Final Project Report Roll NO 55

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Summer Internship Ifians Corporate Service Pvt.

Ltd

SUMMER INTERNSHIP REPORT

IFIANS CORPORATE SERVICES PVT LTD, PUNE

SUBMITTED BY:

Vivek Chandak

Div.-A, Roll no: 55

POST GRADUATE DIPLOMA IN MANAGEMENT

2012-14

INSTITUTE OF MANAGEMENT DEVELOPMENT AND RESEARCH

PUNE

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Summer Internship Ifians Corporate Service Pvt.Ltd

Summer Internship Project Report

On

CONSUMER BEHAVIOUR, INVESTMENT PATTERN & PREFERENCE IN INSURANCE

SECTOR

At

Under the guidance of

Companys Guide Name Faculty

Guide

Mr. Pravin Nagpal

Prof. Abhijeet Shivane Director at IFIANS Corporate Services Pvt. ltd

IMDR, Pune

Submitted By:

Vivek Chandak

Roll No.-55

PGDM-2 A (2012-14)



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Certificate



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DECLARATION

I, Vivek Chandak, hereby declare that this Summer Project Report entitled CONSUMER

BEHAVIOUR, INVESTMENT PATTERN & PREFERENCE IN INSURANCE SECTOR

submitted in the partial fulfillment of Post Graduate Diploma In Management (PGDM),

Institute of Management Development and Research (IMDR), Pune is based on primary &

secondary data found by me in various departments, books, and websites & collected by me,

under the guidance of Mr.Pravin Nagpal (Chartered Accountant).

Place: Pune Vivek Chandak

Date: / / Roll No: 55 PGDM 2

A



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ACKNOWLEDGEMENT

First, I must thank PROF. ABHIJEET SHIVANE (IMDR) for her help to determine the

objective of the report. He made me grateful with her valuable suggestions from time to time

during my internship.

The second person to acknowledge will surely be the director of the company Mr.

Pravin Nagpal , He has been a great support from the choice of the topic, sharing his

knowledge and expertise and helping me.

Special thank goes to Mrs. Puneet Nagpal , for providing me every kind of information related

to my internship and project study.

I really should thank every other employee of Ifians, whom I found during different phases of

my internship. Most of them have been very open and friendly with me and provided me with

the answers I needed from them.

Lastly, I would like to thank my classmates working in the IIFL for providing me with brief but

useful information about the practices in their organization.

I am Thankful to you all

VIVEK CHANDAK



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CHAPTER NO 1:- INTRODUCTION

INTRODUCTION

Project on CONSUMER BEHAVIOUR, INVESTMENT PATTERN & PREFERENCE IN

INSURANCE SECTOR was carried out for IFIANS Financial Services from 1 th June, 2013

to 30th July, 2013.

The project on CONSUMER BEHAVIOUR, INVESTMENT PATTERN & PREFERENCE IN

INSURANCE SECTOR was carried out in IFIANS Financial Services, Warje, Pune. The

intention behind taking over this project with IFIANS Financial Services was to primarily

understand the concept of Financial Planning and Investment of an Individual in India.

I. Background of the Study

The pre-liberalized India had a very poor rate of savings and most of the money earned was

spent on consumption rather than accumulation. But in the post-liberalization period, India

saw an upsurge in volume of savings. It is widely believed that Mutual funds (MFs) and LifeInsurances (LIs) are designed to target small investors, salaried people. With this

background, a humble attempt is made in this report to study the factors influencing the

fund/scheme selection behavior of Indian retail investors with regards to mutual fund and life

insurance products.

ii. Utility of the Study

The study will help the individuals to make a wise decision in investing their savings; such as:

whom to buy from and where to buy. Further this study will help mutual fund and life

insurance companies to understand the profile of Indian retail investors and their behavioral

pattern.

iii. Objective of the study



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To understand the retail investors behavior towards different investment avenue on

the basis of their age, gender, education and profession.

To identify the features as the retail investors look for in investment products.

To identify the scheme preference of investors.

To identify the factors those influence the investors fund/scheme selection

To identify the source of information that influences the fund/scheme selection

decision.

iv. Limitations of the Study

Like most of the other researches, the study suffers from the following limitations that

should be considered carefully at the time of generalizing the findings of the study:

The respondents who have not given any information are not included in the sample

but do come under the population

Sample size is limited to 50 educated investors in Pune city only. The sample size

may not adequately represent the national market.

This study has not been conducted over an extended period of time having both

market ups and downs. The market state has a significant influence on the buying

patterns and preferences of investors.



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COMPANY PROFILE

IFIANS corporate service Pvt. Ltd. team is a professional firm since 1997,

Offering services and has been synthesizing the learning from a vast experience-base and

converting that into advantage for its clients.

With a watchword of commitment, we provide all sort of services related to Accounting,

Auditing, Taxation, Business process outsource, Income Tax, Financial services, Company

law matters, Fringe Benefit Tax, Wealth Creation, Real Estate Matter for Residents & NRI's

etc. thereby freeing up valuable time of yours to apply in running your business.

The sphere of our service network includes Corporate Houses, Banks, Co-Op Societies,

Public Sector Undertakings, NGO, NRI's and individuals. They are committed to provide

tailor made services to the individual needs of each client. Main aim is to provide a

professional service to our clients at a reasonable cost using state of the art technology.

IFIANS team offers a formidable range of expertise and experience. Everything from

business accounting and taxation to business start-ups and corporate finance and keep

a close eye on all the essentials for clients and offer proactive advice on how they can

improve their personal, family, or business finances.

Their Major services are:

Taxation and Accounting

Investments, Insurance, &Tax Savings

Our team offers a formidable range of expertise and experience. Everything from business

accounting and taxation to business start-ups and corporate finance. We keep a close eye on

all the essentials for you and offer proactive advice on how you can improve your personal,

family, or business finances.



