Project on Nj India Invest Pvt Ltd

1

A

PROJECT STUDY REPORT

On

Training Undertaken at

Titled:

“A study on mutual fundand

awareness of Mutual Funds among insurance advisors"

Submitted in partial fulfillment for

The award degree of

Master of Business Administration

Advent Institute of Management Studies

Off Badi Road, Thoor, Udaipur (Raj.)

SUBMITTED BY: SUBMITTED TO :

Rajendra patidar Dr. N.S. Rao

M.B.A. III Sem. Director

9680503438

2009-2011

2

PREFACE

The summer training of a management studies play an important role in developing his as

well groomed professional. It allows a student to give theoretical concepts a practical in the

field of application. If gives the candidate an idea of dynamic & versatile professional world

as well as exposure to intricacies & complexities of corporate world.

Doing the summer training at NJ INDIA INVEST was great experience. An opening

experience to the concepts of marketing department helped me in understanding the

concepts that are applied by the organization since it`s inception has progressed a lot & is

walking guideline of success, As the organization is marching with the speeds towards the

horizon. This division is holding with a greater speed to keep the pace with the major players

in the market.

During the MBA course we are taught dozen of subjects which if not applied properly are a simple waste of time. Implementing & in learning of concept of marketing in the market provider an opportunity to practically. I got a chance to apply our theory & acceptance myself with the functioning of marketing in a period of 8 weeks exposure to the corporate environment. I got a learning of basics of marketing etc.

Real learning places it`s worth only when it gives sweet fruits in future. Summer training is one way to learning at work. I enjoyed the interesting experience & every part of it.

3

ACKNOWLEDGEMENT

This summer report project would not have been possible without support and assistance of all the specialists working in this area. I would like to take this opportunity to thank each one of the intellectual exchanges, valuable suggestions, critical reviews and technical assistance.

First of all, I am highly indebted to Mr. Amit Soni (BM) for giving me opportunity to work under their personal guidance. I express my sincere gratitude to other member of department for their valuable time and suggestions, me to completethis project successfully.

I am highly thankful to my Dr. N. S. Rao Director (AIMS) and all faculty member of my institute who extended their support and guidance throughout the period of summer training.

I am thankful to all my trainers during this training helped me whatever little way they could during period.

I also feel to recognize the constructive feedback of my friend and moral support of my family for without them this project would not have been possible.

4

EXECUTIVE SUMMARY

The project titled “A study of mutual fund and awareness among insurance advisors” being carried out for NJ INDIA INVESTS PVT. LTD. Today an investor is interested in tracking the value of his investments, whether he invests directly in the market or indirectly through Mutual Funds. This dynamic change has taken place because of a number of reasons. With globalization and the growing competition in the investments opportunity available he would have to make guided and rational decisions on whether he gets an acceptable return on his investments in the funds selected by him, or if he needs to switch to another fund. In order to achieve such an end the investor has to understand the basis of appropriate preference measurement for the fund, and acquire the basic knowledge of the different measures of evaluating the performance of the fund. Only then would he be in a position to judge correctly whether his fund is performing well or not, and make the right decision. This project is undertaken to help the investors in tracking the performance of their investments in Mutual Funds and has been carried out with the objective of giving performance analysis of Mutual Fund.

The methodology for carrying out the project was very simple that is through secondary data obtained through various mediums like fact sheet of the funds, the Internet, Business magazines, Newspaper, etc. the analysis of Mutual Funds has been done with respect to its various parameters. I hope NJ INDIA INVEST PVT. LTD., Udaipur will recognize this as well as take more references from this project report.

5

TABLE OF CONTENTS

Chapter Name Page No.

Objective of study ……………………………………………………………...6

Industry profile …………………………………………………………………7

Types of mutual fund…………………………………………………………..17

Advantage of mutual fund……………………………………………………..23

Disadvantage of mutual fund…………………………………………………..24

Major mutual fund companies in India……………………………………........36

Factor affecting mutual fund……………………………………………………37

Company profile…………………………………………………………………..45

Why insurance agents should sell mutual fund………………………………59

Research Methodology………………………………………………………......64

Questionnaire…………………………………………………………………….66

Summary of finding …………………………………………………………….68

Suggestions……………………………………………………………………....74

Bibliography……………………………………………………………................76

Conclusion………………………………………………………………………...77

6

INDUSTRY OVERVIEW

MUTUAL FUND

INTRODUCTION:-

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.

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, Government securities, Bonds, Call Money Markets etc, and distributes the profits. In the other words, a Mutual Fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time. Investors of mutual funds are known as unit holders.

7

The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A Mutual Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.

Characteristics:

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

A mutual fund is managed by investment professionals and other service providers, who earn a fee for their services, from the fund.

The pool of funds is invested in a portfolio of marketable investments. The value of the portfolio is updated every day.

The investor’s share in the fund is denominated by ‘units’. The value of the units changes with change in the portfolio’s value, every day. The value of one unit of investment is called the Net Asset Value or NAV.

8

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.

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

First Phase: 1964-1987

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 cores of assets under management.

Second Phase: 1987-1993 (Entry of Public Sector Funds)

In 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June1987followed by Canara bank Mutual Fund (Dec87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December

9

1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 cores.

Third Phase: 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The industry now functions under the SEBI (Mutual Fund) Regulations1996.As at the end of January 2003; there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase – Since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. The graph indicates the growth of assets over the years.

10

Growth of mutual fund business in India in the four decades from 1964, when UTI was set up is given in the table below:-

Period(Year)

Aggregate investment in Crores of Rupees Period(Year)

Aggregate investment in Crores of Rupees

1964-69 65 1992-93 46988.02

1969-74 172 1993-94 61301.21

19774-79 402 1994-95 75050.21

1979-84 1261 1995-96 81026.52

1986-87 4563.68 1996-97 80539.00

1987-88 6738.81 1997-98 68984.00

1988-89 13455.65 1998-99 63472.00

1989-90 19110.92 1999-00 107966.10

1990-91 23060.45 2000-01 90587.00

1991-92 37480.20 2001-02 94571.00

NOTE:- Industry AUM tripled from 1.50 lac crore 2003 to 4.50 lac crore in Nov. 08.

11

Note: Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified undertaking of the Unit Trust of India has therefore been excluded from the total assets industry as a whole from February 2003 onwards.

12

MUTUAL FUND STRUCTURE

The Structure Consists

The structure of mutual funds in India is governed by the SEBI Regulations, 1996. These regulations make it mandatory for mutual funds to have a 3-tier structure of Sponsors- Trustee-AMC (Asset Management Company). The Sponsor is the promoter of mutual fund, and appoints the Trustee. The Trustees are responsible to the investors in the mutual funds, and appoint the AMC for managing the investment portfolio. The AMC is the business face of the mutual funds, as it manages all the affairs of mutual funds. The mutual funds and AMC have to be registered by the SEBI.

Sponsor

A sponsor is a body corporate who establishes a mutual fund. It may be one person acting alone or together with another body corporate. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund

Board of Trustee:

13

Mutual fund requires to have an independent board of Trustee, where two third of the trustees should be independent person who are not associated with the sponsor in any manner. The board of trustees of the trustee company holds the property of the mutual fund in trust for the benefit of the unit holders. The board of trustees is responsible for protecting the unit holder’s interest.

Asset Management Company (AMC)

The role of asset Management Company is highly significant in the mutual fund operation. The AMC is appointed by the Trustee. They are the fund managers i.e. they invest the investors money in various securities ( equity, debt and money market instruments) after proper research of market conditions and the financial performance of individual companies and specific securities in the efforts to meet or beat average market return and analysis. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. At least 50% of the directors of the AMC are independent directors who are not associated with the Sponsor in any manner. The AMC must have a net worth of at least 10 crores at all times. They also look after the administrative functions of a mutual fund for which they charge management fee.

Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form, redemption requests and dispatches account statements to the unit holders.

Custodian

Mutual fund is required by law to protect their portfolio securities by splacing them with a custodian. Nearly all mutual funds use qualified bank custodians. Only a registered custodian under the SEBI regulation can act as a custodian to a mutual fund. A custodian handles the investment back office of a mutual fund.

Fee structure:-

Custodian charges range between 0.15% to 0.20% on the net value of the customer’s holding for custodian services space is one important factor which has fixed cost element.

14

IMPORTANT CHARACTERISTICS OF A MUTUAL FUND

A Mutual Fund actually belongs to the investors who have pooled their Funds. The ownership of the mutual fund is in the hands of the Investors.

A Mutual Fund is managed by investment professional and other Service providers, who earns a fee for their services, from the funds.

The pool of Funds is invested in a portfolio of marketable investments.

The value of the portfolio is updated every day.

