Japi Project

8/2/2019 Japi Project

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Project Report

On

MUTUAL FUNDSAND PORTFOLIOMANAGEMENT

SERVICES

Submitted in the partial fulfillment of two yearFull time MBA (2007-2009)

By

Name:JAPNEET KAURMBA, Class of 2009

Enroll. No. : 0721703907Date: 31st March 2009

Faculty Guide: Mr.

TECNIA INSTITUTE OF ADVANCED STUDIES3, PSP, INSTITUTIONAL AREA,

MADHUBAN CHOWK, ROHINI, DELHI


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Contents

Chapters Page No.

Chapter one Research Problem & Purpose

1.1 Acknowledgement 2

1.2 Companys Profile 41.3 Executive Summary 61.4 Introduction 7

1.5 Research Methodology 8

1.6 Objective of Project 9

Chapter Two - Review of Literature 10

Chapter Three - Research

3.1 Mutual funds 11

3.2 History of Mutual Funds 14

3.3 Different types of Mutual Funds 34

3.4 Examples of Mutual funds 42

3.5 Portfolio Management Services 47

Chapter Four - Discussion

4.1 SWOT Analysis 60

4.2 Comparison between Mutual Funds and PMS 64

4.3 Conclusion 68

4.4 Findings 69

4.5 Future of Asset Management Industry 70

4.6 Limitations 73

Bibliography 74

Annexure 75


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EXECTIVE SUMMARY

Project work is a part of our curriculum, which help us to correlate our theoretical

concepts with practical experience. I prepared this report for my two years of Master of

Business Administration. My topic of project is Mutual funds v/s Portfolio Management

Services

The project is an attempt to analyze two such investment options in which

investment decision is taken by the professionals or with the help of professionals, investors

decide where to invest. i.e. MUTUAL FUNDS AND PORTFOLIO MANAGEMENT

SERVICES. It includes the comparative analysis of both the investment options. PMS is a

new concept as compared to MF.The method adopted for the research was Secondary data. By using different books,

fact files &main source i.e. internet.

Topics covered in the report:

About mutual fund and Portfolio Management Services

Their advantages and limitations

Similarities and Difference between mutual fund and PMS

Suitability of both MF & PMS to different types of investors

Different players providing mutual funds and Portfolio Management Services

Comparative analysis of mutual fund and PMS


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INTRODUCTION

As we know every person has different objectives of investment (saving, returns, tax

planning or retirement planning etc), and for different time horizon (short term or long term)

in which they invest. The most important point is that where they actually invest and at what

percentage in different sectors. And whether they invest in Mutual funds, and if yes then

which kind of schemes they choose and what are the reasons for selecting particular scheme.

And if people are not investing in Mutual funds, then what are the reasons, what they think

about it as an investment option. What is Portfolio Management Services? What types of

people prefer portfolio management services? What are the advantages and limitations of

portfolio management services. This project will help the company in comparing the two

investment options, similarities and differences between the two and help in taking the

decision whether to go for providing Portfolio Management Services or not.


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Research Methodology

RESEARCH :

1. Design : I did a descriptive study that shows

a. An analysis of Customer behavior.

b. Description of the global and Indian financial market.

c. Customers preferences.

2. Sample size : 30

3. Sampling technique : deliberate

4. Place : Delhi

SOURCE OF DATA COLLECTION

Primary Sources:

Interaction with customers

Interactions with brokers

Secondary Sources:

Company database

Research reports from internet

Reference books

Business Newspapers

Magazines


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OBJECTIVES

To study the suitability, advantages and limitation of both Mutual Funds and

Portfolio Management Services.

To know about the financial market, factors affecting movements in the

market.

To study and know the investment preferences of investors

To know what is the attitude of the people towards Mutual Fund and

portfolio management services.

To find out the medium of investment which customers prefer most.

To find out the source of get information about financial market by customer.

To know about the Time frame when customers like to invest.

To find the medium of making transaction by customer.

To have vast knowledge of mutual fund industry and portfolio management

services as a whole.


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MUTUAL FUND

Investors, in general, and small investors in particular are often not in a position to

undertake investment analysis. They are not personally qualified and do not have expertise

to critically evaluate different investment options. Sometimes, the amount of investment at

the disposal of the investor is so small that investment analysis is not worthwhile.

Diversification of investments is neither practical nor possible. So, small investors, in such

cases, may go of indirect investment instead of direct investing. A Mutual Fund is a form of

indirect investing.

A mutual fund is a professionally-managed firm ofcollective investments that pools money

from many investors and invests it in stocks,bonds, short-term money market instruments,

and/or other securities. In a mutual fund, the fund manager, who is also known as the

portfolio manager, trades the fund's underlying securities, realizing capital gains or losses,

and collects the dividend orinterestincome. The investment proceeds are then passed along

to the individual investors. The value of a share of the mutual fund, known as the net asset

valueper share (NAV), is calculated daily based on the total value of the fund divided by

the number of shares currently issued and outstanding.

A portfolio selector for selecting an investment portfolio from a library of assets based on

investment risk and risk-adjusted return is provided. The selector chooses a tentative

portfolio from the library and determines a risk-adjusted return for the portfolio. The risk-

adjusted return is computed by subtracting the average of multiple segment shortfalls from

the average of multiple segment performances, over the same segments, based on analysis

of market value data for the assets in the portfolio and for a baseline asset.
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A Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is then invested in capital market

instruments such as shares, debentures and other securities. The income earned through

these investments and the capital appreciation realised 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 basket of securities at a relatively low cost. The flow chart below

describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart


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Organization of a Mutual Fund companies

STRUCTURE OF MUTUAL FUNDS

SEBI (mutual fund) regulations, 1996 regulate the structure of mutual fund in India. Mutual

funds in India are constituted in the form of a public trust created under the Indian TrustsAct, 1882. This trust will be created by sponsor of the mutual fund. The sponsor will make

initial contribution in this trust and will appoint trustees to hold the assets of the trust for the

benefit of the unit-holders, who are the beneficiary of the trust. The AMC then launches

schemes on behalf of trustees inviting investors to contribute to the common pool by buying

units of the scheme.

In other words, the pool of money contributed by the investors in kept with a trust,

which is managed by trustees. The trustees then appoint the AMC as the investment

manager of the trust, which work under the overall supervision of the trustees. AMC takes

care of all the operations of managing the money of the investors.

As per these regulations, mutual funds should have the following three tier structure:


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Sponsor

Trust/trustee

Asset Under Management

SPONSOR:

SEBI Regulations define sponsor as any person who either itself or in association with

another body corporate establishes a mutual fund. In simple words, a sponsor is an entity

that sets up the manual fund. Sponsor sets up a mutual fund to earn money by doing fundmanagement. Largely, a sponsor can be compared with a promoter of a company.

Sponsor does the following important activities:

Sponsor creates a public trust under Indian Trust Act, 1882 (this trust becomes the

mutual fund)

Sponsor appoints trustees to manage the trust with the approval of SEBI.

Sponsor creates an Asset Management Company under Companies Act, 1956, which

will act as the investment manager for the mutual fund.

Sponsor applies and registers the trust as a mutual fund with SEBI.

TRUSTEE:

Mutual fund is formed as a trust. Trustees manage a trust. Trustees are responsible to the

investors in the mutual funds. They take care of the interests of investors in the mutual

funds. Trustees can be formed in either of the following two ways:

Board of Trustees, or


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Trustee company

The provisions of Indian Trust Act,1882, govern board of trustees or the Trustee company.

A trustee company is also subject to provisions of companies act, 1956.

The following are the functions/ obligations of Trustees:

Trustees ensure that the activities of the mutual fund are in accordance with SEBI

(mutual fund) regulations, 1996.

