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SUMMER TRAINING

AT

HDFC MUTUAL FUND

(HDFC ASSETS MANAGEMENT COMPANY

LTD)

IN PARTIAL FULFILLMENT OF

MASTER OF BUSINESS ADMINISTRATION

PROGRAMME

SUBMITTED BY: GUIDED BY:

BADAMI KALPESH. D. INTERNAL GUIDE AT GRIMS

DR.R.S.SHAH

EXTERNAL GUIDE AT CO.

MR.RAJAN MEHTA

GIDC RAJJU SHROFF ROFEL INSTITUTE OF MANAGEMENT

STUDIES, VAPI

SUMMER TRAINING PROJECT (2007)

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DECLARATION

I, Badami Kalpesh D. a student of MBA semester iii, here by declare thatthe project

work presented in this report is my contribution and has been carried out undersupervision of DIRECTOR DR.R.S.SHAH of GIDC RAJJU SHROFF

INSTITUTE OF MANAGEMENT STUDIES.

The objective of the training undertaken is to get specialized knowledge in the

specialized field, which further sharpen the skill and add practicality in the

specialization. This work has not been previously submitted to any other university

for any other examination

DATE: - SIGNATURE (student)

BADAMI KALPESH D.

PLACE: - SIGNATURE (guide)

DR.R.S.SHAH

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PREFACE

Experience is the best teacher. This saying is very well applicable in everyoneslife. Therefore as a student of management it must apply to me also. Then thequestion arises that from where we can get this experience. Obviously we mustundergo practical Training. To serve this purpose I had undergone two monthssummer training at HDFC assets Management Company limited and as an outcome Ihave prepared this project report.

This project report on mutual fund awareness in retail investors of HDFC assets

Management Company in Surat is as per syllabus prescribed by Veer Narmad southGujarat University for MBA students. This project also deals with various activities ofHDFC assets Management Company limited. The experience of this training will beuseful in my future and findings of this particular project will be Helpful to takedecision regarding to marketing and advertising of mutual fund schemes To HDFCassets Management Company limited.

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ACKNOWLEDGEMENT

First of all, I would like to express my sincere gratitude to Mr. Rajan Mehta, Branchmanager of HDFC assets Management Company limited, Surat branch for allowingme for summer training at HDFC assets Management Company limited.

I heartily feel thanks to Mr. Piyush lal, sales executive who provided me valuablesuggestions and guidance at every stage of my summer training.

I would also like to express my gratitude to Mr. R.s.shah, my project mentor and otherfaculty members of GIDC RAJJU SHROFF ROFEL INSTITUTE OFMANAGEMENT STUDIES, vapi for guide me.

I would like to thank following persons who help me a lot in my summer training.

Mr. Gaurav maheshwari, HDFC assets Management Company limited

Mr. Pinkal shah, HDFC assets Management Company limited.

Mr. Chintan patel, HDFC assets Management Company limited.

Mr. Ritesh jariwala, HDFC assets Management Company limited.

Mr. Utkrash gheewala, HDFC bank, Parle point branch Mr. Nilesh patel, HDFC bank, Parle point branch.

Mr. Mitesh sampat, HDFC bank, Parle point branch.

I also thank to respondents, who have been helpful and faithful enough to give therequired information, which helped my project to be a great success, which was themain and important part of my project. I feel happy indeed and it has given me a lot of

pleasure in company.

Last but not the least I would like to extent my deep sense of gratitude to my family,friends and all whom guided and helped me during my training period.

Place: - Surat. Badami Kalpesh. B.Date: - 9thAugust 2007

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Objectives of Study

Without any aim or objective, no activity can exist, in the same direction of

preparation of this report on HDFC assets Management Company limited. In different

functional areas & research on the mutual fund awareness in retail investors of

HDFC assets Management Company limited in Surat is based on the following

objectives: -

1. My primary objective is to acquire primary functions of management like

Planning, Organizing, Directing and controlling from various functional areas

such as Finance, Human Resource, Marketing, and Sales etc.

2. Whatever we are taught in the classrooms, there is a limitation that book can

only give theoretical concept or knowledge and it has a limited view of

practically. So, the other important objective of this training is to know about

practical aspect and to know how a company actually works in practical

situation.

3. To know the mutual fund awareness level of the retail investors who are invest

in HDFC assets Management Company limited.

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Limitations of Study

There is no activity without any limitations.

1. Though every one used to be very co-operative but every detail was unable to

be disclosed to me as the officials has to maintain secrets of the company.

2. It is difficult to cover all the function of the company.

3. The analysis and conclusion made by me as per my limited understanding and

there may be something variation in the actual situation.

4. Because of the limited time period, the survey work was conducted in the

Surat region and the sample size was taken as 100 respondents only.

5. In this rapidly changing turbulent era the suggestions and recommendations

drawn out today might prove inadequate or improper tomorrow; this is likely

to limit its effectiveness.

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EXECUTIVE

SUMMARY

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Executive Summary

The entire report is an unforgettable journey of support, knowledge, experience,

dedication, perfection, and patience. For me it is all about to understand a customer

and market of mutual fund industry.

The report is specially oriented to particular area, though it is representing the strong

base of Investment management-which covers different investment avenues, their

handling contribution, strategy, portfolios, and related risk factors. Mutual funds- how

they are formed, history, scenario, types, trends, myths, distribution, advantages, and

even disadvantages of them.

Tips to effectively sell the mutual funds, to be effective agent, some dos and donts

about mutual funds while investing. Company details and its progress and its

interpretation base for analysis, conclusion, findings, and questionnaire, which helped

a lot in consumer, survey analysis. Asset allocation, accounting, taxation, valuation

and necessary information for generating base for conclusion. And at last but not the

least the collected data from city and their interpretation.

In short all efforts which was made to make this report explains

WORK IS WORSHIP

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CONTENTS

Sr. No. Name of Table Page No.

1 Objectives of Study 5

2 Limitations of study 6

3 Executive summary 8

4 Company details 11

About the Company 12

Sponsors of HDFC Assets ManagementCompany

13

Management of HDFC Assets ManagementCompany

14

Offices of HDFC assets management companylimited

17

5 Product details 24

6 Future scenario 32

7 Industry details 33

Introduction 34

History of Mutual Fund Industry 36 Customers Profile of mutual fund industry 40

Positioning Strategy of mutual fund industry41

Promotional Tools Employed by various mutualfund companies

42

Facts About Mutual Fund 45

8 Mutual fund 46

Introduction to Mutual Fund 47

Mutual Fund Cycle 49

Critical view about Mutual Fund 50

Why Investor Needs Mutual Fund 54

Mutual Fund Risk 55

9 Types of Mutual Fund 58

10 Structure of Mutual Fund 60

11 Other various assets management companies details 64

12 Regulatory Aspects 67

13 Research 71

Purpose of the Research 72

Research Objective 7314 Research Methodology 74

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Research Design 75

Sources of Data 76

Sampling Plan 78

Data Collection Method 80

15 Data analysis and findings 81

16 Findings 9217 Limitations 95

18 Conclusions 97

19 Recommendations 100

20 Annexure 103

21 Glossary 105

22 List of Table 107

23 List of Graphs 108

24 Bibliography 109

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COMPANY

DETAILS

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About the Company: -

An HDFC asset Management Company limited is well-established fund house. HDFCAssets Management Company limited is sponsored by Housing Development FinanceCorporation Limited (HDFC) and Standard life investments limited.

HDFC assets Management Company limited launched its scheme HDFC EQUITYFUND in the year January 1995. Since then it focused on different class of schemesfor many years and launched several innovative products that went to become

bourgeoning categories in the Indian mutual fund industry.

