Kotak Muctual Fund PROJECT REPORT

8/6/2019 Kotak Muctual Fund PROJECT REPORT

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A

Reprot

On“Marketing of Mutual Funds with Competitive Analysis inPresent Scenario.”

COMPLETED IN

SUBMITTED BY : COMPANY GUIDE :

PANKAJ MATHUR MANAN BAPNA

(STATE HEAD)

MAHARISHI ARVIND INSTITUTE OF ENGINEERING & TECHNOLOGY

( AFFILIATED TO UNIVERSITY OF RAJASTHAN)

MAHARSHI ARVIND INST. OF MANAGEMENT



CONTENTS

Acknowledgement

Certificate

Preface

1. Profile of Kotak Mahindra

An Overview

Ethics

Areas of Operation Accolades

2. Profile of Kotak Mahindra Mutual Fund

An Overview

Board of Directors

Project Title

3. Introduction to the Mutual Fund Industry Types of Mutual Fund

History

Constitution of Mutual Fund

Working of Asset Management Company

Net Asset Value

Benefits of Mutual Fund

Investment Allocation

4. Schemes of Kotak Mutual Fund

5. SWOT Ananlysis




6. The Research

7. Reccommandation

8. Bibilography




ACKNOWLEDGEMENT

The project would not be complete without a mention of those, who have spared their valuable time and shared their rich experience, in making this project a success.

I owe my indebtedness to ‘Mr. Manan Bapna’ State Head, Rajasthan for Kotak

Mutual Funds , for granting me an opportunity to work with the esteemed organization.

He has been benevolent enough to lend his help and spare his valuable time throughout

the project. I am thankful for his continuous motivation and encouragement.

I extend my heartfelt thanks to ‘Mr. Sanjeev Lodha and ‘Mr. Ankit Babaerwal

(H.R.)’, in charge, Back Office for their incessant guidance and support all through the

project. They have been immensely contributive with their ideas and have guided me on

all aspects. I also feel privileged to place on record the excellent marketing tactics,

which I had learnt from them during my project.

I express a deep sense of gratitude to all the staff members at my office- Kotak Mutual

Funds .; who gave me a full-fledged support throughout my project.




PREFACE

A professional course like Business Management demands in depth theoretical

knowledge and practical exposure to its application. For the same, the course design

includes two months summer training. The course aims to groom the students

professionally and offer him/her a chance to work in the real environment of the

corporate world, so as to have an opportunity to gain experience on practical aspects and

supplement his/her theoretical knowledge.

Mutual Fund being the ideal investment vehicle in today’s complex and modern

financial scenario, consequently study of mutual fund has become an essentialingredient of any business and finance programs. Markets for equity, shares, bonds, and

other fixed income instruments, real estates, derivatives and other assets have become

mature and information driven. Mutual Fund is emerging as the most attractive

investment avenue though still a recent phenomenon in the Indian context.

I was fortunate enough to closely watch and learn the working of mutual fund, during

my summer training at the esteemed organization- KOTAK MUTUAL FUND.

The project assigned was based on marketing and then comparative analysis with

investment schemes. The project dealt with – ‘Agency Expansion & Marketing of

Mutual Funds’.

It is hoped that the organization will be benefited from the suggestions as well as study

carried out.




Profile of Kotak Mahindra Group

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance

Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak &

Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986,and that's when the company changed its name to Kotak Mahindra Finance Limited.

Since then it's been a steady and confident journey to growth and success

1986 Kotak Mahindra Finance Limited starts the activity of Bill Discounting

1987 Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market

1990 The Auto Finance division is started

1991 The Investment Banking Division is started. Takes over FICOM, one of India’s

largest financial retail marketing networks

1992 Enters the Funds Syndication sector

1995 Brokerage and Distribution businesses incorporated into a separate company -

Kotak Securities. Investment Banking division incorporated into a separate

company - Kotak Mahindra Capital Company

1996 The Auto Finance Business is hived off into a separate company - Kotak

Mahindra Prime Limited (formerly known as Kotak Mahindra Primus Limited).Kotak Mahindra takes a significant stake in Ford Credit Kotak Mahindra

Limited, for financing Ford vehicles. The launch of Matrix Information Services

Limited marks the Group’s entry into information distribution.




