A SUMMER TRAINING PROJECT REPORT

ON

“Comprehensive study on Mutual Fund Industry”IN

INDIA INFOLINE LTD SUBMITTED IN THE PARTIAL FULFILLMENT FOR THE AWARD OF

THE DEGREE OF MASTER IN BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF:

Ms. ANSHU LOCHAB

Assistant Professor, RDIAS

SUBMITTED BY:

VAIBHAV SHARMA

Enrollment No: 08915903911

MBA, Semester III

Batch 2011 – 2013

RUKMINI DEVI INSTITUTE OF ADVANCED STUDIES

An ISO 9001:2008 Certified Institute

(Approved by AICTE, HRD Ministry, Govt. of India)

Affiliated to Guru Gobind Singh Indraprastha University, Delhi

2A & 2B, Madhuban Chowk, Outer Ring Road, Phase-1, Delhi-110085

STUDENT DECLARATION

This is to certify that I have completed the Project titled “Comprehensive study on Mutual

Fund Industry” under the guidance of “Ms. Anshu Lochab” in the partial fulfillment of the

requirement for the award of the degree of “Masters in Business Administration” from

“Rukmini Devi Institute of Advanced Studies, New Delhi.”

This is an original work and I have not submitted it earlier elsewhere.

Vaibhav Sharma

Enrollment No: 08915903911

Class & Section: MBA, Semester-III

CERTIFICATE OF GUIDE

This is to certify that the project titled “Comprehensive study on Mutual Fund Industry”

is an academic work done by Vaibhav Sharma submitted in the partial fulfillment of the

requirement for the award of the degree of “Masters in Business Administration” from

“Rukmini Devi Institute of Advanced Studies, New Delhi.” under my guidance and direction.

To the best of my knowledge and belief the data and information presented by him / her in

the project has not been submitted earlier elsewhere.

Ms. Anshu Lochab

Assistant Professor

RDIAS

ACKNOWLEDGEMENT

It gives me immense pleasure to present this project report on Comprehensive Study on

Mutual Fund Industry carried out at Infia Infoline ltd. (IIFL). This project is the result of

time, efforts and knowledge contributed by various member of the organization. The summer

training program was the great experience for me as in this, I got the opportunity to learn and

experience the corporate world.

No work can be carried out without the help and guidance of various persons. I am happy to

take this opportunity to express my gratitude to those who have been helpful to me in

completing this project report. They have been the source of guide and motivation for the

completion of project.

I pay my gratitude and sincere regards to Ms. Anshu Lochab, my project Guide for giving

me the cream of his knowledge. I am thankful to her as she has been a constant source of

advice, motivation and inspiration. I am also thankful to her for giving her suggestions and

encouragement throughout the project work.

I would like to thank my project mentors at IIFL, Mr. Praveen Sharma for giving his

valuable time and advices. They have helped me to gain practical and theoretical aspect of the

organization.

VAIBHAV SHARMA

MBA – III

08915903911

EXECUTIVE SUMMARY

Among various financial instruments, i.e., shares, MFs, bonds and debentures, Mutual Fund

is a special type of financial instrument that pools the funds of investors who seek to

maximize ROI.

The Indian mutual fund industry is mainly divided into three kinds of categories. These

categories include public sector, nationalized banks and private sector & foreign players. 

In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being.

Mutual Funds have not only contributed to the India growth story but have also helped

families tap into the success of Indian Industry. As information and awareness is rising more

and more people are enjoying the benefits of investing in mutual funds. The main reason the

number of retail mutual fund investors remains small is that nine in ten people with incomes

in India do not know that mutual funds exist. But once people are aware of mutual fund

investment opportunities, the number who decide to invest in mutual funds increases to as

many as one in five people. The trick for converting a person with no knowledge of mutual

funds to a new Mutual Fund customer is to understand which of the potential investors are

more likely to buy mutual funds and to use the right arguments in the sales process that

customers will accept as important and relevant to their decision.

UTI Mutual Fund was one of the leading Mutual Fund companies in India with a corpus of

more than Rs 60,923 Crores and it is the public sector mutual fund. Now HDFC Mutual fund

became the Top mutual fund holding largest AUM. Bank of Baroda, Punjab National Bank,

Can Bank and SBI are the major nationalized banks mutual fund. 

At present mutual fund industry is mainly dominated by private and foreign sector players

which include major players like Prudential ICICI Mutual Fund, HDFC Mutual Fund,

Reliance Mutual Fund etc. are private sector mutual funds players while Franklin Templeton

etc. are major foreign mutual fund player.

MFs presently offer a variety of options to investors such as income, balanced, liquid, gilt,

index, exchange traded and sectoral funds. Today, there are 45 asset management companies

covering Indian public sector, private sector and joint ventures with foreign players. These 45

mutual fund houses put together mobilized about Rs 6,92,705 crores worth assets under

management.

The variation occurred in mobilization of funds during various periods is very high with

Private sector participations followed by the public sector excluding UTI, and by UTI. There

is considerable competition between foreign and domestic owned bodies and within domestic

owned bodies.

According to the ASSOCHAM (Associated Chambers of Commerce and Industry of India)

study, Asset Under Management (AUM) as percentage of GDP in India is 4.12% as against

those of Australia 88.22%, Germany 10.54%, Japan 7.57%, UK 18.81%, USA 61.27%,

Canada 34.33%, France 59.63% and Brazil 19.95%.

CHAPTER 1

INTRODUCTION

1.1 About Organization

1.1.1 Company profile

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd (NSE:

INDIAINFO, BSE: 532636) and its subsidiaries, is one of India’s premier providers of

financial services. INDIA INFOLINE LIMITED is a National company and a one-stop

financial services shop, most respected for quality of its advice, personalized service and

cutting-edge technology.

IIFL offers advice and execution platform for the entire range of financial services covering

products ranging from Equities and derivatives, Commodities, Wealth management, Asset

management, Insurance, Fixed deposits, Loans, Investment Banking, Gold bonds and other

small savings instruments.

IIFL’s research is available not just over the Internet but also on international wire services

like Bloomberg, Thomson First Call and Internet Securities besides others where it is

amongst one of the most read Indian brokers.

IIFL is a listed company with a consolidated group net worth of about Rs 1,800 crores. The

income and net profit during FY2010-11 were Rs. 14.7 bn and Rs. 2.1 bn respectively.

The Group has a consistent and uninterrupted track record of profits and dividends since its

listing in 2005. The company is listed on both Exchanges and also trades in the derivatives

segment.

IIFL’s Crisil and ICRA Rating for short term is top rated as CRISIL A1+ and ICRA (A1+)

respectively. For long term, IIFL has been rated ICRA(AA-) by ICRA and CRISIL

AA-/Stable by CRISIL indicating high degree of safety for timely servicing of financial

obligations.

IIFL is having near over 3,000 business locations across 500 cities in India. One can reach

IIFL in a variety of ways, online, over the phone and through our branches. All the offices are

connected with the corporate office in Mumbai with cutting edge networking technology. The

group caters to a customer base of about a million customers.

