__________________________________Mutual fund market and kotak scheme analysis 1 A PROJECT REPORT ON MUTUAL FUND MARKET AND RESEARCH WORK ON KOTAK K30 SCHEME FOR R.H.KOTHARI INDUSTRY LTD. SUBMITTED TO UNIVERSITY OF PUNE IN PARTIAL FULFILLMENT OF 2 YEAR FULL TIMECOURSE MASTER IN BUSINESS ADMINISTRATION (M.B.A. UNIV.) SUBMITTED BY AKHIL TRIVEDI M.B.A. II (BATCH 2005-2007) VISHWAKARMA INSTITUTE OF MANAGEMENT (PUNE)
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__________________________________Mutual fund market and kotak scheme analysis
1
A
PROJECT REPORT
ON
MUTUAL FUND MARKET AND RESEARCH WORK ON KOTAK K30 SCHEME
FOR
R.H.KOTHARI INDUSTRY LTD.
SUBMITTED TO UNIVERSITY OF PUNE IN PARTIAL FULFILLMENT OF 2 YEAR FULL TIMECOURSE MASTER
IN BUSINESS ADMINISTRATION (M.B.A. UNIV.)
SUBMITTED BY
AKHIL TRIVEDI M.B.A. II
(BATCH 2005-2007)
VISHWAKARMA INSTITUTE OF MANAGEMENT (PUNE)
__________________________________Mutual fund market and kotak scheme analysis
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1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. WHAT IS MUTUAL FUND AND EXPLANATION IN DETAILS
4. TYPES OF MUTUAL FUNDS SCHEMES
5. BASIC FUNDAMENTAL OF MUTUAL FUNDS
6. A PERSONAL INVESTMENT PLAN
7. SURVEY ANALYSIS
8. MARKETING PLAN
9. MARKETING STRATEGIES
10. MARKET TRENDS
11. FUTURE SCENARIO
12. RESEARCH METHODOLOGY
13. CONCLUSION
14. RECOMMENDATION
15. BIBLOGRAPHY
EXECUTIVE SUMMARY
Mutual Funds have gained popularity as an investment vehicle over the past two years. Though
__________________________________Mutual fund market and kotak scheme analysis
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technically, must have been in India since 1964 through Unit Trust of India , the industry has only
recently after new private sector funds and funds backed by global investment houses set up shop in
India.
Mutual Funds have often been associated with equity\stock markets. While that is industry, the debt or
fixed income side has also gained prominence in the recent past. In fact, now mutual funds offer
instruments! schemes for all types of investors from -the risk averse to high risk takers.
The project lays a great stress on investor education. The primary objective is to explain in clear and
simple language, the benefits and pitfalls of investing in mutual funds. There is a gap in the market
about quality information on Mutual Funds. Most of the information is either inadequate or biased
towards a particular scheme/fund or a particular category. This project attempts to look at the subject
from the point of view of an ordinary investor who has little time or inclination to get into the technical
details of Mutual Funds.
The first portion of the project explains the basics of a Mutual Fund including the history and evolution
of the history. Then it highlights the types of Mutual Funds and the recent trends in the industry. A
section follows this on how to choose the right fund for you which covers all things one should look at
before investing in a fund.
The chapter on ranking of mutual funds is aimed at selecting the star performers amongst the 590 or
more schemes available in the market.
The second portion deals with doubts and questions that arise in investors' mind about Mutual Funds.
The FAQs cover questions with explanatory answers to all possible queries.
INTRODUCTION
A GLOBALLY PROVEN INVESTMENT AVENUE
Worldwide, Mutual Fund or Unit Trust as it is referred to in some parts of the world, has a long and
successful history. The popularity of Mutual Funds has increased manifold in developed financial
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markets, like the United States. As at the end of March 2006, in the US alone there were 8,002 mutual
funds with total assets of over US$ 9.36 trillion (Rs.427Iakh crores).
In India, the mutual fund industry started with the setting up of the Unit Trust of India in 1964. Public
sector banks and financial institutions were allowed to establish mutual funds in 1987. Since 1993,
private sector and foreign institutions were permitted to set up mutual funds.
In February 2003, following the repeal of the Unit Trust of India Act 1963 the erstwhile UTI was
bifurcated into two separate entities viz. The Specified Undertaking of the Unit Trust of India,
representing broadly, the assets of US 64 scheme, assured returns and certain other schemes and UTI
Mutual Fund conforming to SEBI Mutual Fund Regulations.