1998 Enters the mutual fund market with the launch of Kotak Mahindra Asset

Management Company.

2000 Kotak Mahindra ties up with Old Mutual plc. for the Life Insurance business.

Kotak Securities launches its on-line broking site (now

www.kotaksecurities.com). Commencement of private equity activity through

setting up of Kotak Mahindra Venture Capital Fund.

2001 Matrix sold to Friday Corporation

Launches Insurance Services

2003 Kotak Mahindra Finance Ltd. converts to a commercial bank – the first Indian

company to do so.

2004 Launches India Growth Fund, a private equity fund.

2005 Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra Prime

(formerly known as Kotak Mahindra Primus Limited) and sells Ford credit Kotak

Mahindra.

Launches a real estate fund




ETHICS

KOTAK MAHINDRA’S reputation is critical to being the world’s leading emergingmarket bank. The preservation and enhancement of that reputation depends upon

business operating to the highest standards of ethical conduct.

The principles that govern the behavior of the business and employees are reflected in a

group code of conduct. It is a practical working document that guides employees

through the many difficult issues that confront them.

There follows the summary of key elements in the Group Code of Conduct:

Local Laws and Group Standards

Confidentiality and Data Protection

Suitable Products

Money Laundering

Insider Trading

Bribery and Corruption

Gifts and Entertainment

Conflicts of interest

Dealing in Standard Chartered shares

Speaking up.

AREAS OF OPERATIONS

♦ Personal Banking




♦ Business Financial Services

♦ Commercial Banking

ACCOLADES

Best Debt House in India

Euro money Awards for Excellence, 2003

Best Bond House in Thailand




KOTAK MAHINDRA MUTUAL FUNDS

Kotak Mahindra is one of India's leading financial institutions, offering complete

financial solutions that encompass every sphere of life. From commercial banking, to

stock broking, to mutual funds, to life insurance, to investment banking, the group

caters to the financial needs of individuals and corporates.

The group has a net worth of over Rs. 2,840 crore, employs around 7,800 people in its

various businesses and has a distribution network of branches, franchisees,

representative offices and satellite offices across 264 cities and towns in India and

offices in New York, London, Dubai and Mauritius. The Group services over 1.6million customer accounts.

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned

subsidiary of KMBL, is the asset manager for Kotak Mahindra Mutual Fund (KMMF).

KMAMC started operations in December 1998 and has close to 4,34,504 investors in

various schemes. KMMF offers schemes catering to investors with varying risk - return

profiles and was the first fund house in the country to launch a dedicated gilt scheme

investing only in government securities.

