Summer Project Presentation 1222515464977351 9

8/9/2019 Summer Project Presentation 1222515464977351 9

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Growth Prospect in

Mutual Fund IndustryA Summary of Summer Project

in

Bajaj Capital

Saket Sogani


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About Bajaj Capital The single focus of the organization is to

be the most useful, reliable and efficient

provider of Financial services. They have a track record of ethical

dealings for the last 42 years and have

had the honor of helping millions ofinvestors achieve their life's financialgoals.


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Range of Products and Services Investment Advisory Products

Company fixed deposits

Bonds Mutual funds

Life insurance Generalinsurance

Pension schemes Post officeschemes

Tax saving schemes


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Continue. Insurance link and investment

schemes

Initial public offerings

Housing loans

NRI schemes Car

insurance

Financial Planning Services

Investment lannin Retirement


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Continue. Children's future planning

Tax planning

Short-term cash flow planning

They have a well-trained professional teamcomprising of MBAs, CAs, CSs, Financial

Analysts, Financial Planners, InvestmentExperts, Insurance Experts, and LawGraduates.


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History of Mutual Fund The origin of mutual fund industry in India is

with the introduction of the concept of mutual

fund by UTI in the year 1963. Though thegrowth was slow, but it accelerated from theyear 1987 when non-UTI players entered the

industry.

The mutual fund industry can be broadly putinto four phases according to the developmentof the sector.


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First Phase - 1964-87

Unit Trust of India (UTI) was established on 1963 by an Actof Parliament. It was set up by the Reserve Bank of Indiaand functioned under the Regulatory and administrative

control of the Reserve Bank of India.

Second Phase - 1987-1993 (Entry of Public Sector

Funds)

Entry of non-UTI mutual funds. SBI Mutual Fund was thefirst followed by Canbank Mutual Fund (Dec 87), PunjabNational Bank Mutual Fund (Aug 89), Indian Bank MutualFund (Nov 89), Bank of India (Jun 90), Bank of BarodaMutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The

end of 1993 marked Rs.47,004 as assets under


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Third Phase - 1993-2003 (Entry of Private

Sector Funds)

With the entry of private sector funds in 1993, a new erastarted in the Indian mutual fund industry, giving the Indianinvestors a wider choice of fund families. Also, 1993 was theyear in which the first Mutual Fund Regulations came intobeing, under which all mutual funds, except UTI were to be

registered and governed.

The 1993 SEBI (Mutual Fund) Regulations were substituted

by a more comprehensive and revised in 1996. Theindustry now functions under the SEBI (Mutual Fund)Regulations 1996.


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Fourth Phase - since

February 2003 This phase had bitter experience for UTI. It was bifurcated into two

separate entities. One is the Specified Undertaking of the UnitTrust of India with AUM ofRs.29,835 crores (as on January 2003)

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB,BOB and LIC. It is registered with SEBI and functions under theMutual Fund Regulations.

As at the end of September, 2004, there were 29 funds,

which manage assets ofR

s.153108 crores under 421schemes.


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Some Basic Concepts

Mutual Funds


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What are Mutual Funds?

A Mutual Fund is a trust that pools together the

savings of a number of investors who share acommon financial goal. The fund managerinvests this pool of money in securities --ranging from shares and debentures to money

market instruments or in a mixture of equity anddebt, depending upon the objectives of thescheme.


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Mutual Fund Operation Flow

Chart


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What Types of Mutual Funds

Are Available? There are thousands of different mutual funds

offered on the market. They range from funds that

include a broad variety of investments to funds thatinvest exclusively in single securities or narrowsectors of the market. With the many differentinvestment styles and objectives, theres bound to

be a number of mutual funds that are suited to yourinvesting profile. Each of these funds has expense,risk, and return characteristics. There are 15principal types of funds. They are listed according

to their primary objectives: growth, income, and


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Balanced Funds

Balanced funds seek to obtain the highest

return consistent with a low-risk strategy. Theyhold a mix of common and preferred stocks,bonds and cash reserves. The mix can varyaccording to current market conditions.

Balanced funds may offer higher yields thanpure stock funds. Balanced funds are generallythe least risky of growth-oriented mutual funds.