Their physical presence in key global markets includes subsidiaries in Colombo, Dubai, New

York, Mauritius, London, Singapore and Hong Kong.

1.1.2 Vision and Mission of the Company

VISION: To be the most respected company in the financial services space.

MISSION: To be the full fledged financial services company known for its quality of advice,

personalized services and cutting edge technology.

1.1.3 Product range of the company

Equities: IIFL’s core offering, gives a leading market share in both retail and institutional

segments. Over a million retail customers rely on its research, as do leading FIIs and MFs

that invest billions.

Commodities: India Infoline extension into commodities trading reconciles its strategic

intent to emerge as a one stop solutions financial intermediary. Its experience in

securities broking has empowered it with requisite skills and technologies. The Companies

commodities business provides a contra-cyclical alternative to equities broking. The

Company was among the first to offer the facility of commodities trading in India’s young

commodities market (the MCX commenced operations only in 2003). The commodities

market has several products with different and non-correlated cycles.

Insurance: An entry into this segment helped complete the client's product basket;

concurrently, it graduated the Company into a one stop retail financial solutions provider. To

ensure maximum reach to customers across India, IIFL have employed a multi pronged

approach and reach out to customers via our Network, Direct and Affiliate channel.

Portfolio Management: Portfolio Management Service is a product wherein an equity

investment portfolio is created to suit the investment objectives of a client. India Infoline

invests your resources into stocks from different sectors, depending on your risk-return

profile. This service is particularly advisable for investors who cannot afford to give time or

don't have that expertise for day-to-day management of their equity portfolio.

Private Wealth Management: Services cater to over 2500 families who have trusted IIFL

with close to Rs 25,000 crores ($ 5bn) of assets for advice.

Investment banking services: They are for corporates looking to raise capital. IIFL’s forte is

Equity Capital Markets, where they have executed several marquee transactions.

Credit & Finance: It focuses on secured mortgages and consumer loans. Their high quality

loan book of over Rs. 6,200 crores ($ 1.2bn) is backed by strong capital adequacy of

approximately 20%.

IIFL Mutual Fund: It made an impressive beginning in FY12, with lowest charge Nifty

ETF. Other products include Fixed Maturity Plans.

Life Insurance, Pension and other Financial Products: An open architecture completes

IIFL’s product suite to help customers build a balanced portfolio.

1.1.4 Subsidiaries

IIFL Finance ltd.

IIFL Insurance Broker

IIFL Commodities ltd.

IIFL (Asia) PTE ltd.

IIFL Wealth management ltd.

IIFL Capital ltd.

IIFL Securities Ceylon ltd.

IIFL Asset Management Company ltd.

1.1.5 Organizational Structure

Fig 1.1: Organizational Structure

1.1.6 Present Leadership

Directors Name Designation

Mr. Nirmal Jain Chairman

Mr. R Venkataraman Managing Director

Mr. Nilesh Vikamsey Independent Director

Mr. Sunil Kaul Independent Director

Mr. Kranti Sinha Independent Director

Mr. Arun K. Purvar Independent Director

Table 1.1: Present leadership

1.1.7 Few milestones

2011: Launched IIFL Mutual Fund.

2010: Received in-principle approval for membership of the Singapore Stock Exchange;

received membership of the Colombo Stock Exchange

2009: Acquired registration for Housing Finance; SEBI in-principle approval for Mutual

Fund; Obtained Venture Capital license

2008: Launched wealth management services under the ‘IIFL Wealth’ brand; set up India

Infoline Private Equity fund; received the Insurance broking license from IRDA; received the

venture capital license; received in principle approval to sponsor a mutual fund; received

‘Best broker- India’ award from Finance Asia; ‘Most Improved Brokerage- India’ award

from Asia money.

2007: Commenced institutional equities business under IIFL; Formed Singapore subsidiary,

IIFL (Asia) Pte Ltd.; Launched a proprietary trading platform; inducted an institutional

equities team; formed a Singapore subsidiary; raised over USD 300 mn in the group;

launched consumer finance business under the ‘Moneyline’ brand.

2006: Acquired membership of DGCX; commenced the lending business; launched

investment banking services.

2005: Maiden IPO and listed on NSE, BSE.

2004: Acquired commodities broking license; Launched Portfolio Management Service

2003: Launched proprietary trading platform Trader Terminal for retail customers.

1999:Restructured the business model to embrace the internet; launched

www.indiainfoline.com

1997: Launched research products of leading Indian companies, key sectors and the economy

Client included leading FIIs, banks and companies.

1995: Commenced operations as an Equity Research firm

1.1.8 Achievements

IIFL has received membership of the Colombo Stock Exchange becoming the first

foreign broker to enter Sri Lanka.

IIFL owns and manages the website, www.indiainfoline.com, which is one of India’s

leading online destinations for personal finance, stock markets, economy and

business.

IIFL has been awarded the ‘Best Broker, India’ by Finance Asia and the ‘Most

improved brokerage, India’ in the Asia Money polls.

India Infoline was also adjudged as ‘Fastest Growing Equity Broking House -

Large firms’ by Dun & Bradstreet.

A forerunner in the field of equity research, IIFL’s research is acknowledged by none

other than Forbes as ‘Best of the Web’ and ‘…a must read for investors in Asia’.

1.1.9 IIFL’s philosophy on Corporate Governance

IIFL (India Infoline) is committed to placing the Investor First, by continuously striving to

increase the efficiency of the operations as well as the systems and processes for use of

corporate resources in such a way so as to maximize the value to the stakeholders. The Group

aims at achieving not only the highest possible standards of legal and regulatory compliances,

but also of effective management.

1.1.10 SWOT Analysis

SWOT Analysis is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities, and threats for a business entity.

STRENGTHS

Customization: It understands the dreams, needs, aspirations, concerns and resources

are unique and this reflects in every move they do for the sake of individual customer.

Expertise: India Infoline Ltd brings within the customers reach their institutional

expertise and the ability to effectively combine an invaluable understanding of the

financial markets, with an intention of building a long-term partnership.

One-stop-shop for all the investment needs: India Infoline Ltd gives all the types of

services and products an individual investor can dream and think off. The entire

financial products and services are under one-roof.

Competitive pricing: It charges less brokerage compared to its competitors.

WEAKNESSES

Tedious procedures: Tedious procedures and delays in processing the data and

documents of new customers.

Fund transfer: It has tie-ups with only 5 banks for online fund transfer, where as

other competitors have more tie-ups.

Attrition: High attrition rates in trainee’s category.

OPPORTUNITIES

The company should adopt some strategies to increase the business through existing

clients as economy seems to be completely out of the recession.

Huge untapped market in rural areas, Tier2 and Tier 3 cities and towns of India can be

concentrated to increase the business

Many a banks are offering fund transfer services. The company can increase the tie-

ups for fund transfers at attract customers of different banks.

THREATS

Stiff competition from existing players in the market and there is also a threat of new

entrants. It has lead to cut throat competition in terms of brokerage charges and

exposure

Changing economic scenario in India and changes in government policies will have

great impact on the revenue of this company

Many investors burnt their fingers during the bearish market conditions. It has turned

many a trading accounts inoperative.