As at the end of March 2006, there were 29 mutual funds, which managed assets of Rs. 2,31,862 crores (
US $ 52 Billion) under 592schemes. This fast growing industry is regulated by the Securities and
Exchange Board of India (SEBI).
THEORETICAL BACKGROUND
Financial markets are the backbone of any economic system. Indian economic growth is inevitable, but
stability and dynamism of the financial system is imperative to aid allocation of scarce capital across
crucial sectors of the economy. The Indian financial system had for long been dominated by government
sponsored financial institutions and . nationalized commercial banks. However, in recent years the
private sector has been showing steady progress in the areas of banking, asset management and other
financial services. Mutual Funds is one such financial institution, which has now become a favorable
investment option for the Indian investor.
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Equity Market
The current slide in the market is mostly due to profit booking at higher levels. Nothing has changed
fundamentally for the Indian economy. The Indian economy appears to be entering into a higher
trajectory of growth. Due to some concerns over interest rates in domestic market and increased interest
rates in US, stock market has seen correction in the last few days of October-2005. FIIs were sellers in
Indian stock market. We expect this is a temporary phenomenon. The bull run is expected to continue in
coming days. Most of bluechip stocks have corrected very well and now available at better rates from
which we can see decent upside. Investors should use this correction phase for building investment
portfolio. While growth has averaged 5-6% in the past, the reforms initiated in the last few years have
improved the business environment and the Indian economy is expected to be amongst the top 5
economies over the next 20 years. The latest economic data has reinforced our view that capital
formation is on the rise and the manufacturing sector could start witnessing capacity additions in the
future as demand picks up. Overall, the economic fundamentals are strong with various drivers such as
infrastructure spending, retail lending, positive demographics, outsourcing opportunities and a potential
capex recovery, in place. One of India's key advantages is that it does not rely excessively
on external demand as a source of growth. As a result, India has much better balance in its growth model
than the rest of the region - giving it a built-in macro resilience that other Asian economies lack.
With Sensex at 8500, many would wonder, are there any worthwhile investment opportunities. It is easy
to give reasons in retrospection suggesting the index growth from 6100 in May 2005 to 8500 in
September 2005. Although majority of the market is abuzz on the huge foreign institutional inflows
(FIIs have pumped in US$9bn up to September 2005 as against US$8.5bn in 2004), these have been
attracted by the strong historical performance and expectation of good corporate earnings growth over
the next few years. The long-term structural story remains intact. We expect India to post a consistent
GDP growth of 6.5-7% over the next few years, which would continue to attract foreign investor
attention.
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The direction of the equity markets over the medium to long term looking very positive. Economic
growth is expected to improve demand for goods and services across sectors and this should lead to
better profit growth for the corporate sector. Global investors are positive on emerging markets in
general and India in particular given the superior growth of these economies vis-à-vis the developed
economies over the next few decades. And given the low equity ownership amongst Indian households
continues to be very low, this trend seems to be changing on the back of the buoyancy in the stock
markets and declining returns from traditional savings avenues, combined with various tax reforms
undertaken by the government. If the proposed pension reforms are implemented, it should give a
further fillip to the domestic markets over the long term.
So the moot question remains, where do we invest our money? The major Indian index namely Sensex is
currently trading at around 17.8x its historical earnings and an expected one year forward earnings
multiple of around 15.5x. This compares India at par with most of the emerging market indices. At the
current levels we feel four major factors would affect the market movement. Firstly corporate earnings,
secondly FII inflows, thirdly rising interest rates and finally rising crude oil price impact on the
economy. While crude prices have not impacted the market sentiment, which could be because of
the balance sheet strength gained by companies over the last few years through good financial
performance, the same could dent going forward. However, we expect the companies with relatively
stronger balance sheets to help sustain the high crude price impact.
WHAT IS A MUTUALFUND?
A Mutual Fund is a trust that pools the savings of a Number of investors who share a common financial
Goal. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual
Funds.
These investors buy units of a particular Mutual Fund Scheme that has a defined investment objective
and Strategy.