Some of these were HDFC GROWTH FUND, HDFC TOP 200 FUND, and HDFCBALANCED FUND, HDFC PRUDENCE FUND etc.

HDFC assets Management Company limited have offices in 29 cities and currentlymanage assets in excess of Rs 36146.67 cores. (May 2007.)

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Sponsors of HDFC Assets Management Company:-

Housing Development Finance Corporation Limited (HDFC)

HDFC was incorporated in 1977 as the first specialized Mortgage Company in India.HDFC provides financial assistance to individuals, corporates and developers for the

purchase or construction of residential housing. It also provides property relatedservices (e.g. property identification, sales services and valuation), training andconsultancy. Of these activities, housing finance remains the dominant activity.HDFC has a client base of around 9.5 lack borrowers, around 1 million depositors,over 91,000 shareholders and 50,000 deposit agents as at March 31, 2007. HDFC has

raised funds from international agencies such as the World Bank, IFC (Washington),USAID, DEG, ADB and KfW, international syndicated loans, domestic term loansfrom banks and insurance companies, bonds and deposits. HDFC has received thehighest rating for its bonds and deposits program for the twelfth year in succession.HDFC Standard Life Insurance Company Limited, promoted by HDFC was the firstlife insurance company in the private sector to be granted a Certificate of Registration(on October 23, 2000) by the Insurance Regulatory and Development Authority totransact life insurance business in India.

Standard Life Investments Limited

The Standard Life Assurance Company was established in 1825 and has considerableexperience in global financial markets. The company was present in the Indian lifeinsurance market from 1847 to 1938 when agencies were set up in Kolkata andMumbai. The company re-entered the Indian market in 1995, when an agreement wassigned with HDFC to launch an insurance joint venture. On April 2006, the Board ofThe Standard Life Assurance Company recommended that it should demutualise andStandard Life plc float on the London Stock Exchange. At a Special General Meetingheld in May voting members overwhelmingly voted in favor of this. The Court ofSession in Scotland approved this in June and Standard Life plc floated on the LondonStock Exchange on 10 July 2006. Standard Life Investments was launched as an

investment management company in 1998. It is a wholly owned subsidiary ofStandard Life Investments (Holdings) Limited, which in turn is a wholly ownedsubsidiary of Standard Life plc. Standard Life Investments is a leading assetmanagement company, with approximately US$ 269 billion as at March 30, 2007, ofassets under management. The company operates in the UK, Canada, Hong Kong,China, Korea, Ireland and the USA to ensure it is able to form a truly globalinvestment view. In order to meet the different needs and risk profiles of its clients,Standard Life Investments Limited manages a diverse portfolio covering all of themajor markets world-wide, which includes a range of private and public equities,government and company bonds, property investments and various derivativeinstruments.

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Management of HDFC Assets Management Company:-

HDFC Trustee Company Limited:

A company incorporated under the Companies Act, 1956 is the Trustee to the Mutual

Fund vides the Trust deed dated June 8, 2000, as amended from time to time. HDFCTrustee Company Limited is a wholly owned subsidiary of HDFC Limited.

HDFC Asset Management Company Limited:

HDFC assets Management Company limited was incorporated under the CompaniesAct, 1956, on December 10, 1999, and were approved to act as an Asset ManagementCompany for the Mutual Fund by SEBI on July 3, 2000. The registered office of theHDFC assets Management Company limited is situated at Ramon House, 3rd Floor,H.T. Parekh Marg, 169, Backbay Reclamation, Church gate, Mumbai - 400 020. Interms of the Investment Management Agreement, the Trustee has appointed HDFCAsset Management Company Limited to manage the Mutual Fund. The paid upcapital of the HDFC assets Management Company limited is Rs.75.161 crore.

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The present share holding pattern of the HDFC Assets management company is as

follows:

Particulars% of the paid up share

capital

HDFC 50.10

Standard Life InvestmentsLimited

49.90

The HDFC Assets management company is managing 18 open-ended schemes of the

Mutual Fund viz. HDFC Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC

Income Fund (HIF), HDFC Liquid Fund (HLF), HDFC Tax Plan 2000 (HTP), HDFC

Children's Gift Fund (HDFC CGF), HDFC Gilt Fund (HGILT), HDFC Short Term

Plan (HSTP), HDFC Index Fund, HDFC Floating Rate Income Fund (HFRIF), HDFC

Equity Fund (HEF), HDFC Top 200 Fund, (HT200), HDFC Capital Builder Fund

(HCBF), HDFC Tax Saver (HTS), HDFC Prudence Fund (HPF), HDFC High Interest

Fund (HHIF), HDFC Sovereign Gilt Fund (HSGF) and HDFC Cash ManagementFund (HCMF). HDFC assets Management Company limited is also managing the

respective Plans of HDFC Fixed Investment Plan, a closed ended Income Scheme.

The HDFC Assets management company has obtained registration from SEBI vide

Registration No. - PM / INP000000506 dated December 22, 2000 to act as a Portfolio

Manager under the SEBI (Portfolio Managers) Regulations, 1993.

The HDFC Assets management company is also providing portfolio management /

advisory services and such activities are not in conflict with the activities of the

Mutual Fund

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HDFC assets Management Companys punch line is continuing a

tradition of trust.

In Gujarat HDFC assets Management Company is located at Ahmadabad,

Surat, vadodara, Rajkot.

HDFC assets Management Company is working from 9:30 a.m. onwards.

HDFC assets Management Company Have 200 and more distributors in

Surat.

HDFC assets Management Company Provide account statements to

investors according to investors requirement.

HDFC assets Management Company Provide good services to investors.

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Offices of HDFC ASSETS MANAGEMENT

COMPANY LIMITED

INVESTOR SERVICE CENTRES/OFFICIAL POINTS OF ACCEPTANCE FOR HDFC MUTUAL

FUND

REGISTEREDOFFICE

HDFC Mutual Fund - Mumbai *

Ramon House, 3rd Floor,H.T Parekh Marg, 169,

Backbay Reclamation, Church gate

Mumbai 400020.

Andhra Pradesh

HDFC Mutual Fund - Hyderabad

6-3-883/7, 2nd Floor,Saphire Square, Somajiguda,

Hyderabad - 500282.

Email:[email protected]

HDFC Mutual Fund - Visakhapatnam

Ground Floor, Saigopal Arcade,Opp Waltair Club,

Waltair Main Road, Siripuram,Visakhapatnam - 530003.


Bihar

HDFC Mutual Fund - Patna

Rani Plaza Apartment,

(Patna X-Ray Clinic),Exhibition Road,Patna - 800001.


New Delhi

HDFC Mutual Fund - New Delhi

4th Floor, Mohan Dev Bldg., 13,Tolstoy Marg, Connaught Place,

New Delhi - 110001.Email:[email protected]

Goa HDFC Mutual Fund - Goa

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A3, First Floor, Krishna Building,Opp. Education Dept,

Behind Susheela Building, G.P. Road,Panaji - 403001.


Gujarat

HDFC Mutual Fund - Ahmadabad

2nd Floor, Megha House,Besides Gruh House,Mithakhali Six Roads,Ahmedabad - 380009.


HDFC Mutual Fund - Rajkot

2nd Floor, Shiv Darshan,Dr Radha Krishnan Road,

5, Jagnath Plot Corner,Rajkot - 360001.


HDFC Mutual Fund - Surat

U1 - U3, Jolly Plaza,Opp Athwa Gate Police Station,

Athwa Gate,Surat - 395001.