The investor’s share in the fund is denominated by “units”. The value of the units changes with change in the portfolio value, every day. The

value of one unit of investment is called net asset value (NAV).

The investment portfolio of the mutual fund is created according to The stated Investment objectives of the Fund.

RESPONSIBILITY OF CUSTODIANS: -

Receipt and delivery of securities

Holding of securities.

Collecting income

Holding and processing cost

Corporate actions etc

15

RATE OF RETURN ON MUTUAL FUNDS:-

An investor in mutual fund earns return from two sources:

Income from dividend paid by the mutual fund.

Capital gains arising out of selling the units at a price higher than the

acquisition price

Formation and regulations:

Mutual funds are to be established in the form of trusts under the Indian trusts act and are to be operated by separate asset management companies (AMC s)

AMC’s shall have a minimum Net worth of Rs. 5 crores;

AMC’s and Trustees of Mutual Funds are to be two separate legal entities and that an AMC or its affiliate cannot act as a manager in any other fund;

Mutual funds dealing exclusively with money market instruments are to be regulated by the Reserve Bank Of India

Mutual fund dealing primarily in the capital market and also partly money market instruments are to be regulated by the Securities Exchange Board Of India (SEBI)

All schemes floated by Mutual funds are to be registered with SEBI

16

TYPES OF MUTUAL FUND

Diagram

17

Schemes according to maturity period : -

A mutual fund scheme can be classified into open-ended scheme or close ended scheme depending on its maturity period.

Open ended fund/scheme:

An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are on a daily basis. The key feature of open-end schemes is liquidity.

Close ended Fund/scheme:

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors some close ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investors i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally a weekly basis.

Schemes according to investment objective :

A scheme can also be classified as growth scheme, income scheme, or balance scheme considering its investment objective. Such schemes may be open-ended or close-ended scheme as described earlier. Such schemes may be classified mainly as follows:

Equity funds: These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as:

1. Growth Fund: Aim to provide capital appreciations over the medium to long term. These schemes normally invest a majority of their funds in equities and are willing to bear short term decline in value for possible future appreciation. These schemes are not for investors seeking regular income or needing their money back in the short term

2. Diversified Equity Fund: Diversified equity funds are the most popular among investors. They invest in many stocks across many sectors, and because they have

18

the freedom to chop and churn their portfolios as they like, diversified equity funds are a good proxy to the stock market. If a general exposure to equities is what you want, they are a good option. They can invest in all listed stocks, and even in unlisted stocks. They can invest in which ever sector they like, in what ever ratio they like.

3. Equity – Linked Savings Schemes (ELSS): Equity – linked savings schemes (ELSS) are diversified equity funds that additionally offer income tax benefits to individuals. ELSS is one of the many section 80c instruments, along with the more popular debt options like the PPF, NSC and infrastructure bonds. In this Section 80c grouping. ELSS is unique. Being the only instrument to offer a total equity exposure.

4. Index Fund: An index fund is a diversified equity fund; with a difference- a fund manager has absolutely no say in stock selection. At all times, the portfolio of an index fund mirrors an index, both in its choice of stocks and their percentage holding. As of March 2004, equity index funds tracked either the Sensex or the Nifty. So, an index fund that mirrors the Sensex will invest only in the 30 Sensex stocks, which too in the same proportion as their weight age in the index.

5. Sector Fund: Sector funds invest in stocks from only one sector, or a handful of sectors. The objective is to capitalize on the story in the sectors, and offer investors a window to profit from such opportunities. It’s a very narrow focus, because of which sector funds are considered the riskiest among all equity funds.

6. Mid – Cap Fund: These are diversified funds that target companies on the fast –growth trajectory. In the long run, share prices are driven by growth in a company’s turnover and profits. Market players refer to them as ‘mid-sized companies’ and ‘mid-cap stocks’ with size in this context being benchmarked to a company’s market value. So, while a typical large cap stock would have a market capitalization of over Rs 1,000 crores, a mid-cap stock would have a market value of Rs 250-2,000 crores.

Mutual Fund Equity schemes have delivered very attractive returns in last 5 years, giving over 51% returns annually

19

DEBT FUNDS:-These Funds invest a major portion of their corpus in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors.

Debt funds are further classified as:

1. Gilt Funds: Invest their corpus in securities issued by Government, popularly known as GOI debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

2. Income Funds: Income funds aim to maximize debt returns for the medium to longer term. Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.

3. MIPs: Invests around 80% of their total corpus in debt instruments while the rest of the portion is invested in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.

4. Short Term Plans (STPs): Meant for investors with an investment horizon of 3-6 months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Scheme Name3

Years

5

Years

7

Years

10

Years

Average of Diversified Mutual fund

Schemes20.98 35.10 31.92 27.79

BSE 30 (Sensex) 23.7 29.19 23.4 12.69

NSE 50 23.08 27.78 22.11 12.9

No. of Diversified Schemes

considered46 30 20 6

20

5. Liquid Funds: Also known as Money Market Schemes, These funds are meant to provide easy liquidity and preservation of capital. These schemes invest in shortterm instruments like Treasury Bills, inter-bank call money market etc. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return

6. matrix and are considered to be the safest amongst all categories of mutual funds.

7. Floating Rate Funds: These income funds are more insulated from interest rate than their conventional peers. In other words, interest rate changes, which cause the NAV of a conventional debt fund to go up or down, have little, or no, impact on NAVs of floating rate funds.

HYBRID FUNDS:-

1. BALANCED FUNDS:-These funds, as the name suggests, are a mix of both equity and debt funds. The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in shares prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. Following are balanced funds classes:-

a. Debt-oriented funds -Investment below 65% in equities.b. Equity-oriented funds -Invest at least 65% in equities, remaining

in debt.

2. Growth and Income Fund: Funds that combine features of growth funds and income funds are known as Growth-and-Income Funds. These funds invest in companies having potential for capital appreciation and those known for issuing high dividends. The level of risks involved in these funds is lower than growth funds and higher than income funds.

3. Asset Allocation Fund: Mutual funds may invest in financial assets like equity, debt, money market or non-financial (physical) assets like real estate, commodities etc.. Asset allocation funds adopt a variable asset allocation strategy that allows fund managers to switch over from one asset class to another at any time depending upon their

4. Outlook for specific markets. In other words, fund managers may switch over to equity if they expect equity market to provide good returns and switch over to debt if they expect debt market to provide better returns.

21

Comparison of Investment Products

Return  Safety  Volatility  Liquidity  Convenien

ce 

Equity  High  Low  High  High  Moderate 

Bonds  Moderate  High  Moderate  Moderate  High 

Corporate

Debentures 

Moderate  Moderate  Moderate  Low  Low 

Corporate

FDs 

Moderate  Low  Low  Low  Moderate 

Bank

Deposits 

Low  High  Low  High  High 

PPF  Moderate  High  Low  Moderate  High 

Life

Insurance 

Low  High  Low  Low  Moderate 

Gold  Moderate  High  Moderate  Moderate  Gold 

Real

Estate 

High  Moderate  High  Low  Low 

Mutual

Funds 

High  High  Moderate  High  High 

ADVANTAGES OF MUTUAL FUND:

1. Portfolio Diversification

22

Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small).

2. Professional Management

Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own.

3. Less Risk

Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities.

4. Low Transaction Costs

Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors.

5. Liquidity

An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid.

6. Choice of Schemes

Mutual funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options

7. Transparency

Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the regulator.

8. Flexibility

Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes.

9. Safety

23

Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.

DISADVANTAGE OF MUTUAL FUND

1. Costs Control Not in the Hands of an Investor:-

Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units), irrespective of the performance of the fund.

2. No Customized Portfolios:-

The portfolio of securities in which a fund invests is a decision taken by the fund manager. Investors have no right to interfere in the decision making process of a fund manager, which some investors find as a constraint in achieving their financial objectives.

3. Difficulty in Selecting a Suitable Fund Scheme:-

Many investors find it difficult to select one option from the plethora of funds / schemes / plans available. For this, they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.

4. Delay in Redemption:-

The redemption of the funds though has liquidity in 24-hours to 3 days takes formal application as well as needs time for redemption. This becomes cumbersome for the investors.

5. Non-availability of loans:-

Mutual funds are not accepted as security against loan. The investor cannot deposit the mutual funds against taking any kind of bank loans though they may be his assets.

RISK V/S. RETURN:

24

R IS

K

INVOLVED IN MUTUAL

FUND :

RISK INVOLVED IN MUTUAL FUND :

25

THE RISK-RETURN TRADE-OFF

The most important relationship to understand is the risk-return trade-off. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Hence it is up to you, the investor to decide how much risk you are willing to take. In order to do this you must first be aware of the different types of risks involved with your investment decision.

MARKET RISK:

Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (“SIP”) that works on the concept of Rupee Cost Averaging (“RCA”) might help mitigate this risk.