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

Trustees ensure that all the other fund constituents are formed and proper due

diligence is exercised by the AMC in the appointment of constituents and business

associates.

All schemes floated by the AMC have to be approved by the trustees.

Trustees review and ensure that the net worth of the AMC is as per the SEBI

stipulated norms.

Trustees furnish to SEBI, on a half-yearly basis, a report on the activities of AMC.

ASSET MANAGEMENT COMPANY (AMC)

An Asset Management Company is a company registered under the companies Act, 1956.

Sponsor creates the asset management company and this is the entity, which manages the

funds of the mutual fund (trust). The mutual fund pays a small fee to the AMC formanagement of its fund. The AMC acts under the supervision of trustees and is subject to

the regulations of SEBI too.

OTHER CONTITUENTS THAT WORK ALONG WITH AMC TO MANAGE THE

INVESTORS MONEY IN A MUTUAL FUND

CUSTODIAN: The most important asset of any mutual fund is its portfolio. Hence, it

becomes very important to keep safe the securities. This responsibility of safe keeping the

securities is on the custodians. Securities, which are in material form, are kept in safe

custody of a custodian and securities, which are in De-materialized form, are kept with a

depository participant, who acts on the advice of custodian.


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Custodian performs a very important back office operation. They ensures that

delivery has been taken of the securities, which are bought, and that they are transferred in

the name of the mutual fund. They also ensures that funds are paid out when securities are

bought.

Custodians keep the investment account of the mutual fund. They collect and

account for the dividends and interest receivables on mutual fund investments. They also

keep track of various corporate actions like bonus issue, right issue, stock splits, buyback

offers, open offers etc. and act on these as per instructions of the investment manager.

DEPOSITORY PARTICIPANT (DP): DP works with the custodian and holds the

securities of the mutual fund in dematerialized form. On the advice of custodian they

receive the securities from the stock exchange into the de-mat account of the mutual fund.

Similarly, they also deliver securities out of the account of the mutual fund on the advice of

custodians.

REGISTRAR AND TRANSFER AGENT: a mutual fund manages money of a large

number of investors from different cities and town of the country. In the process of fund

management investor, servicing is a very important function. This would typically include

processing investors application, recording the details of investors, sending them account

statements and other reports on periodicals basis, processing dividend payouts, making

changes in investor details and keeping investor records updated by adding details of new

investors and by removing details of investors who withdraw their funds from mutual funds.

It would be very impractical and expensive for any mutual fund to have adequate workforce

all over India for this purpose. Therefore, there are entities called as registrars and transfer

agents, which does this work for all the mutual funds. This not only ensures quality services

across all location but also keeps the costs lower for the investor.

ROLE OF BROKER: Brokers are registered members of the stock exchange. AMC buys

and sells securities on the stock exchange through these brokers. Many brokers also provide

the investment manager (AMC) with research reports on the performance of various

companies, sector and market outlook, investment recommendations etc.


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SELLING AND DISTRIBUTION AGENTS: selling and distribution agents are people

or entities who make the products reach the investors. They act as an intermediary between

the mutual fund and the investors. They bring in investors fund for a commission. The

selling and distribution agents are of various forms:

Individuals agents

Distribution companies

Banks and NBFCs

Direct marketing channels

The agents and distributors are paid commission on the funds, which they mobilize

from the investors.

ADVANTAGES OF MUTUAL FUNDS:

Professional Management: You avail of the services of experienced and skilled

professionals who are backed by a dedicated investment research team, which

analyses the performance and prospects of companies and selects the suitable

investments to achieve the objective of the scheme.

Diversification: Mutual Funds invest in a number of companies across a broad

cross-section of industries and sectors. This diversification reduces the risk because

seldom do all stocks decline in the same time and in same proportion.

Convenient Administration: Investing in a Mutual Fund reduces paper work and

helps you avoid many problems such as bad deliveries, delayed payments and

unnecessary follow up with brokers and companies. Mutual Fund saves your time

and makes investing easy and convenient.


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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.

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, you can get your money back promptly at net

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

you can sell your units on a stock exchange at a prevailing market price or avail of

the facility of direct repurchase at NAV related prices which some close-ended and

interval schemes offer you periodically.

LIMITATION OF MUTUAL FUNDS

No Insurance: Mutual funds, although regulated by the government, are not insured

against losses. Despite the risk-reducing diversification benefits provided by mutual

funds, losses can occur, and it is possible (although extremely unlikely) that you

could even lose your entire investment.

Dilution: Although diversification reduces the amount ofriskinvolved in investing

in mutual funds, it can also be a disadvantage due to dilution. For example, if a

singlesecurityheldby a mutual fund doubles in value, the mutual fund itself would

not double in value because that security is only one small part of the fund's

holdings.

Fees and Expenses: Most mutual funds charge management and operating fees that

pay for the fund's management expenses (usually around 1.0% to 1.5% peryear). In

addition, some mutual funds charge high sales commissions, 12b-1 fees, and

redemption fees.
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Poor Performance: Returns on a mutual fund are by no means guaranteed. In fact,

on average, around 75% of all mutual funds fail to beat the major market indexes,

like the S&P 500, and a growing number of critics now question whether or not

professional money managers have better stock-picking capabilities than the average

investor.

Loss of Control: The managers of mutual funds make all of the decisions about

which securities to buy and sell and when to do so. This can make it difficult for you

when trying to manage yourportfolio. For example, the tax consequences of a

decision by the managerto buy or sell an asset at a certain time might not be optimal

for you. You also should remember that you are trusting someone else with your

money when you invest in a mutual fund.

Mechanism of Mutual Fund Operations:

A Mutual Fund represents pooled savings/funds of individuals investors. Professional

managers of the mutual fund invest these funds in different type of securities. They have to

take different decisions from time to time. The revenue returns may be distributed by the

mutual funds among the unit holders. Capital appreciation in the mutual funds also belongs

to the investors.

Select the ideal mix of Schemes:

Investing in just one Mutual Fund scheme may not meet all your investment needs. You

may consider investing in a combination of schemes to achieve your specific goals. The

following tables could prove useful in selecting a combination of schemes that satisfy your

needs:

AGGRESSIVE PLAN

Money Market Schemes 5 %
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Income Schemes 10-15%

Balanced Schemes 10-20 %

Growth Schemes 60-70 %

MODERATE PLAN


Income Schemes 20 %


Growth Schemes 30-40 %

CONSERVATIVE PLAN


Income Schemes 50-60 %


Growth Schemes 10 %

Different types of mutual fund:

Large cap funds

Mid-cap funds

Small cap funds

Equity funds

Balanced funds

Growth funds

Income funds

No load funds

Value funds
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Money market funds

International mutual funds

Regional mutual funds

Sector funds

Index funds

Fund of funds

Closed-End Mutual Funds:

A closed-end mutual fund has a set number of shares issued to the public through an initial

public offering. These funds have a stipulated maturity period generally ranging from 3 to

15 years.

The fund is open for subscription only during a specified period. Investors can invest in the

scheme at the time of the initial public issue and thereafter they can buy or sell the units of

the scheme on the stock exchanges where they are listed.

Once underwritten, closed-end funds trade on stock exchanges like stocks or bonds. The

market price of closed-end funds is determined by supply and demand and not by net-asset

value (NAV), as is the case in open-end funds. Usually closed mutual funds trade at

discounts to their underlying asset value.

Open End Mutual Fund:

An open-end mutual fund is a fund that does not have a set number of shares. It continues to

sell shares to investors and will buy back shares when investors wish to sell. Units are

bought and sold at their current net asset value.