1.2 About the topic

COMPREHENSIVE STUDY ON MUTUAL FUND INDUSTRY

1.2.1 about mutual funds

A mutual fund is just the connecting bridge or a financial intermediary that allows a group of

investors to pool their money together with a predetermined investment objective. The

mutual fund will have a fund manager who is responsible for investing the gathered money

into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying

units or portions of the mutual fund and thus on investing becomes a shareholder or unit

holder of the fund.

Mutual funds are considered as one of the best available investments as compare to others

they are very cost efficient and also easy to invest in, thus by pooling money together in a

mutual fund, investors can purchase stocks or bonds with much lower trading costs than if

they tried to do it on their own. But the biggest advantage to mutual funds is diversification,

by minimizing risk & maximizing returns.

There are many types of mutual funds. You can classify funds based Structure (open-ended &

close-ended), Nature (equity, debt, balanced), Investment objective (growth, Income, money

market) etc.

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

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

nationalized banks and smaller private sector players.

Fig 1.2: Working of a mutual fund

1.2.2 Evolution of Mutual Funds Industry

The formation of Unit Trust of India (UTI) marked the evolution of the Indian mutual fund

industry in the year 1963. The primary objective at that time was to attract the small investors

and it was made possible through the collective efforts of the Government of India and the

Reserve Bank of India.

Over a period of 25 years this grew fairly successfully and gave investors a good return, and

therefore in 1989, as the next logical step, public sector banks and financial institutions were

allowed to float mutual funds and their success emboldened the government to allow the

private sector to foray into this area.

The history of mutual fund industry in India can be better understood by following phases:

PHASE I - Establishment and Growth of UTI (1964-87): Unit Trust of India (UTI) was

established on 1963 by an Act of Parliament by the Reserve Bank of India and functioned

under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI

was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over

the regulatory and administrative control in place of RBI. The first scheme launched by UTI

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

management.

PHASE II - Entry of Public Sector Funds (1987-93): 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), 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.

PHASE III - Emergence of Private Sector Funds (1993-03): With the entry of private

sector funds in 1993, a new era started in 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 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 UTI with Rs 44,541 crores of AUM was way ahead of other mutual funds.

PHASE IV - Growth and consolidation (2003 onwards): In February 2003, following the

repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One

is the Specified Undertaking of the Unit Trust of India with assets under management of

Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64

scheme, assured return and certain other schemes. The specified unfertaking of UTI,

functioning under an administrator and under the rules framed by govt. of India and does not

come under the purview of the mutual funds regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation

of the erstwhile UTI which had in march 2000 more than Rs 76,000 crores of AUM and with

the setting up of a UTI mutual fund, conforming to the SEBI mutual funds regulations and

with recent mergers taking place among different private sectors funds, the mutual funs

industry has entered its phase of consolidation and growth.

Graph 1.1: Growth in AUM

1.2.3 Pros and Cons

ADVANTAGES

Professional Investment Management: Mutual funds hire full-time, high-level

investment professionals. Fund scan afford to do so as they manage large pools of

money. The mangers have real time access to crucial market information and able to

execute trade on the largest and most cost effective scale.

Low Cost: A mutual fund let's you participate in a diversified portfolio for as little as

Rs 5,000 and sometimes less. And with a no-load fund, you pay little or no sales

charges to own them.

Diversification: Mutual funds invest in a broad range of securities. This limits risk by

reducing the effect of a possible decline in the value of any one security. Mutual fund

unit-holders can benefit from diversification techniques usually available only

to investors wealthy enough to buy significant positions in a wide variety of

securities.

Liquidity: In open-ended schemes, you can get your money back promptly at net

asset value related prices from the mutual fund itself.

Personal Service: One call puts you in touch with a specialist who can provide you

with information you can use to make your own investment choices. They will

provide you personal assistance in buying and selling your fund units, provide fund

information and answer questions about your account status.

SEBI Regulated: All mutual funds are registered with SEBI and function within the

provisions and regulations that protect the interests of investors.

Return Potential: Over a medium to long-term, Mutual Funds have the potential to

provide a higher return as they invest in a diversified basket of selected securities.

Transparency: You get regular information on the value of your investment in

addition to disclosure on the specific investment made by the mutual fund scheme.

DISADVANTAGES

Entry and exit costs: The concentrated buying or selling often result in adverse price

movements i.e. at the time of buying, the fund ends up paying a higher price and

while selling it realizes a lower price. For obvious reasons, this problem is even more

severe for funds investing in small capitalization stocks.

No control over costs: 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.

Fluctuating Returns: Mutual funds are like many other investments without a

guaranteed return. There is always the possibility that the value of your mutual fund

will depreciate.

Misleading advertisements: The misleading advertisements of different funds can

guide investors down the wrong path. Some funds may be incorrectly labeled as

growth funds, while others are classified as small-cap or income. A fund can therefore

manipulate prospective investors by using names that are attractive and misleading.

Instead of labeling itself a small cap, a fund may be sold.

1.2.4 Recent trends in Mutual Fund industry

The most important in the mutual fund industry is the aggressive expansion of the foreign

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

bank and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early nineties and go off to

a good start due to the stock market boom prevailing then. These banks did not really

understand the mutual fund business and they just viewed it as another kind of banking

activity. Few hired specialized staff and generally choose to transfer staff from the parent

organization.

Some schemes had offered guaranteed returns and their patent organization had to bail out

these AMCs by paying large amount of money the difference between the guaranteed and

actual returns. The service level was also bad. Most of these AMCs have not been able to

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

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

experience of some of the AMCs floated by private sector Indian companies was also very

similar. They quickly realized that the AMCs business is a business, which makes money in

the long term and requires deep pocketed support in the intermediate years. Some have

sold out to foreign owned companies, some have merged with the others and there is general

restructuring going on.

The foreign owned companies have deep pockets and have come in here with the expectation

of a long haul. They can be credited with introducing many new practices such as new

product innovation, sharp improvement in the service standards and disclosure, usage of

technology, broker education etc. In fact, they have forced the industry to upgrade itself and

service levels of the organization like UTI have improved dramatically in the last few years

in response to the competition provided by these.

1.2.5 Role of SEBI in Mutual Funds

As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual

funds to protect the interest of investors. SEBI notified regulation for mutual funds in 1993.

Thereafter mutual fund sponsored by private sector entities were allowed to enter the capital

market. The regulations were fully revised in 1996 and been amended. Therefore, from time

to time SEBI has also issued guidelines to the mutual fund from time to time to protect the

interest of the investors.

All mutual funds whether promoted by public sector or private sector entities including those

promoted by foreign entities are governed by the same set of regulation. There is

no distinction in regulatory requirement of the mutual fund and all are subject to monitoring

and inspecting by SEBI. The risks associated with the scheme launched by mutual funds

sponsored by these entities are of similar type.