The money thus collected is then invested by the fund manager in different types of securities. These
could range from shares to debentures to money market instruments, depending upon the scheme's stated
__________________________________Mutual fund market and kotak scheme analysis
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objectives. The income earned through these investments and the capital appreciation realised by the
scheme 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.
Mutual funds are open-ended investment funds, meaning that new investors can contribute money to
the fund at any time, and existing investors can return their units or shares to the fund for redemption at
any time. When you redeem your units or shares of a mutual fund you will receive a cheque based on
the current market value of the fund s portfolio.
Growth of Assets(Rs.In Crores)
050000
100000150000200000250000
1 2 3 4 5 6
Assets
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Number of Schemes
1980
1990
2000
2010
1 2 3 4 5 6
Schemes
Several parties are involved in the organization and Operation of a mutual fund, including:
Mutual Fund Manager: Establishes one or more mutual funds, markets them and oversees their
general administration.
Portfolio Adviser: The professional money manager appointed by the Mutual Fund Manager to direct
the fund s investments. The Mutual Fund Manager also often acts as the Portfolio Adviser.
Principal Distributor: Coordinates the sale of the fund to investors, either directly or through a
network of registered dealers.
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Custodian: The bank or trust company appointed by the Mutual Fund Manager to hold all of the
securities owned by the fund.
Transfer Agent and Registrar: The group responsible for maintaining a list of all investors in the
fund.
Auditor: The independent accountants retained by the Mutual Fund Manager to audit each year, and
report on the financial statements of the fund.
Trustee: The entity that has title to the securities owned by the fund (when the fund is organized as a
trust, instead of as a corporation) on behalf of the unitholder.
__________________________________Mutual fund market and kotak scheme analysis
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TYPES OF MUTUAL FUND SCHEMES
There are a wide variety of Mutual Fund schemes that cater to your needs, whatever your age, financial
position, risk tolerance and return expectations. Whether as the foundation of your investment
programme or as a supplement, Mutual Fund schemes can help you meet your financial goals.
(AI) By Structure
Open-Ended Schemes
These do not have a fixed maturity. You deal directly with the Mutual Fund for your investments and
redemptions. The key feature is liquidity. You can conveniently buy and sell your units at Net Asset
Value ("NAV") related prices.
Close-Ended Schemes
Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called close-ended
schemes. You can invest directly in the scheme at the time of the initial issue and thereafter you can buy
or sell the units of the scheme on the stock exchanges where they are listed. The market price at the
stock exchange could vary from the scheme's NAV on account of demand and supply situation, Unit
holders' expectations and other market factors.
One of the characteristics of the close-ended schemes is that they are generally traded at a discount to
NAV but closer to maturity, the discount narrows. Some close-ended schemes give you an additional
option of selling your units directly to the Mutual Fund through periodic repurchase at NAV related
prices. SEBI Regulations ensure that at least one of the two exit routes are provided to the investor.
Interval Schemes
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These combine the features of open-ended and close-ended schemes. They may be traded on the stock
exchange or may be open for sale or redemption during predetermined intervals at NAV related prices.
(B) By Investment Objective
Growth Schemes
Aim to provide capital appreciation 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.
Income Schemes
Aim to provide regular and steady income to investors. These schemes generally invest in fixed income
securities such as bonds and corporate debentures.
Capital appreciation in such schemes may be limited.
Ideal for
Retired people and others with a need for capital Stability and regular income
Investor who need some income to supplement their earnings.
Balanced Schemes
Aim to provide both growth and income by periodically distributing a part of the income and capital
gains they earn. They invest in both shares and fixed income securities in the proportion indicated in
their offer documents. In a rising stock market the NAV of these schemes may not normally keep pace,
or fall equally when the market falls.
Ideal for:
Investors looking for a combination of income and moderate growth.
__________________________________Mutual fund market and kotak scheme analysis
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Money Market/Liquid Schemes
Aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally
invest in safer, short-term instruments such as treasury bills, certificates of deposit, commercial paper
and inter bank call money. Returns on these schemes may fluctuate, depending upon the interest rates
prevailing in the market.
Ideal for:
corporate and individual investors as a means to park their surplus funds for short periods or
awaiting a more favorable investment alternative.
Other Schemes
Tax Saving Schemes
These schemes offer tax rebates to the investors under tax laws as prescribed from time to time. This is
made possible because the Government offers tax incentives for investment in specified avenues.