Open-end funds keep some portion of their assets in short-term and money market

securities to provide available funds for redemptions. A large portion of most open mutualfunds is invested in highly liquid securities, which enables the fund to raise money by

selling securities at prices very close to those used for valuations.

Large Cap Funds:
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Large cap funds are those mutual funds, which seek capital appreciation by investing

primarily in stocks of large blue chip companies with above-average prospects for earnings

growth.

Different mutual funds have different criteria for classifying companies as

large cap. Generally, companies with a market capitalisation in excess of

Rs1000 crore are known large cap companies. Investing in large caps is a

lower risk-lower return proposition (vis--vis mid cap stocks), because such

companies are usually widely researched and information is widely available.

Mid Cap Funds:

Mid cap funds are those mutual funds, which invest in small / medium sized companies. As

there is no standard definition classifying companies as small or medium, each mutual fund

has its own classification for small and medium sized companies. Generally, companies

with a market capitalization of up to Rs 500 crore are classified as small. Those companies

that have a market capitalization between Rs 500 crore and Rs 1,000 crore are classified as

medium sized.

Equity Mutual Funds:

Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest

pooled amounts of money in the stocks of public companies.

Stocks represent part ownership, or equity, in companies, and the aim of stock ownership is

to see the value of the companies increase over time. Stocks are often categorized by their

market capitalization (or caps), and can be classified in three basic sizes: small, medium,

and large. Many mutual funds invest primarily in companies of one of these sizes and are

thus classified as large-cap, mid-cap or small-cap funds.

Equity fund managers employ different styles of stock picking when they make investment

decisions for their portfolios. Some fund managers use a value approach to stocks, searching

for stocks that are undervalued when compared to other, similar companies. Another

approach to picking is to look primarily at growth, trying to find stocks that are growing


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faster than their competitors, or the market as a whole. Some managers buy both kinds of

stocks, building a portfolio of both growth and value stocks.

Balanced Fund:

Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a

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

both income and capital appreciation while avoiding excessive risk.

Balanced funds provide investor with an option of single mutual fund that combines both

growth and income objectives, by investing in both stocks (for growth) and bonds (for

income). Such diversified holdings ensure that these funds will manage downturns in the

stock market without too much of a loss. But on the flip side, balanced funds will usually

increase less than an all-stock fund during a bull market

Growth Funds:

Growth funds are those mutual funds that aim to achieve capital appreciation by investing in

growth stocks. They focus on those companies, which are experiencing significant earnings

or revenue growth, rather than companies that pay out dividends.

Growth funds tend to look for the fastest-growing companies in the market. Growth

managers are willing to take more risk and pay a premium for their stocks in an effort to

build a portfolio of companies with above-average earnings momentum or price

appreciation.

In general, growth funds are more volatile than other types of funds, rising more than other

funds in bull markets and falling more in bear markets. Only aggressive investors, or those

with enough time to make up for short-term market losses, should buy these funds.

No-Load Mutual Funds:

Mutual funds can be classified into two types - Load mutual funds and No-Load mutual

funds. Load funds are those funds that charge commission at the time of purchase or

redemption. They can be further subdivided into (1) Front-end load funds and (2) Back-end


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load funds. Front-end load funds charge commission at the time of purchase and back-end

load funds charge commission at the time of redemption.

On the other hand, no-load funds are those funds that can be purchased without commission.

No load funds have several advantages over load funds. Firstly, funds with loads, on

average, consistently underperform no-load funds when the load is taken into consideration

in performance calculations. Secondly, loads understate the real commission charged

because they reduce the total amount being invested. Finally, when a load fund is held over

a long time period, the effect of the load, if paid up front, is not diminished because if the

money paid for the load had invested, as in a no-load fund, it would have been compounding

over the whole time period.

Value Funds:

Value funds are those mutual funds that tend to focus on safety rather than growth, and

often choose investments providing dividends as well as capital appreciation. They invest in

companies that the market has overlooked, and stocks that have fallen out of favour with

mainstream investors, either due to changing investor preferences, a poor quarterly earnings

report, or hard times in a particular industry.

Value stocks are often mature companies that have stopped growing and that use their

earnings to pay dividends. Thus value funds produce current income (from the dividends) as

well as long-term growth (from capital appreciation once the stocks become popular again).

They tend to have more conservative and less volatile returns than growth funds.

Money Market Mutual Funds:

A money market fund is a mutual fund that invests solely in money market instruments.

Money market instruments are forms of debt that mature in less than one year and are very

liquid. Treasury bills make up the bulk of the money market instruments. Securities in the

money market are relatively risk-free.


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Money market funds are generally the safest and most secure of mutual fund investments.

The goal of a money-market fund is to preserve principal while yielding a modest return.

Money-market mutual fund is akin to a high-yield bank account but is not entirely risk free.

When investing in a money-market fund, attention should be paid to the interest rate that is

being offered.

International Mutual Funds:

International mutual funds are those funds that invest in non-domestic securities markets

throughout the world. Investing in international markets provides greater portfolio

diversification and let you capitalize on some of the worlds best opportunities. If

investments are chosen carefully, international mutual fund may be profitable when some

markets are rising and others are declining.

However, fund managers need to keep close watch on foreign currencies and world markets

as profitable investments in a rising market can lose money if the foreign currency rises

against the dollar.

Regional Mutual Fund:

Regional mutual fund is a mutual fund that confines itself to investments in securities from a

specified geographical area, usually, the fund's local region. A regional mutual fund

generally looks to own a diversified portfolio of companies based in and operating out of its

specified geographical area. The objective is to take advantage of regional growth potential

before the national investment community does.

Regional funds select securities that pass geographical criteria. For the investor, the primary

benefit of a regional fund is that he/she increases his/her diversification by being exposed to

a specific foreign geographical area

Sector Mutual Funds:


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Sector mutual funds are those mutual funds that restrict their investments to a particular

segment or sector of the economy. These funds concentrate on one industry such as

infrastructure, heath care, utilities, pharmaceuticals etc. The idea is to allow investors to

place bets on specific industries or sectors, which have strong growth potential.

These funds tend to be more volatile than funds holding a diversified portfolio of securities

in many industries. Such concentrated portfolios can produce tremendous gains or losses,

depending on whether the chosen sector is in or out of favor.

Index Funds:

An index fund is a type of mutual fund that builds its portfolio by buying stock in all the

companies of a particular index and thereby reproducing the performance of an entire

section of the market. The most popular index of stock index funds is the Standard & Poor's

500. An S&P 500 stock index fund owns 500 stocks-all the companies that are included in

the index.

Investing in an index fund is a form of passive investing. Passive investing has two big

advantages over active investing. First, a passive stock market mutual fund is much cheaper

to run than an active fund. Second, a majority of mutual funds fail to beat broad indexes

such as the S&P 500.

Fund of Funds:

A fund of funds is a type of mutual fund that invests in other mutual funds. Just as a mutual

fund invests in a number of different securities, a fund of funds holds shares of many

different mutual funds.

Fund of funds are designed to achieve greater diversification than traditional mutual funds.

But on the flipside, expense fees on fund of funds are typically higher than those on regular

funds because they include part of the expense fees charged by the underlying funds. Also,


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since a fund of funds buys many different funds which themselves invest in many different

stocks, it is possible for the fund of funds to own the same stock through several different

funds and it can be difficult to keep track of the overall holdings.