1.2.6 Classification of Mutual Funds

Fig 1.3: Mutual funds classification

MUTUAL FUNDS

Based on Structure Based on investment objective

Open ended

Close ended

Equity fund

Debt Funds

Gilt Funds

Hybrid Funds

Other Funds

OPEN ENDED FUNDS

Funds that can sell and purchase units at any point of time are classified as Open-end funds.

The fund size (corpus) of an open-end fund is variable because of continuous selling and

repurchases by the fund. An open end fund is not required to keep selling new units to the

investors at all times but is required to always repurchase, when an investor wants to sell his

units. The NAV of an open ended fund is calculated daily.

CLOSE ENDED FUNDS

Funds that can sell a fixed number of units only during the NFO period are known as Closed

ended funds. The corpus of a close end fund remains unchanged all times. After the closure

of the offer, buying and redemption of units by the investors directly from the funds is not

allowed. However, to protect the interest of the investors, SEBI provides with two avenues to

liquidate their positions.

EQUITY FUNDSEquity funds are considered to be the more risky funds as compared to other fund types, but

they also provide higher returns than other funds. It is advisable that an investor looking to

invest in an equity fund should invest for long term i.e. for 3 years or more. There are

different types of equity funds each falling into different risk bracket. In the order of

decreasing risk level, there are following types of equity funds:

Aggressive Growth Funds: In Aggressive Growth Funds, fund managers aspire for

maximum capital appreciation and invest in less researched shares of speculative

nature. Because of these speculative investments Aggressive Growth Funds become

more volatile and thus, are prone to higher risk than other equity funds.

Growth Funds: Growth Funds also invest for capital appreciation (with time horizon

of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that

they invest in companies that are expected to outperform the market in the future.

Without entirely adopting speculative strategies, Growth Funds invest in those

companies that are expected to post above average earnings in the future.

Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market

capitalization than large capitalization companies are called Mid-Cap or Small-Cap

Funds. Market capitalization of Mid-Cap companies is less than that of big, blue chip

companies (less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap

companies have market capitalization of less than Rs. 500 crores. The shares of Mid-

Cap or Small-Cap Companies are not as liquid as of Large-Cap Companies which

gives rise to volatility in share prices of these companies and consequently,

investment gets risky.

Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest

in one or more foreign companies. Foreign securities funds achieve international

diversification and hence they are less risky than sector funds. However, foreign

securities funds are exposed to foreign exchange rate risk and country risk.

Diversified Equity Funds: Except for a small portion of investment in liquid money

market, diversified equity funds invest mainly in equities without any concentration

on a particular sector(s). These funds are well diversified and reduce sector-specific or

company-specific risk. However, like all other funds diversified equity funds too are

exposed to equity market risk.

Equity Index Funds: Equity Index Funds have the objective to match the

performance of a specific stock market index. The portfolio of these funds comprises

of the same companies that form the index and is constituted in the same proportion

as the index. Equity index funds that follow broad indices (like S&P CNX Nifty,

Sensex) are less risky than equity index funds that follow narrow sectoral indices (like

BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and

therefore, are more risky.

Dividend Yield Funds: The objective of Equity Income or Dividend Yield Equity

Funds is to generate high recurring income and steady capital appreciation for

investors by investing in those companies which issue high dividends (such as Power

or Utility companies whose share prices fluctuate comparatively lesser than other

companies' share prices). Equity Income or Dividend Yield Equity Funds are

generally exposed to the lowest risk level as compared to other equity funds.

DEBT FUNDSFunds that invest in medium to long-term debt instruments issued by private companies,

banks, financial institutions, governments and other entities belonging to various sectors (like

infrastructure companies etc.) are known as Debt/Income Funds. Debt funds are low risk

profile funds that seek to generate fixed current income to investors. In order to ensure

regular income to investors, debt funds distribute large fraction of their surplus to investors.

Based on different investment objectives, there can be following types of debt funds:

Diversified Debt Fund: Debt funds that invest in all securities issued by entities

belonging to all sectors of the market are known as diversified debt funds. The best

feature of diversified debt funds is that investments are properly diversified into all

sectors which results in risk reduction. Any loss incurred, on account of default by a

debt issuer, is shared by all investors which further reduces risk for an individual

investor.

High yield debt funds: High Yield Debt Funds prefer securities issued by those

issuers who are considered to be of "below investment grade". The motive behind

adopting this sort of risky strategy is to earn higher interest returns from these issuers.

These funds are more volatile and bear higher default risk, although they may earn at

times higher returns for investors.

Fixed Term Plan Series: Fixed Term Plan Series usually are closed-end schemes

having short term maturity period (of less than one year) that offer a series of plans

and issue units to investors at regular intervals. Unlike closed-end funds, fixed term

plans are not listed on the exchanges. Fixed term plan series usually invest in

debt/income schemes and target short-term investors. The objective of fixed term plan

schemes is to gratify investors by generating some expected returns in a short period.

GILT FUNDS

Also known as Government Securities in India, Gilt Funds invest in government papers

having medium to long term maturity period. Issued by the Government of India, these

investments have little credit risk (risk of default) and provide safety of principal to the

investors. However, like all debt funds, gilt funds too are exposed to interest rate risk. Interest

rates and prices of debt securities are inversely related and any change in the interest rates

results in a change in the NAV of debt/gilt funds in an opposite direction.

HYBRID FUNDS

As the name suggests, hybrid funds are those funds whose portfolio includes a blend of

equities, debts and money market securities. Hybrid funds have an equal proportion of debt

and equity in their portfolio. There are following types of hybrid funds in India:

Balanced Funds: The portfolio of balanced funds include assets like debt securities,

convertible securities, and equity and preference shares held in a relatively equal

proportion. The objectives of balanced funds are to reward investors with a regular

income, moderate capital appreciation and at the same time minimizing the risk of

capital erosion. Balanced funds are appropriate for conservative investors having a

long term investment horizon

Growth-and-Income Funds: Funds that combine features of growth funds and

income funds are known as Growth-and-Income Funds. These funds invest in

companies having potential for capital appreciation and those known for issuing high

dividends. The level of risks involved in these funds is lower than growth funds and

higher than income funds.

Asset Allocation Funds: Mutual funds may invest in financial assets like equity,

debt, money market or non-financial (physical) assets like real estate, commodities

etc.. Asset allocation funds adopt a variable asset allocation strategy that allows fund

managers to switch over from one asset class to another at any time depending upon

their outlook for specific markets.

OTHER FUNDS

Other funds include the following:

Commodity Funds: Those funds that focus on investing in different commodities

(like metals, food grains, crude oil etc.) or commodity companies or commodity

futures contracts are termed as Commodity Funds. A commodity fund that invests in a

single commodity or a group of commodities is a specialized commodity fund and a

commodity fund that invests in all available commodities is a diversified commodity

fund and bears less risk than a specialized commodity fund. "Precious Metals Fund"

and Gold Funds (that invest in gold, gold futures or shares of gold mines) are common

examples of commodity funds.

Real Estate Funds: Funds that invest directly in real estate or lend to real estate

developers or invest in shares/securitized assets of housing finance companies, are

known as Specialized Real Estate Funds. The objective of these funds may be to

generate regular income for investors or capital appreciation.

