Summer Internship Project Pravin

7/28/2019 Summer Internship Project Pravin

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CHAPTER 1

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INTRODUCTION

Investment in share markets are influenced by the analysis & reasoning which

help in predicting the market to some extent. Over the past years a number of technical &

theories for analysis have evolved, these combined with modern technology guides the

investor. The big players in the market, like Foreign Institutional Investors, Mutual

Funds, etc. have the expertise for various analytical tools & make use of them. The small

investors are not in a position to benefit from the market the way Mutual Funds can do.

Generally a small investors investments are based on market sentiments, inside

information, through grapevine, tips & intuition.

The small investors depend on brokers and brokerage house for his investments.

They can invest through the Mutual Funds who are more experienced and expert in this

field than a small investor himself. In recent years a large number of players have entered

into his market. The project has been carried out to have an overview ofMutual Fund

Industry and to understand investors perception about Mutual Funds in the context of

their trading preference, explore investors risk perception & find out their preference

over Top Mutual fund.

Indian Stock market has undergone tremendous changes over the years.

Investment in Mutual Funds has become a major alternative among Investors. The project

has been carried out to have an overview of Mutual Fund Industry and to understand

investors perception about Mutual Funds in the context of their trading preference,

explore investors risk perception & find out their preference over Top Mutual funds. The

methodology used was data collection using Schedule. Secondary data was collected

from Internet and Books. Primary Data was collected through survey among existing

clients along with the other investors. The procedure adopted to select sample was simple

random sampling The research design is analytical in nature. A questionnaire was

prepared and distributed to Investors. The investors profile is based on the results of aquestionnaire that the Investors completed. The Sample consists of 100 investors from

various brokers premises. The target customers were Investors ho are trading in the stock

market. The area of survey was restricted to people residing in NASHIK.

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1.2

SELECTION OF THE TOPIC

Until a decade ago, an investor would have invested only in banks Fixed deposits,

company Fixed deposits , post office savings and the assured return scheme of banks.

Today the time has changed; investors became more aware about the various investment

avenues, conscious about the return on investment.

Indian economy is growing rate with high disposable income & huge saving.

Thus it is very necessary to channelise these saving properly. There are many investment

opportunities available, but there are vary few which give high return. One such

investment avenue is in stock market but its highly volatile. Safety is the prime concern

of all investors but liquidity preferences vary & investor generally tries to get maximum

return consistently with reasonably safety & their liquidity preferences.

The study commissioned to the researcher envisaged to find the brand selection

parameters and preferences which investors follow while deciding upon a firm and

mutual fund schemes for investment services. Integrated Enterprises India Ltd with its

wide range of financial services and products ranging from, Life insurance, Mutual

Funds, Fixed deposits, Research & advisory services, Government bonds, has provided

an excellent platform to conduct such a research.

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The study will help to formulate strategies which are in tune with the market

realities and which will help to understand investors perceptions, expectations, and

understandings about investment and a financial service provider.

1.3

OBJECTIVE OF THE STUDY

To study the Mutual Fund industry structure, various types of Mutual Fund.

To study the investment preferences of an individual investor.

To study the various motives behind the selecting particular investment avenue.

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Major Objectives Purpose behind the objective

1. To study the investment

preferences of an individual

investor. ( Investment

Preferences)

To study which type of investment investors

prefers from available and/or known

investment avenues Equity Market Fixed Deposits Mutual Funds

Precious Metals (Gold, Silver, etc.) Real

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To study various influences that drives the mind of the prospect in investment

Decisions.

To study investment habits of people who are interested to investment.

To understand buying behavior of people among various financial product.

To be able to apply the theoretical knowledge obtained at the institute in practical

manner in the actual business environment.

To get the knowledge about organization problems, perceptions and challenges

and suggest remedies if possible.

To get an opportunity of real life business experience and interact with the

managers of the company and gain knowledge

1.4

RESEARCH METHODOLOGY

I decided to do the project in two parts. The first part of the project is comprised

of the study of Mutual Funds as a whole and the second part deals with the investors

perception regarding their investment preferences about investment in Mutual Funds.