Examples of Mutual Funds

LOTUS INDIA GROWTH FUND:

MINIMUM INVESTMENT : Rs. 5000/- per application plus multiples of Re. 1/-

SCHEME TYPE : Open - Ended Diversified Equity Scheme

INEPTION DATE : 9th August 2007

AUM : Rs. 133.53 crores

INVESTMENT OBJECTIVE:

The investment objective of the Scheme is to generate long-term capital growth from a

diversified portfolio of predominantly equity and equity-related securities. However, there

can be no assurance that the objectives of the scheme will be achieved.

ASSET ALLOCATION:

Investments % to the portfolio

Equity and Equity related instruments 93.30%

Cash & Cash Equivalent6.70%


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BENCHMARK INDEX : BSE100

FUND MANAGER : MR. PRADEEP KUMAR

PERFORMANCE (as on 31st March2008):

Lotus India Growth Fund 1.40%

BSE 100 5.83%

LOTUS INDIA EQUITY FUND:

SCHEME TYPE : An Open Ended Scheme

MINIMUM INVESTMENT : Rs. 5000/- per application plus in multiples of Re. 1/-

INCEPTION DATE : 4TH October 2007

AUM : Rs. 84.44 crores

INVESTMENT OBJECTIVE:

The investment objective of the scheme is to generate long term capital growth from a

focused portfolio of predominantly equity and equity-related securities.

ASSET ALLOCATION:

Investments % to the portfolio

Equity and Equity related instruments 89.29%

Mutual Fund Units 4.74%

Cash & Cash Equivalent 5.97%

BENCHMARK INDEX : BSE 100

FUND MAMAGER : MR. TRIDIB PATHAK

PERFORMANCE (as on 31st March2008):

Lotus India Equity fund -3.90%

BSE 100 -10.94%


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PORTFOLIO MANAGEMENT

The global markets and the Indian markets have been volatile over the past few months andhave arguably caused concern among the investors.

The global meltdown can be attributed to whats happening in the US and some otherinfluential developed economies. It all started with the subprime crises resulting in theliquidity and credit crunch. A slowing US economy have caused concern among the

consumers and have spread negative sentiments in the markets of Europe and some otherparts of the world. It is also felt by some analysts that credit rating of bond insurers haveaccelerated the panic and concern prevalent in the financial system.

So with this market coming down and valuation coming to more terrestrial levels, analystsand fund managers have begun to evaluate where the maximum potential of growth lies inthe global economies. In our markets there is also the local situation of liquidity having beensucked out owing to large recent IPOS and margin selling on behalf of retail investors. Alsothe fed cut interest rate by 75bps to 2.25 (as on 19th march 2008) in view of weakening ofeconomic outlook and increasing downside risk to growth is a step to modulate the impactof slowdown. Also with dollar weakening capital inflows can be anticipated.

Therefore great attention has to be paid to events happening worldwide because their impacton our economy and on our market is material.To keep a close look at all these is not possible for an individual investor. Due to lack ofknowledge and time he is not able to properly and profitably invest his surplus. Indiancapital market is growing rapidly since last couple of decades. It has witnessed drasticchanges under broad stock market liberalization measures.


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Although the rate of savings is growing rapidly the small savers are still hesitant to enterthe capital market directly. The present scenario proves this best .This is mainly due to lackof information, time and knowledge about capital market and fear of risk involved. Undersuch circumstances it becomes necessary to mobilize funds from such investors to providethem maximum benefit with reduced risk.

Indian capital market is growing rapidly since last couple of decades. Indian economy ingeneral and Indian capital market in particular has experienced a remarkable growth.Although the rate of savings are growing rapidly the small savers are still hesitant to enterthe capital market directly.

This is mainly due to lack of information and knowledge about capital market and fear ofrisk involved. Under such circumstances it becomes necessary to mobilize funds from suchinvestors to provide them maximum benefit with reduced risk.

The simple fact that securities carry differing degrees of expected risks leads most investorsto the notion of holding more than one security at a time, in an attempt to spread risks by notputting their eggs into one basket. This is called a portfolio.Like many areas of business, portfolio management is both an art and a science. It is muchmore than the selection of securities from a catalog by a financial consultant or theapplication of a formula to a set of financial data input supplied by a security analyst. It is adynamic decision-making process, one that is continuous any systematic but also one thatrequires large amounts of astute managerial judgment about the securities markets and theindividual for whom portfolio is managed.

A portfolio is the collection of securities. Portfolio analysis considers the determination offuture risk and return in holding various blends of individual securities. The portfoliomanagement begins where the security analysis ends and this fact has importantconsequences on investors.

It is an important foundation of mutual funds business. Portfolio expected return is aweighted average of the expected return of individual securities but portfolio variance insharp contrast, can be something less than a weighted average of security variances. As aresult an investor can reduce his risk by adding another security with greater individual riskthan any other security in the portfolio.

From the investors perspective, the need for successful portfolio management function isobviously paramount. There have been paramount evidences regarding the great degree of

proliferation in management of funds around the world. It is widely understood thatdiversified funds intends to reduce market risks to a greater extent. Diversification of onesholdings is intended to spread risk.

we know that even the value of cash suffers from the inroads of inflation. So, in thisuncertain market if one holds several assets, even if one goes bad, the other will providesome protection from an extreme loss.


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The process used to manage the security portfolio is conceptually same as that used in anymanagerial decision. One should plan; implement the plan; and monitor the results.How should an investor go about selecting the one best portfolio to meet his needs isanother important question in portfolio management.

Various economists have tried to evaluate investments with the aid of two or moreindicators based on the distribution of returns. The most common profitability index used isthe expected return. Until Dr. Harry M. Markowitz infused a high degree of sophisticationinto portfolio construction by developing a Mean-Variance Model for selection ofportfolios, portfolio managers used rules of thumb and intuitive judgement.

Portfolio Management Services can be defined as an art and science of making

decisions about investment mix and policy, matching investments to objectives, asset

allocation for individuals and institutions, and balancing risk vs. performance. Portfolio

management is all about strengths, weaknesses, opportunities and threats in the choice of debt

vs. equity, domestic vs. international, growth vs. safety, and numerous other tradeoffs

encountered in the attempt to maximize return at a given appetite for risk.

In Portfolio Management Services people have the bagfuls of money, but they dont know

how to multiply it, so they require a knowledgeable or we can say experienced person whocan help them in multiplication or growth of their money & have the capacity to provide

them a good return. Portfolio management services are generally provided by the

financial advisers to investors. In it the custodian (portfolio manager) has legal title to the

assets and the investor retains beneficial ownership of the assets.

In other words we can say that it is a service of managing peoples Portfolio & a process

of managing assets of investors, including choosing & monitoring appropriate

investments & allocating funds accordingly. This is a kind of service where personalized

service is required i.e. every investor is treated individually, he is not at all related with any

of the other investors of service providing company, even if any of the big investor deallocate

his investment it will also not effect the other investor.

It can be discretionary means advice of the investor affects his portfolio, in other words,


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investor can suggest where to invest his amount or shouldnt be; other type is non-

discretionary in which investor cant interfere in investment of his amount, it is all up to the

service providing companies where it likes to invest that amount.

TYPES OF PORTFOLIO MANAGEMENT SERVICES:

Discretionary Portfolio Management Scheme: under this scheme,

portfolio manager has full discretion to manage the investors portfolio. Investor

gives full authority to take decisions regarding portfolio selection.

Non discretionary portfolio management scheme: Portfolio manager

seeks an approval from the investor before making any investment decision.

Investment decisions are made in due consultation.

Advisory services: This is in the nature of providing advice only and thedecision to take action on the advice and execution rests with the investor.

ADVANTAGES OF PORTFOLIO MANAGEMENT SERVICES:

Asset Allocation: Asset allocation plan offered by Portfolio management service PMS

helps in allocating savings of a client in terms of stocks, bonds or equity funds. The plan istailor made and is designed after the detailed analysis of client's investment goals, saving

pattern, and risk taking capacity.