For example, Equity Linked Savings Schemes (ELSS) and Pension Schemes. The details of such tax
saving schemes are provided in the relevant offer documents.
Ideal for:
Investors seeking tax rebates.
Special Schemes
This category includes index schemes that attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50, or industry specific schemes (which invest in specific industries)
or sectoral schemes (which invest exclusively in segments such as A Group shares or initial public
offerings).
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Index fund schemes are ideal for investors who are satisfied with a return approximately equal to that of
an index.
Sectoral fund schemes are ideal for investors who have already decided to invest in a particular sector or
segment. Keep in mind that anyone scheme may not meet all your requirements for all time. You need to
place your money judiciously in different schemes to be able to get the combination of growth, income
and stability that is right for you. Remember, as always, higher the return you seek higher the risk you
should be prepared to take.
A few frequently used terms are explained here below:
Net Asset Value ("NAV")
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the
net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This
is also called Bid Price.
Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their
units on maturity. Such prices are NAV related.
Sales Load
Is a charge collected by a scheme when it sells the units. Also called , 'Front-end' load. Schemes that do
not charge a load are called 'No Load' schemes.
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Repurchase or 'Back-end' Load
Is a charge collected by a scheme when it buys back the units from the unit holders.
BASIC FUNDAMENTALS OF MUTUAL FUND
WHY SHOULD YOU INVEST IN MUTUAL FUNDS?
The advantages of investing in a Mutual Fund are:
1. Professional Management: You avail of the services of experienced and skilled professionals who are
backed by a dedicated investment research team which analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.
2. Diversification: Mutual Funds invest in a number of companies across a broad cross-section of
industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the
same time and in the same proportion. You achieve this diversification through a Mutual Fund with far
less money than you can do on your own.
3. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you avoid
many problems such as bad deliveries, delayed payments and unnecessary follow up with brokers and
companies. Mutual Funds save your time and make investing easy and convenient.
4. Return Potential: Over a medium to long-term, Mutual Funds have the potential to provide a higher
return as they invest in a diversified basket of selected securities.
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5. Low Costs: Mutual Funds are a relatively less expensive way to invest compared to directly investing
in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into
lower costs for investors.
6. Liquidity: In open-ended schemes, you can get your money back promptly at net asset value related
prices from the Mutual Fund itself. With close-ended schemes, you can sell your units on a stock
exchange at the prevailing market price or avail of the facility of
direct repurchase at NAV related prices which some close-ended and interval schemes offer you
periodically. '
7. Transparency: You get regular information on the value of your investment in addition to disclosure
on the specific investments made by your scheme, the proportion invested in each class of assets and the
fund manager's investment strategy and outlook.
8. Flexibility: Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs and
convenience.
9. Choice of Schemes: Mutual Funds offer a family of schemes to suit your varying needs over a
lifetime.
10. Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions
of strict regulations designed to protect the interests of 'investors. The operations of Mutual Funds are
regularly monitored by SEBI.
UNDERSTANDINGAND MANAGING RISK
All investments whether in shares, debentures or deposits involve risk: share value may go down
depending upon the performance of the company, the industry, state of capital markets and the
economy; generally, however, longer the term, lesser the risk; companies may default in payment of
interest/ principal on their debentures/bonds/deposits; the rate of interest on an investment may fall short
__________________________________Mutual fund market and kotak scheme analysis
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of the rate of inflation reducing the purchasing power. While risk cannot be eliminated, skillful
management can minimize risk. Mutual Funds help to reduce risk through diversification and
professional management. The experience and expertise of Mutual Fund managers in selecting
fundamentally sound securities and timing their purchases and sales, help them to build a diversified
portfolio that minimizes risk and maximizes returns.
HOW TO INVEST IN MUTUAL FUNDS.
Step One - Identify your investment needs. Your financial goals will vary, based on your age, lifestyle,
financial independence, family commitments, level of income and expenses among many other factors.
Therefore, the first step is to assess your needs.
Begin by asking yourself these questions:
l. What are my investment objectives and needs?
Probable Answers: I need regular income or need to buy a home or finance a wedding or educate my
children or a combination of all these needs.
2.How much risk am I willing to take?
Probable Answers: I can only take a minimum amount of risk or I am willing to accept the fact that my
investment value may fluctuate or that there may be a short-term loss in order to achieve a long-term
potential gain.