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The first part of the project i.e. descriptive study is comprising an overall study of

Mutual funds as what it is ,why to invest and where to invest, risk factor associated with

it ie,an overview of whole Mutual fund industry.

The second part of the project that is related to investors perception about

investment in Mutual funds available in market. Indian Stock market has undergone

tremendous changes over the years. Investment in Mutual Funds has become a major

alternative among Investors. The project has been carried out to understand investors

perception about Mutual Funds in the context of their trading preference and explore

investors risk perception.

The methodology used for market research, to study the behavior of the investors

towards various investment avenues (mutual fund) is presented in the following research

plan.

1. Information required

The information required for the study was:-

The factors affecting investment decision.

The awareness about mutual fund.

The funds and schemes preferred

The reasons for investing in mutual fund.

The views and experience of investors on mutual fund.

Future investment intension.

The current investment opinion.

Investors interest in knowing and investing in mutual fund.

2. Research Design

A Research Design is a specification of methods & procedures for acquiring the

information. A research design is a master plan or model for the conduct of formal

investigation. Research design is purely & simply the framework. Its a blueprint that is

followed in completing a study.

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3.Sources of data collection

A) Primary sources

To fulfill the objectives of the study, the primary data was collected, by conducting a

survey with the help of a questionnaire. Primary data is the first hand information

collected directly from the respondents. This data was later used for analysis.

B) Secondary Sources

The main source secondary data is information collected through internet, books, and

the most important is the Valuable information given by the guides both internal and

external forms is the key points.

4. Research Approach

The study necessarily required the information, which was primary in nature. It was

felt that survey was the best option. As the objective involved studying the opinion of

the investors and understanding their investment needs, preferences, behaviors

towards investment, the survey method was found to be most adequate and useful.

5. Research Instruments

The research instrument was a structured questionnaire. The questionnaire was useful

to know opinion of the investors and their investment needs, preferences, behaviors,

expectation and some other parameters from their investment.

6. Sample size:

The sample size selected for the study was 100 respondents from the entire segment.

1.5

SCOPE OF THE STUDY

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The scope of my project was to study the investors perception in mutual funds

investment. For that Integrated Enterprises India Ltd had assigned me and gave me this

opportunity. In todays area as, the mutual fund investment is really important element of

investment as compare to other investment options and Services.

While working on Investors perception, I understand the various factors like,

Nature, purpose, conditions, investment needs, preferences, and behaviors, expectation of

customers and income level of each and every customer.

Firstly I need to understand what products and services offered by the various

mutual fund companies to their customers and accordingly I need to take the steps

towards the designing the questionnaire for to know about investors perception, motive

behind investment option, expectations of the individual customers. (Which includes,

salary earner, businessman, self employed etc..)

1.6

LIMITATIONS OF THE STUDY

The study is restricted to Nashik City Area Only. The sample are chosen is purely

on the basis of convenience & limited due to time restricted time factor.

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The truthfulness of responses given by respondents has its effect on the study

because some people were not willing to disclose there investment profile.

As the time span of project was limited to 2 months, the number of customers

covered was only a small percentage of the total population. Hence the sample

may not reflect the true picture.

The collected data is subject to customers perception & views and only from the

limited sources.

Being a service industry, the quality is main concern in differentiation and it is not

exactly measurable.

Some Respondents were not willing to share the information & spend time for

filled the questionnaire so some information was filled just by observation. It may

lead to some error.

Changing the mentality of people for investing in a particular Financial Product is

a very difficult task.

The area of sample was decided after taking into consideration the major factors

like

Availability of investors

Approachability and Time available with investor for interaction, etc

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CHAPTER 2

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2.1

HISTORY OF THE ORGANIZATION

With service excellence always at the fore, Integrated Enterprises is one of India's

market-leading financial solutions provider serving over 6 lac investor families.

Integrated Enterprises commenced operations in 1974; Shri P.Vaidyanathan is the

chairman and founder of the company. He is the architect of the companys growth and

success. He has more than 35 years experience in Financial Services Industry and has

been the driving force for the company to reach great heights. When there were very few

companies to offer the services that we covered. Now, with a strong presence of 121

branches all over the country and a comprehensive suite of products and services, we take

care of the needs of the investor community as a whole.