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Personalized services: PMS provides personalized services to the investors. Portfolio

manager make the portfolio of the investor according to his investment objective. Advice

investor in making his objective clear.

Timing: portfolio managers preserve client's money on time. Portfolio management

service PMS help in allocating right amount of money in right type of saving plan at right

time. This means, portfolio manager provides their expert advice on when his client should

invest his money in equities or bonds and when he should take his money out of a particular

saving plan. Portfolio manager analyzes the market and provides his expert advice to the

client regarding the amount of cash he should take out at the time of big risk in stock

market.

Flexibility: portfolio managers plan saving of his client according to their need and

preferences. But sometimes, portfolio managers can invest client's money according to his

preference because they know the market very well than his client. It is his client's duty to

provide him a level of flexibility so that he can manage the investment with full efficiency

and effectiveness.

In comparison to mutual funds, portfolio managers do not need to follow

any rigid rules of investing a particular amount of money in a particular

mode of investment.

Mutual fund managers need to work according to the regulations set up

by financial authorities of their country. Like in India, they have to

follow rules set up by SEBI.

Services and Strategies provided through Portfolio Management are:

Portfolio managers works as a personal relationship manager through whom the

client can interact with the fund manager at any time depending on his own

preference.


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To discuss any concerns regarding money or saving, the client can interact with his

appointed portfolio manager on monthly basis.

The client can discuss on any major changes he want in his asset allocation and

investment strategies.

Portfolio management service (PMS) handles all type of administrative work like

opening a new bank account or dealing with any financial settlement or depository

transaction.

While choosing online Portfolio management service (PMS), the client receives a

User-ID and Password, which helps him in getting online access to his portfolio

details and checking his portfolio as frequent as he want.

LIMITATION OF PORTFOLIO MANAGEMENT SERVICES:

Only for high net worth individual: PMS is categorized only for HNIs.

Minimum investment in the PMS is Rs 10 lacs or above. Small investors can not

avail PMS services.

PMS do not come under the purview of the Securities and Exchange

Board of India (SEBI). Hence the restrictions placed by SEBI on the structure of

the fund's portfolio do not apply here.

Another aspect that you need to be wary of in case of PMS is the cost

structure. Often times the cost structure is ambiguous; moreover there is no

regulatory authority to monitor these charges.


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DETAILS OF SOME OF PMS PROVIDING

COMPANIES

Sharekhan Portfolio Management Services:

Minimum Investment amount is Rs. 5 lacs.

Sharekhan generates wealth through Equities & futures & options.

Bottom up stock selection approach

There are three schemes which Sharekhan provides, those are;

Pro-Tech which is for aggressive Investors in which funds are invested

into futures-options & also into some companies whose trading chart is

rising from long time


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Pro-Prime which is made for the people who are middle aged & want a

good return on their investment & does not mind some short term volatility,

in this scheme funds are invested in on the basis of companys steady &

sustainable returns, Margin of Safety & low volatility.

Pro-Arbitrage which is made for people who are old aged & want to grow

his money & dont want to risk their capital

Charges & returns at Sharekhan are different as per different scheme Investor

adopts.

HSBC Portfolio Management Services:

The desire to grow money is a natural instinct. But as simple as the desire is, the process to

do so is just as complex. At HSBC, we believe that growing and protecting your wealth is

an art. Minimum Investment amount at HSBC is Rs. 5 lac. At HSBC discretionary Portfolio

Service is provided.

There are three schemes which HSBC provides, those are:

Signature Portfolio: In the course of time, every artist develops a signature style. It is the

peak of his instincts and experience that combine to create a winning piece of art With the

Signature investment strategy, our experienced fund management team aims to deliver

potential results by investing in the Right Stocks, at the Right Value, with the Right

Exposure. They choose the stocks they believe in, ably guided by their talents and


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convictions. If they know it is a good company, they buy enough to make a real difference

to returns; and when they do not like a company, they do not have to own it

Strategic Portfolio: The eye of the artist can spot brilliance even when its hidden. Or

undervalued. Its a talent we at HSBC prize. Our Fund Managers take a keen look at stocks

that are misvalued as they are currently in an unusual situation resulting in a significant

price-value mismatch. With their knowledge

and training, they choose stocks that have the potential to provide long-term value to you.

85% Capital Protection Oriented Portfolio: A prized piece of art retains its intrinsic

value. We take pride in offering HSBC 85% Capital Protection Oriented Portfolio*. This is

an open ended product that seeks to generate capital appreciation by investing in equity /

equity related securities while endeavoring to partially protect (i.e. 85% of the capital) the

downside by investing in debt /money market instruments / funds.

The Portfolio will invest primarily in a basket of stocks aimed at replicating the NSE

NIFTY Index composition and/or money market instruments through the liquid schemes of

HSBC Mutual Fund. The product is managed using CPPI methodology with Sinopia Asset

Management, Hong Kong as the Investment Advisor to the product. The allocation between

the basket of stocks and the liquid, money market funds or instruments will be managed in

such a

way that the Portfolio endeavors not to lose more than 15% over a period of one year

starting on the launch date and reset on each subsequent anniversary date. The portfolio

provides daily liquidity, with redemptions allowed on an ongoing basis without any exit

load applicable.

MOTILAL OSWAL SECURITIES PMS (MOST PMS):

It is a proven fact that Equities tend to outperform all other asset classes over the long run.

However, investing in equities requires knowledge, time and a specific mind-set. It may not


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be possible for you to give the necessary time, given your other commitments. MOST PMS

helps you to earn the returns of Equities, with maximum ease and comfort. We have 3

different schemes, with different approaches to managing your investments.

Value PMS

Bulls Eye PMS

Value Hedging PMS

VALUE PMS: Value PMS is a scheme meant for investors with a Long Term investment

horizon in the Indian Equity Markets. In Value PMS there is low portfolio churn and a high

margin of safety investment philosophy for long term and sustainable wealth creation.

Value PMS primary objective is preservation of capital and prevention of any significant

permanent

capital loss. The whole stock selection process is geared to find investment ideas with a

sufficient margin of safety, so that even a mediocre sale will fetch good returns. This

approach can be termed as conservative. In it one can expect a return of 15% or a better than

that but it does not guarantee positive returns. Minimum Portfolio Size is Rs. 50 Lakhs cashor approved

securities per individual or group.

BULLs EYE PMS: Bull's Eye PMS is meant for investors who want to take moderate risk

and generate healthy returns from the medium term movements in the Equity markets. Bull's

Eye is about identifying the right stocks, picking and exiting at the right times and then

continuing the cycle. Booking profits regularly and ability to sit on cash are the key salient

features of Bulls Eye

PMS. Idle cash will be invested in liquid mutual funds for the short term. the minimum

signing amount is Rs. 50 Lakhs, we give flexibility to the investor to join at Rs. 25 Lakhs &

then scale up based on his comfort & overall performance. The scheme aims to deliver 15-


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20% returns in Volatile Markets, especially when there is no one-sided trend. In a trended

bull market, returns

can be substantially better.

VALUE HEDGING PMS:

Value Hedging PMS is a promising scheme that may be a unique and pioneering effort in its

segment. Not only will it benefit investors from exceptional stock-picking ability, but also

from capitalizing on short-term price volatility. This scheme offer delicate balance between

long-term returns and short-term gains. This is primarily a hedging based discretionary PMS

product. In this scheme what they do is:

They will pick stocks based on their value investing philosophy. In this PMS Scheme they

will use various derivatives strategies to hedge your portfolio based on prevailing market

conditions. For example, in a bearish market they can hedge your position by writing the

calls and collecting premiums and at the same time they can buy the puts to avoid the fall in

asset value vis-a-vis

market fall Needless to say, most of the stocks they will pick will have to be on the

derivatives list. With an increasing list, almost every important stock will be a part of the

derivatives segment. The Value Hedging PMS might also invest in some non-F&O stocks in

case the investment rationale is very compelling.