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We have experienced, professionally focused team of finance professionals supported by

senior Chartered Accountants, Advocates, Company Secretary, Attorneys who are dedicated

to provide efficient services in a consistent manner.

They provide following income tax services for Resident Indians:

Filling of Income return for Individuals, HUF, Firms, Trust, Co-Op. Soc., Private

Limited & Limited Companies (including MNCs).

Income tax returns for Landlords, Rental income, Professionals Doctors,

Architects.

Electrical & Engg. Contractors.

Rectification, Revision or Appeal of Income tax orders.

To follow up for income tax refunds.

To get the clearance certificate for going abroad.

Payments on which income tax deduction at source required.

Annual return for TDS in electronic form ( eTDS ).

Registration of trust for charitable purposes.

Advance tax computation.

Obtaining advance Ruling. Tax planning, specific advice on taxation & Consultancy in TDS matters.

Other Compliances as per Income Tax Act.

They provide following Investments, Insurance, Tax saving, and financial services

for Resident Indians

Life Insurance from LIC of India and ICICI Prudential Life Insurance

Health, Four wheeler, Property, Overseas Travel and other insurance from ICICI

LOMBARD, General insurance Company Ltd.

NSC, PPF, Postal Savings, RBI Bonds, Infra /Capital Gain Bonds etc.

Mutual Funds: Equity Funds, Debt funds, Tax Savings Funds, S.I.P. , M.I.P

Financial Advices to customers according to their previous Investments.



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Management Team

Director Mr.Praveen Nagpal

Associate Director Mrs.Puneet NagpalEquity Manager Mr. Swapnil BhaleraoHr Manager Miss. Swapnil SahaNo. of Senior Employees 8 nos.No. of Junior Employees 6 nos.Office Helping Staff 4 nos.

Clients

At Ifians, we specialize in Financial Accounting, Service tax, Income tax and Investment

Advisory Services. Few of our premier clients are:

Elements

M/s Lisa Home Solutions Pvt. Ltd. (www.lisahomesolutions.com)

ASC Computers

TXIS (Technology Xpress Info Systems) Pvt. Ltd.

Jain Excellency Services

M/s Ashwamegh Travels

Virtual HR Services

Lily Chilli

Also expertise in filing salary returns and investment consultation. They are providing

services to more than 3000 customers across Pune Mumbai, Hyderabad and

Bangalore. Our clients work with various organizations as:

Tech Mahindra Ltd

Infosys Technologies Ltd.

Avaya India Pvt Ltd

Amdocs development Centre India Pvt. Ltd

Cognizant Technology Solutions India Ltd

Wipro Technologies

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Accenture India Pvt. Ltd.

IBM India Pvt ltd.

Oracle Financial Solutions India Ltd.

Tata Consultancy services (TCS) ltd.

System Plus India Pvt. Ltd.

BMC Software Ltd.

Persistent Systems India Ltd.

Sungard India Pvt Ltd.

Pimpri Chinchwad Municipal Corporation

GKN Sinter Metals Ltd.

V-Life Sciences India Pvt Ltd.

EDS India Pvt Ltd.

Benninger India Pvt. Ltd

Websym technologies Pvt. Ltd

Foseco India Pvt. Ltd

Symantec India Pvt. Ltd.

John Deere India

Cap Gemini Mahindra Satyam Computer Services Ltd.

Redknee India Pvt. Ltd.

KPIT Info systems Ltd.

Principle

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CHAPTER NO:-2

INDUSTRY BACKGROUND

Changing Scenario

Since 1991, there has been a radical change in the Indian economic environment.

In the early 90s the country was confronted with a severe crisis due to a sharp

plunge in the foreign exchange reserves, a downgrading of the credit rating,

suspension of foreign private capital flows and a decline in the industrial output.

India was on the verge of defaulting on its foreign debt obligations. The only way

was to initiate reforms and a structural adjustment program. The country would

have to lift restrictions on foreign investments, on the flow of private capital and on

private initiatives in many area of economic development. The structural reforms

focused on liberalizing industry, trade, taxation and foreign investment, and on

reforming the financial sector.

Fundamentals of Investment:-

There are three fundamentals of investment, namely:

SAFETY

LIQUIDITY

RETURN

The order is quite clear: Safety- always first, then the Liquidity- next and Return-

third. A lot of people fall prey to the lure of high returns, and usually, this has

resulted in a LOSS.

Most popular investment options for tax saving and investment as covered under

chapter VI A (U/s 80 C and other) of the Income Tax Act 1961.

Investments are of two types:

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Direct Investment and Indirect Investment

Direct Investment: - Where amount is required to be invested specially to meet the

investment and tax saving needs.

Indirect Investment: - In such cases, due to certain laws or basic requirements like housing,

we invest the money. However such investments give us the tax benefit too and hence is

called as indirect investments.

Direct Investment includes:

PPF LIC- Traditional and ULIP etc.

ULIP Unit Linked Insurance Plan

Mutual Fund(ELSS)

National Saving Certificates.

Infrastructure bonds u/s 80CCF

Tax Saving Fixed Deposits.

Postal Saving Schemes.

Capital Gain Bonds (eg. REC, NHAI)

80 CCG RGESS Scheme

Indirect Investment includes:

PF(employee contribution)

Education fees

Home Loan Principle

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Int. on Home Loan

Stamp Duty.

Education fees for Children

Interest on Educational Loan

Ded. U/s 80DD, 80U etc.