CREDIT RISK:

The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cash flows determines the Credit Risk faced by you. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. An ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poor credit quality. A well-diversified portfolio might help mitigate this risk.

26

INFLATION RISK:

Things you hear people talk about: “Rs. 100 today is worth more than Rs. 100 tomorrow.” “Remember the time when a bus ride costed 50 paisa?”“Mehangai Ka Jamana Hai.”The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A welldiversified portfolio with some investment in equities might help mitigate this risk.

INTEREST RATE RISK:

In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates raise the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified portfolio might help mitigate this risk.

POLITICAL/GOVERNMENT POLICY RISK:

Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa.

LIQUIDITY RISK:

Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities.

MUTUAL FUND INVESTING STRATEGIES:

27

1. Systematic Investment Plans (SIPs)

These are best suited for young people who have started their careers and need to build

their wealth. SIPs entail an investor to invest a fixed sum of money at regular intervals in

the Mutual fund scheme the investor has chosen, an investor opting for SIP in xyz Mutual

Fund scheme will need to invest a certain sum on money every month/quarter/half-year in

the scheme.

2. Systematic Withdrawal Plans (SWPs)

These plans are best suited for people nearing retirement. In these plans, an investor

invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at

regular intervals to take care of his expenses

3. Systematic Transfer Plans (STPs)

They allow the investor to transfer on a periodic basis a specified amount from one scheme

to another within the same fund family – meaning two schemes belonging to the same

mutual fund. A transfer will be treated as redemption of units from the scheme from which

the transfer is made. Such redemption or investment will be at the applicable NAV. This

service allows the investor to manage his investments actively to achieve his objectives.

Many funds do not even charge any transaction fees for his service – an added advantage

for the active investor.

FACTORS AFFECTING MUTUAL FUND

28

1. Governmental Influences

Mutual fund business is a highly regulated business throughout the world as it seeks to ensure that quality and fairly priced schemes are available. Governmental intervention thus in mutual fund market usually is most needed to ensure that insurers are reliable. And in the developing countries the additional goal may be promotion of domestic mutual fund industry and ensuring the national mutual fund industry contributes to overall economic development. In a non technical sense mutual fund is purchased in a good faith so the duty of government intervention in mutual fund industry is to ensure that this principle of mutual fund is never defeated. The ideology of government plays an important role in mutual fund industry also. For example in the past during 1991, the P .V Narsimha Rao government strongly believed in liberalization also liberalized the mutual fund sector which helped to allow private players in the industry from 1993 and enhancing joint ventures with foreign companies. The present government with more focuses on foreign direct investments has declared to favour the rise FDI in mutual fund to 49% which further enhances competition in the industry.

2. Taxation Policy

Social equity being one of the motives behind tax collections, government gives certain exemptions from such levying. One such exemption is deduction incurred by taxpayers towards investment in mutual fund coverage. Similarly, capital invested in infrastructure bonds etc is offered with certain concession under tax laws. The central idea behind such exemptions is that the capitals so allocated by individuals reduce the ultimate burden on the public infrastructure or helps in creating such infrastructural facilities. The income tax rules related to the mutual fund transactions can be classified under:

[A] Exemptions available to companies or businesses[B] Exemptions available to insured individuals

[A] Exemptions available to companiesExpenses deductible from commission earned by distributor, banker, national distributor.Tax concessions under risk management practices of an enterpriseIn growth option equity schemes there no long term capital gain by company.In dividend option equity schemes there no tax.Return received by charitable trust is total exempted from tax.Else schemes give to advantage of tax saving, growth potential and return.

[B] Tax rules governing investment by individuals

Deduction in respect of ELSS schemes (sec 80C):Investment in this fund would enable you to avail the benefits under clause (xiii) of a section 80C of the Income Tax Act investment made in the schemes up to 1 lakh by the eligible investor for deduction under this section of the Act.Since it will be an income deduction an investment of Rs 1 lakh in this fund can save off Rs. 33600 from your tax payable liability (assuming you are in the highest tax bracket) Investor will receive tax free dividend in above case. Investor will also receive tax free dividend by

29

investing equity schemes in dividend option Investors also receive tax free return by investing equity schemes in growth option for long term capital gain.

C Tax Planning

An individual can think of health ELSS schemes purchase as a tool of tax planning exercise. For example people who are marginally affected by tax liability can be as well purchase a ELSS fund get benefits of Rs. 33600 from tax. In this way tax burden is become less by purchasing ELSS fund. Thus tax law offer benefit to individuals/companies by way of exemptions/deductions of expenditure incurred towards purchase of mutual fund various schemes coverage from total taxable income.

3. Foreign Trade Regulations:-

With the vast potential for mutual fund in India due its large population in the country many foreign companies are ready to enter into the Indian market. But companies can be permitted in India through joint ventures with an Indian partner as well as come separately and the foreign equity shall be restricted to only 25%. Another statement also tells that Indian subsidiaries of foreign companies shall not be allowed to participate in banking sector unless they entered in to joint ventures with the Indian partners. But at present the mutual fund regulator is in favor of hike in FDI cap from 25% to 49%, and is finalizing a report that will be submitted to the government for a comprehensive legislation for the industry. The security exchange board of India and association of mutual fund India have been advocating a hike in FDI limit for mutual fund companies so that the foreign partners can infuse additional funds in these companies to sustain their growth. The government will need to amend the separate mutual fund Act for FDI capital as well as domestic company as this is the statutory provision unlike sectors like civil aviation and telecom, which have come through notification.

4. National Income:-

The relative importance of the mutual fund Market within a country will also be dependent upon economic development. With greater rates of economic growth, consumption of investment should increase as a result of increased income, and an increased stock of assets requiring mutual fund. Furthermore, the development of mutual fund is likely to facilitate greater economic growth, implying that economic growth may be endogenous. Consistent with these arguments, studies find that the level of financial development and economic development are positively related to the level of mutual fund across emerging markets.

5. Consumptions and Savings:-

The gross capital formation of any country is important for indication of its growth in the future years. It is quite necessary to set up the rate of capital formation so that a large stock of machines, tools and equipments are accumulated in a country. Experience of development in other countries suggests that a high rate of capital formation was achieved to trigger rapid rate of economic growth. With the hike in foreign capital coming to India the rate of capital formation is becoming boom to insurers, which has given them opportunities. It is heartening to them to note that latest savings rate of 28% is highest till now and with the growth rate

30

near to 8% is bringing a pool of buyer’s purchasing power. This directly influences the demand for mutual fund products.

6. Employment:-

The effect of employment on mutual fund industry is as direct as that on economic development of any country. With the rising levels of employment the effect on mutual fund industry is positive because employment adds to the insured properties and assets from every prospective be it due to organized or unorganized.

7. Inflation

The midterm policy review the strong macroeconomic indicators and RBI has revised its GDP growth estimates to the upper limit of the earlier projection range 8% inflation (WPI) has been steadily moving up in recent times and RBI has highlighted that primary articles prices have been on of the key contributors. However one needs to keep in mind thatrecent increase in global oil prices.

8. Money supply

The central banks has indicated that credit growth and money supply number are likely to be above its prosecution for the current fiscal year, the statement “to consider promptly all possible measures as appropriate to the evolving global and domestics situation “is indicative of phased increase in FII limits for gilt investment could help in depending the securities market and is part of the road map towards fuller convertibility.

9. Interest

Interest is major factor for investment when a person find less return from investment tool than people move towards the higher returns tool of investment.

10. Risk factor

All investments in Mutual Fund and securities are subject to market risks and the NAV of the fund may go up or down depending on the factors and forces affecting the security market. There can be no assurance that the fund’s objective will be achieved. Past performance of the sponsors/Mutual fund/schemes/AMC is not necessarily indicative of the future results. The name of the schemes does not in any manner indicate their quality, their future prospects or returns.The specific risk would be credit, market, illiquidity, judgmental error, interest rate, swaps and forward rates.

11. Demographic environment

31

The demographic environment significantly affects the demand for the mutual fund industry. Factors like the average age of the population, levels of education, household structures income distribution, life style and the extent of industrialization as well as urbanization terribly influences the demand of mutual fund schemes In India the average age of the population is at an increasing trend following the improved medical technology and better awareness of health care requirements. As a result, the risk of investment death is decreasing while connectivity is increasing. Simultaneously the demand for pension funds and income fund is expected to grow. For example at the time of independence the average age of dying for Indians was 45. Presently it has increased to 65 following better healthcare, improvements in medical science and more health consciousness among the common man. By 2010 it is expected to rise to 75. Hence risk profile is also changing. Earlier people are thinking about safely but at present people thinking about capital growth.