Kotak Portfolio Management Services:

Kotak Securities brings with it years of experience, expertise, research and the backing of

India's leading stock broking house. The portfolio managers have over 10 years of

understanding diverse investment instruments and needs.

Kotak Securities is one of India's oldest portfolio management companies. It is also one of

the largest with an AUM worth Rs. 2500 crore. And for those who wish to grow their wealth

exponentially-it is also one of the best. The Portfolio Management Service combines


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competent fund management, dedicated research and technology to ensure a rewarding

experience for its clients.

Kotak securities have a range of PMS schemes with different perspectives. These are

defined as follows:

Origin Equity Portfolio

Select Portfolio

Klassic Portfolio- Flexi

Investguard Portfolio

Core Portfolio

Let us check out them one by one:

ORIGIN PORTFOLIO:

Origin portfolio is constructed with long term view for an investor who is untroubled by

short term returns, volatility and market momentum. Any investor with a affinity for high

risk taking is suitable & prospective client of this portfolio. This portfolio would aim to

invest in growth oriented companies with sustainable business models backed by strong

management capabilities with emphasis on smaller capitalized companies with a market

capitalization not exceeding Rs. 2500 crore at the time of investment. In this Portfolio

Service Kotak will Buy & Hold a basket of 15-25 companies with a medium to

long term horizon. Endeavour shall be to focus on emerging businesses at a nascent stage or

matured businesses at attractive valuations. As an investment strategy, the portfolio

composition shall constitute companies ranging from Rs 100 cr. to 2500 cr. in market

capitalization. The composition shall be optimized in market capitalization mix as well as

sectoral exposure

SELECT PORTFOLIO:


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Select Portfolio is designed for those investors who are willing to invest for medium to long

term without being perturbed about short-term returns, volatility and market momentum.

Any investor with a penchant for medium to high risk taking qualifies for the portfolio. The

scheme will seek to achieve returns through broad based participation in equity markets by

constructing a

concentrated portfolio of sizably capitalized companies. Portfolio will be designed on an

aggressive pattern which will consist of 10-12 stocks. They will follow the Buy & Hold

Approach. It will be a Multi cap portfolio with companies spread across large cap, mid cap

and small cap.

SELECT OPTIMA PORTFOLIO

Select Optima Portfolio will seek to achieve returns through investments in stocks of

concentrated number of small, medium and large capitalized companies. In Optima Plan*,

portfolio will seek to achieve returns through broad based participation in equity markets by

constructing a focused portfolio of sizably capitalized companies. Investment approach in

this scheme will be as to invest in those companies which have growth in earnings

considerably higher than that of all companies in an index put together, have sufficient

diversification in revenues streams & are having lesser need for raising capital. In it Kotak

follows Buy & Hold Approach. It is for those Investors who have medium & long term

investment horizon. In it Portfolio shall be diversified over 15-20 stocks across the sectoral

spectrum

KLASSIC PORTFOLIO FLEXI

This Portfolio is been designed for an investor willing to invest for medium to long term

without being perturbed about short term returns, volatility and market momentum. Any

investor with a penchant for medium to high risk taking is the most suitable client for this

portfolio. The scheme will seek to achieve returns through broad based participation in

equity markets by


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creating a diversified equity portfolio of small, medium and large capitalized companies.

INVESTGUARD PORTFOLIO:

A person who does want to take risks or have the low risk appetite is the most suitable

investor for this Portfolio. In it Investment will be made across shares and fixed income

products, moving from shares into fixed interest investments when the fund's value drops

below a predetermined "floor". When markets start to move up, the product will increase its

holdings in shares, tapping

into these growth opportunities. In this scheme the debt portion will be invested in debt

oriented schemes of mutual funds, Gilt schemes, Liquid schemes, money market

instruments, Government securities, Corporate Bonds and deposits, securitized instruments

and / or any other instruments permitted by SEBI & the equity portion would be primarily

invested in large cap stocks with high liquidity and closely follows the BSE Sensex

movement.

CORe PORTFOLIO:

CORe Portfolio is aimed at investors seeking to benefit from the growth in Indian economy.

An investor willing to keep aside funds for at least 18 months without being perturbed about

short term returns, volatility and market momentum. CORe Portfolio aims to capture the

long term upside of the India Growth Story by diversifying across the major themes. The

scheme will

invest in all equity and equity related instruments with emphasis on companies in the

business areas driven by consumerism, outsourcing, real estate plays as well as core

infrastructure plays. The Portfolio Manager may invest in futures and options to hedge, to

generate returns, or to balance the portfolio, the quantum of exposure to derivatives will not

normally exceed 50% of

the portfolio invested by the Client. It is focused Portfolio of 15-20 stocks, where stock

selection approach will be Bottom-Up.


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SWOT ANALYSIS

The SWOT analysis approach seeks to address the question of strategy formation from a

two-fold perspective: from an external appraisal (of threats and opportunities in an

environment) and from an internal appraisal (of strengths and weaknesses in an

organisation). The two perspectives can be differentiated by the different degree of control

attainable within each. The dynamic and unrestricted nature of the external environment can

seriously hamper the process of detailed strategic planning, whilst internal factors are or at

least should be more easily manageable for the organisational entity in question.

Elements of a SWOT analysis:

A strength = a resource or capacity the organisation can use effectively to achieve its

objectives.

A weaknesses = a limitation, fault or defect in the organisation that will keep it from

achieving its objectives.

An opportunity = any favourable situation in the organisations environment.


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A threat = any unfavourable situation in the organisations environment that is potentially

damaging to its strategy.

SWOT analysis of Mutual Funds

Strengths:

Diversified portfolio a low cost

Professionally managed investments.

Higher return at a lower risk

Liquidity in investments

Choice in Different Schemes

Weakness:

No Insurance of funds

Investor has no control over his investments.

Inefficient cash reserves leads to unutilized working capital.

Opportunities:


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Regulated by SEBI

Transparency in dealings

Tax benefits on some mutual funds

Protection from inflation

Investment in international stock

Threats:

Returns depend upon market & economy conditions.

SWOT analysis of PMS

Strengths

Tailor made investments.

Personalized services to investors.

Investment at right time.

Investment as per needs of investors.

Weakness

PMS is categorized only for HNIs. Its Cost structure is ambiguous

Opportunities

Transparency in dealings


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Tax benefits on some mutual funds

Protection from inflation

Investment in international stock

Threats

Returns depend upon market & economy conditions.

Its not regulated by SEBI or any other regulating body.

Lesser awareness about the service.

Comparison Between Mutual Funds and Portfolio

Management Services

There is a world of difference between mutual fund and portfolio management services

like PMS is generally categorized for high net worth individuals who want to invest above

5 or 10 lakhs. It depends upon different service provider of Portfolio Management. The

main benefit of PMS is the personalised service and customised portfolio solutions on

offer. However at Rs 10 lakhs, the level of personalization offered will not be significant.

Further your money will be invested in a pool with that of many other investors. This in

turn doesnt make the fund very different from a mutual fund. However if you are a kind

of investor who would like to track the daily developments of your portfolio then PMS

would do that for you. However this is not a good enough reason to pick PMS over mutual

funds. One of the features that go against PMS is that unlike mutual fund they do not


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come under the purview of the securities and exchange board of India (SEBI). Hence the

restrictions placed by SEBI on the structure of the funds portfolio do not apply here.