HDFC Mutual Fund - VadodaraUpper Ground Floor, Gokulesh,

R C Dutt Road,Vadodara - 390007.


Jharkhand

HDFC Mutual Fund Jamshedpur

Gayatri Enclave,2nd Floor, "K Road",

Bistupur,

Jamshedpur - 831001.Email:[email protected]

Karnataka HDFC Mutual Fund Bangalore

No.114, 1st Floor, Prestige Towers,99 & 100, Residency Road,

Bangalore - 560025.Email:[email protected]

HDFC Mutual Fund Mangalore

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UG -II, 6 & 7, Upper Ground Floor,Maximus Commercial Complex,

Light House Hill Road, Opp. KMC,Mangalore - 575001.


Kerala

HDFC Mutual Fund Kochi

Ground Floor,Cinema Cum Commercial Complex,

Behind Ravipuram Bus Stop,M.G. Road,

Kochi - 682016.Email:[email protected]

MadhyaPradesh

HDFC Mutual Fund Bhopal

Ranjit Towers,

Zone II, 8 MP Nagar,Bhopal - 462011.


HDFC Mutual Fund Indore

M1, M2 & M3, Mezzanine Floor,Sterling Arcade,15 / 3, Race Course Road,

Indore - 452001.Email:[email protected]

Maharashtra HDFC Mutual Fund Mumbai

Mistry Bhavan, 1st Flr, 122,Backbay Reclamation,

Dinsha Vachha Road, Churchgate,Mumbai - 400020.


HDFC Mutual Fund Nagpur

106-110, Shriram Shyam Towers,2nd Floor, Next to NIT Building,

Kingsway, Sadar,

Nagpur - 440001.Email:[email protected]

HDFC Mutual Fund Nashik

G- 1 & G-2, "Suyojit Heights",Opp. Rajiv Gandhi Bhavan,

Sharanpur Road,Nashik - 422002.


HDFC Mutual Fund Pune

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HDFC House, 2nd Floor,Shivaji Nagar, University Road,

Pune - 411005.Email:[email protected]

Orissa

HDFC Mutual Fund Bhubaneswar

2nd Floor, Vinayak 96,Janpath,

Bhubaneshwar - 751001.Email:[email protected]

Punjab

HDFC Mutual Fund Chandigarh

SCO 375-376,Ground Floor, Sector 35-B,

Chandigarh - 160022.Email:[email protected]

HDFC Mutual Fund Ludhiana

SCO 122,Feroze Gandhi Market,

Ludhiana - 141001.Email:[email protected]

Rajasthan

HDFC Mutual Fund Jaipur

Moondhra Bhavan,3 Ajmer Rd,

Jaipur - 302001.


HDFC Mutual Fund Jodhpur

Gulab Singh Building,11, Chopasani Road,Jodhpur - 342003.


Tamil Nadu

HDFC Mutual Fund Coimbatore

1371A, Ground Floor,

Nadar Building Trichy Road,Coimbatore - 641018.Email:[email protected]

HDFC Mutual Fund Chennai

ITC Centre, 1st Floor,760 Anna Salai,

Chennai - 600002.Email:[email protected]

Uttar Pradesh HDFC Mutual Fund Kanpur

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1st Floor, 16/80 D,Behind SBI Main, Civil Lines,

Kanpur - 208001.


HDFC Mutual Fund Lucknow

4 Shahnajaf Road,Lucknow - 226001.


West Bengal

HDFC Mutual Fund Kolkata

Menaka Estate, 1st Floor,3 Red Cross Place,Kolkata - 700001.


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(Fig no 1- office locations of HDFC Assets Management Company)

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PRODUCT

DETAILS

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Product Details

EQUITY BALANCED DEBT

(Fig no 2 - Different Types of Products)

EQUITY SCHEMES OF HDFC ASSET MANAGEMENT

COMPANY:-

1. HDFC Equity Fund:-

Investment Objective: The investment objective of the Scheme

Is to achieve capital appreciation.

Investment Options: Dividend & Growth Option

Nature of Scheme: - Open Ended Growth Scheme

Inception Date: - January 01, 1995

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2. HDFC growth fund:-

Investment Objective: - The primary investment objective of

the Scheme is to generate long term capital appreciation from a

portfolio that is invested predominantly in equity and equity

related instruments.



Inception Date: -September 11, 2000

3. HDFC Top 200 fund:-

Investment Objective: - To generate long-term capitalappreciation from a portfolio of equity and equity-linkedinstruments primarily drawn from the companies in BSE 200index.


4. HDFC mid cape opportunity fund;- Investment Objective: - To generate long-term capital

appreciation from a portfolio that is substantially constituted of

equity and equity related securities of small and Mid-Cap

companies.


Nature of Scheme:- Open Ended Growth Scheme

Inception Date:- May 07, 2007

5. HDFC capital builder fund:-

Investment Objective: - To generate long-term capital

appreciation from a portfolio that is substantially constituted of

equity and equity related securities of small and Mid-Cap

companies.



Inception Date:- February 01, 1994

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6. HDFC core and satellite fund:-

Investment Objective: - The primary objective of the

Scheme is to generate capital appreciation through equity

investment in companies whose shares are quoting at prices

below their true value.



Inception Date:- September 17, 2004

7.HDFC premier multicape fund:-

Investment Objective: - The primary objective of the Schemeis to generate capital appreciation in the long term throughequity investments by investing in a diversified portfolio ofMid Cap and Large Cap `blue chip` companies.

Investment Options: Dividend Plan, Growth Plan, The

Dividend Plan offers Dividend Payout and Reinvestment

Facility.


Inception Date: - April 06, 2005

BALANCED SCHEMES OF HDFC ASSET MANAGEMENT

COMPANY:-

1. HDFC balanced fund: -


Scheme is to generate capital appreciation along with current

income from a combined portfolio of equity and equity

related and debt and money market instruments.


Nature of Scheme: - Open Ended balanced fund

Inception Date: - September 11, 2000

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2. HDFC prudence fund:-

Investment Objective: - The investment objective of theScheme is to provide periodic returns and capital

appreciation over a long period of time, from a judicious mix

of equity and debt investments, with the aim to prevent/

minimize any capital erosion


Nature of Scheme: - Open Ended balanced fund

Inception Date: - February 01, 1994

3. HDFC short term plan:-


HDFC Short Term Plan is to generate regular income

through investment in debt securities and money market

instruments.

Investment Options: Growth Plan, Dividend Plan. The


Facility.

Nature of Scheme:- Open Ended income fund

Inception Date: - February 28, 2002

4. HDFC multi yield fund:-


Scheme is to generate positive returns over medium time

frame with low risk of capital loss over medium time frame.

Investment Options: Growth Plan, Dividend Plan. The


Facility.

Nature of Scheme: - Open Ended income fund


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DEBT SCHEMES OF HDFC ASSET MANAGEMENT

COMPANY :-

1. HDFC Income Fund:-

Investment Objective: - The primary objective of the Scheme

is to optimize returns while maintaining a balance of safety,

yield and liquidity.


Nature of Scheme: - Open Ended Income Scheme


2. HDFC Income Fund: -

Investment Objective: - The investment objective of HDFC

High Interest Fund is to generate income by investing in a

range of debt and money market instruments of various

maturity dates with a view to maximizing income while

maintaining the optimum balance of yield, safety and liquidity.


Nature of Scheme: - Open Ended Income Scheme

Inception Date: - April 28, 1997

3. HDFC MF Monthly Income Plan - Short Term Plan:-

Investment Objective: - The primary objective of Scheme is

to generate regular returns through investment primarily in

Debt and Money Market Instruments. The secondary objective

of the Scheme is to generate long-term capital appreciation by

investing a portion of the Schemes assets in equity and equity

related instruments. However, there can be No assurance that

the investment objective of the Scheme will be achieved.