12. Social Factors

The social environment covers the customs, habits, level of education, tastes and standard of living of people in the society. Today’s social environment is greatly influenced to a major extent by the changes in technological aspects. With the rapid progress in technology and economic liberalization, the physical boundaries are gradually vanishing. As a result, the social life of the people and their views towards risk and uncertainty of life and health are gradually changing.These factors of social life are affecting human motivations and emotions related to the physical and mental incapacities, loss of health and death. In general there are extremes apprehensions of one’s death, though it is certain. The perception of an individual toward risk and capital growth depends on the social culture and religious belief. In the urbanized area people does think about investment and capital growth. These beliefs ultimately influence the buying behaviour of a consumer.

13. Education

Education is major factor of demand for mutual fund product. if the education levels is higher than the people know the benefits of mutual fund the use mutual fund as investment tool and also take rise capital growth.

MUTUAL FUND PLAYERS

The Indian mutual fund industry is mainly divided into three kinds of categories. These categories include public sector players, nationalized banks and private sector and foreign players.

UTI Mutual Fund was one of the leading Mutual Fund companies in India till June 2010 with a corpus of more than Rs. 80217.18 Crore and it is the public sector mutual fund. Bank of Baroda, Punjab National Bank, Can Bank and SBI are the major nationalized banks mutual fund. At present mutual fund industry is mainly dominated by private and foreign sector players which include major players like Prudential ICICI Mutual Fund, HDFC Mutual Fund, Reliance Mutual Fund etc. are private sector mutual funds players while Franklin Templeton

32

etc. are major foreign mutual fund players. At present there are more than 38 players operating in Indian.

Latest Average Asset Under Management for all Mutual Fund houses, increase or decrease in corpus, sales & redemption figures..  

Amount in \ Crores

Mutual Fund NameNo. of

Schemes*Asset Under Management

    As on Corpus As on CorpusNet inc/dec in corpus

AIG Global Investment Group Mutual Fund

44 Jun 30, 2010

1,014.66 May 31, 2010

1,030.86 -16.202

Axis Mutual Fund 60 Jun 30,

20102,999.19 May 31,

20104,715.89 -1716.705

Baroda Pioneer Mutual Fund

31 Jun 30, 2010

3,075.20 May 31, 2010

4,759.53 -1684.337

Benchmark Mutual Fund 17 Jun 30,

20102,250.37 May 31,

20102,263.15 -12.779

Bharti AXA Mutual Fund 45 Jun 30,

2010692.74 May 31,

2010724.17 -31.426

Birla Sun Life Mutual Fund 217 Jun 30,

201063,111.55 May 31,

201073,828.03 -10716.484

Canara Robeco Mutual Fund

89 Jun 30, 2010

8,533.44 May 31, 2010

10,661.95 -2128.507

Deutsche Mutual Fund 116 Jun 30,

20109,016.87 May 31,

201010,102.46 -1085.587

DSP Blackrock Mutual Fund 98 Jun 30,

201021,415.75 May 31,

201021,884.95 -469.201

Edelweiss Mutual Fund 41 Jun 30,

2010282.76 May 31,

2010261.09 21.673

Escorts Mutual Fund 30 Jun 30,

2010195.50 May 31,

2010198.23 -2.729

Fidelity Mutual Fund 61 Jun 30,

20107,878.87 May 31,

20107,457.84 421.031

Fortis Mutual Fund 111 Jun 30,

20105,162.39 May 31,

20107,537.44 -2375.053

Franklin Templeton Mutual Fund

172 Jun 30, 2010

34,563.92 May 31, 2010

35,774.79 -1210.867

HDFC Mutual Fund 173 Jun 30,

201086,648.10 May 31,

2010101,863.31 -15215.214

HSBC Mutual Fund 84 Jun 30,

20105,353.19 May 31,

20105,851.11 -497.918

ICICI Prudential Mutual Fund

328 Jun 30, 2010

73,795.43 May 31, 2010

87,709.81 -13914.385

IDBI Mutual Fund 6 Jun 30,

201028.18 - - - 

33

IDFC Mutual Fund 173 Jun 30,

201020,965.76 May 31,

201026,614.77 -5649.013

ING Mutual Fund 92 Jun 30,

20101,495.47 May 31,

20101,645.42 -149.951

JM Financial Mutual Fund 90 Jun 30,

20105,657.99 May 31,

20108,950.43 -3292.441

JP Morgan Mutual Fund 31 Jun 30,

20104,030.79 May 31,

20103,784.98 245.816

Kotak Mahindra Mutual Fund

123 Jun 30, 2010

28,540.87 May 31, 2010

40,657.52 -12116.648

L&T Mutual Fund 66 Jun 30,

20103,693.42 May 31,

20105,170.69 -1477.279

LIC Mutual Fund 62 Jun 30,

201030,049.38 May 31,

201038,962.82 -8913.437

Mirae Asset Mutual Fund 37 Jun 30,

2010252.13 May 31,

2010236.50 15.633

Morgan Stanley Mutual Fund

11 Jun 30, 2010

2,256.80 May 31, 2010

2,253.67 3.128

Peerless Mutual Fund 20 Jun 30,

2010921.26 May 31,

2010823.38 97.876

PRINCIPAL Mutual Fund 84 Jun 30,

20106,827.97 May 31,

20107,647.76 -819.785

Quantum Mutual Fund 11 Jun 30,

2010101.04 May 31,

2010101.72 -0.685

Reliance Mutual Fund 193 Jun 30,

2010101,320.15 May 31,

2010118,973.14 -17652.99

Religare Mutual Fund 92 Jun 30,

201010,918.47 May 31,

201015,464.10 -4545.625

Sahara Mutual Fund 44 Jun 30,

2010741.62 May 31,

2010765.23 -23.614

SBI Mutual Fund 116 Jun 30,

201033,733.39 May 31,

201036,235.76 -2502.377

Shinsei Mutual Fund 11 Jun 30,

2010273.08 May 31,

2010323.71 -50.627

Sundaram BNP Paribas Mutual Fund

138 Jun 30, 2010

12,717.49 May 31, 2010

13,976.11 -1258.621

Tata Mutual Fund 169 Jun 30,

201018,464.10 May 31,

201022,673.43 -4209.33

Taurus Mutual Fund 49 Jun 30,

20102,438.65 May 31,

20103,056.16 -617.506

UTI Mutual Fund 212 Jun 30,

201064,445.65 May 31,

201078,617.15 -14171.505

Major Mutual Fund Companies in India:-

34

Birla Sun Life Mutual Fund:-

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada, USA, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs. 62,367crores.

BOB Mutual Fund:-

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund:-

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing Development Finance Corporation Limited and Standard Life Investments Limited.

HSBC Mutual Fund:-

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund:-

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management (India) Pct. Ltd. was incorporated on April 6, 1998

ICICI Prudential Mutual Fund:-

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsorers, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993.

35

Sahara Mutual Fund:-

Sahara Mutual Fund was setup on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs. 25.8 crores.

SBI Mutual fund:-

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch off fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 37417 Crores as AUM. Now it has an investor base of over 8 Lac spread over 18 schemes.

Tata Mutual Fund:-

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsores for Tata Mutual Fund are Tata Sons Ltd. and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country with more than Rs. 21,935 crores (as on April 30, 20) of AUM.

Kotak Mahindra Mutual fund:-

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having more than 1,99m,818 investors in its various schemes. KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt Scheme investing only in government securities.

UTI Mutual Fund:-

36

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Privete Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance funds.

Reliance Mutual Fund:-

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.

Franklin Templeton India Mutual Funds:-

The group, Frnaklin Templeton Investments is a California (USA) based company with a global AUM of 34003 crores (as of June 30). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, closed end Income schemes and Open end fund of funds schemes to offer.

Morgan Stanley mutual

Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investmenty management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset management services and products to governments, corporations, pension funds and non-profit organisations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the needs of Indian retail investors focussing on a long-term capital appreciation

37

Escorts mutual Fund:-

Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited.

Benchmark Mutual Funds:-

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset Management company Pvt. Ltd. is the AMC.

Canara Robeco Mutual Funds:-

Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the sponsor. Canbank Investment Management Services Ltd. incorporated on March 2, 1993 is the AMC. The corporate office of the AMC is in Mumbai.

LIC Mutual Funds:-

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund.

REGULATORY MEASURES BY SEBI:  

Like Banking & Insurance up to the nineties of the last century, Mutual Fund industry in India

was set up and functioned exclusively in the state monopoly represented by the Unit Trust of

India. This monopoly was diluted in the eighties by allowing nationalized banks and

insurance companies (LIC & GIC) to set up their institutions under the Indian Trusts Act to

transact mutual fund business, allowing the Indian investor the option to choose between

different service providers. Unit Trust was a statutory corporation governed by its own

38

incorporating act. There was no separate regulatory authority up to the time SEBI was made

a statutory authority in 1992. but it was only in the year 1993, when a government took a

policy decision to deregulate Indian Economy from government control and to transform it

market oriented, that the industry was opened to competition from private and foreign

players. By the year 2000 there came to be established in the market 34 mutual funds

offerings a variety of about 550 schemes.

SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) REGULATIONS,

1996 :-

The fast growing industry is regulated by Securities and Exchange Board of India (SEBI)

since inception of SEBI as a statutory body. SEBI initially formulated “SECURITIES AND

EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) REGULATIONS, 1993” providing

detailed procedure for establishment, registration, constitution, management of trustees,

asset management company, about schemes/products to be designed, about investment of

funds collected, general obligation of MFs, about inspection, audit etc. based on experience

gained and feedback received from the market SEBI revised the guidelines of 1993 and

issued fresh guidelines in 1996 titled “SECURITIES AND EXCHANGE BOARD OF INDIA

(MUTUAL FUNDS) REGULATIONS, 1996”. The said regulations as amended from time to

time are in force even today. 

The SEBI mutual fund regulations contain ten chapters and twelve schedules. Chaptere

containing material subjects relating to regulation and conduct of business by Mutual Funds.

REGISTRATION OF MUTUAL FUND:

Application for registration

1. An application for registration of a mutual fund shall be made to the Board in Form A by

the sponsor.

Application fee to accompany the application

39

2. Every application for registration under regulation 3 shall be accompanied by

nonrefundable application fee as specified in the Second Schedule.

Application to conform to the requirements

3. An application which is not complete in all respects shall be liable to be rejected:

Provided that, before rejecting any such application, the applicant shall be given an

opportunity to complete such formalities within such time as may be specified by the Board.

Furnishing information

4. The Board may require the sponsor to furnish such further information or clarification as

may be required by it.

Eligibility criteria

5. For the purpose of grant of a certificate of registration, the applicant has to fulfill the

following, namely:-

(a) The sponsor should have a sound track record and general reputation of fairness and

integrity in all his business transactions.

Explanation: For the purposes of this clause “sound track record” shall mean the sponsor

should,—

(i) Be carrying on business in financial services for a period of not less than five years; and

(ii) The net worth is positive in all the immediately preceding five years; and

(iii) The net worth in the immediately preceding year is more than the capital contribution of

the sponsor in the asset management company; and

(iv) the sponsor has profits after providing for depreciation, interest and tax in three out of the

immediately preceding five years, including the fifth year;

(b) In the case of an existing mutual fund, such fund is in the form of a trust and the trust

deed has been approved by the Board;

40

(c) The sponsor has contributed or contributes at least 40% to the net worth of the asset

management company:

Provided that any person who holds 40% or more of the net worth of an asset management

company shall be deemed to be a sponsor and will be required to fulfill the eligibility criteria

specified in these regulations;

(d) The sponsor or any of its directors or the principal officer to be employed by the mutual

fund should not have been guilty of fraud or has not been convicted of an offence involving

moral turpitude or has not been found guilty of any economic offence.

(e) Appointment of trustees to act as trustees for the mutual fund in accordance with the

provisions of the regulations;

(f) Appointment of asset management company to manage the mutual fund and operate the

scheme of such funds in accordance with the provisions of these regulations;

(g) Appointment of a custodian in order to keep custody of the securities 10[or gold and gold

related instruments and carry out the custodian activities as may be authorized by the

trustees.

Consideration of application

8. The Board, may on receipt of all information decide the application.

Grant of Certificate of Registration

9. The Board may register the mutual fund and grant a certificate in Form B on the applicant

paying the registration fee as specified in Second Schedule.

Terms and conditions of registration

10. The registration granted to a mutual fund under regulation 9, shall be subject to the

following terms and conditions:

(a) The trustees, the sponsor, the asset management company and the custodian shall

comply with the provisions of these regulations;

41

(b) The mutual fund shall forthwith inform the Board, if any information or particulars

previously submitted to the Board was misleading or false in any material respect;

(c) The mutual fund shall forthwith inform the Board, of any material change in the

information or particulars previously furnished, which have a bearing on the registration

granted by it;

(d) Payment of fees as specified in the regulations and the Second Schedule.

Rejection of application

11. Where the sponsor does not satisfy the eligibility criteria mentioned in regulation 7, the

Board may reject the application and inform the applicant of the same.

Payment of annual service fee:

12. A mutual fund shall pay before the 15th April each year a service fee as specified in the

Second Schedule for every financial year from the year following the year of registration:

Provided that the Board may, on being satisfied with the reasons for the delay permit the

mutual fund to pay the service fee at any time before the expiry of two months from the

commencement of the financial year to which such fee relates.

42

COMPANY OVERVIEW

1. INTRODUCTION:-

“Success is a journey, not a destination.” If we look for examples to prove this quote then we can find many but there is none like that of NJ India Invest Pvt. Ltd. Back in the year 1994, two people created history by establishing NJ India Invest Pvt. Ltd. leading advisors and distributors of financial products and services in India.

NJ has over a decade of rich exposure in financial investments space and portfolio advisory services. From a humble beginning, NJ over the years has evolved out to be a professionally managed, quality conscious and customer focussed financial / investment advisory & distribution firm.

NJ prides in being a professionally managed, quality focused and customer centric organisation. The strength of NJ lies in the strong domain knowledge in investment consultancy and the delivery of sustainable value to clients with support from cutting-edge technology platform, developed in-house by NJ.

At NJ we believe in …

having single window, multiple solutions that are integrated for simplicity and sapience

making innovations, accessions, value-additions, a constant process providing customers with solutions for tomorrow which will keep them above the curve,

today

NJ has over INR 60 billion* of mutual fund assets under advice with a wide presence in over 120 locations* in 21 states* and 750+ employees in India. The numbers are reflections of the trust, commitment and value that NJ shares with its clients

43

NJ Wealth Advisors, a division of NJ, focuses on providing financial planning and portfolio advisory services to premium clients of high net-worth. At NJ Wealth Advisors, we have developed processes that focus on providing the best in terms of the advice and the ongoing management of your portfolio and financial plans.

At NJ, our experience, knowledge and understanding enables us to provide you with the expected value, in an enhanced way. As a leading player in the industry, we continue to successfully meet the expectations of our clients, through meaningful and comprehensive solutions offered by NJ Wealth Advisors

2. VISION & MISSION OF NJ India invest:-

Vision

To be the leader in our field of business through,

Total Customer Satisfaction Commitment to Excellence Determination to Succeed with strict adherence to compliance Successful Wealth Creation of our Customers

Mission

Ensure creation of the desired value for our customers, employees and associates, through constant improvement, innovation and commitment to service & quality. To provide solutions which meet expectations and maintain high professional & ethical standards along with the adherence to the service commitments.

3. PHILOSOPHY:-

At NJ our Service and Investing philosophy inspire and shape the thoughts, beliefs, attitude, actions and decisions of our employees. If NJ would resemble a body, our philosophy would be our spirit which drives our body.Service Philosophy:

Our primary measure of success is customer satisfaction …

We are committed to provide our customers with continuous, long-term improvements and value-additions to meet the needs in an exceptional way. In our efforts to consistently deliver the best service possible to our customers, all employees of NJ will make every effort to:

think of the customer first, take responsibility, and make prompt service to the customer a priority

44

deliver upon the commitments & promises made on time

anticipate, visualize, understand, meet, exceed our customer’s needs

Bring energy, passion & excellence in everything we do.

be honest and ethical, in action & attitude, and keep the customer’s interest supreme

Strengthen customer relationships by providing service in a thoughtful & proactive manner and meet the expectations, effectively.

Investing Philosophy:

We aim to provide Need-based solutions for long-term wealth creation

We aim to provide all customers of NJ, directly or indirectly, with true, unbiased, need-based solutions and advice that best meets their stated & un-stated needs. In our efforts to provide quality financial & investment advice, we believe that

Clients want need-based solutions, which fits them

Long-term wealth creation is simple and straight

Asset-Allocation is the ideal & the best way for long-term wealth creation

Educating and disclosing all the important facets which the customer needs to be aware of, is important

The solutions must be unbiased, feasible, practical, executable, measurable and flexible

Constant monitoring and proper after-sales service is critical to complete the ongoing process.

At NJ our aim is to earn the trust and respect of the employees, customers, partners, regulators, industry members and the community at large by following our service and investing philosophy with commitment and without exceptions.

4. MANAGEMENT :-

The management at NJ brings together a team of people with wide experience and

knowledge in the financial services domain. The management provides direction and

guidance to the whole organization. The management has strong visions for NJ as a globally

respected company providing comprehensive services in financial sector.