Another aspect that you need to be worry of in case of PMS is the cost structure. Often

times the cost structure is ambiguous; moreover there is no regulatory authority to monitor

these charges.

Another difference between PMS and a Mutual Fund scheme is clientfund

manager relationship. In PMS, the portfolio manager, before taking up an assignment of

management of funds or portfolio of securities on behalf of the client, enters into an

agreement in writing with the client clearly defining the interrelationship and setting out

their mutual rights, liabilities and obligations relating to the management of funds or

portfolio of securities containing the details as specified in the SEBI (Portfolio Managers)

Regulations. Thus when the portfolio manager deploys the funds, he only considers the

needs of specific client. Mutual Fund schemes on other hand have a common investment

objective for all the investors of the scheme and no investor can influence the fund

managers investment decision.

Returns delivered by some of PMS providers over last 4 years(AVG.)


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Returns delivered by mutual funds over last 10 years (AVG.)

Balanced funds:

ISSUES 10-year return (%) SIP return (%)

Alliance '95 28.18 29.38HDFC Prudence 22.95 28.17

UTI Balanced 21.19 22.24

J M Balanced 15.04 18.13

GIC Balanced 8.03 12.61

Diversified equity funds :


Franklin India Prima 22.16 35.78

HDFC Equity 23.76 33.22

Franklin India Bluechip 24.21 31.43

Franklin India Prima Plus 22.99 30.22

Birla Advantage 23.79 26.16

HDFC Capital Builder 15.43 24.54

Equity Linked Saving Schemes:


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Magnum Taxgain 20.28 29.29

Canequity-Tax Saver 9.84 13.03

RESEARCH WORK

CUSTOMER

/ INVESTORS

BEHAVIOR


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ANALYSIS IN

MARKET:

In any business whatever sector it is either it is financial and service sectorCUSTOMER IS

KING. Every industry tries to know more about its customers behaviour. But first they

should know who are its customers because without knowing it a company cannot do its

marketing and cannot maintain its relationships effectively and efficiently.

Todays Business is all about to build and maintain relationships with your customers.

Every customer is different and are his needs. The key to successful selling is to identify

these and position our product accordingly. Help your client to achieve their financial goals

help you to maintain long lasting relationship with them.

TYPES OF CUSTOMERS:


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Half success is to choose a right targeted customers and remaining half to handle

them properly to provide gentle information to appreciate their belief and to protect

them from unfair trade practices.

Companies use different-different tools to get information about the behaviour of the

customer in the market. It is also helpful to target the right segment of the market and

success.

These tools can be:

Questionnaire

Observation

OBSERVATION AND INFERENCE OF DATA:

1. PEOPLE PREFERENCE TO INVEST THEIR MONEY:


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INVESTMENT PREFERANCE

31 3918

8 4

2625

2019

10

1422

1422

28

2010

1027 33

94

3824 25

0

20

40

60

80

100

120

A B C D E

PREFERANCES

CUMULATIVE

5

4

3

2

1

Figure-1

OBSERVATION:

Above collected data or table shows that:

31% people mark A as their 1st preference, 39% mark B, 18% mark C, 8% mark D and 4%

mark E as their 1st preference.

26% people mark A as their 2nd preference, 25% mark B, 20% mark C, 19% mark D and

10% mark E as their 2ndpreference.

14% people mark A as their 3rd preference, 22% mark B, 14% mark C, 22% mark D and

28% mark E as their 3rd preference.

20% people mark A as their 4th preference, 10% mark B, 10% mark C, 27% mark D and

33% mark E as their 4th preference.

9% people mark A as their 5th preference, 4% mark B, 38% mark C, 24% mark D and 25%

mark E as their 5th preference.

INFERENCE: People like to invest more in BANK F.D as their 1st preference.

People like to invest more in MUTUAL FUND as their 2nd preference.

2. EXISTENCE OF MUTUALFUND IN CUSTOMERS PORTFOLIO:


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47

29

18

6

0

10

20

30

40

50

Series1 47 29 18 6

A B C D

Figure-2

OBSERVATION:

47% People mark that mutual fund exist 0-25% in their investment portfolio.




INFERENCE:


47% People want to make below 25% of total investment in mutual fund.

29% People want to make in between 25-50% of total investment in mutual fund.

3. CUSTOMERS ARE SATISFIED OR NOT FROM THEIR INVESTMENT


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83

17

0

20

40

60

80

10 0

Series1 83 1 7

A BA, 83

B, 17

A B

Figure-3

OBSERVATION:

83% People are satisfied from their past and current investment. 17% People are not satisfied because of few reasons:

o They took a wrong decision about their investment.

o Human wants cannot satisfy.

INFERENCE: 83% People are satisfied from their investment.

4. CUSTOMERS ARE AWARE ABOUT MUTUAL FUNDS SCHEMES

72

2 8

0

10

20

30

40

50

60

70

80

Series1 72 2 8

A B

A

72%

B

28%

A B

Figure-4

OBSERVATION:

72% People are aware about the schemes of mutual funds.

28% people are not aware about schemes.


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INFERENCE: 28% People are not aware about mutual fund schemes.

5. CUSTOMERS RANKED SECURITIES ACCORDING TO SECURITIES RISK FACTOR:

SECURITIES RANKED (RISK FACTOR)

329 8

51

37

15 26

22

27

3729

7

4

39 3720

0

20

40

60

80

100

120

A B C D

PREFERANCES

CUMULATIVERISK

%

4

3

2

1

Figure-5

OBSERVATION:


32% people rank A, 9% rank B, 8% rank C and 51% rank D as highly risky according to

their risk factor.

37% people rank A, 15% rank B, 26% rank C and 22% rank D as above average risky

according to their risk factor.

27% people rank A, 37% rank B, 29% rank C and 7% rank D as average risky according to

their risk factor.

4% people rank A, 39% rank B, 37% rank C and 20% rank D as low risky according to their

risk factor.

INFERENCE:

51% people ranked D (F&O) AS Highly risky.

37% people ranked A (EQUITY) as above average risky.


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6. EXPECTATION OF RETURN WHILE MAKING INVESTMENT:

A, 10

B, 28

C, 37

D, 25

0

5

10

15

20

25

30

35

40

A B C D

FIGURE-6

OBSERVATION: 37% people marked C, 28% marked B, 25% marked D and only 10% marked

A.

INFERENCE:

37% people want atleast 15-20% return while making investment.

28% people want atleast 10-15% return while making investment.

7. MEDIUM FOR GETTING INFORMATION ABOUT FINANCIAL MARKET

47

2528

37

0

10

20

30

40

50

Series1 47 25 28 37

A B C D

FIGURE-7


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OBSERVATION*: 47% marked A, 25% marked B, 28% marked C and 37% marked D.

INFERENCE:

47% people get information about financial market from newspaper.

37% people get information about financial market from television.

*(few people get information from more than one medium)

8. MEDIUM FOR MAKING TRANSACTIONS:

40

22

0

42

0

10

20

30

40

50

Series1 40 22 0 42

A B C D

FIGURE-8

OBSERVATION*: 40% marked A, 22% marked B and 42% marked D.

INFERENCE:

47% people make transactions online.

42% people make transactions by self.

*(few people do transactions through more than one medium)

9. TIME OF INVESTING MONEY:


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8

42

14

37

0

10

20

30

40

50

Series1 8 42 14 37

A B C D

FIGURE-9

OBSERVATION: 42% want to invest when market is rising,

37% want to invest market is very low.

Only 8% people want to invest when market is declining.