Donations

PPF (Public Provident Fund) [EEE]

It is a saving cum tax saving instrument. It also serves as a retirement planning tool for many

of those who do not have any structured pension plan. PPF has, the last number of years,

been one of the best investment options. It offers:

a) High and assured returnsb) 100% guaranteed by the govt. of India

c) Tax rebate while investing and tax- free returns U/s 10(10D)

PPF at a glance:

1. Minimum amount is Rs. 500 and maximum is Rs. 100,000 in a financial year.

2. A PPF account can be opened in Post office and Nationalized banks.

3. PPF also comes under Section 80C for income tax deduction.

4. Lock in period for PPF is 15 years.

5. Loans from the amount at credit in PPF amount can be taken after

completion of one year from the end of the financial year of opening the

account and before completion of the 5 th year.

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6. Interest @ 8.7% is calculated and credited to the accounts at the end of

each financial year.

PPF is considered to be the best investment option as it is backed by Government ofIndia.

For example, a person in the highest tax bracket investing Rs. 100,000 in PPF would

have saved Rs. 30,000+Edu.Cess from tax under Sec 80C.

ULIP: (Unit Linked Insurance Plans): [EEE]

In true sense a combination of Investment fund and Insurance policy.

Minimum Limit: Rs. 10,000 (sub to policy) with additional contribution of Rs.

1,000.

Maximum limit: no maximum limit (subject to policy limits).

Age of the investor: 0-65 years.( as per plan).

Higher it is also exempted from the wealth tax.

Service tax may be charged since insurance cover is taken.

Maturity: fund value or fund value + insurance cover (as per plan).

Opportunity to invest in various funds as available in market.

Opportunity to invest and withdraw, and high returns are expected due to

investment in stocks.

Flexibility to choose life cover.

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Choice of various plans.

Note: usually ULIPs are good if you below the age 55 and if you have

knowledge of mutual fund or stock market, it will be added advantage.

ULIPs contain some chargers as allocation, mortality, fund management

and administration of policy, which needed to be borne by investor.

LIFE INSURANCE [EEE]

Life insurance is a contract that pledges payment of an amount to the person assured (or his

nominee) on the happening of the event insured against.

Life Insurance Corporation of India (LIC) was established in 1956 to spread the message of

life insurance in the country and to mobilize people's savings for nation-building activities.

The main features of LIC are given below:

1. Saving Institution:

Life insurance both promotes and mobilizes saving in the country. The income tax

concession provides further incentive to higher income persons to save through LIC policies.

The total volume of insurance business has also been growing with the spread of insurance-

consciousness in the country. The total new business of LIC during 1995-96 was Rs. 51815

crore sum assured under 10.20 lakh policies.

The LIC business can grow at still faster speed if the following improvements are made:

The organizational and operational efficiency of the LIC should be increased.

(i) New types of insurance covers should be introduced.

(ii) The services of LIC should be extended to smaller places.

(iii) The message of life insurance should be made more popular.

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(iv) The general price level should be kept stable so that the insuring public does not get

cheated of a large amount of the real value of its long-term saving through inflation.

2. Term Financing Institution:

LIC also functions as a large term financing institution (or a capital market) in the country.

The annual net accrual of investible funds from life insurance business (after making all kinds

of payments liabilities to the policy holders) and net income from its vast investment are quite

large. During 1994-95, LIC's total income was Rs. 18,102.92crore, consisting of premium

income of Rs. 1152, 80 crore investment income of Rs. 6336.19crore, and miscellaneous

income of Rs. 238.33crore.

3. Investment Institutions:

LIC is a big investor of funds in government securities. Under the law, LIC is required to

invest at least 50% of its accruals in the form of premium income in government and other

approved securities.

LIC funds are also made available directly to the private sector through investment in shares,

debentures, and loans. LIC also plays a significant role in developing the business of

underwriting of new issues.

4. Stabilizer in Share Market:

LIC acts as a downward stabilizer in the share market. The continuous inflow of new funds

enables LIC to buy shares when the market is weak. However, the LIC does not usually sell

shares when the market is overshot. This is partly due to the continuous pressure for

investing new funds and partly due to the disincentive of the capital gains tax.

Here are few most popular policies and its features/ benefits are:

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Endowment Type: Endowment with Profits (Plan 14), Jeevan Anand (Plan 149), Jeevan

Mitra (Double Cover Plan 88)/ (Triple Cover Plan 133), Jeevan Saral (Plan 165)

Money Back Policy: Money Back with profits (Plan -75), Jeevan Surabhi [15/20/25] yrs,Bima Gold Plan

Unit Linked Insurance Policy(ULIPS): LICs Endowment Plus

Special Plans: New Jeevan Shree , Health plus Mediclaim ULIP , Bima Nivesh Triple Cover

Childrens Policy: Jeevan Kishore, Jeevan Chhaya, Komal Jeevan

Womwns Policy: New Jeevan Bharati

Pension Plans And Annunities: New Jeevan Dhara, New Jeevan Suraksha, New Jeevan

Akshay Pension Plus, Insurance +ULIP+Pension.

Term Insurance Policy: Amulya Jeevan (Above 25 Lacs), Anmol Jeevan (Below 25 Lacs)

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Investment Avenues

Diagram 4

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Fixed Return Options:

1. Post Office (KVP, NSC, M.I.S.)2. Public Provident Fund

3. Bank Fixed Deposits

4. Government Securities or Gilts

5. RBI Taxable Bonds

6. Insurance

7. Company Debentures

8. Company Fixed Deposit

9. Infrastructure Bonds

Variable Return Options:

1. Mutual Fund2. Shares and Stock Market

o Primary Market (IPO)

o Secondary Market

3. Bullion Market (Gold & Silver)

4. Property

5. Foreign Exchange Assets


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Comparison of Various Investment Avenues