Exchange Traded Funds (ETF): Exchange Traded Funds provide investors with

combined benefits of a closed-end and an open-end mutual fund. Exchange Traded

Funds follow stock market indices and are traded on stock exchanges like a single

stock at index linked prices. The biggest advantage offered by these funds is that they

offer diversification, flexibility of holding a single share (tradable at index linked

prices) at the same time. Recently introduced in India, these funds are quite popular

abroad.

1.2.7 Investment Strategies

Systematic Investment Plan: Under this a fixed sum is invested each month on a

fixed date of a month. Payment is made through post dated cheques or direct debit

facilities. The investor gets fewer units when the NAV is high and more units when

the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

Systematic Transfer Plan: Under this an investor invest in debt oriented fund and

give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the

same mutual fund.

Systematic Withdrawal Plan: If someone wishes to withdraw from a mutual fund

then he can withdraw a fixed amount each month.

1.2.8 Frequently used terms

Net Asset Value (NAV): NAV is the market value of the assets of the scheme minus its

liabilities. The per unit NAV is the net asset value of the scheme divided by the number of

units outstanding on the valuation date.

Sale price: It is the price an investor pay when he invest in a scheme. It is also called as offer

price. It may include a sales load.

Repurchase price: It is the price at which units under open ended schemes are repurchased

by the mutual funds. Such prices are NAV related.

Redemption price: It is the price at which close-ended schemes redeem their units on

maturity. Such prices are NAV related.

Sales load: It is a charge collected by a scheme when it sells the units. It is also called ‘Front-

end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.

Repurchase or ‘Back-end’ Load: It is a charge collected by a scheme when it buys back the

units from the unit holders.

1.2.9 Asset Management

Asset Management: The practice of managing assets so that the greatest return is achieved.

Asset Management is a systematic process of operating, maintaining, and upgrading assets

cost-effectively. Asset management can be defined as the professional management of

investments such as stocks and bonds. The services of a professional firm are expensive and

successful asset management usually requires a large and diverse portfolio. Asset

management services are often handled by a team of financial professionals.

Asset Management in India: Asset Management Companies in India have come a long way

since the pre liberalization era when only the government owned Unit Trust of India was the

sole option for Indian investors. Like the other Finance Companies in India, Investment

Management Companies too have grown massively in size as well as numbers. The massive

Indian market which is still quite primitive in terms of financial inclusion has attracted a host

of domestic and foreign investment companies. Only 4–5 per cent of household assets are in

mutual funds and the top eight cities in terms of households penetrated account for 75 per

cent of retail AUMs. There are only about 35 fund families in India, as compared to the

global numbers like 700-odd fund families in the US, 60 fund families in China and around

70 in Japan.

The Lehman crisis took a toll on the weaker asset managers but the industry continues to

thrive as modernization of the Indian economy will lead to a transfer of asset from the

informal sector to the formal sector. The Total Assets under Management in India as of June

2011 stands at Rs 6.93 lakh crore. The industry has 45 active players with HDFC MF being

the largest investment company in India followed by Reliance MF.

1.2.10 Asset Management Companies in India

BANKS

Joint Ventures – Predominantly Indian

1. Canara Robeco Asset Management Company Limited

2. SBI Funds Management Private Limited

3. Union KBC Asset Management Company Pvt. Ltd.

Joint Ventures – Predominantly Foreign

1. Baroda Pioneer Asset Management Company Limited

Others

1. IDBI Asset Management Ltd.

2. UTI Asset Management Company Ltd

INSTITUTIONS

Joint Ventures – Predominantly Indian

1. LIC NOMURA Mutual Fund Asset Management Company Limited

PRIVATE SECTOR

Indian

1. Axis Asset Management Company Ltd.

2. Benchmark Asset Management Company Pvt. Ltd. (bought by Goldman Sachs)

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

4. Edelweiss Asset Management Limited

5. Escorts Asset Management Limited

6. IDFC Asset Management Company Limited

7. India Infoline Asset Management Co. Ltd.

8. JM Financial Asset Management Private Limited

9. Kotak Mahindra Asset Management Company Limited(KMAMCL)

10. L&T Investment Management Limited

11. Motilal Oswal Asset Management Company Limited

12. Peerless Funds Management Co. Ltd.

13. Quantum Asset Management Company Private Limited

14. Reliance Capital Asset Management Ltd.

15. Religare Asset Management Company Limited

16. Sahara Asset Management Company Private Limited

17. Sundaram Asset Management Company Limited

18. Tata Asset Management Limited

19. Taurus Asset Management Company Limited

Foreign

1. AIG Global Asset Management Company (India) Pvt. Ltd.

2. BNP Paribas Asset Management India Private Limited

3. Daiwa Asset Management (India) Private Limited

4. FIL Fund Management Private Limited

5. Franklin Templeton Asset Management (India) Private Limited

6. Goldman Sachs Asset Management (India) Private Limited

7. Mirae Asset Global Investments (India) Pvt. Ltd.

8. Pramerica Asset Managers Private Limited

Joint Ventures – Predominantly Indian

1. Birla Sun Life Asset Management Company Limited

2. DSP BlackRock Investment Managers Private Limited

3. HDFC Asset Management Company Limited

4. ICICI Prudential Asset Mgmt. Company Limited

Joint Ventures – Predominantly Foreign

1. AEGON Asset Management Company Pvt. Ltd.

2. Bharti AXA Investment Managers Private Limited

3. HSBC Asset Management (India) Private Ltd.

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

5. JPMorgan Asset Management India Pvt. Ltd.

6. Morgan Stanley Investment Management Pvt. Ltd.

7. Principal Pnb Asset Management Co. Pvt. Ltd.

1.2.11 Asset Under Management (AUM) of different AMCs

ASSET MANAGEMENT COMPANIES AUM

HDFC Mutual Fund 92,625

Reliance Mutual Fund 80,694

ICICI Prudential Mutual Fund 73,050

Birla Sun Life Mutual Fund 67,206

UTI Mutual Fund 60,923

SBI Mutual Fund 47,184

Franklin Templeton Mutual Fund 35,533

DSP BlackRock Mutual Fund 30,002

IDFC Mutual Fund 27,147

Kotak Mahindra Mutual Fund 25,324

Tata Mutual Fund 20,754

Deutsche Mutual Fund 13,852

Sundaram Mutual Fund 13,228

Religare Mutual Fund 10,958

Axis Mutual Fund 8,759

Canara Robeco Mutual Fund 7,580

Fidelity Mutual Fund 7,378

LIC NOMURA Mutual Fund 5,919

JM Financial Mutual Fund 5,812

Baroda Pioneer Mutual Fund 5,511

JPMorgan Mutual Fund 5,281

IDBI Mutual Fund 5,198

PRINCIPAL Mutual Fund 4,660

BNP Paribas Mutual Fund 4,562

HSBC Mutual Fund 4,554

Goldman Sachs Mutual Fund 4,313

Peerless Mutual Fund 4,009

Taurus Mutual Fund 3,745

L&T Mutual Fund 3,046

Pramerica Mutual Fund 2,387

Morgan Stanley Mutual Fund 2,250

Indiabulls Mutual Fund 2,165

Union KBC Mutual Fund 2,034

ING Mutual Fund 923

Sahara Mutual Fund 787

AIG Global Investment Group MF 739

Daiwa Mutual Fund 710

Mirae Asset Mutual Fund 464

Motilal Oswal Mutual Fund 453

Edelweiss Mutual Fund 380

Quantum Mutual Fund 193

IIFL Mutual Fund 167

BOI AXA Mutual Fund 135

Escorts Mutual Fund 112

Table 1.2: AUM of different AMCs

CHAPTER 2

LITERATURE REVIEW

2.1 Literature Review

A literature review is a body of text that aims to review the critical points of current

knowledge including substantive findings as well as theoretical and methodological

contributions to a particular topic. Literature reviews are secondary sources, and as such, do

not report any new or original experimental work. Also, a literature review can be interpreted

as a review of an abstract accomplishment.