CONCLUSION:

42% People would like to invest when market is rising.

37% People would like to invest when market is very low.

10. LIKING TO INVEST IN MUTUAL FUNDS:

8 1

1 9

0

2 0

4 0

6 0

8 0

1 0 0

S e r i e s 1 8 1 1 9

A B

Series1,

81%

Series1,

19%

A B

FIGURE-10

OBSERVATION:

81% People would like to invest in mutual fund in future if get a good opportunity.


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28% People would not like to invest in mutual fund in future if get a good opportunity.

INFERENCE

81% WANT TO INVEST IN MUTUAL FUND IN FUTURE


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ANNEXURE

SAMPLE QUESTIONNAIRE FOR CUSTOMER / INVESTOR BEHAVIOURANALYSIS IN MARKET:


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----------------Questionnaire--------------

CUSTOMER BEHAVIOUR ANALYSIS IN MARKET

Q-1 WHERE DO YOU LIKE TO INVEST YOUR MONEY? RANK THEM ACCORDING TOYOUR PREFERENCE:(A) MUTUAL FUND ( ) (B) BANK F. D. ( )(C) SHARES ( ) (D) POST OFFICE ( )(E) GOVT. BONDS ( )Q-2 WHERE DOES MUTUAL FUND EXIST IN YOUR INVESTMENT PORTFOLIO?(A) 0 - 25% ( ) (B) 25 - 50% ( )(C) 50 - 75% ( ) (D) 75 100% ( )

Q-3 ARE YOU SATISFIED FROM YOUR INVESTMENT?(A) YES ( ) (B) NO ( )

Q-4 ARE YOU AWARE ABOUT THE SCHEMES OF MUTUAL FUNDS?

(A) YES ( ) (B) NO ( )( IF NO, SO PLZ GO TO Q-10 )

Q-5 HOW WILL YOU RANK SECURITIES IN RESPECT OF THEIR RISK FACTOR?(A) EQUITY ( ) (B) MUTUAL FUNDS ( )(C) COMMODITY ( ) (D) F & O ( )

Q-6 HOW MUCH MINIMUM RETURNS DO YOU PREFER WHILE MAKINGINVESTMENT?(A) 5-10% ( ) (B) 10-15% ( )(C) 15-20% ( ) (D) 20-25% ( )

Q-7 FROM WHOM DO YOU GET INFORMATION ABOUT FINANCIAL MARKET?(A) NEWS PAPER ( ) (B) FRIENDS ( )(C) BROKERS ( ) (D) TELEVISION ( )

Q-8 WHICH MEDIUM DO YOU MAKE FOR TRANSACTIONS?(A) ONLINE ( ) (B) BROKERS ( )(C) BY POST ( ) (D) SELF ( )Q-9 WHEN WOULD YOU LIKE TO INVEST YOUR MONEY? WHEN!(A) MARKET IS VERY HIGH ( ) B) MARKET IS RISING ( )

(C) MARKET IS DECLINING ( ) D) MARKET IS VERY LOW ( )

BEFORE ASKING Q-10, YOU SHOULD KNOW THAT: A Mutual Fund is a trust that pools thesavings of a number of investors who share a common financial goal. The money thus collected isthen invested in capital market instruments such as shares, debentures and other securities. Theincome earned through these investments and the capital appreciation realised are shared by its unitholders in proportion to the number of units owned by them. A Mutual Fund offers an opportunityto invest in a diversified, professionally managed basket of securities at a relatively low cost.


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Q-10 NOW; WOULD YOU LIKE TO INVEST IN MUTUAL FUNDS?

(A) YES ( ) (B) NO ( )

NAME: OCCUPATION: .....

ADDRESS: TEL NO: .

FINDINGS


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After analysis different Mutual funds and customer behavior, it is revealed that mutual funds

issues can be compared by different factors like its NAV, RETURNS, RISK, EXPENSE

RATIO, RETURN SINCE LAUNCH and its DIVERSIFIED STOCK. A Customer can

compare different issues and make decisions accordingly, if they found any contradictory

like return on one is better but it is high risky now its depend on investor attitude that

whether he is risk taker or averter.

And, In a survey of 100 people at Delhi, I come on following findings:

People in India want safe investment thats why people marked maximum 39%

bank f.d as their first preference.

People preferred mutual funds after bank f.d because in their opinion mutual funds

are less risky as compared to other securities.

28% of the sample population is not aware about mutual fund and its schemes.

Approximately 50% of population want to invest below 25% of their investment

portfolio in mutual funds.

Approx. 70% people want return more than 10% on their investment for them

mutual fund is a very good option.

17% people are not satisfied from their investment.

51% people said F&O is highly risky. People marked mutual fund low risky than

F&O AND equity.

47% people get information about financial market through newspaper.

42% people do transaction by theirself and 40% online.

Maximum (42%) customer want to invest when market is rising.

Mutual funds have evolved a lot since its inception and growing rapidly.

From a single fund house in 1964 there are at present 34 fund houses.


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Many private players and foreign players have increased and more foreign players

are on the prowl.

SIP (Systematic Investment plans) has got lot of popularity in the last 3-4 years as it

gives the advantage of Rupee cost averaging.

The Mutual Fund industry is mainly penetrated in urban or semi-Urban areas. And

Rural India is still to be tapped.

It is very important that while comparing the scheme the scheme with same

investment style and sector allocation should be selected.

Various qualitative and quantitative measures should be used.

Compare the scheme and only return should not be taken into consideration.

The less than three-year-old PMS has already built up a client base of 540 and an

asset portfolio of Rs 100 crore.

In PMS, there had been a very sharp growth in its client base last year. Based

exclusively on the good report card and strong recommendations of existing clients,

new customers have come seeking the company's services. On a year-on-year basis,

the company's client base has grown over 300 per cent, from around 145 clients last

year to 540 today.

One may know what stocks, equity funds or bonds one would like to own, but he/she

doesnt knows how much of your savings one should allocate to each of these. The

decision on asset allocation will be crucial in determining investment returns over

the long term. With PMS, an asset allocation plan is tailor-made, after a detailed

check on investment goals, savings pattern and appetite for risk one has.

In PMS investor can switch over to different investments as per market.

CONCLUSION


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In the case of Mutual Funds as it can be seen from the performance figures, the SIP has

delivered better returns than a lump-sum investment.

But if we compare the average returns of Mutual funds and portfolio management

services over the last few years, PMS has given the better returns to the investors. Like

Reliance PMS has given the returns of 73.1% per annum, Angel has given 63% returns, and

Morgan has given 37% return. And in Mutual funds, Franklin India prima fund has given

the maximum average return of 35.78% over the last 10 years.

Although anybody with a nest egg, which meets the minimum investment

requirement, can consider using a PMS. However, a PMS may only add significant value in

the following cases:

Equity bias: Portfolio management services may be ideal for a person who seeks a

substantial investment in the stock markets. An equity portfolio also offers greater scope for

a manager to add value than does a debt portfolio. Several of the established players in the

PMS business focus on equity investments, though some also offer hybrid products.

Large surplus to invest: The minimum portfolio size that portfolio managers accept for

a customised portfolio ranges from Rs 25 lakh to Rs 5 crore. So one must consider PMS

only if he/she has a substantial surplus to invest in stocks. If one cant, evaluate yourself and

use the services of a financial planner or an advisor, instead of a PMS.

Otherwise for small scale investors in order to diversify his portfolio in small

investments only & to get it professionally managed mutual funds is a better option as

compared to personal investments

RECOMMENDATIONS


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Companies should promote awareness programmes because many of the people arenot aware about different schemes and they dont want to invest on confused terms.

Companies should take more initiative while

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