45

The Customer First philosophy in deeply ingrained in the management at NJ. The aim of the

management is to bring the best to the customers in terms of -

Range of products and services offered

Quality Customer Service

All the key members of the organization put in great focus on the processes & systems under

the diverse functions of business. The management also focuses on utilizing technology as

the key enabler for all the activities and to leverage the technology for enhancing overall

customer experience.

The key members of the management are:

Mr. Neeraj Choksi Jt. Managing Director

Mr. Jignesh Desai Jt. Managing Director

Key Sales Team:

Mr. Misbah Baxamusa National Head

Mr. Naveen Rathod V.P. (Sales)

Mr. Kulbhushan Nandwani A.V.P. (Marketing)

Mr. Prashant Kakkad A.V.P. (Sales)

Key Executive Team :

Mr. Shirish Patel Information Technology

Mr. Abhishek Dubey Business Process

Mr. Vinayak Rajput Operations

Mr. Dhaval Desai Human Resources

Mr. Col. Dixit Administration

Mr. Tejas Soni Finance

46

Mr. Viral Shah Research

Mr. Rakesh Tokarkar Compliance

5. People & culture:-

People:

Enthusiasm, Enterprise, Education and Ethics form the four pillars at NJ. At NJ one can

witness the vibrant energy, enthusiasm and the enterprising drive to excel flowing freely

throughout the organization. At NJ can also experience the creativity, one-to-one

responsiveness, collaborative approach and passion for delivering value.

At NJ people evolve to be more effective, efficient, and result oriented. Knowledge is inherent

due to the education-centric approach and the experience in handling different

clients groups across diverse product profiles.

NJ understands that the people are the most important assets of the company and it is

not the company that grows but the people. NJ hence undertakes rigorous training

and educational activities for enhancing the entire team at NJ . NJ also believes in the

‘Learning through Responsibility’ concept for its employees. 

For people at NJ success is not a new word, but is a regular stepping - stone to

realising the one vision that everyone shares.

Culture

At NJ we believe in transforming the lives of our customers. We exist to create a difference a change towards a better life. The culture at NJ reflects this responsibility, this dream of transforming lives. And we at NJ are always excited and enthused in doing so.

We believe in keeping ‘You First’, providing you with products and services that meet your stated and unstated needs. Client satisfaction and client service is the Mantra we constantly recite. This service oriented philosophy runs throughout the organization, from top to bottom.

47

Employees are given ample freedom in their work. The objective is to keep an open, healthy environment with ample scope for enterprise, improvement, innovations and out-of-the box solutions

Our efforts are constantly engaged in improving our existing services, offering new and innovative solutions that go beyond your expectations. This focus has made us one of the most respected and preferred service providers, especially in the mutual fund industry.

6. SERVICE STANDARDS:-

Service in words, service in action

Service is the key to unlocking customer satisfaction, which again is key for

sustainability Business. At NJ we understand this very well. NJ has set strict

processes in place to delivered service to customers. AT NJ strict quality service

standards are set and a well defined established and followed religiously by our

quality customer service team.

Performance evaluated on a frequent basis and glitches are iron out.

But quality service also involves quality people in addition to processes. NJ gives

Significant the proper training and development of the people involved in the service

delivery chain.

Further Welth:

Have well-defined “Privacy Policy” to keep clients information confidential & internal

done on the same at regular intervals.

Receive various statistics which are analyzed on an ongoing basis to improve the

standards.

We are committed to improve and enhance our services and undertake new

Services initiative and other services differentiate us with other services providers in

the industry.

48

Our service commitment…..

The service commitments are to guide the actions of the people at NJ. Clearly stated Customers can freely communicate any such action /events wherein they feel that any Of the commitments have been breached/ compromised . At NJ we desire to honors Our commitments all points of the time and to all our customers without any bias.

To provide customer-focused need-based valued services.

To provide reliable, accurate and timely information.

To maintain all records in privacy.

To optimize services/benefits at least justifiable cost.

To develop and grow the customers business.

To provide constructive after sales service.

To honors our service commitments.

As NJ Wealth Advisor’s Global Private Client, you get comprehensive set of services that ensure you stay informed, insightful, in command, of your investments at all times.

7. PRODUCTS:-

Life Vista

Life is counted not in years, but in moments. Moments of truth, joy, achievement and satisfaction of peace, tranquillity, and freedom. At NJ, we bring such moments to life.

How we can help you?

We will do a detailed study of your goals and objectives in life and would help you by devising a comprehensive plan to help you achieve them. We would also regularly monitor your plans to make sure that you are always on track to achieve your goals. Asset Vista

Wealth is not an end. Neither is it a beginning. Wealth is a process, a journey. A journey of power, achievement and responsibility.At NJ we ensure that this journey continues and grows.

49

How we can help you?

We will seek to manage and monitor your portfolio as per your objectives and your risk profile. We would manage your portfolio the Asset Allocation way which is the most effective & ideal way to manage investments. You would also have access to consolidated portfolio reports that enable you to see all your investments into multiple avenues at a single place.

8. SERVICES PROVIDED TO CLIENT:-

As NJ Wealth Advisor’s Global Private Client, you get comprehensive set of services that ensure you stay informed, insightful, in command, of your investments at all times.

Comprehensive Financial Planning:-

We all have many responsibilities and goals in our lives. We have dreams and aspirations for a better future. But quite often we are not sure as to how we will fulfil these goals and aspirations. Life changes over time. We may never be sure what today holds for us tomorrow. What if something goes wrong? How do we make sure that we get what we wish?

A comprehensive Financial Plan is what you need. At NJ Wealth Advisors we offer you with Comprehensive Financial Planning solutions which would involve …

A detailed study of your goalsPreparation of a comprehensive Financial Plan

50

Monitoring of the Financial Plan on an on-going basis

At NJ Wealth Advisors we offer you with comprehensive Financial Planning Services under the product – Life Vista.

Quality Portfolio Advisory:- Making money is easy. Managing money is difficult. And managing money in today’s complex financial markets with multiple products on an ongoing basis becomes even more difficult.

As investors we often may feel the lack of time and energy to undertake monitoring and managing of our investments in multiple avenues. This requires both dedicated efforts and skills in portfolio management.

At NJ Wealth Advisors we realise the need for quality, unbiased portfolio advisory services. At NJ we would aim to manage your portfolio with a superior, time tested and much effective way of Asset Allocation keeping in mind your risk profile.

At NJ Wealth Advisors we offer you with quality Portfolio Advisory Services under the product – Asset Vista.

Consolidated Reporting:-

Quality online Wealth Account:

As a premium client you would have access to one of the best online investment accounts that offer comprehensive reports, many of which are unique in nature and give valuable insights on our investments

Our online Wealth Account covers almost all the investment avenues that you may have:

Mutual Funds – All AMCs, All Schemes

Direct Equity

Life Insurance

Physical Assets – Gold and Property

Private Equity – Business

Debt Products

Bank Deposits and Company Deposits RBI / Infrastructure Bonds Postal Savings – KVP, MIS, NSC Debentures Small Savings – PPF, NSS

51

You would have access to Consolidated Net Asset Reports which would give you a single view of all your investments into different avenues as given above.

Further, within each of the Asset class we have many more reports and utilities. Some of the reports covered are …

Consolidated:

Consolidated Asset Allocation, Consolidated Net Asset, Interest Income, Profit & Loss

Mutual Funds:

Valuation, Transaction, Profit & Loss, Performance, Portfolio reports like - AMC / Sector / Equity / Credit / Debt Exposure, Weighted Average Maturity, Dividend history, etc

Direct Equity:

Demat accounts, Transaction, Valuation, Profit & Loss

Life Insurance:

Policy Report, Premium Reminder, Cash Flow

Debt:

Transaction, Interest Income, Maturity reports for different Asset

Dedicated team:-

At NJ Wealth Advisors, we work in a team concept to provide quality, effective and timely

service to our clients. The team is designed keeping you at the beginning or the end of the

flow as the originator and the end receiver of any request or service.

 The team handling you consists of the Relationship Manager and the Account

Manager who would be in direct touch with you. This would be supported by the

Centralised Research Team, the Chief Portfolio Manager and the Service Team. All the

important investment decisions and/or plans recommended to you are actually prepared

and /or approved by the Chief Portfolio Manager with inputs from the Research Team.

52

The structure ensures that all the Plans and recommendations that you receive are

unbiased, based on true research & detailed study, and suited to your needs.

Quality Customer Service

NJ realizes the true importance of quality customer service. The service commitments are to

guide the actions taken at NJ. Clearly stated, customers can freely communicate any such

actions/events wherein they feel that the following commitments have been breached. At NJ we

desire to honour our commitments at all points of time and to all customers without any bias.

