only this much size has been taken into consideration. After
analyzing the Questionnaire the following evaluation has been done:-
CATEGORY OF INVESTORS
TOTAL INCOME
RISK RETURN
IT PEOPLE HIGH LOW HIGHDOCTORS HIGH LOW HIGHTIMBER MERCHANTS HIGH HIGH HIGHJEWELLERS HIGH HIGH HIGH REAL ESTATE AGENTS HIGH HIGH HIGH
After analyzing the above table the conclusion was made that the business people
are more Risk taker while professional people are less Risk taker where the return
expected in both the case are high.
VI.II PERSONAL VISIT:-
The second way of collecting data is Personal Visits to the Corporates personally by
fixing an appointment. Personal Visit gives a clear picture of the conclusion drawn
in Questionnaire It gives a clear view of the client Awareness about the
product .Some of the difficulties in making Personal Visits are:-
To take a time or appointment from the corporates.
To convenes investor to invest in a particular product.
Personal Visit gives a clear picture about the Investment areas of both the categories
PROFESSIONAL PEOPLE BUSINESS PEOPLEPPF LANDKISAN VIKAS PATR GOLDBANK ACCOUNT STOCKS INSURANCE INSURANCEFURTHER STUDIES etc. VEHICLES etc.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 52
From the above table it is clear that the Professional people invest in the Value
Added items where as Business people they invest in Future Prospect assets like
land, gold etc.
VI.III TELEPHONIC INFORMATION:-
The further source of collecting data is telephonic information with the existing
customer and the prospective investors. It is very difficult to reveal the data of
investors from the company itself because it has been kept as a secret document.
After getting a data some problems too come in the way. Some are:-
People are not ready to listen.
People ask question like from where did you get the number?
From this source not much of the Information is drawn.
Few respondents where not happy with the level of customer services
endured by
Angel broking pvt. Ltd. Particularly about the delays in replying or not
replying the queries raised by them.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 53
CHAPTER :- VII
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 54
INTERPRETATION AND ANALYSIS OF DATA:-
CHART:- VII.IFrom the data collected through the questioner, observation made during the personal
visits the data revealed following information :-
PERCENTAGE OF INVESTMENT TO TOTAL INCOMEThe following table and pie chart throw the light on the percentage of saving out of
income.
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 55
Percentage in Income People Invest
1% 5%
56%
38%
Over 50% 30-50% 10-30% Below 10%
In the above chat it has been observed that people invest mostly between 10% to
30% of their income as the moderate level of income is in the range of rupees 30,000
to 40,000. There are very few people who invest above 50% of their Income as their
income level is too high say above Rs 10,000,00. Investors are having different
responsibilities toward the society and family due to which they are not able to invest
more money in Financial product .There are many people who invest only 10% of
there income according to total Sample Size.
CHART:-VII.II
INVESTMENT IN FINANCIAL PRODUCTS Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017
3.WHAT ARE THE BREAK UP IN PERCENTAGE TERMS TO YOUR INVESTMENT?
TYPE OF INVESTMENT PERCENTAGEINSURANCEMUTUAL FUNDSSHAREREAL ESTATEPPFBONDS
4.ARE YOU AWARE OF MetLife?
Yes No
5.WHAT IS YOUR PERCEPTION ABOUT MUTUAL FUNDS? Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 70
Safe Risky Others
6. WHAT ARE DIFFERENT TYPES OF MUTUAL FUNDS ARE YOU AWARE OF?
Growth schemes.(provide appreciation of capital over medium to long term)
Income schemes.(provide regular and continuous income to investor) Balance schemes.(provide both growth and income) Money market and Liquid Schemes.(provide easy liquidity preservation
of capital and moderate income). Tax saving schemes.(offer tax rebates under tax laws) Guilt funds(generating returns by investing in securities created and issued
by a central gov. or state gov.)
7. WHICH OF THEM DO YOU PREFER?
Growth schemes Income schemes Balance schemes Money Market and Liquid schemes Tax saving schemes Guilt Funds
8. DO YOU THINK THE MUTUAL FUNDS ARE NOT AS POPULAR IN INDIA AS IN OTHER COUNTRIES?
Risk involved as returns are not assured. Any other reason please specify…………………………………………
9.HOW DO YOU LOOK MUTUAL FUND COMPANIES?
Brand Name Good Service High Yield Advertisement Any Other Reason……………………………...........................................
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 71
10.NAME
11.AGE
25-35 35-45 45-60 60 & above
Dr. D. Y. PATIL CENTER FOR MANAGEMENT & RESEARCH. CHIKHALI. PUNE- 411017 72