Most often associated with academic-oriented literature, such as a thesis, a literature review

usually precedes a research proposal and results section. Its main goal is to situate the current

study within the body of literature and to provide context for the particular reader.

The Fall and Rise of Mutual Funds in India (Kaushal Shah & Associates, 2007)

This article take the reader through the entire journey of mutual fund industry in India, its

origin, its fall & rise throughout all these years and tried to predict what the future may hold

for the mutual fund investors in the long run.

India’s Mutual Fund Industry (Tetsuya Kamiyama, Nomura Capital Market Review,

Vol. 10, No. 4, Winter 2007)

The assets managed by India's mutual funds have shown impressive growth, and had totaled

3.3trillion rupees (Rs 3.3 trillion) as of the end of March 2007. India's middle class, who are

prospective investors in mutual funds, has been growing, and we expect to see further growth

in the mutual fund market moving forward. In this paper, the researcher first provides an

overview of the assets managed within India's mutual fund market, both now and in the past,

and of the legal framework for mutual funds, and then discuss the current situation and recent

trends in financial products, distribution channels and asset management companies.

Making Mutual Fund Work for You (June 2008, AMFI in association with Price

Waterhouse, Financial & Business Communications)

This guide on the concept, operations and advantages of mutual funds and the rights of

mutual fund unit holders was produced by AMFI to promote financial literacy among public

regarding Indian Mutual fund Industry. This guide explains the concept of mutual fund, its

advantages and risks associated with the mutual funds. The main aim of this guide was to

spread awareness among investors regarding their rights as mutual fund unit holders

Indian Mutual Fund Industry – The Future in a Dynamic Environment (June 2009,

KPMG & CII)

This report highlighted the low customer awareness levels and financial literacy pose the

biggest challenge to channelizing household savings into mutual funds. Further, fund houses

have shown limited focus on increasing retail penetration and building retail AUM.

Customer awareness is the pre-requisite for the achievement of the industry growth potential,

there is a need for planning, financing and executing initiatives aimed at increasing financial

literacy and enhancing investor education across the country through a sustained

collaborative effort across all stakeholders, which is expected to result in a massive increase

in mutual fund penetration.

Distributors and the mutual fund houses have exhibited limited interest in continuously

engaging with customers post closure of sale as the commissions and incentives have been

largely in the form of upfront fees from product sales. The next phase in the industry is likely

to be characterized by a stronger focus on customer centricity, cost management and robust

governance and regulatory framework – all aimed at enabling the industry to achieve

sustained, profitable growth, going forward.

Bijan Roy, et. al., conducted an empirical study on conditional performance of Indian mutual

funds. This paper uses a technique called conditional performance evaluation on a sample of

eighty-nine Indian mutual fund schemes. This paper measures the performance of various

mutual funds with both conditional and unconditional form of CAPM, Treynor-Mazuy model

and Henriksson-Merton model. 

The effect of incorporating lagged information variables into the evaluation of mutual fund

manager’s performance is examined in Indian context. The results suggest that the use of

conditioning lagged information variables improves the performance of mutual fund

schemes, causing alphas to shift towards right and reducing the number of negative timing

coefficients.

CHAPTER 3

RESEARCH METHODOLOGY

3.1 Purpose of the study

A big boom has been witnessed in the mutual fund industry in the recent times. Thus, the

main purpose of the study is to study about mutual funds as an investment option and its

industry in detail.

The study will help to know the interest and preferences of the customers, which company,

portfolio, mode of investment, and option of getting return and so on they prefer.

3.2 Research objectives of the study

To find out Preferences of investors for Asset Management Company.

To know Preferences for the portfolios.

To know why one has invested or not invested in Mutual fund.

To find out the most preferred channel.

To find out what should do to boost Mutual Fund Industry.

3.3 Research methodology of the study

3.3.1 Research design

The research design used in conducting the following study was the explanatory study design.

Explanatory study design: It explains ‘why is it going on?’ Explanatory research is research

conducted in order to explain any behavior in the market. It could be done through using

questionnaires, group discussions, interviews, random sampling, etc.

3.3.2 Data collection techniques

Research is based on primary data. Secondary data is used only for the reference. Research

has been done by primary data collection, and primary data has been collected by

interacting with various people. The secondary data has been collected through various

manuals, journals and websites.

Primary Data sources

The method which involves, collection of data for the given subject, is directly from the

real world which is collected by the researcher himself. The data were collected through:

Questionnaires

Questionnaires often make use of Checklist and rating scales. These devices help

simplify and quantify people's behaviors and attitudes. A checklist is a list of

behaviors, characteristics, or other entities that the researcher is looking for. Either the

researcher or survey participant simply checks whether each item on the list is

observed, present or true or vice versa. A rating scale is more useful when a behavior

needs to be evaluated on a continuum.

Personal interview

Face -to -face interviews have a distinct advantage of enabling the researcher to

establish rapport with potential participants and therefore gain their cooperation.

These interviews yield highest response rates in survey research. They also allow the

researcher to clarify ambiguous answers and when appropriate, seek follow-up

information. Disadvantages include impractical when large samples are involved time

consuming and expensive.

Secondary Data sources

The data which is collected by others is to be re-used by the researcher.

Researches on mutual funds scenario

Annual reports on the organization.

3.3.3 Sample design

3.3.3.1 Population

In sampling, this includes defining the population from which our sample is drawn. A

population can be defined as including all people or items with the characteristic one wish to

understand. Because there is very rarely enough time or money to gather information from

everyone or everything in a population, the goal becomes finding a representative sample (or

subset) of that population.

In my project, the population was the working class who are earning and willing to invest

their money in one way or other and the people who are having at least a bit knowledge of

different investment options.

3.3.3.2 Sample size

Sample size is the number of observations used for calculating estimates of a given

population. For example, if we interviewed 30 random students at a given high school to see

if they liked a certain music artist, "30 students" would be our sample size.

The sample size in my project is of 50 persons who filled the questionnaire for my study and

provided me the needed information.

3.3.3.3 Sampling method.

The sampling method used in this project report is simple random sampling.