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Investment

AvenuesLiquidity Safety Returns Volatility

TAX

BENEFITCONVENIENCE

Fixed Deposits Low Low Moderate Low No Moderate

Equity sharesModerate

to highLow Uncertain High No Moderate

Co. Debenture Low Moderate Moderate Moderate No Low

Co. Deposit Low Moderate Low Low No Low

Life Insurance Low High Low Low Yes Moderate

Mutual Funds

(Open ended)High Moderate Moderate High No High

Mutual Funds

(close ended )High Moderate Moderate High Yes High

RBI Bonds Moderate High Moderate Low Yes Moderate

Bank Fixed

DepositHigh High Low Low No High

PPF Low High Moderate Low Yes Moderate

Post Office High High Good Low Yes Moderate

NSC Low High Moderate Low Yes Moderate

Gold High High Moderate Moderate No High

Infrastructure

BondsModerate High Moderate Low No Low

Real Estate Low Moderate Variable High Yes High

Public sec. &

FII Bonds

Moderate High Moderate Moderate No High


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Comparison between FD, Bonds and Mutual Fund Features

Table 2

Characteristics FD's Bonds Mutual Funds

Accessibility Low Low HighTenure Fixed(medium) Fixed(Long) No Lock-in

Min. Investment Rs.1000 Rs.5000 Rs.5000

Tax Benefits None 80L, 88 Dividend Tax-Free

Liquidity Low Very Low Very High

Convenience Medium Tedious Very High

Transparency None None Very High

ABOUT MUTUAL FUND INDUSTRYDefinition:

Mutual Fund is a pool of money, collected from investors, and is invested according

to certain investment objective.

Mutual Fund is the pooling of Money from the retail investors to the corporate

investors for Sustainable growth of the investments.

Introduction:-

A Mutual Fund is a pool of money, collected from investors, and is invested

according to certain investment objectives with a common financial goal. A Mutual

Fund is created when investors put their money together. The most important

characteristic of a mutual fund is that the contributors and the beneficiaries of the

fund are the same class of people, namely the investors.

The money thus collected is invested by the fund manager in different type of

securities depending upon the objective of the scheme. These could range from

shares to debentures to money market instruments. The income earned by these

instruments and the capital appreciation 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.

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

Characteristics:

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A mutual fund actually belongs to the investors who have pooled their funds.

A mutual fund is managed by investment professionals and other service

providers, who earn a fee for their services, from the fund.

The pool of funds is invested in a portfolio of marketable investments. The

value of the portfolio is updated every day.

The investors share in the fund is denominated by units. The value of the

units changes with change in the portfolios value, every day.

Mutual Fund Operation Flow Chart

History of the Indian 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: 1964-1987

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 RBI. 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 AUM.

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

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In 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.

Third Phase: 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian

mutual fund industry, giving the Indian investors a wider choice of fund families.

Also, 1993 was the year in which the first Mutual Fund Regulations came into

being, under which all mutual funds, except UTI were to be registered and

governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton)

was the first private sector mutual fund registered in July 1993. The industry now

functions under the SEBI (Mutual Fund) Regulations 1996.As at the end of January

2003; there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit

Trust of India with Rs.44,541 crores of assets under management was way ahead

of other mutual funds.

Fourth Phase Since February 2003In 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 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.

Risk Associated With Mutual Fund:-

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Interest Rate Risk Bond price move inversely to changes in interest rate. If

interest rate go up bond price come down and vice-versa changes in bond

price will affect the NAV of income funds since NAV is compiled on a daily

basis, the effect of interest rate fluctuation will get reflected in the NAV.

Liquidity Risk this prefers to at which security can be sold at or near its true

value. The primary assessment of liquidity risk is the spread between the bid

price and the offer price quoted by dealer.

Credit Risk Credit risk or default risk refers to the risk that on investors of a

fixed income security may default. Because of the risk, debentures are sold at

a fixed spread above these offered a treasury security, which are considered

as risk free. Normally, fixed income security will fluctuate depending upon the

actual changes in the provided level of credit risk and actual event of default.

Market Risk the prices of shares are subject to wide price fluctuations

depending upon market conditions over which nobody have a control.

Moreover, every economy has to pass through a cycle-Boom, Recession,

Slump and Recovery. The phase of the business cycle affects the market

conditions to a larger extent.

Types of Mutual Fund

A Mutual Fund may float several schemes, which may be classified on the basis of

its structure, its investment objectives and other objectives.

TYPES OF MUTUAL FUND SCHEMES:

By Structure

o Open-ended schemes

o Close-ended schemes

o Interval schemes

By Investment Objective

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o Growth schemes

o Income schemes

o Balance schemes

o Money Market schemes

Other types of schemes

o Tax Saving schemes

o Special schemes

o Index schemes

o Sector specific schemes

Closed-end funds: A closed-end mutual fund bears a number of shareswhich are issued to the public by an initial public offering (IPO).

Open-end funds: Open end funds are managed by mutual fund houses for

raising money from shareholders and they invest in a group of assets.

Large cap funds: Large cap funds are those mutual funds, which look for

capital appreciation by way of investing in blue chip stocks.

Mid-cap funds: Mid cap funds invest in small/medium sized companies, but

with no proper definition of classifying a company. Equity funds: Equity mutual funds, also known as stock mutual funds invest

pooled amounts of money in public company stocks.

Balanced funds: Balanced funds are also known as hybrid fund, buying a

combination of common stock, preferred stock, bonds, and short-term

bonds.

Growth funds: Growth funds are mutual funds that target at capital

appreciation by investing in growth stocks.

Exchange traded funds: Exchange Traded Funds (ETFs) are a basket of

securities being traded on an exchange, just similar to that of a stock. They

are not like the conventional mutual funds.

Sector funds: These funds are funds that restrict the investments to a

specific segment or sector.

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Index funds: An index fund aims to replicate the actions of an index of a

specific financial market.

FREQUENTLY USED TERMS

Net Asset Value (NAV):

Net Asset Value is the market value of the assets of the scheme minus its

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

the number of units outstanding on the Valuation Date.