Our services include distribution of financial products - Mutual Funds, IPOs,

Fixed Deposits, Government Bonds, Life Insurance and Post office Schemes. Integrated

also provides demat services and has built a strong customer base of more than 2 lac

demat account holders. Our processing services include PAN, TAN applications, e-TDS

returns.We undertake merchant banking activities and also act as share transfer agent and

registrar to an issue.

Our core competence lies in reaching out to all prospective investors and

satisfying their financial needs by providing them with the best product that suits them.

We achieve this with the help of well-experienced manpower with vast domain

knowledge and varied skill sets.

Integrated Enterprises provide innovative and tailored solutions to all financial

needs of its customers. Integrated is a 35-year old company, engaged in a variety of

financial services and products.

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CREDENTIALS

35 years of experience as Total Financial Solutions Provider.

Wide spectrum of products and services to cater to the diversified needs of

investors.

Serving over 6 lac investor families.

Investors have the facility of choosing all services under one roof.

Wide network of 121 branches across the country.

State-of-the-Art infrastructure is being used to provide effective service to the

clients.

Highly competent workforce with professional knowledge and expertise.

Largest Depository Participant in India with a strong customer base of more than

2 lakh demat account holders.

More than 20 lakh PAN applications have been made through us

Category 1 Merchant Banker approved by SEBI

Category 1 Registrar & STA approved by SEBI with more than 200 major client

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To be India's first Multinational providing complete financial services solution across the

global.

OUR VISION AND VALUES

A fully diversified financial services company providing quality service to corporate and

retail investors with absolute integrity. Integrated has grown over the last decades based

on a foundation of core values and vision. This has been our vantage point in building a

strong customer relationship and reaching new heights in the future.

INTEGRITY

We are trustworthy of customers and provide high quality services to their utmost

satisfaction. We follow an honest and ethical approach in all our dealings with the

customers.

COMMITMENT

We have a strong commitment to serve our customers. We understand individual

customer needs and make them choose the right product that suits them.

WORKFORCE

Our people are our greatest strengths. We have a well-managed workforce who have

domain knowledge and are expertise in their field of operation

CUSTOMER FOCUS

We are driven by our customers. We provide them with outstanding service by catering

to all their financial needs under one roof. We continuously strive to understand and

exceed customer expectations and ensure long-term satisfaction

TEAMWORK

Our efforts are based on teamwork and collaboration. We create a work culture that is

conducive to innovative ideas and thoughts. We achieve our goals through efficient

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teamwork, partnership and joint effort. We work towards a unified approach in providing

financial solutions to all investors.

MILESTONES

Integrated begins operations

Investors start investing in companies through us

Accepts company deposits, post office schemes and bonds

Expansion of Integrated Branch Network across the country

Starts offering Merchant Banking services. Approved by SEBI as Category 1 MerchantBanker

Starts acting as Share Transfer Agent approved by SEBI as Category I RTI/STA

Diversifies its activities as a Depository Participant offering demat services to itscustomers

Integrated expands its product range to include tax related services such as PAN, TAN ande-TDS filing

Adds E-Return filing to its array of services

Opens its 100th branch.

Entry into Share Broking Services through its subsidiary company

Integrated becomes a one-stop shop offering wide range of financial services

Personalizes Financial Planning to Retail Investors

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http://www.cubsharebroking.com/http://www.cubsharebroking.com/


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Asset Under Management in Mutual Funds crosses 1200 crores