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Investment Options: Quarterly Dividend Option, MonthlyDividend Option, and Growth Plan. The Dividend Plan offers

Dividend Payout and Reinvestment Facility

Nature of Scheme: - An open-ended income scheme. Monthly

income is not assured and is subject to availability of

distributable surplus

Inception Date:- December 26, 2003

4. HDFC MF Monthly Income Plan - Long Term Plan:-

Investment Objective: - The primary objective of Scheme is

to generate regular returns through investment primarily in

Debt and Money Market Instruments. The secondary objective

of the Scheme is to generate long-term capital appreciation by

investing a portion of the Schemes assets in equity and equity

related instruments. However, there can be no assurance that

the investment objective of the Scheme will be achieved

Investment Options: Growth Plan, Quarterly Dividend

Option, Monthly Dividend Option. The Dividend Plan offers

Dividend Payout and Reinvestment Facility.

Nature of Scheme: - An open-ended income scheme. Monthly

income is not assured and is subject to availability of

distributable surplus

Inception Date: - December 26, 2003

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5. HDFC Floating Rate Income Fund Long Term Plan:-

Investment Objective: - The primary objective of the Scheme

is to generate regular income through investment in a portfolio

comprising substantially of floating rate debt / money market

instruments, fixed rate debt / money market instruments swapped

for floating rate returns, and fixed rate debt securities and money

market instruments.

Investment Options: Dividend Plan, Growth Plan. The

Dividend Plan offers Reinvestment Facility only

Nature of Scheme: - An open-ended income scheme.

Inception Date: - January 16, 2003

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FUTURE

SCENARIO

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The asset base will continue to grow at an annual rate of about 35 to 40%

over the next five year as investors shift their assets from banks and other

traditional avenues. Some of the older public and private sector players will

either close shop or be taken over.

Out of ten public players five will sell out, close down or merge with

stronger player in three to four years. In the private sector this trend has

already started with two mergers and one take over. Here too some of them

will down their shutters in the near future to come.

But this does not mean that there is no room for other players. The

market will witness a flurry of new players entering the areas. There will be a

large no. of offers from various asset management companies in the time to

come, some big names like Principle, SBI, Fidelity, old mutual etc are looking

at Indian market seriously. One important reason for it is that most major

players have presence here and hence these big names would hardly like to get

left behind.

The mutual fund industry is awaiting the introduction of derivatives in India as

this would enable it to hedge its risk and this in turn would be reflected in its

Net Asset Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes

to trade in derivatives. Importantly, many market players have called on the

Regular to initiate the process immediately, so that the mutual funds can

implement the changes that are required to trade in Derivatives.

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INDUSTRY

DETAILS

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Introduction

A Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is invested by the fund manager in

different types of 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.

Anybody with an investible 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.

A Mutual Fund is the ideal investment vehicle for todays complex and modern

financial scenario. Markets for equity shares, bonds and other fixed income

instruments, real estate, derivatives and other assets have become mature and

information driven. Price changes in these assets are driven by global events

occurring in faraway places. A typical individual is unlikely to have the knowledge,

skills, inclination and time to keep track of events, understand their implications and

act speedily. An individual also finds it difficult to keep track of ownership of his

assets, investments, brokerage dues and bank transactions etc.

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A Mutual Fund is the answer to all these situations. It appoints professionally

qualified and experienced staff that manages each of these functions on a full time

basis. The large pool of money collected in the fund allows it to hire such staff at a

very low cost to each investor.

In effect, the Mutual Fund vehicle exploits economies of scale in all three areas -

research, investments and transaction processing. While the concept of individuals

coming together to invest money collectively is not new, the mutual fund in present

form is a 20th century phenomenon. In fact, mutual funds gained popularity only after

the Second World War. Globally, there are thousands of firms offering tens of

thousands of mutual funds with different investment objectives. Today, Mutual Funds

collectively manage almost as much as or more money as compared to banks.

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History of Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of

India, at the initiative of the Government of India and Reserve Bank of India. The

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

First phase 1964-87(Monopoly of UTI)

An Act of Parliament established Unit Trust of India (UTI) on 1963. 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 andthe Industrial Development Bank of India (IDBI) took over the regulatory and

administrative control in place of RBI. The first scheme launched by UTI was Unit

Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under

management.

Second Phase 1987-93(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 Canbank Mutual Fund (Dec 87), Punjab

National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of

India (Jun 90), and 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.

Third Phase 1993-2003

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(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.

Forth 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 andcertain 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.

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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 October 31, 2003, there

were 31 funds, which manage assets of Rs.126726 crores under 386 schemes.

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The graph indicates the growth of assets over the

years.

(Fig no 3. Growth of Asset Over The year)

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Customers Profile of mutual fund industry:-

(Fig no 4.Type of Customer)

1. While you recommend a financial plan, you also need to understand the

needs and financial objectives of your customer along with his risk tolerance

and his expectations from the investments.

2. Honest and straightforward advice is appreciated. Help your customers make

the right choice

3. Advise your customers to start investing early and regularly to help them

optimize the benefits of the compounding rupee.

4. Help your investors with the procedures and paper work involved in making

an investment.

Treat every customer exclusively. A satisfied customer can give you increased

business through resale and referrals of other prospective customers

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Positioning Strategy of mutual fund industry:-

Positioning starts with a product. But positioning is not what you do to a product.

Positioning is what you do to the mind of the prospect. That is, you position the

product in the mind of prospect. A companys differentiating and positioning strategy

must change as the product, market, and competitors change over time. . There

should be no under positioning, over positioning, confused positioning or

doubtful positioning.

Channel of Distribution:-

In Every asset Management Companys distribution channel played very

important roles.

Here assets management companies have distributors like

Consultants

Agents

Distributors

Advisers

Broker

Their role is very important for Assets Management Companys Office.

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Promotional Tools Employed by various mutual fund

companies:-

Some specific other document help to increase selling product like: -

(1) Banners: -

Banners define brief idea of scheme, it should be very attractive with specific

objective & its related picture in city, and Banners keep in specific places which

very help to do good publicity. It distributes only by AMCs office.

When any new scheme is launched or any new NFO coming up that times

company make banners before few days. Its helps to good advertising & easy

cover to customer or people.

(2) Application Form:

Any product like Equity, debt and balance, investor should fill up its commonApplication forms.

Form define acknowledge slip which give return to customer.

Actually 3-time stamp done in form, one of them is acknowledged slip.These forms are distributed by Assets Management Companys office.

It is all Assets Management Companys office duty to dispatch forms to their

customer like agents, brokers, and advisers time to time.

(3) Broachers:

Broachers include brief history of company. It defines when and where assets

management Company invests investors money.

This defines performance of each scheme product & also defines its comparison to

last 3 months to more than 5 years.

In end of every month Assets Management Companys office send Boucher to

their investors, brokers, agents, advisers regularly.

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NET ASSET VALUE:-

The Net Asset Value or NAV is a term used to describe the value of an entity's assetsless the value of its liabilities. The term is commonly used in relation to collectiveinvestment schemes. It may also be used as a synonym for thebook value of a firm.

NAV covers the company's current asset and liability position. Investors mightexpect the company to have large growth prospects, in which case they would be

prepared to pay more for the company than the NAV suggests.

The NAV is usually below the market price because the current values of the fundsassets are higher than the historical financial statements used in the NAV calculation.