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Growth and Income Funds Growth and income funds attempt to achieve both long-

term growth and current income. They invest primarily inhigh-yield common stock, preferred stock, and convertible

debt (bonds) to generate both growth potential andcurrent income. Because they include a mix ofinvestments, these funds are typically less risky thangrowth funds.

Growth Funds Growth funds seek long-term appreciation by investing in

the stocks of established companies that may be poisedfor growth. These companies typically pay low dividendsyet offer the potential for long-term capital appreciation.Some growth funds limit their investments to specific

sectors of the economy. Growth funds are generally less


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International and Global Growth

Funds

International and global mutual funds offerdiversification into international stock markets.

International funds invest only in foreignsecurities. Global funds, on the other hand, caninvest in foreign andU.S. securities. The risksassociated with investing on a worldwide basis

include differences in regulation of financialdata and reporting, currency exchangedifferences, as well as economic and politicalsystems that may be different that those in theUnited States.


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Aggressive Growth Funds

Aggressive growth funds, sometimes known as

"small-cap" funds, seek maximum capital gains.They invest primarily in the stock of smaller,less established companies. Since thesecompanies generally pay little or no dividends,

aggressive growth funds rely on capital growthfor returns. These funds tend to be the riskiestof growth-oriented mutual funds.


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Money Market Funds

Money market funds seek current income whilemaintaining a stable $1.00 per share net asset value by

investing in short-term debt securities, including T-bills,certificates of deposit, commercial paper, and otherhighly liquid and safe securities. They offer modestcurrent income and no potential for capital gains. Theygenerally offer the lowest returns but the most safety of

all fund types. Some money market funds also offer tax-free income. Money market funds are neither insured norguaranteed by the Federal Deposit InsuranceCorporation or any other government agency. Althoughthe fund seeks to preserve the value of your investment

at $1.00 a share, it is possible to lose money by investingin the fund.


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Government Securities Funds Government securities funds invest primarily in

Treasury and government agency securities.

Because they are issued or guaranteed by theU.S. government, they are considered the creditworthiness alternatives available. Governmentsecurities offer moderate current income and highsafety. Treasury securities are backed by the full

faith and credit of the U.S. government as to thetimely payment of principal and interest.Government agency securities are not consideredgovernment obligations and therefore are not

backed by the full faith and credit of the


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Municipal Bond Funds

Municipal bond funds seek tax-free income by investingin the bonds of state and local governments. In many

cases, it may be wise to consider municipal bond fundsissued by your state because they may offer double oreven triple tax-free income. In some states you will haveto pay income tax if you buy shares of a municipal bondfund that invests in bonds issued by other states. In

addition, while some municipal bonds in the fund maynot be subject to regular income taxes, they may besubject to federal, state, or local alternative minimumtax. If you sell a tax-free bond fund at a profit, there arecapital gains taxes to consider. As with all types of bondfunds, the principal value will fluctuate with changes ininterest rates.


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Corporate Bond Funds Corporate bond funds invest in debt securities issued by

corporations. The risk of corporate bond funds may varydepending on the objectives of the fund. Because credit

risk is somewhat higher, these funds may offer higherreturns than funds specializing in government securities.Principal will fluctuate with changes in interest rates

High-Yield Bond Funds

High-yield bond funds seek to maximize current income

by investing in lower-quality high-yielding corporatebonds. The bonds held by these funds are generallyrated BB or lower by rating agencies. They offer the highcurrent yields to compensate for the greater risk ofdefault. Since they are more volatile than and pay higher

yields than investment grade bonds, they tend to be


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International Bond Funds

International fixed-income funds invest in debt securitiesof foreign governments and corporations, and seek to

provide current income. Global bond funds may includeU.S. government and corporate bonds. The risksassociated with investing on a worldwide basis includedifferences in regulation of financial data and reporting,currency exchange differences, as well as economic

and political systems that may be different than those inthe U.S.

Besides growth and income, there are a variety ofmutual funds that limit their investments to a particularsector, index, or other specialized investments.

Depending on your investment objectives andreference for risk, these funds mi ht be considered


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Index Funds

Index funds are mutual funds that attempt to match theperformance of any of several market indexes. For

example, a stock index fund may hold stocks that mirrorthe S&P 500 or the Dow Jones Industrial Average.Index funds provide broad diversification within a singletype of asset class.