3. What are my cash flow requirements?
Probable Answers: I need a regular cash flow or I need a lump sum amount to meet a specific need after
a certain period or I don't require a current cash flow but I want to build my assets for the future. By
going through such an exercise, you will know what you want out of your investment and can set the
foundation for a sound Mutual Fund investment strategy.
Step Two - Choose the right Mutual Fund.
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Once you have a clear strategy in mind, you now have to choose which Mutual Fund and scheme you
want to invest in. The offer document of the scheme tells you its objectives and provides supplementary
details like the track record of other schemes managed by the same Fund Manager. Some factors to
evaluate before choosing a particular Mutual Fund are:
the track record of performance over the last few years in relation to the appropriate yardstick
and similar funds in the same category.
how well the Mutual Fund is organised to provide efficient, prompt and personalized service.
degree of transparency as reflected in frequency and quality of their communications.
Step Three - Select the ideal mix of Schemes. Investing in just one Mutual Fund scheme may not meet
all your investment needs. You may consider investing in a combination of schemes to achieve your
specific goals.
The following charts could prove useful in selecting a combination of schemes that satisfy your needs.
This plan may suit
Investor seeking Income & moderate growth.
Investor looking for growth & stability with moderate risk
Aggressive Plan
70%
15%
5%
10%
Growth Scheme
IncomeScheme
Money market Scheme
Balanced Scheme
Conservative Plan
10%
50%
30%
10%Growth Scheme
IncomeScheme
Money marketScheme
Balanced Scheme
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This plan may suit
Retired & other investor who needs to preserve capital & earn regular income
Step Four - Invest regularly
For most of ,the approach that works best is to invest a fixed amount at specific intervals, say every
month . By investing a fixed sum each month, you buy fewer units when the price is higher and more
units when the price is low, thus bringing down your average cost per unit. This is called rupee cost
averaging and is a disciplined investment strategy followed by investors all over the world. With many
open-ended schemes offering systematic investment plans, this regular investing habit is made easy for
you.
Step Five - Keep your taxes in mind
As per the current tax laws, Dividend/Income Distribution made by mutual funds is exempt from
Income Tax in the hands of investor. Further, there are other benefits available for investment in Mutual
Funds under the provisions of the prevailing tax laws. You may therefore consult your tax advisor or
Chartered Accountant for specific advice to achieve maximum tax efficiency by investing in Mutual
Funds
Step Six- Start early It is desirable to start investing early and stick to a regular investment plan. If you
start now, you will make more than if you wait and invest later. The power of compounding lets you
earn income on income and your money multiplies at a compounded rate of return.
Step Seven -The final step all you need to do now is to get in touch with a Mutual Fund or your
agent/broker and start investing. Reap the rewards in the years to come. Mutual Funds are suitable for
every kind of investor-whether starting a career or retiring, conservative or risk taking , growth oriented
or income seeking.
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YOUR RIGHTS AS A MUTUAL FUND UNITHOLDER
As a unitholder in a Mutual Fund scheme coming Under the SEBI (Mutual Funds) Regulations, you are
entitled to:
1. Receive unit certificates or statements of accounts Confirming your title within 30 days from the date
of closure of the subscription under open-end schemes or within 6 weeks from the date your request for
a unit certificate is received by the Mutual Fund.
2. Receive information about the investment policies, investment objectives, financial position and
general affairs of the scheme.
3. Receive dividend within 30 days of their declaration and receive the redemption or repurchase
proceeds within 10 days from the date of redemption or repurchase.
4. Vote in accordance with the Regulations to
a change the Asset Management Company;
b. wind up the schemes.
5. To receive communication from the Trustee about change in the fundamental attributes of any scheme
or any other changes which would modify the scheme and affect the interest of the unit holders and to
have option to exit at prevailing Net Asset Value without any exit load in such cases.
6. Inspect the documents of the Mutual Funds specified in the scheme's offer document.
In addition to your rights, you can expect the Following from mutual fund. To publish their NAV , in
accordance with the regulations daily in case of open-ended schemes and once a week, in case of close-
ended schemes. To disclose your schemes' entire portfolio twice a year, unaudited financial results half
yearly and audited annual accounts once a year. In addition many mutual funds send out newsletters
periodically. To adhere to a Code of Ethics which require that investment decisions are taken in the best
interests of the unit holders.