Processes 15 lakhs PAN card applications

Files 10 lakhs e-TDS returns

2.2

PRODUCTS AND SERVICES

PRODUCTS-

Mutual Fund

Life Insurance ICICI Prudential

E-share (Demat) Services

Stock Broking

PAN cards

Government Bonds

Fixed Deposits

SERVICES-

No Services Description

1 Investments Marketing Corporate Fixed Deposits, Debentures,

2 Demat Services Opening of Depository Accounts, Demat

3 Share Broking Services Facilitating Buying & Selling of Securities through NSE

4 Insurance Marketing Life, Health & General Insurance Schemes

5 Corporate Services Merchant banking, Registrar to an issue

6 Tax Related Services Processing of PAN, TAN, e-TDS, e-TCS

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2.3

ORGANIZATION FLOW CHART

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Information

Technology

CHAIRMAN

PRESIDENT

DIRECTOR

VICE

PERSON

East Zonal

Manager

AdministrationSale

West Zonal

Manager

Human

Resource

Finance Marketing

North Zonal

Manager

South Zonal

Manager

Regional

Manager

Regional

Manager

Regional

Manager

Regional

Manager

Branch

Manager

Branch

Manager

Branch

Manager

Branch

Manager


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CHAPTER 3

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Relation

Executive

Relation

Executive

Relation

Executive

Relation

Executive


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INTRODUCTION

WHAT IS MUTUAL FUND?

Mutual Fund is saving or investment vehicle, akin to, but different from bank

deposits, shares etc., It is an entity wherein people / institutions pool small amounts of

money into larger amounts for investment and achieve returns with minimum risk, which

otherwise is not possible by a common man.

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 invested by the fund

manager in different types of securities, capital market instruments such as shares,debentures and other securities depending upon the objective of the scheme. These could

range from shares to debentures to money market instruments. The income earned

through these investments and the capital appreciations realized 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 portfolio at a relatively low cost. The

small savings of all the investors are put together to increase the buying power and hire a

professional manager to invest and monitor the money. Anybody with an ingestible

surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual

Fund scheme has a defined investment objective and strategy.

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THE FLOW CHART BELOW DESCRIBES BROADLY THE WORKING OF

MUTUAL FUND

The structure of Mutual Funds in India is governed by SEBI (Mutual Fund)

Regulations, 1996.

It is mandatory to have a three tier structure of Sponsor Trustee Asset Management

Company.

The trust is established by a Sponsor or more than one sponsor who is like a promoter

of a company. He appoints the Trustees who are responsible to the investors of the fund.

The Trustees of the mutual fund hold its property for the benefit of the unit holders.

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Asset Management Company (AMC) approved by SEBI is the business face of the

mutual fund as it manages all the affairs of the fund by making investments in various

types of securities.

Custodian, who is registered with SEBI, holds the securities of various schemes of the

funds in its custody.

3.1

HISTORY OF INDIAN MUTUAL FUNDS 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 the. The history of

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

First Phase 1964-87

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 UnitScheme 1964. At the end of 1988 UTI had Rs.6,700 Crores of assets under management.

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

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 June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National

Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), 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 1990. At the end of 1993, the mutual

fund industry had assets under management of Rs.47,004 Crores.

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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 1993 SEBI (Mutual Fund) Regulations were

substituted by a more

Comprehensive and revised Mutual Fund Regulations in 1996. The industry now

functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund

houses went on increasing, with many foreign mutual funds setting up funds in India and

also the industry has witnessed several mergers and acquisitions. 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.44, 541 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 Specified Undertaking of Unit Trust of India, functioning under an

Administrator and under the rules framed by Government of India and does not come

under the purview of the Mutual Fund Regulations. 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. With the bifurcation of the erstwhile UTI which had

in March 2000 more than Rs.76,000 Crores of assets under management and with the

setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and

with recent mergers taking place among different private sector funds, the mutual fund

industry has entered its current phase of consolidation and growth. As at the end of

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September, 2004, there were 29 funds, which manage assets of Rs.153108 Crores under

421 schemes.

STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY

The largest categories of Mutual Funds are the ones floated by the private sector

and by Foreign Asset Management Companies. The largest of these are Prudential ICICI

AMC and Birla Sun Life AMC. The aggregate corpus of assets managed by this category

of AMCs is in excess of Rs.350 bn.

Earlier the Indian Mutual Fund industry was dominated by the Unit Trust of India

which has a total corpus of Rs.700 bn collected from more than 20 million investors. The

UTI has many funds/schemes in all categories i.e. equity, balanced, income etc. with

some being open-ended and some being closed-ended. The Unit Scheme 1964 commonly

referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of

about Rs.200 bn.

UTI was floated by financial institutions and is governed by a special Act of

Parliament. Most of its investors believe that the UTI is government owned andcontrolled, which, while legally incorrect, is true for all practical purposes.