CALCULATING NET ASSET VALUE

Unit capital is the investors subscriptions. In MF it is not treated as a liability.

Investments made on behalf of the investors are assets side of the balance sheet. There

are liabilities of short-term nature.

FUNDS NET ASSET = ASSET LIABILITIES

NAV = Net AssetsIssued Units

I.e.NAV= (market value of investments + other accrued income + other assets accrued

expenses other payables other liabilities)/ (no. Of units outstanding as at the NAV

date)

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THE FACTOR AFFECTING THE NAV ARE AS FOLLOWING:

1. Capital gains or losses on the sale or purchase of investment

Securities.

2. Dividend and income earned on the assets

3. Capital appreciation in the underlying value of the stocks holds in the portfolio

4. Other assets and liabilities

5. Number of units sold or purchased

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Facts About Mutual Fund

Equity Instruments like shares form only a part of the securities held by

Mutual Funds. Mutual Funds also invest in debt securities, which are

relatively much safer.

The biggest advantage of Mutual Funds is their ability to diversify the risk.

Mutual Funds are there in India since 1964. Mutual Funds market is much

evolved in U.S.A and is there for last 60 years.

Mutual Funds are the best solution for people who want to manage risk and

get good returns.

The size of Mutual Funds market in India is Rs. 107728 crores and that in

U.S.A is many times higher.

According to the SEBI - NCAER Survey of Indian Investors about 15 million

or 8.7% of the households have invested in Mutual Funds and there are nearly

23 million unit holders in India.

30% of investors fall in the income group of investors having monthly income

up to Rs. 10,000/-.

In U.S.A there are more deposits in the mutual funds than in bank deposits.

The truth is, as investors we should always pay attention to our mutual funds

and continue to monitor them.

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MUTUAL FUND

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Introduction to Mutual Fund

A Mutual Fund is a trust that pools the savings of a number of investors who share acommon financial goal. The money thus collected is invested by the fund manager in

different types of securities depending upon the objective of the scheme. These could

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

these investments and the capital appreciation realized by the scheme is 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.

Anybody with an invest able surplus of a few thousand rupees can invest in Mutual

Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

A mutual fund is the ideal investment vehicle for todays complex and modern

financial scenario. Markets for equity shares, bonds and other fixed income

instruments, real estate, derivatives and other assets have become mature and

information driven. Price changes in these assets are driven by global events

occurring in faraway places. A typical individual is unlikely to have the knowledge,

skills, inclination and time to keep track of events, understand their implications and

act speedily.

A mutual fund is answer to all these situations. It appoints professionally qualified

and experienced staff that manages each of these functions on a fulltime basis. The

large pool of money collected in the fund allows it to hire such staff at a very low cost

to each investor. In fact, the mutual fund vehicle exploits economies of scale in all

three areas research, investment and transaction processing.

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A draft offer document is to be prepared at the time of launching the fund. Typically,

it pre specifies the investment objective of the fund, the risk associated, the cost

involved in the process and the broad rules for entry into and exit from the fund and

other areas of operation. In India, as in most countries, these sponsors need approval

from a regulator, SEBI in our case. SEBI looks at track records of the sponsor and its

financial strength in granting approval to the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according to

the investment objective. It also hires another entity to be the custodian of the assets

of the fund and perhaps a third one to handle registry work for the unit holders of the

fund. In the Indian context, the sponsors promote the Asset Management Company

also, in which it holds a majority stake. In many cases a sponsor can hold a 100%

stake in the Asset Management Company (AMC).

E.g. Birla Global Finance is the sponsor of the Birla Sun Life Asset Management

Company Ltd., which has floated different mutual funds schemes and also acts as an

asset manager for the funds collected under the schemes.

As per SEBI regulations, mutual funds can offer guaranteed returns for a maximum

period of one year. In case returns are guaranteed, the name of the guarantor and howthe guarantee would be honored is required to be disclosed in the offer document.

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Mutual Fund Cycle

(Fig no 5.-Mutual Fund Cycle)

From the above cycle, it can be observed that how the money from the investors flow

and they get returns out of it. With a small amount of fund, investors pool their money

with the funds managers. Taking into consideration the market strategy the funds

managers invest this pool of money into reliable securities. With ups and downs in

market returns are generated and they are passed on to the investors. The above cycle

should be very clear and also effective.

The fund manager while investing on behalf of investors takes into consideration

various factors like time, risk, return, etc. so that he can make proper investment

decision.

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Critical view about Mutual Fund

Benefits

If mutual funds are emerging as favorite investment vehicle, it is because of the many

advantages they have over other forms and avenues of investing, particularly for the

investors who has limited resources available in terms of capital and ability to carry

out details research and market monitoring. The following are the major advantages

offered by mutual funds to all investors.

PROFESSIONAL EXPERTISE

Fund managers are professionals who track the market on an on going basis.

With their mix of professional qualification and market knowledge, they are

better placed than the average investor to understand the markets.

DIVERSIFICATION

Since a mutual fund scheme invests in number of stocks and/or debentures, the

associated risks are greatly reduced.

RELATIVELY LESS EXPENSIVE

When compared to direct investments in the capital market, mutual funds cost

less. This is due to savings in brokerage costs, demat costs, depository costs

etc.

LIQUIDITYInvestments in mutual funds are completely liquid and can be redeemed at Net

Assets Value (NAV) related price on any working day.

TRANSPARENCY

You will always have access to up-to-date information on the value of your

investment in addition to the complete portfolio of investments, the proportion

allocated to different assets and the fund managers investment strategy.

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FLEXIBILITY

Through features such as regular investment plans, regular withdrawal plans

and dividend investment plans, you can systematically invest or withdraw

funds according to your needs and convenience.

SEBI REGULATED

All mutual funds are registered with SEBI and function within the provisions

and regulations that protect the interests of investors.

While most investment options provide most of these features, only

Mutual Funds provide all of these options.

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Limitations

NO CONTROL OVER COST

Any investor in a mutual fund has no control over the overall cost of investing.

He pays investment management fees as long as he remains with fund, albeit in

return for the professional management and research. Fees are payable even in

declining stage. A mutual fund investor also pays fund distribution costs, which

he would not incur in direct investing. However, this shortcoming only means

that there is a cost to obtain the benefits of mutual fund services.

NO TAILOR-MADE PORTFOLIOS

Investors who invest on there own can build their own portfolios of shares and

bonds and other securities. Investing through funds means he delegates this

decision to the fund managers. The very high-net-worth individuals or large

corporate investors may find this to be a constraint in achieving their

objectives. However, most mutual fund managers help investors overcome this

constraint by offering families of funds- a large number of different schemes

within their own management company. An investor can choose form different

investment plans and construct a portfolio of his own.

MANAGING A PORTFOLIO OF FUNDS

Availability of a large number of funds can actually mean too much choice for

the investor. He may again need advice on how to select a fund to achieve his

objectives, quite similar to the situation when he has to select individual shares

or bonds to invest in.

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ENTRY AND EXIT COST

Mutual funds are a victim of their own success. When a large body like a fund

invests in shares, the concentrated buying and selling often results in adverse

price movement i.e. at the time of buying, the fund ends up paying a high price

and by selling it realizes a lower price. For obvious reasons, this problem is

even more severe for funds investing in small capitalization stocks. However,

given the large size of debt market, excluding UTI, most debt funds do not

face this problem.

CHANGE OF INDEX COMPOSITION

The indices changing over the world to reflect changing market conditions.

There is an inherent survivorship bias in this process, with the bad stocks

bided out and replaced by emerging blue chips. This is a severe problem in

India with the sensex having being changing twice in last 5 years, with each

change being quite substantial. Another reason for change index composition

is Mergers and Acquisitions. The weight age of the shares of a particular

company in the index changes if it acquires a large company not a part of the

index.