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What are the potential advantages of investing in mutual funds?
There are many reasons why people invest in mutual funds:
Diversification:
Investing in a number of different securities helps reduce the risk of investing. When
you buy a mutual fund, you are buying an interest in a portfolio of dozens of different securities, giving
you instant diversification, at least within the type of securities held in the fund.
Affordability: With many mutual funds, you can begin buying units with a relatively small amount of
money(e.g., Rs 5000 for the initial purchase). Some mutual funds also let you buy more units on a
regular basis with even smaller installments (e.g., Rs 500 per month).
Professional Management:
Mutual funds are managed by professionals who are experienced in
investing money and who have the skills and resources tore search many different investment
opportunities.
Liquidity: Units or shares of mutual funds can be redeemed at any time.
Flexibility:
Many mutual fund companies administer several different mutual funds (e.g., money
market ,fixed-income, growth, balanced and international funds) and allow you to switch between funds
within their fund family at little or no charge. This can enable you to change the balance of your
portfolio as your personal needs or market conditions change.
Performance Monitoring: The value of most mutual funds is reported daily in the financial press and
on many internet sites, allowing you to continually monitor the performance of your investment.
What are some of the potential disadvantages?
When you invest in a mutual fund you place your money in the hands of a professional manager. The
return on your investment will depend heavily on that manager s skill and judgement. Even the best
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portfolio advisers are wrongs one times, and studies have shown that few portfolio advisers are able to
consistently out-perform the market. Check the fund manager s track record over a period of time when
choosing a fund.
As a mutual fund investor, you will also be paying, through management expenses and commissions, for
management services and for various administrative and sales costs. Those fees and commissions reduce
the return on your investment and are charged, in almost all cases, whether the fund performs well or
not. Sales commissions and redemption fees can have a very significant impact on your return if you
decide to redeem your mutual fund investment in the short-term.
How will I know if mutual funds are right for me?
For most investors, choosing a qualified financial adviser is an important first step in any investment
program With the help of your financial adviser(s), you ll want to establish your investment goals,
assess your risk tolerance, and develop a personal investment strategy. Ask your financial adviser if
mutual funds are an appropriate investment for you. Discuss what type of fund best matches your
personal investment strategy, then ask for some specific suggestions.
Once you have identified some funds that seem to meet your investment needs, read the prospectus and
financial statements for each one.
Consider:
Investment Objectives:
Are the fund s investment objectives consistent with your own? Can the fund
provide the level of regular income you need? Does it provide the type of diversification you re looking
for? If you have other investments, how will this fund affect the overall balance of your portfolio?
Risk:
Are you comfortable with the level of risk associated with the fund? If you have other
investments, would this fund tend to increase or decrease your overall risk exposure? Unlike GICs or
savings accounts, mutual funds are not covered by deposit insurance. Values of most mutual funds will
fluctuate and you can lose money depending on changes in the marketplace.
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Time Horizons: Does the investment fit with your expected investment time horizon? For example, if
you re investing for a relatively short time, will sales charges and redemption fees offset any possible
gains? Might the value of the fund be down just when you need to redeem your investment?
Expected Return: Does the fund have the potential to provide the returns you need to meet your goals?
Remember, predicting the return of any mutual fund requires that you predict the future something that
can never be done with certainty. Past performance will tell you about the fund s historical volatility and
its performance relative to competing funds, but it is not are liable indicator of future performance. The
return you can expect from a mutual fund is closely related to its risk. The lower the risk of the fund, the
lower the return you should expect. Be realistic in your expectations.
Costs:
Fees and commissions associated with mutual funds will affect your overall return and can
vary widely from one fund to the next. Higher fees and commissions do not necessarily mean better
performance. Check and compare fees and commissions before you invest.
Service Provider:
Do you know something about the mutual fund firm offering the mutual funds for
sale? Consider who operates the mutual fund and who provides the services necessary for its operations.
You ll also want to look at the performance history of the fund manager who selects the securities to be
held in the fund.
Flexibility:
Will you be entitled to switch your investment to other funds in the same fund family ?
Can you afford the minimum initial investment? Does the fund offer other
features such as regular monthly purchase plans or redemption plans that are attractive to you?