The second largest categories of mutual funds are the ones floated by nationalized

banks. Can bank Asset Management floated by Canara Bank and SBI Funds Management

floated by the State Bank of India are the largest of these. GIC AMC floated by the

General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are

some of the other prominent ones. The aggregate corpus of funds managed by this

category of AMCs is about Rs.200 bn.

How are the Mutual Funds Structured?

The Mutual Funds are structured in two forms: Company form and Trust form.

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Company Form: These forms of mutual funds are more popular in US.

Trust Form:In India, mutual funds are organized as Trusts. The Trust is either

managed by a Board of Trustees or by a Trustee Company. There must be at least 4

members in the Board of Trustees and at least 2/3 of the members of the board must be

independent. Trustee of one mutual fund cannot be a trustee of another mutual fund.

Unit Trusts Constituents:

A Mutual Fund is set up in the form of a Trust which has the following constituents:-

1. Fund Sponsor

2. Mutual Fund as Trust

3. Asset Management Company

4. Other Fund Constituents

4.1. Custodian and Depositors

4.2. Brokers

4.3. Transfer Agent

4.4. Distributors

FUND SPONSOR

What a promoter is to a company, a sponsor is to a mutual fund. The sponsor

initiates the idea to set up a mutual fund. It could be a financial services company, a bank

or a financial institution. It could be Indian or foreign. It could do it alone or through a

joint venture. In order to run a mutual fund in India, the sponsor has to obtain a license

from SEBI. For this, it has to satisfy certain conditions, such as on capital and profits,

track record (at least five years in financial services), default-free dealings and a general

reputation for fairness. The sponsor must have been profit making in at least 3 years ofthe above 5 years. The Sponsor appoints the Trustees, Custodian and the AMC with the

prior approval of SEBI and in accordance with SEBI Regulations.

The sponsor should inspire confidence in you as a money manager and,

preferably, be profitable. Financial muscle, so long as it is complemented by good fund

management, helps, as money is then not an impediment for the mutual fund- it can hire

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the best talent, invest in technology and continuously offer high service standards to the

investors. In the days of assured return schemes, sponsors also had to fulfill return

promises made to the unit holders. All things considered, choose sponsors who are good

money managers, who have a reputation for fair business practices and who have deep

pockets.

TRUST

The Mutual Fund is constituted as a Trust in accordance with the provisions of the

Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian

Registration Act, 1908. The Trust appoints the Trustees who are responsible to the

investors of the fund.

TRUSTEES

Trustees are like internal regulators in a mutual fund, and their job is to protect the

interests of the unit holders. Trustees are appointed by the sponsors, and can be either

individuals or corporate bodies. In order to ensure they are impartial and fair, SEBI rules

mandate that at least two-thirds of the trustees be independent, i.e., not have any

association with the sponsor. Trustees appoint the AMC, which subsequently, seeks their

approval for the work it does, and reports periodically to them on how the business being

run. Trustees float and market schemes, and secure necessary approvals. They check if

the AMCs investments are within defined limits and whether the funds assets are

protected. Trustees can be held accountable for financial irregularities in the mutual fund.

Rights of the Trustees:

Trustees appoint the AMC in consultation with the sponsor and according to the SEBI

Regulations.

All Mutual Fund Schemes floated by the AMC have to be approved by the Trustees.

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Trustees can seek information from the AMC regarding the operations and compliance

of the mutual fund.

Trustees can seek remedial actions from AMC, and in cases can dismiss the AMC.

Trustees review and ensure that the net worth of the AMC is according to the

stipulated norms, every quarter.

Obligations of the Trustees:

Trustees must ensure that the transactions of the mutual fund are in accordance with

the trust deed.

Trustees must ensure that the AMC has systems and procedures in place.

Trustees must ensure due diligence on the part of AMC in the appointment of

constituents and business associates.

Trustees must furnish to the SEBI, on half yearly basis a report on the activities of the

AMC.

Trustees must ensure compliance with SEBI Regulations.