Precious Metals Funds Precious metals funds invest directly in precious metals

or in the stocks of companies that mine preciousmetals. Most of these funds limit their investments togold and gold bullion or to shares in gold-miningcompanies. The returns from precious metals funds

come primarily from long-term capital appreciation.


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Asset Allocation Funds

Asset allocation funds are those that give the managergreat flexibility in deciding how to invest fund assets.The fund manager can typically invest in all the major

investment classes, including stocks, bonds, and moneymarket securities. The weightings of each class mayvary dramatically and will reflect the market outlook andexpectations of the fund manager.

Sector Funds Sector funds invest in specific industries or sectors of

the economy, such as communications, aerospace anddefense, or health care. While they may be diversifiedwithin a particular sector, they lack broad diversification.This increases their investment risk. These funds

typically seek long-term capital appreciation.


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Socially Conscious Funds Socially conscious funds invest exclusively in

the securities of socially conscious companies.For example, this type of fund may not invest incompanies that cause environmental pollutionor that have interests in countries withrepressive governments.

The value of mutual fund shares fluctuates with

market conditions and, when sold, shares maybe worth more or less than their original costs.Bond funds are subject to the inflation, interestrate, and credit risks associated with the

underlying bonds in the fund.


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Why choose Mutual Funds? Investing in Mutual Funds offers several benefits:

Professional expertise:

Fund managers are professionals who track the market onan on-going basis. With their mix of professionalqualification and market knowledge, they are better placedthan the average investor to understand the markets.

Diversification:

Since a Mutual Fund scheme invests in number of stocksand/or debentures, the associated risks are greatlyreduced.

Relatively less expensive:

When compared to direct investments in the capital market,

Mutual Funds cost less. This is due to savings in brokerage


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Continue..

Liquidity:

Investments in Mutual Funds are completely liquid and can beredeemed at their Net Assets Value-related price on any workingday.

Transparency:

You will always have access to up-to-date information on the value ofyour investment in addition to the complete portfolio of investments,the proportion allocated to different assets and the fund managersinvestment strategy

Flexibility:

Through features such as Systematic Investment Plans, SystematicWithdrawal Plans and Dividend Investment Plans, you cansystematically invest or withdraw funds according to your needs andconvenience.


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Continue..

SEBI regulated market:

All Mutual Funds are registered with SEBI and functionwithin the provisions and regulations that protect theinterests of investors. AMFI is the supervisory body ofthe Mutual Funds industry.


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Mutual

Fund

Type

Objective Risk Investment

Portfolio

Who should invest Investment

horizon

Money

Market

Liquidity +

Moderate Income+ Reservation ofCapital

Negligibl

e

Treasury Bills,

Certificate ofDeposits,CommercialPapers, CallMoney

Those who park

their funds incurrent accounts orshort-term bankdeposits

2 days -

3 weeks

Short-term

Funds(Floating -

short-term)

Liquidity +

Moderate Income

Little

InterestRate

Call Money,

CommercialPapers, TreasuryBills, CDs, Short-term Governmentsecurities.

Those with surplus

short-term funds

3 weeks -

3 months

Bond

Funds

(Floating -

Long-term)

Regular Income CreditRisk &

InterestRateRisk

PredominantlyDebentures,

Governmentsecurities,Corporate Bonds

Salaried &conservative

investors

Morethan 9 -

12months

Gilt Funds Security & Income InterestRateRisk

Governmentsecurities

Salaried &conservativeinvestors

12months &more

Equity Long-term Capital High Stocks Aggressive 3 years


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Index Funds To generatereturns thatarecommensurat

e with returnsof respectiveindices

NAV varieswith indexperformance

Portfolioindices likeBSE, NIFTYetc

Aggressiveinvestors.

3 years plus

Balanced

Funds

Growth &RegularIncome

CapitalMarket Riskand InterestRisk

Balancedratio of equityand debtfunds toensure higherreturns atlower risk

Moderate &Aggressive

2 years plus

Continue..


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Systematic Investment Plan

(SIP) A Systematic Investment Plan (SIP) is a simple

method of investing, used across the world as a

means to accumulate wealth. It works the sameway as a recurring deposit account. SIPinvolves investing a fixed sum of money in aspecific investment scheme, on a regular basis,

for a pre-determined number of period.