Tax Considerations:
Is the mutual fund a qualifying investment for your RRSP, Registered
Retirement Income Fund (RRIF) or other registered plan? If you are investing in the fund outside a
registered plan, do you understand the tax implications of the distributions of income or capital gains
that the fund may make to you?
Who can sell mutual funds?
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Like other securities, mutual funds must be sold through dealers who are registered with the securities
regulator in your province or territory. The names of registered dealers in your area can be found in the
telephone book. Most financial institutions
such as banks, credit unions and trust companies
also
have subsidiaries that are registered to sell mutual funds. You will also be able to find information about
dealers and salespersons from your provincial securities regulator or its web site.
What should I expect from the salesperson when I buy a mutual fund?
You should expect your salesperson:
to deal with you fairly, honestly and in good faith;
to discuss with you your general investment objectives and tolerance for risk;
to make recommendations that are consistent with your objectives and risk tolerance;
to disclose to you any significant conflicts of interest (the form of disclosure may vary depending
on the nature of the conflict);
to promptly deliver a disclosure document (simplified prospectus) and current financial
information for any mutual fund you buy;
to relay your purchase order to the fund on the day you place it, or on the next business day if the
order was given after normal business hours;
Research Methodology
Research Methodology is a systematic method of discovering new facts or verifying old facts, their
sequence, inter-relationship, casual explanation and the natural laws which governs them.
Research Methodology explained by Redman and Mory are as follows systematized effort to gain new
knowledge Research Methodology is original contribution to the existing stock of knowledge making
for its advancement. It is the purist of truth with the help of study. Observation, comparison and
experiment. In short also covers the systematic method of finding solution to a problem is research. It
also covers the systematic approach concerning generalization and the formulation of the theory.
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Different stages involved in research consists of enacting the problem, formulating a hypothesis,
collecting the facts or data, analyzing the facts and reaching certain conclusion either in the form of
solution towards the concerned problem or in generalization for some theoretical formulation.
In Research Methodology mainly Data plays an important role.
The Data is divided in two parts:
a) Primary Data.
b) Secondary Data.
Primary Data is the data, which is collected directly by direct personal interview,
interview, indirect oral investigation, Information received through local agents,
drafting a schedule, drafting a questionnaire.
Secondary Data is the data, which is collected from the various books, magazine and material, reports.
The data which is stored in the organization and provide by the FINANCE people are also secondary
data. The various information is taken out regarding that subject as well other subject from various
sources and stored. The last years data stored can also be secondary data. This data is kept for the
internal use of the organizatio
The FINANCE manual is for the internal use of the organization they are secondary data which help
people to gain information. In this report the data plays a very crucial role. For this report the data was
provided to me by FINANCE department and other departmental head in the organization.
The Primary and Secondary data which is specified above was provided by:
a) Dy- Manager - finance.
b) Other department head.
Due to discussion with these people lot data as well latest information was known by these people who
was very beneficial and was primary data to me. This is the Research Methodology used in the project.
The primary and secondary data method has been used in this project. Unless the data is collected no
project can be complete. So both these data is very important in the project.
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SURVEY ANALYSIS
OBJECTIVES
I conducted a survey to assess the popularity and awareness among people about the, mutual funds. For
the purpose we chose a random sample of 50 end consumers in the city of Mumbai. The methodology
adopted was that of questionnaire. The question addressed the basic questions relating to investment in
mutual Funds like the rationale of investment
Sampling Method
The sampling method so as to obtain a representative sample is the Non- Probability Sampling methods.
Under non-probability sampling, we selected the respondents to the survey on the basis of Judgment
sampling with Convenience taken into account.
Research instrument
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The research instrument used for this survey is a structured questionnaire. The questionnaire contains
both open-ended and close ended questions. The questionnaire provides a provision with respect to
rating scales.
Assumptions
The sample selected represents the population fully.
The data has been collected by administering an open and close ended questionnaire to sample of
end investors with the assumption that the primary data collected is true and reflects the actual
preferences of the investors.
The sample selected has thorough knowledge of the subject.
Limitations of Study
The respondents who have not given any information are not included in the sample but do come
under the population.
Factors like change in tax and regulatory framework has not been considered.
Analysis Interpretation Of Data
Chart 1: Penetration of mutual funds among respondents.
Penetration of mutual funds among respondents.