ASSET MANAGEMENT COMPANY (AMC)

An AMC is the legal entity formed by the sponsor to run a mutual fund. The

AMC is usually a private limited company in which the sponsors and their associates or

joint venture partners are the shareholders. The trustees sign an investment agreement

with the AMC, which spells out the functions of the AMC. It is the AMC that employs

fund managers and analysts, and other personnel. It is the AMC that handles all

operational matters of a mutual fund from launching schemes to managing them to

interacting with investors. The people in the AMC who should matter the most to you are

those who take investment decisions. If a schemes corpus is up to Rs.100 crores it pays

1.25% of its corpus a year; on over Rs.100 crores, the fee is 1% of the corpus. So, if afund house has two schemes, with a corpus of Rs.100 crores and Rs.200 crores

respectively, the AMC will earn Rs.3.25 crore (1.25+2) as fund management fee that

year.

Regulatory requirements for the AMC:

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Only SEBI registered AMC can be appointed as investment managers of mutual

funds.

AMC must have a minimum net worth of Rs.10 crores at all times.

An AMC cannot be an AMC or Trustee of another Mutual Fund.

AMCs cannot indulge in any other business, other than that of asset management

At least half of the members of the Board of an AMC have to be independent.

The 4th schedule of SEBI Regulations spells out rights and obligations of both trustees

and AMCs.

Obligations of the AMC:

Investments have to be according to the investment management agreement and SEBI regulations.

The actions of its employees and associates have to be as mandated by the trustees.

AMCs have to submit detailed quarterly reports on the working and performance of the mutual fund.

AMCs have to make the necessary statutory disclosures on portfolio, NAV and price to the investors.

Restrictions on the AMC:

AMCs cannot launch a scheme without the prior approval of the trustees.

AMCs have to provide full details of the investments by employees and Boar members in all cases where the investment exceeds Rs.1 lakh.

AMCs cannot take up any activity that is in conflict with the activities of the mutual fund.

Conditions under which two AMCs can be merged:SEBI Regulations require the following:-

SEBI and Trustees of both the funds must approve of the merger.

Unit holders should be notified of the merger, and provided the option to exit at NAV without load.

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Index Funds: Index schemes are a type of mutual fund in which the portfolio weightage

for each stock will be similar to the index, which they are mirroring, like BSE Sensex or

the NSE 50. The portfolio of these schemes will consist of only those stocks that

constitute the index. Index funds are expected to provide a rate of return over time that

will approximate or match, but not exceed, that of the market, which they are mirroring.

BENEFITS OF MUTUAL FUND INVESTMENT:

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Professional Management

Mutual Funds provide the services of experienced and skilled professionals,

backed by a dedicated investment research team that analyses the performance and

prospects of companies and selects suitable investments to achieve the objectives of the

scheme.

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.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many

problems such as bad deliveries, delayed payments and follow up with brokers and

companies. Mutual Funds save your time and make investing easy and convenient.

Low Costs and 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. 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.

Liquidity

In open-end schemes, the investor gets the money back promptly at net asset

value related prices from the Mutual Fund. In closed end schemes, the units can be sold

on a stock exchange at the prevailing market price or the investor can avail of the facility

of direct repurchase at NAV related prices by the Mutual Fund.

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BANKS V/S MUTUAL FUNDS:

Mutual Funds are now also competing with commercial banks in the race for

retail investors savings and corporate float money. The power shift towards mutual

funds has become obvious. The coming few years will show that the traditional saving

avenues are losing out in the current scenario. Many investors are realizing that

investments in savings accounts are as good as locking up their deposits in a closet. The

fund mobilization trend by mutual funds indicates that money is going to mutual fund in

a big way.

India is at the first stage of a revolution that has already peaked in the U.S. The U.S.

boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund

assets are not even 10 per cent of the bank deposits, but this trend is beginning to change.

This is forcing a large number of banks to adopt the concept of narrow banking wherein

the deposits are kept in Gilts and some other assets which improves liquidity and reduces

risk. The basic fact lies that banks cannot be ignored and they will not close down

completely. Their role as intermediaries cannot be ignored. It is just that mutual funds are

going to change the way banks do business in the future.

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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.

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 lotof 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 well-diversified 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 rise

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 RISK

Changes in government policy and political decision can change the investment

environment. They can create a favorable environment for investment or vice versa.