The net asset value (NAV) is the market value of the fund's underlying

securities. It is calculated at the end of the trading day. Any open-end funds

buy or sell order received on that day is traded based on the net asset value

calculated at the end of the day. The NAV per units is such Net Asset Value

divided by the number of outstanding units.

Sale Price:

Is the price you pay when you invest in a scheme or NAV a unit holder is

charged while investing in an open-ended scheme is sale price? Also called

Offer Price. It may include a sales load if applicable.

Repurchase Price:

Is the price at which a close-ended scheme repurchases its units and it may

include a back-end load? This is also called Bid Price.

Redemption Price:

Is the price at which open-ended schemes repurchase their units and close-

ended schemes redeem their units on maturity? Such prices are NAV

related.

Sales Load:

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Is a charge collected by a scheme when it sells the units. Also called, Front-

end load.

No Load:

Schemes that do not charge a load are called No Load schemes. A no-load

fund is one that does not charge for entry or exit. It means the investors can

enter the fund/scheme at NAV and no additional charges are payable on

purchase or sale of units.

SYSTEMATIC INVESTMENT PLAN (SIP):-The amount that has to be

invested through same monthly installment is known as Systematic

Investment Plan. The investor has to pay the minimum amount Rs.1000

monthly for all equity and balanced schemes like that for 6months. And

Rs.500 monthly for Tax Saver scheme like that for 12 months. The minimum

amount that the investor has to invest is Rs6000 and maximum as per their

choice. This type of investment is generally preferred for the salaried people.

ADVANTAGES OF MUTUAL FUND

Source : www.amfiindia.com

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Affordability Diversification

RegulationsVariety

Tax BenefitsProfessional

Mgmt


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Mutual Funds offer several benefits to an investor that are unmatched by the other

investment options. Last six years have been the most turbulent as well as exiting

ones for the industry. New players have come in, while others have decided to

close shop by either selling off or merging with others. Product innovation is now

pass with the game shifting to performance delivery in fund management as well

as service. Those directly associated with the fund management industry like

distributors, registrars and transfer agents, and even the regulators have become

more mature and responsible.

1.Affordability: Small investors with low investment fund are unable to invest in

high-grade or blue chip stocks. An investor through Mutual Funds can be

benefited from a portfolio including of high priced stock.

2.Diversification: Investors investment is spread across different securities (stocks,

bonds, money market, real estate, fixed deposits etc.) and different sectors

(auto, textile, IT etc.). This kind of a diversification add to the stability of

returns, reduces the risk for example during one period of time equities might

underperform but bonds and money market instruments might do well do well

and may protect principal investment as well as help to meet return objectives.3.Variety: Mutual funds offer a tremendous variety of schemes. This variety is

beneficial in two ways: first, it offers different types of schemes to investors

with different needs and risk appetites; secondly, it offers an opportunity to an

investor to invest sums across a variety of schemes, both debt and equity

4.Professional Management: Mutual Funds employ the services of experienced

and skilled professionals and dedicated investment research team. The

whole team analyses the performance and balance sheet of companies and

selects them to achieve the objectives of the scheme.

5.Tax Benefits: Depending on the scheme of mutual funds, tax shelter is also

available. As per the Union Budget-99, income earned through dividends from

mutual funds is 100% tax free. Under ELSS of open-ended equity-oriented

funds an exemption is provided up to Rs. 100,000/- under section 80C.

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6.Regulation: All Mutual Funds are registered with SEBI and they function within

the provisions of strict regulations designed to protect the interests of

investors. The operations of Mutual Funds are regularly monitored by SEBI.

Other Benefits

Potential Return: 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.

Low Costs: Mutual Funds are a relatively less expensive way to invest

compared to directly investing in the capital markets because the benefits of

scale in brokerage, custodial and other fees translate into lower costs for

investors.

Liquidity: In open-ended schemes, investor can get money promptly at net

asset value related prices from the Mutual Fund itself. In close-ended schemes

the units can be sold on a stock exchange at the prevailing market price or

avail of the facility of direct repurchases at NAV related prices which some

close-ended and interval schemes offer you periodically.

Transparency: Mutual Funds have to disclose their holdings, investment pattern

and the necessary information before all investors under a regulationframework.

Flexibility: Investment in Mutual Funds offers a lot of flexibility with features of

schemes such as regular investment plans, regular withdrawal plans and

dividend reinvestment plans; you can systematically invest or withdraw funds

according to your needs and convenience.

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DISADVANTAGES OF MUTUAL FUND:

The following are the disadvantages of investing through mutual fund:

No control over cost: - Since investors do not directly monitor the funds

operations, they cannot control the costs effectively. Regulators therefore

usually limit the expenses of mutual funds.

No tailor-made portfolio: Mutual fund portfolios are created and marketed by

AMCs, into which investors invest. They cannot made tailor made portfolio.

Managing a portfolio of funds: As the number of funds increase, in order to

tailor a portfolio for himself, an investor may be holding portfolio funds, with the

costs of monitoring them and using hem, being incurred by him.

Delay in Redemption: The redemption of the funds though has liquidity in 24-

hours to 3 days takes formal application as well as needs time for redemption.

This becomes cumbersome for the investors.

Non-availability of loans: Mutual funds are not accepted as security against

loan. The investor cannot deposit the mutual funds against taking any kind of

bank loans though they may be his assets.

Where Do Mutual Fund Invest?

Broadly mutual funds invest basically in 3 types of asset classes:

Stocks: Stocks represent ownership or equity in a company, popularly known as

shares.

Bonds: These represent debt from companies, financial institutions or government

agencies.

Money market instruments: This includes short term debt instrument such as

treasury bills, certificate of deposits and inter-bank call money.

WHY TO INVEST IN MUTUAL FUNDS:

A proven principle of sound investment is do not put all eggs in one basket.