84%
16%
mutual funds
others
Out of the 60 respondents only 50 (84%) had invested in any kind of mutual fund scheme. This shows
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that the penetration of mutual funds among the populace is still low in spite of the industry's presence in
India for more than 36 years. This reach is in a city like Mumbai which is considered the commercial
hub for the country; one can easily imagine the penetration level in other smaller cities/towns.
Chart 2: Age wise distribution of investment pattern
Age wise distribution of investment patterm
0
10
20
30
40
50
60
20-40 40-55 Above 55
Distribution
Ag
e
Series1
As can be seen from the above charts that for the age group 20-40 the percentage is 50% percent which
shows that the popularity of mutual funds is at its peak among the people in the age group and is the
lowest for age group above 55. This pattern may be due to the fact that 40-55 the time frame when a
person has maximum responsibilities and may be unwilling to put money into schemes do not offer
assured returns or safety. 25-40 one has few responsibilities and can afford take higher risks. People
above 55 are either retired or nearing retirement so they might have some excess cash and hence they
too are willing to take some amount of risks.
Chart 3: Gender wise distribution of investment
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Gender wise distribution of
investment.
72%
28%
male
female
In our sample of 60 respondents only 72% of the male respondents invested in mutual funds which is
more or less in line with over all proportion of people (73.33%).In India it is found that women are weak
in making decision where to invest the money. Women in India are found to keep there funds ideal
rather than invest some where.
Due to lack of knowledge & awareness women participants in investing is less compared to that of male.
In a survey only 28% women were found who are aware of mutual funds. Here in the survey, percentage
gap between male and female is too much more.
Chart 4: Distribution of income
income wise distribution
upto 1lakhs52%
1-3 lakhs28%
3-5lakhs14%
above 5 lakhs6%
upto 1lakhs
1-3 lakhs
3-5lakhs
above 5 lakhs
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Mutual seem to have reached their peak in their reach among people in the income group 5 lakhs and
above as all 3 of the respondents in our sample falling in that income bracket have invested in mutual
funds. For incomes groups upto1 lakh & 1-3 lakhs the reach is penetration is more than 80% which is
acceptable. The only surprising trend is that for income group 3-5 lakhs the penetration seems to be only
14% wl improved immediately.
OBSERVATIONS:
Fixed deposits still have high values in the Indian economy as vehicles are concerned.
Number of people having mutual funds or Shares as first choice are( requires the mutual funds to
do a rethinking as shares are fraught wit than mutual funds still a large number of people prefer
to enter the rather than through mutual funds, this could mean that there is a mutual funds in
these individuals. It is these individuals that could for mutual funds and the need to pull
themselves up and gear up to attract these investors through better designed schemes, simplified
procedures.
One disturbing trend that has come out of this analysis is that 26 out of 60 respondents have
ranked government securities as the last choice even though these have sovereign guarantee and
are absolutely safe. This means Gilt funds have to be careful while designing their schemes as
the preference for government
securities is quite low. This low preference could be either due to filling interest
rates or due to the cumbersome procedures involved in acquisition, redemption of these
securities or due to lack of well developed secondary market for Gilts.
On second number is Public provident fund which has been ranked as number one by 12 and
number two by 24 which makes it a close second to fixed deposits,
Chart 5: Information source
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print46%
T.V28%
newsletter14%
friends6%
others6%
print
T.V
newsletter
friends
others
46% of the respondents came to know about mutual funds through the print media like newspapers and
magazines, hence it may be concluded that the print media is the most effective way of getting the
investors' attention towards the mutual funds. Second most popular medium turned out to be the
television .The potential of newsletters & friends as a medium of promotion doesn't seem to be have
utilized fully as the people who were influenced by television & print media even though it is one of the
major mass communication media.
Chart 6: Influencing factor
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influencing factor
own choice44%
friends20%
proffesionals30%
others6%
own choice friends proffesionals others
As expected a person's own judgment and perception is the most prominent factor in the investment
decision. 30% of the respondents took a professionals device while another 26% were influenced by
friends experience or advice. Both these present an avenue for the mutual fund companies to influence
more and more investors and increase their depth in the market.
IF YOU HAVE TO MAKE AN INVESTMENT WHERE WOULD YOU MAKE IT? ______________________________________________________________________________________________________________________________________________________
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