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Why Investor Needs Mutual Fund

Mutual funds offer benefits, which are too significant to miss out. Any investment has

to be judged on the yardstick of return, liquidity and safety. Convenience and tax

efficiency are the other benchmarks relevant in mutual fund investment. In the

wonderful game of financial safety and returns are the tows opposite goals and

investors cannot be nearer to both at the same time. The crux of mutual fund investing

is averaging the risk.

Many investors possibly dont know that considering returns alone, many mutual

funds have outperformed a host of other investment products. Mutual funds have

historically delivered yields averaging between 9% to 25% over a medium to long

time frame. The duration is important because like wise, mutual funds return taste

bitter with the passage of time. Investors should be prepared to lock in their

investments preferably for 3 years in an income fund and 5 years in an equity funds.

Liquid funds of course, generate returns even in a short term.

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Mutual Fund Risk

Mutual funds face risks based on the investments they hold. For example, a bond fund

faces interest rate risk and income risk. Bond values are inversely related to interest

rates. If interest rates go up, bond values will go down and vice versa. Bond income is

also affected by the changes in interest rates. Bond yields are directly related to

interest rates falling as interest rates fall and rising as interest rates.

Similarly, a sector stock fund is at risk that its price will decline due to developments

in its industry. A stock fund that invests across many industries is more sheltered from

this risk defined as industry risk.

Followings are glossary of some risks to consider when investing in mutual funds.

Country Risk

The possibility that political events (a war, national election), financial problems

(rising inflation, government default), or natural disasters will weaken a countrys

economy and cause investments in that country to decline.

Income Risk

The possibility that a fixed-income funds dividends will decline as a result of falling

overall interest rates.

Market Risk

The possibility that stock fund or bond fund prices overall will decline over short oreven extended periods. Stock and bond markets tend to move in cycles, with periods

when prices rise and other periods when prices fall.

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Risk Return Reward in Mutual Fund

Liquid Fun

Short Ter

Fund

Incom e Fun

MIP

Balance Fun

Equity Fun

(Fig no 6: - Risk Return in Mutual Fund)

This graph shows risk and return impact on various mutual funds. There is a direct

relationship between risks and return, i.e. schemes with higher risk also have potential

to provide higher returns.

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TYPES OF

MUTUAL FUNDS

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Types of Mutual Fund

There are a wide variety of Mutual Fund schemes that cater to your needs, whatever

your age, financial position, risk tolerance and return expectation. Whether as the

foundation of your investment program or as a supplement, Mutual Fund schemes can

help you meet your financial goals. The different types of Mutual Funds are as

follows:

Diversified Equity Mutual Fund Scheme

A mutual fund scheme that achieves the benefits of diversification by investing inthe stocks of companies across a large number of sectors. As a result, it minimizes

the risk of exposure to a single company or sector.

Sectoral Equity Mutual Fund Scheme

A mutual fund scheme, which focuses on investments in the equity of companies

across a limited number of sectors usually one to three.

Index Funds

These funds invest in the stocks of companies, which comprise major indices such

as the BSE Sensex or the S&P CNX Nifty in the same weight age as the

respective indices.

Tax Saving Equity Schemes

Schemes investing predominantly in equity which offer tax rebates to investorsunder specific provisions of the Income Tax Act, 1961 as the Government offers

tax incentives for investment in specified avenues. E.g. Equity Linked Savings

Schemes (ELSS). Currently rebate u/s 88 can be availed unto a maximum

investment of Rs 10,000. A Lock-in of 3 years is mandatory.

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Monthly Income Plan Scheme

A mutual fund scheme which aims at providing regular income (not necessarily

monthly, don't get misled by the name) to the unit holder, usually by way of

dividend, with investments predominantly in debt securities (up to 95%) of

corporate and the government, to ensure regularity of returns, and having a

smaller component of equity investments (5% to 15%) to ensure higher return.

Income schemes

Debt oriented schemes investing in fixed income securities such as bonds,

corporate debentures, Government securities and money market instruments.

Floating-Rate Debt Fund

A fund comprising of bonds for which the interest rate is adjusted periodically

according to a predator-mined formula, usually linked to an index.

Gilt Funds

These funds invest exclusively in government securities.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income as such

schemes invest both in equities and fixed income securities in the proportion

indicated in their offer documents. They generally invest 40-60% in equity and

debt instruments.

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Structure of Mutual Fund

(Fig no 7 - Structure of Mutual Fund)

Fund Sponsor

Any person or corporate body that establishes the Fund with a net worth of Rs. 10

crores and has paid out consistent returns to its investors for last three years

consistently and registers it with SEBI can be a fund sponsor. The fund sponsor forms

a trust and appoints board of trustees. He appoints Custodian and Asset Management

Company (AMC) either directly or through trust in accordance with SEBI regulations.

SEBI regulations also define that a sponsor must contribute at least 40 % to the net

worth of the asset management company.

AMC

Unitholders

Savings

Units

Trust

Investments

Trust

AMCCustodian

Registrar

SEBI

Returns

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Trustees

Trust is created through the document called Trust deed that is executed by the fund

sponsor and registered with SEBI. Board of trustees- a body of individuals or a trust

company-a corporate body may manage the trust cum Mutual Fund. These are

protector of unit holders interests.2/3 of the trustees will be individuals and will not be

associated with the sponsors.

Following are the rights of trustees:

Approve each of the schemes floated by the assets Management Company.

Right to request any necessary information from assets Management

Company.

Right to take corrective action if they believe that of funds business.

Right to dismiss the assets Management Company.

Ensure that any shortfall in net worth of the assets Management Company

is made up.

Following are the obligations of trustees:

Enter in to an investment management agreement with the assets

Management Company.

Ensure that the funds transactions are in accordance with the trust

deed.

Furnish to SEBI on a half yearly basis, a report on the funds activities.

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Ensure that no change in the fundamental attributes of any scheme or

the trust or any other change, which would affect the interest of unit

holder, happens with informing to unit holder.

Review the investor complaints received and redressed of the same by

assets Management Company.

Asset Management Company

This acts as investment manager of the trust under the board supervision and direction

of trustees. In has to be approved and registered with SEBI.

This will float and manage different investment schemes in the name of trust and in

accordance with SEBI regulations. These acts in the interest of holders and reports to

the trustees. At least 50% of the directors on the board are independent of the sponsor

or the trustees.

Following are the obligations of Assets Management Company:

Float investment schemes only after getting approval from the trustees and

SEBI.

Send quarterly reports to trustees.

Make the required disclosures to the investors in the area such as calculation of

NAV and repurchase price.

Must maintain a net worth of at least Rs.10 crores at all the times

Will not purchase or sale securities through any broker with the brokerage of 5 % or

more of the aggregate purchases and sale of securities made by the Mutual Fund in all

its schemes.

Assets Management Company cannot act as trustees of any other Mutual Fund.

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Do not undertake any other activity conflicting with managing the fund.

Following are the bodies appointed by the trustees/AMC.

Custodian is the responsible person for physical handling and safe keeping of the

securities. He should be independent of the sponsor and registered with SEBI.

Indian capital market is moving away from physical certificates for securities to

dematerialized form with a depository. He holds dematerialized security holdings of

Mutual Fund.

Custodian

Often an independent organization, it takes custody of securities and other assets of

mutual fund. Its responsibilities include receipt and delivery of securities, collecting

income-distributing dividends, safekeeping of the units and segregating assets and

settlements between schemes. Their charges range between 0.15-0.2 percent of the net

value of the holding. Custodians can service more than one fund.