Investment in mutual funds is beneficial due to following reasons.

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They help in pooling of funds and investing in large basket of shares of

different companies. Thus by investing in diverse companies, mutual funds

can protect against unexpected fall in value of investment.

An average investor does not have enough time and resources to develop

professional attitude towards their investment. Here professional fund

managers engaged by mutual funds take desirable investment decision on

behalf of investors so as to make better utilization of resources.

Investment in mutual funds is comparatively more liquid because investor can

sell the units in open market or can approach mutual fund to repurchase the

units at net asset value depending upon the type of scheme.

Investors can avail tax rebates by investing in different tax saving schemes

floated by these funds, approved by the government.

COMPANY PROFILE

SBI MUTUAL FUND (SBI MF) is one of the largest mutual funds in the country with an

investor base of over 5.8 million. With over 20 years of rich experience in fund management,

SBI MF brings forward its expertise in consistently delivering value to its investors.

SBI MF draws its strength from India's Largest Bank, State Bank of India.

ICICI PRUDENTIAL Asset Management Company enjoys the strong parentage of prudential

plc, one of UK's largest players in the insurance & fund management sectors and ICICI Bank,

a well-known and trusted name in financial services in India . ICICI Prudential Asset

Management Company, in a span of just over eight years, has forged a position of pre-

eminence in the Indian Mutual Fund industry as one of the largest asset management

companies in the country with assets under management of Rs 69,754.78 Crore .The

Company manages a comprehensive range of schemes to meet the varying investment

needs of its investors spread across 68 cities in the country.

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Product profile

Growth Plan

Flagship product launched in June 1998

Well diversified Equity Fund

Focused on Large cap, Blue-chip, leader stocks

More or less buy and hold strategy

Rs 491crs Assets under Management

Entry load 2.25 % for amt less than 5 Cr

Exit load - Nil

Power plan

This plan was made open ended in Yr 2000 as it was closed end fund

launched by ICICI Ltd.in 1994.

Positioned as Aggressive Diversified Equity Fund

Aggressive means- taking aggressive call / concentrated risk on sector/stocks on which Fund manager are comfortable.

Mid cap exposure of 30-35 %

Rs.577 Crs worth assets under Management

Entry Load 2.25 % for amt up to 5Cr

Exit load Nil

Dynamic Plan

Launched in Oct 2001

Diversified Equity Fund

Unique feature of switching between assets classes.I.e Debt and Equity

Rs.106 Crs worth assets under Management

Entry load 2.25 % for amt up to Rs.5 Cr

Exit load- Nil

Min application amt : Rs.5000

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SIP and SWP is available

Balance Plan

Good for those investors who are not comfortable for 100 % equityexposure.

More than 51 % in equity rest in debt

Debt offer steadiness to portfolio

Entry Load 2.25 % for amt up to Rs.5 cr

Exit load : Nil

Sector Funds

Technology Fund

Investment into Technology sector and

Looking at companies who uses technology as key area to expand

business Entertainment, telecom, IT etc.

FMCG funds

Invest in FMCG sector

Tax Plan

Only plan that offer Section 80 C benefit to investor

3 yrs lock in

Diversified Equity fund categorized under ELSS

Entry load of 2.25 %

Exit load Nil

Child Care Plan

Gift Plan

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51-60 % in Equities

40-49 % in debt

1.5 % Entry load

1 % exit load for 3 yrs from date of purchase

Offers personal accidental death insurance up to 10 times of investment or

5Lacs whichever is lower.

Study plan

0-15 % in Equities

85-100 % in debt

1.5 % Entry load

1 % exit load for 3 yrs from date of purchase

Offers personal accidental death insurance up to 10 times of investment or

5Lacs whichever is lower.

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CHAPTER NO 3:- RESEARCH METHODOLOGY

METHODOLOGY OF STUDY

Research Methodology is a systematic method of discovering new facts or

verifying old facts, their sequence, inter-relationship, casual explanation and the natural laws

which governs them.

Research Methodology explained by Redman and Mory are as follows systematized

effort to gain new knowledge Research Methodology is original contribution to the existing

stock of knowledge making fir its advancement. It is the purist of truth with the help of study.

Observation, Comparison and Experiment. In short also covers the systematic method

findings solution to a problem is research. It also covers the systematic approach concerning

generalization and the formulation of the theory.

Different stages involved in research consists of enacting the problem, formulating a

hypothesis, collecting the facts or data, analyzing the facts and reaching certain conclusion

either in the form of solution towards the concerned problem or in generalization for some

theoretical formulation.

In Research Methodology mainly Data plays an important role.

THE DATA IS DIVIDED IN TWO PARTS:

Primary Data

Secondary Data.

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Primary data is the data, which is collected directly personal interview, interview, indirect oral

investigation, Information received through local agents, drafting a schedule, drafting a

questionnaire.

Secondary data is the data, which is collected from the various books, magazine and

material, reports, etc. The data which is stored in the organization and provide by the HR

people are also secondary data. Various information is taken out regarding that subject as

well other subject from various sources and stored. The last years data stored can also be

secondary data. This data is kept for the internal use of the organization.

This is the Research Methodology used in the project. The primary and secondary data

method has been used in this project. Unless the data is collected no project can be

complete. So both these data is very important in the project. The research instrument used

for this survey is a structured questionnaire. The questionnaire contains both open-ended

and closed-ended questions. The questionnaire provides a provision with respect to rating

scales.

Research Design

The research design adopted is a combination of exploratory, formal and descriptive. Since

the study is based on a hypothesis so it is formal and it has certain elements of exploration

as well. And since the study is related with measuring where or whether, it is descriptive in

nature.

ASSUMPTIONS:

The sample selected represents the population fully.