In statistics, a simple random sample is a subset of individuals (a sample) chosen from a

larger set (a population). Each individual is chosen randomly and entirely by chance, such

that each individual has the same probability of being chosen at any stage during the

sampling process, and each subset of k individuals has the same probability of being chosen

for the sample as any other subset of individual. This process and technique is known

as simple random sampling.

3.3.4 Method of data collection

3.3.4.1 Instruments of data collection

The instruments used for data collection are questionnaire and interviews.

3.3.5 Limitations

Some of the persons were not so responsive.

Possibility of error in data collection because many of investors may have not given

actual answers of my questionnaire.

The sample size may not adequately represent the whole market.

Some respondents were reluctant to divulge personal information which can affect the

validity of all responses.

CHAPTER 4

ANALYSIS AND INTERPRETATION

This analysis is done on the basis of the data collected from the questionnaire filled. This

questionnaire had been filled by 50 persons and on the basis of information given by them,

this analysis has been done.

1. Which age group do you belong?

Age Groups (in years) No. of respondents

18 – 30 25

30 – 45 15

45 – 55 10

55 & above -

Table 4.1: Age group

Chart 4.1: Age

INTERPRETATION

This analysis shows that the young generation i.e. belongs to the age group of 18 – 30 years

are interested in investments the most. People belonging to the age group of 30 – 45 are also

interested to invest their money because of their earning age. People of age group 45 – 55 are

least interested in investments as they are mainly interested in savings.

2. What is your occupation?

Occupation No. of people

Private service 20

Government service 15

Business 12

Others 3

Fig 4.2: Occupation

Chart 4.2: Occupation

INTERPRETATION

This analysis shows that the maximum numbers of people i.e., 20 out of 50 are engaged in

private services which are followed by Government services in which 15 persons are

engaged. The number of people in business is 12 and lowest number of people i.e., 3 is in

other services. The Pie chart is showing this information graphically.

3. How much is your yearly income?

Yearly income (in lakhs)

No. of respondents

Below 1 5

1-3 16

3-5 24

5 & above 5

Table 4.3: Yearly income

Chart 4.3: Yearly income

INTERPRETATION

This analysis shows that the 5 of the 50 persons earns below 1 lakh and hence are less

potential to invest their money, 16 persons earns between 1 and 3 lacs and it is a middle

income group which have potential to invest but found risks in it. And the maximum, i.e. 24

persons earns annual income between 3 and 5 lacs and have the most potential to invest. Only

5 persons out of 50 earns above 5 lakhs.

4. Do you invest?

Invest No. of respondents

Yes 46

No 4

Table 4.4: Invest

Chart 4.4: Invest

INTERPRETATION

This analysis shows that 46 out of 50 respondents are interested and do invest in one or the

other avenue while there are 4 respondents who are not interested and prefer not to invest in

any of the avenue.

5. How much percentage of your income you invest monthly?

Percentage of income No. of respondents

0 - 20 32

20 - 35 9

35 - 50 6

50 & above 3

Table 4.5: Percentage of income invest

Chart 4.5: Percentage of income invest

INTERPRETATION

This analysis shows that the maximum numbers of persons, i.e. 32 like to invest up to 20% of

their monthly income in different avenues and rest of the part is used to spend. The people

like to invest more than 20% and less than 35% of their incomes are 9 and 6 respondents like

to invest their 35 to 50 percent income in different sectors and the lowest i.e., 3 respondents

who are maximum risk takers like to invest above 50% of their income and this shows they

want to increase their wealth rapidly.

6. In which avenue do you generally prefer to invest in?

Investment Avenues No. of respondents

Saving A/c 38

Fixed deposits 20

Insurance 18

Mutual Funds 24

Equity 16

Others (bonds, real estate, derivatives etc.)

10

Table 4.6: Investment avenues

Graph 4.1 Investment avenues

INTERPRETATION

This analysis shows that respondents not give preference to any single investment option.

In fact, investors are aware of every investment avenue available in the market.

24 out of 50 respondents are totally aware and do invest in mutual funds. Many people invest

in options like saving accounts, fixed deposits and insurance because there is no risk in

investing in such avenues. There are respondents who prefer to invest in other avenues of the

investment like equity, derivatives, real estate, bonds etc. This is because of their high

capability of bearing risks.

7. What is your purpose behind investment?

Purpose No. of respondents

High returns 36

Liquidity 20

Wealth creation 18

Tax saving 22

Brand name 10

Table 4.7: Purpose

Graph 4.2: Purpose

INTERPRETATION

This analysis shows that what the actual reason and purpose for the investment is. Most of the

people i.e., 36 respondents invest to get high returns. This means that they want their money

to grow rapidly. 18 out of 50 invest to create their overall wealth. 22 people invest to save

tax, this is generally for the people whose most of the income part goes in tax. 20 respondents

invest because of liquidity reason i.e. they want to convert their funds into cash in short term.

10 people invest on a basis to earn Brand name Equity.

8. For how much period do you prefer to invest?

Duration No. of respondents

Short term (0-5 years) 19

Long term (above 5 years)

31

Table 4.8: Duration

Chart 4.6: Duration

INTERPRETATION

This analysis shows that for how much duration, people want to invest their money in

different avenues. 31 out of 50 respondents like to invest in the long term i.e., for more than 5

years. These people are having wealth creation as their main motive as well as having good

returns whereas 19 people like to invest in the short term i.e., less than 5 years, which means

that they invest just to have quick profits.

9. Are you aware of mutual funds and its operations?

Response No. of respondents

Yes 35

No 15

Table 4.9: Response

Chart 4.7 Awareness

INTERPRETATION

This analysis shows that for how many people are aware of mutual funds and its operations.

35 out of 50 respondents are aware of mutual funds, its industry and its operations whereas

there are still 15 people are not aware of mutual funds, its industry and its operations.

10. Which channel is preferred by you for investing in mutual funds?

Channel No. of respondents

Financial advisor 11

Banks 6

AMCs 7

Table 4.10: Channel

Chart 4.8: Preferred channel

INTERPRETATION

This analysis shows that which channel is famous among investors and are preferred by them

while investing into mutual funds.

11 of the 24 mutual fund investors prefer to invest through financial advisors. 6 of the 24

prefer to invest through banks and the rest 7 mutual fund investors prefer to invest through

AMCs.

11. What are your sources of information about Mutual funds?

Source No. of respondents

Advertisements 2

Peer groups 4

Banks 6

Financial advisors 12

Table 4.11: Source

Chart 4.9: Information sources

INTERPRETATION

This analysis shows that from which sources an investor get to know about the mutual funds.

It can be inferred that the Financial Advisors are the most important source of information

about Mutual Fund.

Out of 24 mutual fund investors, 12 are having financial advisors as their source of

information about mutual funds. 4 and 6 respondents get the information about mutual funds

from peer groups and banks respectively. There are only 2 investors who are having

advertisements are their source of information.

12. What is your preference for future investment in Mutual funds?

Name of AMC No. of respondents

SBI MF 6

UTI 5

HDFC 7

Reliance 4

Others 2

Table 4.12: Name of AMC

Chart 4.10: Name of AMC

INTERPRETATION

This analysis shows the preference of investors for future investment in mutual funds.