Quality Service:

Highlights-

You will receive regular portfolio reports in hard copies to serve as record

All records are maintained for the plans and recommendations and minutes of all the

meetings are kept.

Dedicated Account Manager directly oversees the operational support to you Quality

Advisory.

True, unbiased recommendations.

Each plan is unique in nature to suit your needs and profile.

53

Defined Process followed in investment consultancy / portfolio management.

All the plans are prepared and/or approved in line with the set process by Chief

Portfolio Manager with inputs from the Research Team.

Quality Communications support:

Daily Market Update Email

Daily MF tracker-for short term debt fund Email

Weekly performance report Email/ Hard copy

Comprehensive monthly fact shee Hardcopy

Research articles and reports Email / Hardcopy

54

9. 360° – ADVISORY PLATFORM:-

With this philosophy, we try to offer all possible products, services and support which an Advisor would need in his business.

The support functions are generally in the following areas …

Business Planning and StrategyTraining and Development – Self and of employeesProducts and Service OfferingsBusiness BrandingMarketingSales and DevelopmentTechnologyAdvisors Resources - Tools, Calculators, etc..

55

ResearchCommunications

With this comprehensive supporting platform, the NJ Fundz Partners stays ahead of the curve in each respect compared to other Advisors/competitors in the market.

Recognitions

Some of the awards & recognitions that we have received in past

Year2000: 

For Outstanding Performance presented by Chairman, Prudential Plc. at London.

Year2002:

For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at

London.

Year2003:

For Outstanding Performance presented by Group Chief Executive, Prudential Plc. at

London.

Year2004:

Among Most Valued Business Associates presented by HDFC Standard Life at

Edinburgh,Scotland.

Year 2004:

For Outstanding Performance by Deputy CEO, Prudential Singapore at Malaysia.

Year2006:

Award for mobilizing the Highest Number of SIPs at National Level by Fidelity Mutual

Fund Mumbai.

Year2006:

Award – Vietnam

56

WHY INSURANCE AGENTS SHOULD SELL MUTUAL FUND?

Reason 1: Easy to make more clients …

The Penetration of Mutual Funds is very low …

Whereas relatively,

The Penetration of Insurance is very high ….

Opportunity for you to acquire more clients …

Now no call of yours should get waste

Reason 2: low competition of mutual fund advisors:-

Lack of competition represents a very big opportunity to grow your business anywhere in India.

> 22 Lacs Insurance Advisors

V/s

< 70,000 Mutual Fund Advisors

(Very Few Financial Advisors)

(>35 Insurance Advisors V/s 1 Mutual Fund Advisor)

A huge DEMAND of Quality Mutual Fund Agents …

There is a genuine need for more than 2 lakh mutual fund advisors in India …(our

estimates)

57

Reason 3: More satisfaction to your clients:-

If you are not selling mutual funds then you must not be aware of what they truly are and the possibilities that they offer in providing solutions that meet the diverse needs of different clients.

With mutual funds in your offering, you are in a much better position to fully meet the client’s financial and investment needs.

Your client would ideally like you to do that and will be happy once to offer him multiple solutions.

Reason 4: Additional source of income:-

Mutual fund is one product today that potentially has no limits to the volumes that you can generate. The important differentiation here with insurance is that you income is not based on the premium you collect but on the entire AUM (assets under management) that you have mobilized to counter the low rates. An agent’s AUM running into crores in quite common in the industry. The income from mutual funds can complement your earnings from insurance and may even substitute them in future …

Reason 5: Leveraging existing clientele base:-

How to get more out of what you already have?

Well, mutual fund is just the perfect answer to that question.

The truth is that there is a lot of potential to generate further income from your

existing clientele base.

Much of the investment needs of clients are unexplored and unfulfilled that you can

satisfy.

58

Reason 6: Strong industry growth ahead:-

There is a very strong growth of mutual funds ahead …

The reasons are many – good product, low penetration, huge market, growing

income, changing mindset, lack of other attractive investment products, etc.

In US, almost every third household invests in mutual funds.

The US MF industry size is about 67% of the US GDP and is 1.5 times of the bank

deposits in US.

The situation is though almost opposite in India with the MF industry size here equal to

6% of GDP and bank deposits are 10.50 times of the total industry size.

The potential is huge and India is expected to follow in on the lines of the more

developed countries.

Reason 7: Retention and loyalty of clients:-

The underlying logic can be found in the growth of multiplexes, shopping malls,

after all the human nature is basically the same …

People today look for easy, fast, and single service point that provides them with

solutions that meets their multiple needs.

your client would probably invest in mutual funds some day or later …

Why not you do the same before anyone else gets to your client?

Reason 8: Greater choice of products:-

Till now we haven’t really talked about what choices you can offer to your clients … In

fact, you can offer cash-flow management, to long-term goal oriented planning to your

clients.

Your basket would include pure equity funds (Diversified / Sectoral / Index Funds) to

pure debt funds (Gilt / Income / Short Term Plans / Floating / Liquid Funds) to hybrid

funds (MIPs / Balance / Arbitrage Funds) to the tax saving ELSS.

With a vast range of Fund houses and many more schemes – the choices are

virtually endless, and one is sure to find what one needs.

59

Reason 9: Be a Complete Financial Advisor …

What next to Insurance?

There is an opportunity for you to transcend to the next level and offer ‘real solutions’

that will truly add value to your clients.

You should develop yourself and grow more as a ‘Financial’ advisor rather than just

‘Insurance’ agent.

The learning can extend beyond products to markets, to equities, debt,

economy, etc to understanding real financial planning, funds management, etc

Reason 10: Helps in selling ULIPs …

If your focus is also selling ULIPS then, dealing in mutual funds should also help you

in better understanding and helping communicate the same to your clients.

It is a general observation in western countries that as an economy progresses, term

plans and ULIPs have increasing % of fresh investments from clients as far as

insurance is considered.

Your presence in mutual funds would be an advantage to you going forward.

Reason 11: Market Potential of mutual funds:-

Low Penetration of Mutual Funds in INDIA

Few people have been exposed to the idea & advantages of mutual funds and even fewer actually invest in mutual funds, because of lack of adequate no. of advisors

60

Opportunity to offer such products to clients …

Every person can be a customer!!

Reason12: EXCELLENT PAST PERFORMANCE

Mutual Fund Equity schemes have delivered very attractive returns in last 5 years, giving over 51% returns annually

Opportunity for you to offer your clients with such equity-related products for long-term wealth creation

Measure US India

Rupees invested in Mutual Funds out of 100 > 30 < 2

MF Industry size as % size of economy (GDP) 83% 6%

Total size / value of MF industry (Rs. Lac Crores) > 469 > 5

Scheme Name3

Years

5

Years

7

Years

10

Years

Average of Diversified Mutual fund

Schemes20.98 35.10 31.92 27.79

BSE 30 (Sensex) 23.7 29.19 23.4 12.69

NSE 50 23.08 27.78 22.11 12.9

No. of Diversified Schemes considered 46 30 20 6

61

RESEARCH METHODLOGY

Title of Study :-

A study of mutual fund and awareness of mutual fund among insurance advisors.

OBJECTIVE OF STUDY:-

1 ) Understanding Mutual Funds

2 ) Understanding Market Potential of Mutual funds.

3 ) Understanding which mutual fund is good for whom

4 ) Analyzing Awareness of Mutual Funds among insurance advisors.

62

METHOD OF STUDY-

Data collection:-

1. Primary data2. Secondary data:- Book , Internet, Magazines

NOTE:-Data for the study was collected by the survey method with the accessories questionnaire Keeping in mind the objectives. The primary data was for attaining the objective while the Secondary data were used to write the literature & get the information.

Primary data

Primary data can be obtained through direct communication with respondents or through personal interaction. There are several method of collecting primary data through survey & descriptive research. I have used questioner from as for collecting primary data. Which have been very helpful for me to analyze the exact market potential of and awareness of mutual fund and mutual fund advisors.

Secondary data:

Secondary data means, the data has already collected and analyzed by someone else. Various sources of secondary data are as follow……

Books

Magazines

Internet

Newspapers

Reports

Projects etc.

Data sources

The study is based on primary data only. For this, A questionnaire was prepared consisting of both open and closed ended questions. Answers are collected by personal interview with the insurance advisors of different insurance company by formal and informal talks.

63

Sample size:

The sample size of my project was limited to 150 people only.

Limitation of the study:

Due the constraints, survey was conducted at Udaipur branch. So result cann’t represent the whole market.