The data has been collected by administering a close-ended questionnaire of end

investor with the assumption that the primary data collected is true and reflects the

actual preference of the investors/traders.

The sample selected has thorough knowledge of the subject of share.

It has been assumed that sample of 50 respondents represents the whole

population.

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The information given by the customer is unbiased.

SAMPLING METHOD:

The sampling method so as to obtain a representative sample is the Non-probabilitysampling methods. Under Non-probability sampling, the question addressed the basic

questions relating different avenues of investment have they invested in any investment

avenues before their purpose of investment time for which they would like to invest etc. .

A random sample of 50 people was taken. I selected the respondent to the survey on the

basis of judgment sampling with convenience taken into account.

To achieve the above objective of the study, the following instruments were used:

QUESTIONNAIRES: THEYCONSISTSOFANUMBEROFQUESTIONSPRINTEDORTYPEDINA

definite order on a form or a set of forms. The respondents have to answer the

questions themselves. To do the above research, we used a structured

questionnaire which had 9 questions about the respondents interest and

Knowledge.

SAMPLE DESIGN: A sample is a definite plan for obtaining a sample from a given

population. It refers to the technique or procedure the researcher would adopt in

selecting items for the sample.

POPULATION DEFINITION:

Element: Business Men, Builders, Industrialists, Exporters, Senior Citizens,

CAs, CSs and others.

Sample Unit: Pune City

Sampling Method: Simple Random Sampling

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Sample Size: 50

Data collection: Through directories, Previous records through friends and

relatives.

Development of Working Hypothesis

The Hypothesis was developed by discussing with the concerning department heads and

guides about this exploratory research and reached to the conclusion that the data is to be

collected by personal interactions with the customers asking them about the services their

knowledge about Investments, their satisfaction level and the improvements they wanted or

any additional services which they expected.

Collection of Data

There was secondary data available for the study courtesy the company itself and primary

data was collected by carrying out a survey through personal interviews of the customers.

The sample size was 50.

A sample is a representative of the population which will predict the behavior of the whole

population.

The sampling size is put under two categories: Probability sampling and non-probability

sampling.

Probability Sampling

This is the process of selecting the elements or group of elements from a well-defined

population by such procedure which gives every element in the population an equal chance

of being selected for observation. The sampling method use for this survey is area sampling

which is a sub type of probability sampling.

Sampling Size

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Large sample gives reliable result than small sample. However, it is not feasible to target

entire population or even a substantial portion to achieve a reliable result. So, in this aspect

selecting the sample to study is known as sample size. Hence, for my project my sample size

was 50. The Sample Size of 50 is not enough to draw a conclusion but as per the time

assigned it was difficult to take a sample size more than 50. The Sample Size consists of

both the Service and Business class people.

Execution of the Survey

Accuracy of the findings depends on how systematically the study has been carried out in

time so that it can make some sense when required. I have executed the project after prior

discussion with the guide and structured in the following steps:

Preparation of questionnaire:

I was assigned a location there I used to talk to many of their employees and as there were

many IT companies alongside I would find many people nearby and during their free time I

used to talk to them about their investment and ask them to fill the questionnaire.

Interview of the customers so that more interaction is possible and all varieties of responsescan be registered to have a good data for analysis.

Visiting the corporate and requesting their feedback on the investments services they are

availing and also try to find out their satisfaction level with their existing investments.

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CHAPTER NO:-4 DATA PRESENTATION & ANALYSIS

QUESTIONNAIRE

Personal Information:

Name

Occupation

Age

Address

Phone

1) In which category you would like to rate yourself?

Table 1

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Investment Returns Number Of Respondents

Risk Averse 10

Risk Neutral 35

Risk Taker 5

Total 50


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s

Graph 1

2) Are you an investor, who is interested in getting good deduction from tax?

Interested in Tax Deduction

Table 2

Interested in Tax Deduction

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Information Number Of Respondents

Yes 60

No 15Total 75


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Graph 2

We observe that 80% of all the respondents are interested in getting deduction from tax. We

have got 20% of our total respondents who are not interested in getting deduction from tax at

all.

3) Among which of the following income group do you fall?

Income Group

Table 3

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Income group Number Of Respondents

Up to 2,00,000 2

2,00,000-5,00,000 25

5,00,000-8,00,000 18

Above 8,00,000 5

TOTAL 50


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Income Group

Graph 3

We observe that 4% of all the respondents fall under income group up to 2,00,000.We have

got 50% of our total respondents fall under income group of 2,00,000-5,00,001 and 36% of

our respondents fall under income group of 5,00,001-8,00,001 while 10% of our respondents

fall under income group of 8,00,001 & more. Having a good amount of saving they form a

major part of the investors community. Investors above this level are also potential

customers.

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4) Which are the investments you hold at present?

Investment Holding

Table 4

Investment Holding

Graph 4

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Investment Number Of Respondents

Equity market 12

Mutual fund 28

Govt, bond 0

Real estate 9

Bank FD 38

Post office 6

Life Insurance 30


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We observe that our respondent invest in more than one instrument of saving. Earlier people

were used to invest in fixed deposit, but since the inception of mutual fund now people want

to invest in that because they get more return in no risk or say very little risk, they are now

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aware of the importance of investment and how useful it can be in the future, so now more

and more people want to invest in mutual funds and then stocks there is a tremendous scope

for growth.

5) What is the Basic purpose of your investments?

Purpose for Investment

Table 5

Purpose for Investment

Graph 5

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Investment purpose Number Of Respondents

High return 5

Tax benefit 27

Saving 12Wealth creation 6

Total 50


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We observe that 10% of all the respondents Invest for the purpose of high return, 54% Invest

for the purpose of tax benefit, 24% Invest for the purpose of saving, 12% invest for the

purpose of wealth creation.

6) When do you expect to start drawing your income for investment purpose?