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COMPETITION IN MUTUAL FUNDS INDUSTRY

The most important trend in the mutual fund industry is the aggressive expansion

of the foreign owned mutual fund companies and the decline of the companies floated by

nationalized banks and smaller private sector players. Many nationalized banks got into

the mutual fund business in the early nineties and got off to a good start due to the stock

market boom prevailing then. These banks did not really understand the mutual fund

business and they just viewed it as another kind of banking activity. Few hired

specialized staff and generally chose to transfer staff from the parent organizations. The

performance of most of the schemes floated by these funds was not good. Some schemes

had offered guaranteed returns and their parent organizations had to bail out these AMCs

by paying large amounts of money as the difference between the guaranteed and actual

returns. The service levels were also very bad. Most of these AMCs have not been able to

retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions,

they have serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian companies

was also very similar. They quickly realized that the AMC business is a business, which

makes money in a long term and requires deep-pocketed support in the intermediate

years. Some have sold out to foreign owned companies, some have merged with others

and there is general restructuring going on. The foreign owned companies have deep

pockets and have come in here with the expectation of a long haul. They can be credited

with introducing many new practices such as new product innovation, sharp improvement

in service standards and disclosure, usage of technology, broker education and support

etc. In fact, they have forced the industry to upgrade itself and service levels of

organizations.

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ABN AMRO Mutual Fund

Birla Sun Life Mutual Fund

HDFC Mutual Fund

HSBC Mutual Fund

ING Vysya Mutual Fund

Prudential ICICI Mutual Fund

Sahara Mutual Fund

State Bank of India Mutual Fund

Tata Mutual Fund

Kotak Mahindra Mutual Fund

Unit Trust of India Mutual Fund

Reliance Mutual Fund

Standard Chartered Mutual Fund

Franklin Templeton India Mutual Fund

Morgan Stanley Mutual Fund India

LIC Mutual Fund

GIC Mutual Fund

Fidelity Investments

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Age Group Number of People PercentageUp to 25 23 23%

25-35 40 40%

35-45 23 23%

45-55 6 6%

Above 55 8 8%

Age Group of Investor

23%

40%

23%

6% 8% Upto 25

25-35

35-45

45-55

Above 55

Interpretation:-

From the above data it can be said that the younger generation is keen to have

knowledge about mutual funds. Here 40% of sample size interviewed is belongs to the

age group of the 25-35.

INVESTMENT IN MUTUAL FUNDS

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Investment In Mutual

Fund

Number of people Percentage

Yes 63 63%

No 28 28%

Earlier Now Stopped 9 9%

Investment In Mutual Fund

63%

28%

9%Yes

No

Earlier Now

Stopped

Interpretation:

The major part of the sample taken has invested in the Mutual Funds. The demand

for the mutual funds have increased in the past few years with many Foreign players

entering in the Indian market, Fidelity, Franklin Templeton, DSP Merrill Lynch to name

few. There are 63% who are invest in Mutual Fund and 28% are not investing their

money in Mutual Fund. There are 9% respondents who are earlier investing in Mutual

Fund but now they stopped investing.

EXPERIENCE IN THE MARKET

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Experience In the

Market

Number of People Percentage

Less Than a Year 26 26%

1-4 Years 21 21%

More Than 4 53 53%

Experience In The Market

26%

21%

53%

Less Than a Year

1-4 Years

More Than 4

Years

Interpretation:-

The experience in the market was the main factor which influenced the

investments. There are very few who have experience of less than a year. These are those

investors who entered into the market after noticing the rise in the market. The

achievement of 12,000 marks by SENSEX is motivational force in this. Major part was

having vast experience that is of more than 4 years. These are the ones who have been in

the market and saw it rising to conquer the 10,000 peak.

There are 26% investors who having experience less than a year, 21% who having

1-4 year and 53% investors who having more than 4 years experience in the market

AVERAGE INVESTIMENT PERIOD OF INVESTORS

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Investment Period Number of People PercentageLess Than 6 Months 23 23%

6-12 Months 10 10%

1- 2 Years 42 42%

More Than 2 Years 25 25%

23%

10%

42%

25%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Investment Period

Average Investment Period

Series1 23% 10% 42% 25%

Less

Than 6

6-12

Months

1-2

Years

More

Than 2

Interpretation:-

The investment period is very important to increase the profits. The timing must

be right enough to benefit from fluctuations. The investors decide it in advance for how

much time he would be keeping his money in the market and when he should leave up.