Depository

Indian capital markets are moving away from having physical certificates for

securities, to ownership of these securities in dematerialized form with a Depository.

Thus, a mutual funds dematerialized securities holdings will be held by a Depository

through a Depository Participant. A funds physical securities will continue to be held

by a Custodian. Thus, deliveries of a funds securities are given or received by acustodian or a depository participant, at the instruction of the AMC, although under

the overall direction and responsibility of the Trustees.

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The other various assets management companies details are as

under: -

A) Bank sponsored

a. BOB Asset Management Co. Ltd.

b. Canbank Investment Management Services Ltd.

c. PNB Asset Management Co. Ltd.

d. SBI Funds Management Ltd.

e. UTI Asset Management Company (P) Ltd.

B) Institutions

a. GIC Asset Management Co. Ltd.

b. IDBI Principal Asset Management Co. Ltd.

c. IL & FS Asset Management Co. Ltd.

d. Jeevan Bima Sahayog Asset Management Co. Ltd.

C) Private Sector

1. Foreign

a. Principal Asset Management Co. Ltd.

b. Fidelity Asset Management Co. Ltd.

2. Indian

a. Benchmark Asset Management Co. Ltd.b. Cholamandalam Asset Management Co. Ltd.

c. Escorts Asset Management Ltd.

d. J.M. Capital Management Ltd.

e. Kotak Mahindra Asset Management Co. Ltd.

f. Sundaram Asset Management Company

g. Reliance Capital Asset Management Ltd.

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3. Joint Ventures - Predominantly Indian

a. Birla Sun Life Asset Management Pvt. Co. Ltd.

b. Credit Capital Asset Management Co. Ltd.

c. DSP Merrill Lynch Fund Managers Limited

d. First India Asset Management Private Ltd.

4. Joint Ventures Predominantly Foreign

a. Alliance Capital Asset Management (India) Pvt. Ltd.

b. Deutsche Asset Management (India) Pvt. Ltd.

c. Dundee Investment Management & Research (Pvt.) Ltd.

d. HSBC Asset Management (India) Private Ltd.

e. ING Investment Management (India) Pvt. Ltd.

f. Morgan Stanley Investment Management Pvt. Ltd.

g. Prudential ICICI Management Co. Ltd.

h. Sun F & C Asset Management (I) Pvt. Ltd

I. Templeton Asset Management (India) Pvt. Ltd.

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Regulatory

Aspects

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AMFI (Association of Mutualfund in India)

AMFI not a Self Regulatory Organization (SRO).

Its made to promote mutual fund in the masses and give recommendation in

order to uphold the interest of the investor.

Objectives of AMFI:-

To define and maintain high professional and ethical standards in all areasof operation of mutual fund industry

To recommend and promote best business practices and code of conduct tobe followed by members and others engaged in the activities of mutualfund and asset management including agencies connected or involved inthe field of capital markets and financial services.

To interact with the Securities and Exchange Board of India (SEBI) and to

represent to SEBI on all matters concerning the mutual fund industry.

To represent to the Government, Reserve Bank of India and other bodieson all matters relating to the Mutual Fund Industry.

To develop a cadre of well-trained Agent distributors and to implement aProgramme of training and certification for all intermediaries and otherengaged in the industry.

To undertake nation wide investor awareness Programme so as to promote proper understanding of the concept and working of mutual funds.

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SEBI (Security Exchange Boardof India)

Securities and Exchange Board of India ("SEBI"), the Capital Markets regulator has

clearly defined rules, which govern mutual funds. These rules relate to the formation,

administration and management of mutual funds and also prescribe disclosure and

accounting requirements. Such a high level of regulation seeks to protect the interest

of investors.

All Mutual Funds are registered with SEBI and they function within the provision ofstrict regulations designed to protect the interests of investors. The operations of

Mutual Funds are regularly monitored by SEBI.

RBI (Reserve Bank of India)

Reserve bank of India was the regulator of Mutual Fund before SEBI. It regulated

mutual fund initially and there were only few schemes in the market. But now with

coming of SEBI, it has now become the main regulator of the Mutual Fund. RBI now

only governs Bank Sponsored Mutual Fund.

Ministry of Finance

The Ministry of Finance, which is charged with implementing the government

policies, ultimately supervises both the RBI and the SEBI. Besides being the ultimate

policy making and supervising entity, the MOF has also been playing the role of an

Appellate Authority for any major disputes over SEBI guidelines on certain specific

capital market related guidelines in particular any cases of insider trading or

mergers and acquisitions.

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Company Law Board

Mutual fund Asset Management Companies and corporate trustees are companies

registered under the Companies Act, 1956, and are therefore answerable to regulatory

authorities empowered by the Companies Act.

The primary legal interface for all companies is the Register of Companies (RoC).

The Department of Company Affairs in turn supervises roCs. The DCA forms part of

Company Law Board, which is part of the Ministry of Law and Justice of the Govt. of

India.

The RoC ensures that the assets management company or the Trustee Company as the

case may be is in compliance with all Companies Act provisions. All assets

management company accounts and records are filed with the Roc, who may demand

additional information and documents from the company. The RoC plays the role of a

watchdog with respect to regulatory compliance by companies.

The Company Law Board (CLB) is the apex regulatory authority under the

Companies Act. While the CLB guides the DCA, another arm of the CLB called the

Company Law Bench is the Appellate Authority for corporate offences.

The Company Law Board (CLB) is a body specially constituted by the Central

Government for carrying out judicial proceedings with respect to company affairs.

Since mutual fund assets Management Company are companies, the CLBs role

assumes importance.

As the members of assets management companies or Trustee companies will usuallybe the sponsors and their joint venture partners or associates, it is unlikely that mutual

fund investors will have anything to do with any of these regulators. The authorities

would generally regulate the assets management companies whose shareholders may

have recourse to them in specific cases.

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Investors Rights

Proportionate right to beneficial ownership of schemes assets

Right to obtain information from trustees

Entitled to receive dividend warrants within 30 days of declaration of

dividend

Inspect major documents of the fund

Appointment of the assets management company can be terminated by

75% of the unit holders of the scheme present and voting

Right to approve of changes in fundamental attributes of a close ended

scheme (75 % of unit holders should approve) - right to be informed so in open

ended schemes so that they can redeem

Right to receive a copy of annual financial statements of fund and

periodic transaction statements

75% of the unit holders can resolve to wind up the scheme

Legal Limitations to Investors

Unit holders can not sue the trust

Can initiate legal proceedings against trustees

Sponsor of mutual funds have no obligation to meet any shortfall in the

assured return - unless explicitly guaranteed in the offer document

No rights to a prospective investor

Investor Obligations

Carefully study the offer document before investing

Monitor his investment in a scheme by referring financial statements,

performance updates and research reports sent by the assets management

company.

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RESEARCH

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Purpose of the Research

With liberalization, privatization and globalization there has been a major change in

the Indian Mutual Funds Industry. The momentum is on and one is sure to see similar

hectic activity at the offices of the new entrants especially after the 90s as private

sector gained entry in the Indian markets.

With the private sector penetration, a large number of schemes have also been

introduced due to which the average consumer has become vary sensitive to the new

schemes coming its way. So to ensure about the various consumer attitudes, a survey

was undertaken.

De facto, to ensure what the consumer thinks & what it thinks the best we

undertook a consumer survey, to get a clear picture of the future of the Mutual Funds

companies who are busy wooing the customers, with their lucrative schemes, to

survive the rat race & emerge as no.1 in this field.