64

Questionnaire

AWARENESS OF MUTUAL FUNDS AMONG

INSURENCE ADVISORS

Name: ------------------------- Age: -------------- Address: ----------------------------

Contact no: ---------------------------------- E-mail ID: -------------------------------

Experience in business: ----------------------------

1. What are the products in your existing business?

a. life insurance b. general insurances

c . postal scheme d. others

2. Do you know about Mutual Fund SIP 8th wonder of the world as a product for wealth creation of customers?

a. Yes b. No

c. know slightly

3 Do you know about revenue and commission in Mutual Fund and SIP business for advisors?

a. Yes b. No

c. know slightly

4. Do you know the advantages of adding up Mutual Fund and SIP as a product along with your existing product?

a. Yes b. No

c. Would like to know

5. Would you like to attend business opportunity program organized by NJ India Invest?

a. Yes b. No

c) Yes but not now

65

6. Can we send representative from NJ India Invest for more information about Mutual Fund?

a. Yes b. No c) Yes but with an appointment

7. Have you cleared your AMFI exam?

a. Yes b. No

8 If no, would you like to give the exam if adequate reading materials and training given?

a. Yes b. No

AnyComments____________________________________________________________________________________________________________

66

SUMMARY OF FINDINGS

1. What are the products in your existing business?

a. life insurance b. general insurances

c. postal scheme d. others

Ans:-

No of Response %Life Insurance 120 80General Insurance 18 12Postal schemes 3 2Others 9 6

life insurance

general insurance

postal schemes

others

67

2. Do you know about Mutual Fund SIP 8th wonder of the world as a product for wealth creation of customers?

a. Yes b. No

c. know slightly

Ans:-

No of Response %Yes 48 32No 69 46Know Slightly 33 22

Yes

No

Know Slightly

.3 Do you know about revenue and commission in Mutual Fund and SIP business for advisors?

a. Yes b. No

c .know slightly

Ans:-

No of Response %Yes 60 40No 75 50Would Like to 15 10

68

Know

Yes

No

Would like to know

4. Do you know the advantages of adding up Mutual Fund and SIP as a product along with

your existing product?

a. Yes b. No

c . Would like to know

Ans:-

No of Response %Yes 18 12No 48 32Would Like to Know 84 56

69

Yes

No

Would like to know

5. Would you like to attend business opportunity program organized by NJ India Invest?

a. Yes b. No

c Yes but not now

Ans:-

No of Response %Yes 54 36No 78 52Yes but not now 18 12

Yes

No

Yes but not now

70

6. Can we send representative from NJ India Invest for more information about Mutual Fund?

a. Yes b. No c)Yes but with an appointment

Ans:-

No of Response %Yes 63 42No 69 46Yes but not now 18 12

yes

no

yes but not now

7. Have you cleared your AMFI exam?

a. Yes b. No

Ans:-

No of Response %

71

Yes 12 8No 138 92

Yes

No

8 If no, would you like to give the exam if adequate reading materials and training given?

a. Yes b. No

Ans:-

No of Response %Yes 48 32No 102 68

72

Yes

No

It was a very tough task to create an awareness of mutual fund among the insurance advisors. Mostly they were happy with the insurance product what they are selling and are not ready to add up a new product in their selling basket. Lic agents were not ready to sell “Mutual fund” because they have mis-conception that in mutual fund is only related to equity market and due to the recent economic slowdown people are not ready to invest in the market. After explaining to them about less competition among mutual fund advisors rather than insurance advisors and after making him understand about the proper concept of mutual fund, some of them were considered and were ready to come to meeting or BOP program for becoming mutual fund advisor

Through this research I found that mostly youth insurance advisors were interested to become mutual fund advisor and want to add up a new product in their selling basket. The People who were older, were afraid to appear in any kind of exam. They usually said that they didn’t have time for the training as made mandatory by AMFI.

73

SWOT ANALYSIS of Mutual Funds:-

A type of fundamental analysis of the health of a companies by examining its strengths(S), weakness (W), business opportunity (O), and any threat (T) or dangers it might be exposed to.

I. STRENGTHS: -

Distribution channel strategy : The mutual funds are continuously improving the distribution of its products. Its online and Internet-based access offers a combination of excellent growth prospects and its retail direct business also saw growth of 27% in 2002 and 15% in 2003.

Various sources of income : The mutual fund has many sources of income throughout the group, and this diversity within the group makes the company more flexible and resistant to economic and environmental changes.

Large pool of installed capacities.

Increasing liberalization of government policies

II. WEAKNESS:-

Emerging markets : since there is more investment demand in the United States, Japan and the rest of Asia, The mutual fund should concentrate on these markets, especially in view of low global interest rates.

Mutual funds are like many other investments without a guaranteed return: there is always the possibility that the value of your mutual fund will depreciate. Unlike fixed-income products, such as bonds and Treasury bills, mutual funds experience price fluctuations along with the stocks that make up the fund. When deciding on a particular fund to buy, you need to research the risks involved – just because a professional manager is looking after the fund, that doesn’t mean the performance will be stellar.

Fees: In mutual funds, the fees are classified into two categories: shareholder fees and annual operating fees. The shareholder fees, in the forms of loads and redemption fees are paid directly by shareholders purchasing or selling the funds. The annual fund operating fees are charged as an annual percentage – usually ranging from 1-3%. These fees are assessed to mutual fund investors regardless of the performance of the fund. As you can imagine, in years when the fund doesn’t make money, these fees only magnify losses.

III. OPPORTUNITIES:-

74

Potential markets : The Indian rural market has great potential. All the major market leaders consider the segments and real markets for their products. A senior official in a one of the leading company says foray into rural India already started and there has been realization that the rural market is both price and quantity conscious.

Entry of MNCs : Due to multinationals are entering into market job opportunities are increasing day by day. Also India Mutual Fund majors are tie up with other financial institutions.

IV. THREATS:-

Increased Competition : With intense competition by so many local players causing headache to the current marketers. In addition to this though multinational brands are not yet established but still they will soon hit the mark. Almost 60 to 70% of the revenue is spending on the management and services.

Hedge funds : sometimes referred to as ‘hot money’, are also causing a threat for mutual funds have gained worldwide notoriety for bringing the markets down. Be it a crash in the currency, stock or bond market, usually a hedge fund prominently figures somewhere in the picture.

75

Conclusions

Mutual fund industry in India is still in it`s adolescent`s stage. It has wide opportunities to advance. With the entry of private player & foreign player, the sector seems poised for growth. With the interest rates falling & people now becoming unwilling to save in bank, mutual fund can be a better option. But people do not invest their hard earned money into mutual funds. This is because of unawareness about mutual funds & their benefits. This is the root cause of slow growth of mutual funds industry. The three reasons for the restricted growth of mutual funds industry in India are:

The mutual funds industry is working confined to the metros & larger cities of the country, baring the large investment potential present in even smaller cities of the country

The mutual fund products are seen to be reasonable complex to be understood by the common middle class person.

Mutual funds are to be providing only the equity stokes. The investor`s are unaware of the fact that they can also enrich the investor`s portfolio with debt scheme.

We see that all AMC`s firmly admit the fact that India is the most emerging market in Asia. If is as, it means that people have purchased power & disposable income. If the mutual fund can influence these buyers to invest in their funds then it would be benefits to both of them.

However, it must be said that even these difficult times, the mutual funds industry is continuing it`s efforts to improve customer satisfaction as well as set new standards in areas such as transparence and disclosure norms. Mutual fund benchmark indices have been devised for benchmarking the performance of individual funds in the India mutual funds marketplace.

In order to improve the training process of mutual funds distribution, the association of mutual funds in India (AMFI) has introduced the AMFI certification programme. The security & exchange Board of India (SEBI) has made it. Mandatory to all distributor & agents of mutual funds to pass the AMFI certification programme. The improvement of knowledge of distributors & agents will ultimately help the investors to make informed investment.

76

Suggestions:

Most leads complain about its fees that are Rs. 8000/Rs.6900. they said that it is too much amount to complete AMFI exam and become NJ partner. I know it is nothing in spite of our company gives them. Consideration can be made to reduce the fee to stop de motivating from taking our services.

NJ has almost 25% market stake of mutual fund advisor (almost 15,000 MF advisors are partner of NJ. whereas total MF advisors are 75,000 in India.) but NJ is lacking somewhere in its marketing. NJ needs to advertise its brand to gain the image of a mutual fund distributer in the minds of insurance advisors who are more concern with RR and other mutual fund distributors.

77

Bibliography

Website Referred:

1 www.njindiainvest.com

2 www.moneycontrol.com

3 www.amfiindia.com

4 www.indiainfoline.com

5 www.equityresearch.com

Book referred:

1. Management of financial service: V. K. Bhalla

2. Security analysis & Investment Management: A. V. Adhani

3. Financial management: M. Y. Khan, P. k. Jain

4. Principal of marketing: Philip Kotlar, Armstrong G.

5. Research methodology: C. R. Kothari

6. Marketing Research: Philip kotler