23% people consider the investment for 6 months, 10% people consider the

investment for 6 to 12 months. 42% investors things Investment for 1 year to 2 years as a

right option, while 25% investors want to invested for more over 2 years.

FACTORS INFLUENCING THE INVESTMENT DECISION OF

INVESTORS

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Type of Schemes Number of People PercentageOpen Ended Fund 44 44%

Close Ended Fund 56 56%

Types Of Schemes

56%

44%

Closed Ended Funds Opened Ended Funds

Interpretation:-

The schemes offered in the market are of two types, closed ended and open ended.

The more demand was for the Close ended funds with a locking period of around 3 years.

The exit load refrain the person from quitting earlier. 56% are demand for close ended

fund while 44% are interested for open ended fund.

BRAND NAME EFFECTIVENESS

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Influence Number of People PercentageBy Returns 56 56%

By NAV 23 23%

Both 21 21%

56%

23% 21%

0%

10%

20%

30%

40%

50%

60%

By Returns By NAV Both

Investors Influence

Interpretation:-

From the data collected it is clear that most of people look at the returns that the

Mutual funds are providing, while some look at the current NAV not at returns However

there is some class of people who look at both of the parameters.

56% of the people are in favour to look at the returns that are given by Funds, this

and only 23% people are there who consider the current NAV of the fund before

investing into a Mutual Fund. While 21% of respondents who look both of the parameters

before investing. Experience was the main factor that made a Person invests in mutual

funds.

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After analyzing the collected data from the market survey which was carried out

to find the investment preferences of an individual investor, various motives behind theselecting particular investment avenue and various influences that drives the mind of the

prospect in investment decisions during the month of June-July in the Nashik City the

following points can be drawn:

The younger generation is keen to have knowledge about mutual funds, Investors

prefer Medium Term of the Investment Horizon. Followed by short term horizon, they

cant bear High Risk on their Investment, they wants to be safe, bearing lower risk on the

investment. Investor expects realistic returns on their investment. 48% people wishes

return of upto15%, while 32% peoples expect 15-25% return will satisfactory for them.

Almost 100 percent of the respondents felt the timely service provided by the firm

is most important with the fees charged for it following with the quality of service, values

and principles, convenience provided to them, and support from the customer care

people.

While doing my project I had a chance to look into the vast field of Mutual Fund

Industry and consumer behavior. I could only touch a small part of the topic. But after

going through the whole process I firmly believe that before going for any investment

decision there is a need to classify the investor type according to the risk appetite of the

investor his/her financial need and the time horizon of the investment to be made. It is

also true that there is a bias towards a new fund offer by the Mutual Fund Advisors. Nut

its always better to invest in the fund with good past record.

5.1

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CHAPTER 6

RECOMMENDATIONS AND SUGGESATIONS

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WHAT I RECOMMEND FIRSTLY THERE SHOULD BE

1) First Aid Kit for New Entrant into Investment Market.

This will be a new step towards a good service provider in this field. After all, this

market depends on the after sales service. After seeing such a boost in the share market,

not only our Adult generation but also the young generation is also so much excited to

enter the Investment market. Now the actual problem starts specially with the young ones

in excitement initially they invests the money & due to lack of experience they loose big

block of money in one go & later they blames the company about the loss. So, to make

them train in the field we should provide them the initial precautions that they should

take while enter into the market.

The More You Care For Your Customer More the Faith Will Get Develop From

Customer Side

2) Provision for Class Room training for the new investors for the above reason.

same thing to boost theremoral and to give them some thing related to the market will

help them. Also some tips can also be given to this investor during the session as

precautions.

3) Customers generally want to call to the respective branch for asking some

problems or give orders, a customer can save the money by dialing on the toll free

number. It gives a feeling to the customer that company care for them.

4) Customer Care for general query handle initially customer want to solve his or her

problem at the moment as it arises. Our relationship manager many times dont have that

much time to discuss all that details on phone, they may sometime get busy with the

meeting with client. So for general query handle we can have a separate section.

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Summer Internship Project Pravin

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