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Research Objective

Research Objectives addresses the purpose of the investigation. It is here that you

layout exactly what is being planned by the proposed research. The Research

Objectives flows naturally from the problem statement, giving the sponsor specific,

concrete, and achievable goals. It is best to list the objectives either in order of

importance or in general terms first, moving to specific terms. Research Objective is

the basis for judging the Research process. It is the final step giving exact definition

of problem.

Analyzing mutual fund awareness in retail investors of HDFC

assets Management Company in Surat.

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RESEARCH

METHODOLODY

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Research methodology is a systematic plan or schedule or program of the researchdone. It describes all the procedures of the research.

Research Design

Research design can be described as an out line of a research project working or a

pattern. In a research design there are series of prior decision that together provide

a master plan for completing a research project. Research design is proved to be a

bridge between what has been established and what is to be done in conduct of the

studies. Research design should be compressive and it should provide whichmethod to be used and what work to be done.

Research design describes as a master plan a series of key decisions that serves a

model for conducting a research project. There are the main components of

research design.

Objective of research

Data inputs

Analysis of data collected

The research design was exploratory type and the focus was on getting mutual

funds employees views for various products, expectations from market.

Exploratory Research:

Exploratory study goes beyond description and attempts to explain the reasons for the

phenomenon that the descriptive study only observed. The researcher uses theories or

at least hypotheses to account for the forces that caused a certain phenomenon to

occur.

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Sources of Data

The gathering of data may range from a simple observation at one location to a

grandiose survey of multinational corporations at sites in different parts of the world.

The method selected will largely determine how the data are collected. DATA is the

facts presented to the researcher from the studys environment. Characteristics of the

data are as follows:

Data are more metaphorical than real

Data are processed by our senses-often limited in comparison to

The senses of other living organisms.

Capturing data are said to be trustworthy because they may be

Verified.

Data classify their verity by closeness to the phenomena

There are two kinds of data that can be collected for research purpose. Based on the

requirement in the research appropriate data is collected. Both the kinds of data are

shown below in the figure:

Error: Reference source not found

1) Primary data source

Primary data are collected and gathered for the first time. Primary data are sought for

their proximity to the truth and controls over error. Advantages of primary data are:

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Researchers can collect precisely the information they want.

They usually can specify the operational definitions used and can eliminate, or

at least monitor and record the extraneous influences on the data as they are

gathered.

2) Secondary data source

Someone else collects secondary data. So, it becomes secondary information for the

research. Secondary data have had least one level of interpretation inserted between

the event and its recording. Reasons for using the secondary data are listed below:

They fill a need for specific reference or citation on some point

Secondary data are an integral part of a larger research study

Secondary data may be used as the sole basis for a research study, since

In many research situations one cannot conduct primary research

Because of physical, legal, or cost influences.

Analyzing the requirement of data, it was found that primary data is more important

for achieving Research Objective. Primary data is collected with the help of

interviews.

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Sampling Plan

Collecting the required information from the right source is very important. Sources

from which the data are collected differ as per the required of researcher.

Basically there are two types of data collection sources:

1) Sampling Unit:

The sampling unit primarily consisted of investors like businessman, professionals,

salaried employees and others. The sample unit is taken from the Surat city of Gujarat

region.

2) Sample Size:

Though large sample give more reliable results than small samples but increases the

cost, time and non-sampling error. Keeping in view these constraints 100 respondents

were chosen. Attempts have been made to see that samples are chosen from different

areas of Surat.

I have taken 100 responds as a sample size for this particular project.

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The following table shows area wise distribution of sample size.

AREA SAMPLE

UDHNA 17

MORABHAGAL 3

ADAJAN 15

RANDER ROAD 17

RALWAY STATIONROAD 5

PARLE POINT 5

GHODDOD ROAD 8

PIPLOD 2

MAJURAGATE 2

RING ROAD 4BHAGAL 4

KATARGAM 4

VARACHA 2

CITY LIGHT ROAD 6

NANPURA 2

PANDESARA 1

VED ROAD 1

PAL 1

BHESTAN 1

TOTAL 100

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Data Collection Method

This step involves making a very specific plan about how you will conductyour research and collect your data.

1) Surveys & Questionnaires

Survey The means by which quantitative research is conducted.

Questionnaire A prepared set of questions designed to generate data

necessary for accomplishing the objectives of the research project.

I used survey method for data collection. Information was collected by

personal interviews through questionnaire.

Following types of measurement scales were used in the questionnaire.

Simple category scale: - (Q-2, Q-4, Q-8, Q-9)

Multiple choice single response scales: - (Q-6)

Multiple choice multiple response scale:-(Q-1, Q-3, Q-5, Q-7)

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DATA ANALYSIS

AND

FINDINGS

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Q-1 which investment avenues are you aware of?

INVESTMENT AVANUES FREQUENCY PERCENTAGE

EQUITY/MUTUAL FUND 100 34.36%

POST OFFICE 94 32.30%

F.D. 86 29.55%

OTHERS 11 3.79%

100

94

86

11

EQUITY/M.F.

POST OFFICE

F.D.

OTHERS

(Fig no 9: - Define investments avenues)

Interpretation: -

From the above charts we can interpret that awareness of equity/mutual fund, postoffice (NSC, KVP, and PPF), fixed deposits is more compare to others like GOVTISSUED Instrument, GOVT Backed Instrument, Real Estate, gold etc. so HDFCassets Management Company needs to focus more on those investors who are moreinvest in KVP, NSC, PPF and fixed deposits.

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Q-2 do you invests in mutual fund?

3

97

0

20

40

60

80

100

120

YES NO

PREFERNC

NOO

FPEOPLE

Series1

(Fig no 10: - Define investments in mutual fund)

From the above chart it is getting clear that now a days people are like to invest their

money in mutual fund of different assets management company, out of 100 people

sampled 97 are investing in the mutual fund.

YES NO

97 3

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Q-4 Do you invest in HDFC assets management companyLimited?

YES NO TOTAL

56 44 100

56

44

0

10

20

30

40

50

60

YES NO

PREFERNCE

NOO

F

PEOPLE

Series1

(Fig no 12: - Define investment in HDFC assets Management Company)

From the above chart it is getting clear that out of 100 people sampled, 56peoples are invest in HDFC assets management company and 44 peoplesare not invests in HDFC assets management company.

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Q-5 If yes, in which scheme would you invest in HDFC assetsManagement company limited?

SCHEMES OF HDFC

NO OF

INVESTOERS

EQUITY FUND 43

CAPITAL BUILDER FUND 2

PRUDENCE FUND 17

TAX SAVER FUND 35

CORE AND SATELITE FUND 3

TOP 200 FUND 16

BALANCED FUND 1

GROWTH FUND 16

OTHERS FUND 5

NO OF INVESTOER

43

2

1735

3

16

116 5

EQUITY FUND CAPITAL BUILDER FUND

PRUDENCE FUND TAX SAVER FUND

CORE AND SATELITE FUNDTOP 200 FUND

BALANCED FUND GROWTH FUND

OTHERS FUND

(Fig no 13: - Define scheme in which investors invest in HDFC assetsManagement Company)

From the above chart we can see that in HDFC assets Management CompanysEQUITY FUND maximum number (43) of people are invest. In TAX SAVER FUND35 number of people invests. In both TOP 200 FUND and GROWTH FUND 16numbers of people are invests but in BALANCED FUND, CAPITAL BUILDERFUND, CORE AND SATELITE FUND only 1,2 and 3 people are invest so investors

are not invested in these 3 schemes. In PRUDENCE FUND 17 numbers of people a

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