As HDFC is on top at present, therefore most of the investors i.e., 7 out of 24 prefer to invest

in mutual fund of HDFC. 6 prefer to invest in SBI MF and 5 prefer investing in UTI as they

are the most experienced AMCs. 4 investors prefer to invest in reliance where as there are 2

investors who prefer to invest in other mutual funds which can be from private sector or

foreign.

CHAPTER 5

FINDINGS

5.1 Findings

On the basis of data analysis and interpretation, following findings are made:

Most investors are from the age group of 18-30 years.

There are also investors who are from other age groups but there is no investor who is

above 55 years of age in which people generally prefer to save rather than invest.

In Occupation group, most of the Investors were Private service employees, followed by

govt. employees and businessmen.

Most of the investors are from middle income group, very few are from higher or lower

income group.

Almost all the respondents invest somewhere; only 4 respondents were there who were

not interested in any type of investment.

Most of the people invest a small part of their income but there are few respondents also

who invest more than 50% of their income.

Almost all the Respondents were having a Saving bank account, 20 invested in Fixed

Deposits, 18 invested in insurance, 26 invested in equity and other options whereas only

24 respondents invested in Mutual funds.

Among 50 respondents, less than 50%, i.e. 24 people had invested in Mutual Funds.

Out of 26 respondents, 15 were not aware of Mutual Fund while 11 respondents told

there is not any specific reason for not invested in Mutual Fund.

Most of the people prefer to invest in long term so as to create their overall wealth.

For Future investment, maximum respondents preferred HDFC Mutual Fund, the second

most preferred is SBI MF followed by UTI. Reliance and other mutual funds had been

preferred after them.

In most cases, respondents preferred high return while investment along with the benefit

of tax saving. Long term investors were having wealth creation as their main purpose

while short term investors search for liquidity. There are only few investors who invest

only for the sake of brand name.

35 respondents were aware about Mutual fund, its industry and its operations and 15 were

not.

Most investors preferred to Invest through Financial Advisors, followed by through AMC

(means Direct Investment) and through Bank.

Also financial advisors are the major sources of information about mutual funds. Also

investors get to know about mutual funds through banks, peer groups and advertisements.

CHAPTER 5

RECOMMENDATIONS AND CONCLUSIONS

6.1 Suggestions and recommendations

The most vital problem spotted is of ignorance. Investors should be made aware of the

benefits. Nobody will invest until and unless he is fully convinced. Investors should be

made to realize that ignorance is no longer bliss and what they are losing by not

investing.

Mutual funds offer a lot of benefit which no other single option could offer. But most of

the people are not even aware of what actually a mutual fund is. They only see it as just

another investment option. So the advisors should try to change their mindsets.

The advisors should target for more and more young investors. Young investors as well

as persons at the height of their career would like to go for advisors due to lack of

expertise and time.

Mutual Fund Company needs to give the training to the Individual Financial Advisors

about the Fund/Scheme and its objective, because they are the main source to influence

the investors.

Before making any investment, Financial Advisors should first enquire about the risk

tolerance of the investors/customers, their need and time (how long they want to invest).

By considering these three things they can take the customers into consideration.

Younger people who are under 35 years of age will be a key new customer group into

the future, so making greater efforts with younger customers who show some interest in

investing should pay off.

Systematic Investment Plan (SIP) is one the innovative products launched by Assets

Management companies very recently in the industry. SIP is easy for monthly salaried

person as it provides the facility of do the investment in EMI. Though most of the

prospects and potential investors are not aware about the SIP. There is a large scope for

the companies to tap the salaried persons.

6.2 Conclusion

Running a successful mutual fund requires complete understanding of the

peculiarities of the Indian Stock Market and also the psyche of the small investors.

This study has made an attempt to understand the financial behavior of Mutual Fund

investors in connection with the preferences of Brand (AMC), products, and

channels etc. It is observed that many of people have fear of Mutual Fund. They

think their money will not be secure in Mutual Fund. They need the knowledge of

Mutual Fund and its related terms.

Many of people have not invested in mutual fund due to lack of awareness although

they have money to invest. As the awareness and income is growing the number of

mutual fund investors are also growing.

Brand plays important role for the investment. People invest in those Companies

where they have faith or they are well known with them. There are many AMCs but

only some are performing well due to Brand awareness. Some AMCs are not

performing well although some of the schemes of them are giving good return

because of not awareness about Brand.

Reliance, UTI, SBIMF, HDFC; they are well known Brand, they are performing

well and their AUM is larger than others whose Brand name are not well known.

Distribution channels are also important for the investment in mutual fund.

Financial Advisors are the most preferred channel for the investment in mutual

fund. They can change investors’ mind from one investment option to others. Some

investors directly invest their money through AMC because they do not have to pay

entry load. Only those people invest directly who know well about mutual fund and

its operations and those have time.

BIBLIOGRAPHY

Books

Kothari, C.R., Research methodology, 3rd edition, 1997, Vikas Publishing House Pvt.

Ltd, New Delhi.

Bhole, L.M., Financial markets and institutions, 5th edition, 2011, The McGraw Hill

Co.

Securities training manual, India Infoline

Website sources

http://www.indiainfoline.com/Aboutus/

http://www.indiainfoline.com/Aboutus/Corporate-Structure

http://www.moneycontrol.com/planning_desk/investinginmf.php?step1=1

https://en.wikipedia.org/wiki/Mutual_funds/

http://www.amfiindia.com/showhtml.aspx?page=mfindustry

ANNEXURE

QUESTIONNAIRE

NAME: _______________________ DATE: ____________

MOBILE OR E-MAIL: _______________________

Q 1: Which age group do you belong?

a) 18 - 30 b) 30 - 45

c) 45 - 55 d) 55 & above

Q 2: What is your occupation?

a) Private services b) Government services

c) Business d) Others

Q 3: How much is your yearly income?

a) Below 1 lac b) 1-3 lacs

c) 3-5 lacs d) 5 lacs & above

Q 4: Do you invest?

a) Yes b) No

Q 5: How much percentage of your income you invest monthly?

a) 0-20% b) 20-35%

c) 35-50% d) 50% & above

Q 6: In which avenue do you generally prefer to invest?

a) Saving A/c b) Fixed deposit c) Insurance

d) Mutual funds e) Equity f) Others

Q 7: What is your purpose behind investment?

a) High Returns b) Liquidity c) Wealth creation

d) Tax saving e) Brand name

Q 8: For how much period do you prefer to invest?

a) Short term (0-5yrs) b) Long term (5yrs & above)

Q 9: Are you aware of mutual funds and its operations?

a) Yes b) No

Q 10: Which channel is preferred by you for investing in mutual funds?

a) Financial Advisor b) Banks c) AMCs

Q 11: What are your sources of information about Mutual funds?

a) Advertisements b) Peer groups c) Banks

d) Financial advisors

Q 12: What is your preference for future investment in Mutual funds?

a) SBI MF b) UTI c) HDFC

d) Reliance e) Others