Investment Horizon

Table 6

Investment Horizon

Graph 6

6Graph 6

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Investment Horizon Number Of Respondents

Not for at least 20 yrs 0

In 15-19 yrs 2

In 11-15 yrs 7

In 6-10 yrs 18

Within 5 yrs 22

Total 50


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We have observed that maximum number of customers is interested for investing for medium

term investments i.e. for 5-10 yrs

7) What annual rate of return do you expect from your investments?

Expected Rate of INTEREST

Table 7

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Up to 8% 5

8%-10% 13

10%-15% 25

Above 15% 7


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Expected Rate of INTEREST

Graph 7

Majority of people are interested to take a calculated risk to invest so that they can get a

better return on their investment rather than investing in fixed deposits or saving accounts

where the return is fixed.

8) Which types of funds would you like to prefer for your investment in mutual fund?

Fund Preference

Table 8

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Fund Preference

Graph 8

We observe that 30% of all the respondents prefer investment in equity fund, 24% of all the

respondents prefer investment in Debt fund, and remaining 66% of all the respondents prefer

investment in balanced fund.

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Investment preference Number Of Respondents

Equity fund 15

Debt fund 12

Balanced fund 23

Total 50


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9). what percentage of your disposable income do you invest?

Percentage of income invent

Table 9

Percentage of income invent

Graph 9

Majority of people invest below 10% of their income some people i.e. 28% invest 20%-30%

of their income while only 9% of people invest 20%-35% of their income. A major chunk of

people belonging to this segment are young, large disposable income and have a little

knowledge about investment.

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Below 10% 27

10%-20% 14

20%-35% 9

35% & above 0


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Cross Tabulation

Age wise break up of Service Class respondents

Table 7.14

Service Class 20-30 30-40 40-50 50-60 > 65 Total

Equity Market 5 6 1 0 0 12

Mutual Fund 12 8 2 0 0 22

Govt. Bonds 1 2 2 0 0 5

Real Estate 0 1 0 0 0 1

Bank F.D. 3 5 2 0 0 10

Post office 0 1 3 0 0 3

Life Ins. 1 4 3 0 0 8

Age wise break up of Service Class respondents

Graph 10

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FINDINGS

We observe in the age group of 20-30 years are more open to mutual fund holding

and equity market.

The share of mutual fund shows a decreasing trend as the age increases.

It is observed that in the latter age groups, Life Insurance policies and Government

Securities and Bonds have an increasingly larger share.

Overall, Mutual Fund, Bank FD and Life Insurance policies the most preferred

holdings amongst all age groups in the service category.

Among all the respondents 63% are aware about Mutual Fund and 37% are not

aware about Mutual Fund 50% respondents are investing in lump sum and 50% are investing in Systematic

Investment Plan in Mutual funds.

58% respondents like Growth Option and 42% respondents like Dividend Option.

There are 70% male and 30% female out of all the respondents, more no. of male

are aware then the female about various investment opportunities.

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Suggestions

The company should give the knowledge regarding Mutual Fund through various

sources like more advertisement, TV programs etc. about what it is? How it works?

What is its benefit for us with its advertisement or in programs? Because many

people have heard about it but dont know what it is

The company should also attract the low Income people by showing them the

benefits of the liquidity funds for the short Term to attract them

The company should organize seminar to give information about Mutual Fund and

should distribute brochures having detail of schemes of Mutual Fund

Some of investors have asked for periodical market report about stock market so

that they can get the knowledge properly.

Bibliography

Websites

www.amfindia.com

www.moneycontrol.com

www.wikipedia.com

www.sharemaketbasics.com

www.sharemarket.comBooks

www.icicidirect.com

Books

David F, Swenson. 2005. Unconventional Success.

A fundamental Approach to Personal Investment Free Press 416

D.C. Anjaria. Dhaivat Anjaria. 2001 AMFIs Mutual Fund Testing

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http://www.amfindia.com/http://www.sharemarket.combooks/http://www.icicidirect.com/http://www.amfindia.com/http://www.sharemarket.combooks/http://www.icicidirect.com/


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Marketing Management Eleventh Edition by Philip Kotler

ANEXURE

QUESTIONNAIRE

Dear Respondent,

We the students of PGDM studying at Institute Of Management Development

and Research, Pune, are conducting a survey about Awareness of Investments.

This project is a part of our PGDM curriculum and we would like to have your

cooperation and full support to complete it so we would like you to provide us with

your valuable views and opinions.

Personal Information

Name

Occupation

Age

Address

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Phone

1. In which category you would like to rate yourself?

A) Risk Averse B) Risk Taker C) Risk Neutral

2. Are you an investor, who is interested in getting good deduction from tax?

A) Yes B) No

3. Among which of the following income group do you fall?A) Up to 2 lakh B) 2-5 lakhC) 5-8 lakh D) 8 lakh & above

4. Which are the investments you hold at present?

A) Equity Market B) Fixed Deposit

C) Life Insurance D) Mutual fund

E) Any other _____________

5. What is the Basic purpose of your investments?

A) High Return B) Savings

C) Tax Benefits D) Wealth Creation

6. When do you expect to start drawing your income for investment purpose?

A) For 20 yrs B) 15-19 yrsC) 11-15 yrs D) 6-10 yrsE) Below 5 yrs

7. Which types of funds would you like to prefer for your investment in mutual fund?

A) Equity Fund b) Debt Fund c) Balanced Fund

8. What annual rate of return do you expect from your investments?

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A) Up to 8% B) 8-10 %

C) 10-15% D) above 15%

9. What percentage of your disposable income do you invest?

A) Below 10% B) 10-20%

C) 20-35% D) above 35%

E-Mail ID: Contact No.

Final Project Report Roll NO 55

Documents

Transcript of Final Project Report Roll NO 55