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SIP is a disciplined approach to

investing, and :

Helps us to invest disposable funds eachmonth.

Gives us the benefits of rupee-cost averaging

Relieves us of trying to time the market

Helps us to reach your financial goals


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Growth Analysis

Growth in Asset under management


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OBJECTIVE OF TH

E STUDY

The primary objective of the research is to studythe growth of Mutual Funds in India, their types,and advantages & disadvantages from the pointof view of the investors.

The secondary objective of the study is toanalyze the Investor perception about the EquityLinked Scheme.

To analyze the performance of top players in theMutual Fund Industry and find out the future ofMutual Funds in India.

The study also try to find the new segments of

customers for Bajaj Capital Ltd.


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RESEA

RCH

METH

ODOLOGY

The first stage included gathering information aboutthe Mutual Fund Industry in India and gettingacquainted with the working of the various MutualFund Schemes.The next stage involved determining the objectiveof the study, knowing the target audience anddrafting a questionnaire. The questionnaire was

designed keeping in mind the target audience andobjectives of the study. It was non-disguised innature and will include a few open-endedquestions.


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RESEA

RCH

PLANThe research was exploratory in nature and thegoal was to gather preliminary data to shed light

on the real nature of problems and to suggestpossible solutions or new ideas. It involvedgetting a feel of the situation and lays emphasison the discovery of ideas and possible insights.


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DATA SOUR

CES Primary data was collected from the specially

targeted persons like salaried persons, businessmen and house wife.The primary information wascollected through Questionnaire and interviewspresented to the investors.

Secondary Data was collected from:

1.Print articles on Mutual Funds.

2.Annual audit report of the Mutual FundCompanies.

3.Product and Service Brochures of the MutualFunds.


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SAMPLING PLAN The sampling unit comprised of the people present in

the various offices of Mutual Fund Companies. Thesample size taken for the study was two hundred

fifty. The samples were chosen on the basis of random sampling and these respondents belongedto middle and upper class salaried and self-employed people, students, professionals andhousewives who have invested in Mutual Funds. The

research was carried out in South Delhi only.DATA ANALYSIS TECHNIQUE

Simple averages

Tabulation


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LIMITATIONS

The survey was conducted in selective areasbecause of constraints of time and resources.Therefore, the findings cannot be generalizedor claimed until further research has beencarried out.

The sample size taken was 250, which may notreflect a true picture of the consumers mind.Because of these constraints, the analysis maynot be accurate and may vary, when tested indifferent places and time.


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SURVEY ANAL YSIS

NUMBER O F RESPONDENTS: 250

Gender:

Male Fem ale

200 50

Male0%

Female20%

Findings: Out of total respondents a huge percentage isof male respondents, which mainly reflects the dominance

of male decision makers.


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Age:

18-25

(Years)

25-40

(Years)

40-55

(Years)

Above 55

(Years)53 150 42 5

18-25

(Years)21%

25-40(Years)

60%

40-55

(Years)17%

55 &

above2%


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Educational Background:

Graduate Post-Graduate

Professional Others

58 28 158 6

Gr t

r f i l

t r

t-Gr t

Fi i g: Large portion of investors were highly educated withPost Graduates and Professionally qualified respondents at

equal percentage of 23% and 2% respondents were


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Occupation:

Salaried Class Self Employed Business Class Other

188 12 50 -

Salaried Class75%

Professionals5%

BusinessClass20%

Findings: 75% a very large number of respondents werefrom the

service/salaried class while 20% were from the businessand the rest

Whti i ( th i i R )?


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What is yourincome(monthwise inRs.)?

0- 0000 10000-15000 15000- 5000 ABOVE 5000

48 96 29 77

0-1000019%

10000-1500038%15000-25000

12%

ABOVE25000

31%

Finding: 19% respondents have monthly income below 10000, 38%respondents had income between 10000-15000, 12% respondents hadincome between 15000-25000 and 31% respondents had income above

25000.


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What is percentage of your income y

0-15 15-30 30-40 ABOVE 40

135 110 5 -

0-15

54

15-30

44

30-40

2 ABOVE 40

0

Finding: 54% respondents saved less than 15% of their saving,

44% respondents saved 15-30% of their savings and 2% respon

saved of 30-40% of their saving.


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Purpose of your investment?

SAVINGS WEALTH

CREATION/INVESTMENT128 122

SAVINGS1%

WEALTHCREATION/I

NVESTMENT

%

Finding: For 51% respondents the purpose wassaving andfor 49% the purpose was wealth creation and

investment.


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If you prefer investment, then in which of the folloMUTUAL

FUNDSSHAR

ES

GOVT. BONDS/BANKFDS/POST OFFICE

DEPOSITS

INSURANC

E

GOLD REALESTATE

75 65 58 34 32 38

MUTUAL FUNDS24

SHARES

22

GOVT.

BONDS/BANK

FDS/POSTOFFICEDEPOSITS

19

INSURANCE

11

GOLD11

REAL ESTATE

13

Finding: 24% respondents preferred Mutual funds andinvestors equally

preferred other investments. With increasing gold prices and


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How would you like to do trading in

share market?ONLINE THROUGH PERSONAL ADVICE102 148

ONLINE41

THROUGHPERSONAL

ADVICE

Finding: 41% respondents preferred online trading inshare

market while 59% preferred share trading through


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Is fluctuation in share market effect your inves

NOT AT ALL LITTLE BIT MODERATE VERY

MUCH90 78 67 15

NOT AT ALL6%

LITTLE BIT1%

MODERATE7%

VERY MUCH6%

Finding: According to the responses only 6% were worried aboutfluctuation in share

market and that affected their investment plan. 36 % respondents werenot at all worried

Mutual Funds:


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Mutual Funds:Do you have proper knowledge about the concept of mutual fund?

YES NO PARTIAL, I WOULD LIKETO KNOW MORE

76 35 139

YES3

NO1

PARTIAL, IWOULDLIKE TOKNOWMORE

56

Finding: 30% respondents had proper knowledge about the Muand 14% did not have knowledge about the Mutual Funds. 56%respondents wanted to know about the Mutual Funds as they ha

knowledge about the Mutual Funds.

If you prefer mutual funds as your way of investme


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If you prefer mutual funds as your way of investme

in which kind of Mutual fund you would prefer?

EQUITY DEBT BALANCED

120 40 90

EQUITY48

DEBT16

BALANCED36

Finding: 48% respondents prefer Equity funds, 16%respondents

prefer Debt Funds and 36% preferred Balanced funds.


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How much of your total portfolio is in

Equity?0-25 25-50 50-75 75-100

80 140 25 5

0-252

25-505

50-7510

75-1002

Finding: 32% respondents had invested less than 25% in equity fu

56% have invested in 25-50% equity, 10% had invested 50-75% in

and 2% respondents have invested 75-100% in equity funds.


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Rank these consultancy firms, as per your preference of (1-4

in descending order)BAJAJ CAPITAL INDIABULLS KARVY OTHERS

3 2 1 4

Finding: Karvy Consultant was ranked as the most prefollowed by India bulls than Bajaj Capital.


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Do you have any knowledge about financial plannYES NO Partial, I would like to know

more92 80 78

Finding: 37% respondents have knowledge about financiplanning, 32%

respondents had very little knowledge about financial planninWhile 31%respondents had partial knowledge about financial planning anwere eager toknow more about financial planning.

Did your consultancy firm provide you financial planning servivalue added services?

YES NO64 186

Finding: 26% respondents said that their consultancy firm providefinancial planning services / other value added services while 74%

their consultancy firm did not provide any such information.


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The Future plan: In a study conducted by the Associated Chamber of

Commerce and Industry of India (ASSOCHAM) andthe Association of Mutual Fund Industry of India(AMFI), it has been revealed that by 2014, the sizeof the Indian mutual fund industry is estimated to goup to overRs 1,65,000 crore.

The focus of Industry players is shifting from sectorbased fund to more diversified fund as they carryless risk.Moreover the focus of industry is shiftingfrom Debt based funds to Equity based funds whichperformance better


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Continue Some of the industry biggies are exploring the

opportunities in pension reform by positioning

themselves as the front-runners in the PensionFund arena.

Companies are now focusing on distribution

channels of Financial Planners and E-commerce,as they will stand to benefit enormously if thesetrends gain significance.


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Summer Project Presentation 1222515464977351 9

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