KMAMC ANNUAL REPORTS

2004-2005

2003-20042002-20032001-20022000-20011999-2000

FUND'S FINANCIALSANNUAL REPORT HALF-YEARLY RESULTS ANDPORTFOLIOS

2005-2006

ANNUAL REPORT, HALF YEARLY RESULTS &PORTFOLIOS

2004-2005

ANNUAL REPORT, HALF YEARLY RESULTS & 2003-2004


http://www.kotakmutual.com/download/annualreport2004-05.pdf

http://www.kotakmutual.com/download/kmamc03_04annualreport.pdf

http://www.kotakmutual.com/download/2002_03.pdf

http://www.kotakmutual.com/kmamc.pdf

http://www.kotakmutual.com/AMC-AR.pdf

http://www.kotakmutual.com/AMC_ANNUAL_REPORT-99-00.PDF

http://www.kotakmutual.com/fundfin5.htm



http://www.kotakmutual.com/download/annualreport2004-05.pdf

http://www.kotakmutual.com/download/kmamc03_04annualreport.pdf

http://www.kotakmutual.com/download/2002_03.pdf

http://www.kotakmutual.com/kmamc.pdf

http://www.kotakmutual.com/AMC-AR.pdf

http://www.kotakmutual.com/AMC_ANNUAL_REPORT-99-00.PDF






PORTFOLIOSANNUAL REPORT, HALF YEARLY RESULTS &PORTFOLIOS

2002-2003

ANNUAL REPORT, HALF YEARLY RESULTS &

PORTFOLIOS 2001-2002ANNUAL REPORT, HALF YEARLY RESULTS &PORTFOLIOS

2000-2001

KEY EMPLOYEES OF AMC

Mr. Sandesh Kirkire

CHIEF EXECUTIVE OFFICER

Mr. Sandesh Kirkire, 41, is a Mechanical Engineer, and holds a Masters degree in ManagementStudies from Jamnalal Bajaj Institute of Management Studies (JBIMS), Mumbai University.Following assignments with SBI Capital Markets Ltd. and ITC Bhadrachalam Finance & InvestmentsLtd., Mr. Kirkire joined the Kotak Mahindra Group in 1994. His 15 years of experience in the financialservices space spans Corporate Finance, Proprietory Trading, Investment Banking, Treasury Sales,

Debt Market Trading and Debt Fund Management. Mr. Kirkire has earned several awards in his lastassignment as CIO (Debt) with the AMC, a position he held till May 2005.

Mr. Nilesh Shah

PRESIDENT

Mr. Nilesh Shah, 36, is a CFA and holds a PGDRM from the Institute of Rural Management, Anand(IRMA). He has has over 13 years of experience and achievement in financial services. Followinghis post graduation from IRMA in 1992, Mr. Shah joined Gruh Finance Ltd., working in their Corporate Finance division for 2 years before joining the Kotak Group. In the vKotak Group, hehandled assignments in the Corporate Finance and Capital Markets division before moving intoequities. Prior to joining the AMC, Mr. Shah was Executive Director, Equity Strategy, at KotakSecurities Ltd. Mr. Shah is President of the AMC, and guides its equity strategy, among other

responsibilities.

Mr. R. Krishnan

SENIOR VICE PRESIDENTCHIEF OPERATIONS OFFICER

Mr. R. Krishnan, 36, is a Chartered Accountant and Cost Accountant with over 11 years of experience in the fields of Operations, Systems, Finance, MIS, Accounting, Audit and Taxation.Prior to joining the Kotak Group in August 1994, Mr. Krishnan was a practicing CharteredAccountant for two years, handling Accounting, Audit and Taxation matters for clients. Since joiningthe Kotak Group, Mr. Krishnan has handled major assignments like the US GAAP implementationfor the erstwhile Kotak Mahindra Finance Limited (KMFL) and subsidiary/group companies, SystemsDevelopment and Implementation, for the Retail Assets Group and KMFL's transition to Kotak Bank.Mr. Krishnan's latest assignment was as Head - Operations, Retail Assets, at Kotak Bank. Mr.Krishnan joined Kotak Mutual in August 2004 as Senior Vice President, and Chief Operations

Officer, and oversees the Operations, Accounting and IT functions of the Fund.

Mr. V.R. Narasimhan

CHIEF COMPLIANCE OFFICER



http://www.kotakmutual.com/fundfin.htm



http://www.kotakmutual.com/fundfin.htm




V.R.Narasimhan 49, Post graduate in commerce, business administration and member of theInstitute of company secretaries of India. He was associated with NSDL- the first depository in thecountry since its inception. He was designated as Senior Vice President at NSDL immediatelybefore joining Kotak AMC. He has total experience of over 25 years of which four years was asfaculty at university level, about 10 years in a state level development financial institution, aboutthree years in a national level market regulator and about 10 years in the depository.




TITLE

“ Marketing of Mutual Funds with Competitive Analysis inPresent Scenario.”

Problem Identification / Objectives of the Project

For a project to be successful, definition of objectives is the most important thing. Themain objective of the project undertaken were:

a) To market the mutual funds.

b) To have a Competitive Analysis with other players in the industry.

It can be further segregated into following points:

a) To increase the customer base regarding the SCMF which was launched in Jaipur in

January only.

b) To create awareness among the investors for this investment vehicle, which is still at

inception stage in Jaipur context.

c) To find out the attractiveness of the mutual funds as compared to other investment

avenues.

Significance of the study




The underlying motives of the research were to furnish the organization with vital

information and facilitate the researcher to gain a practical insight to the market

scenario. The study proved significant in terms of catering to the interests of both the

company and the researcher.

Significance to the organization

The study enabled the organization to know about the perception of investors for

investment in various investment avenues; the benefits people are looking forth from the

mutual funds and the flaws in the various schemes.




MUTUAL FUNDS: AN OVERVIEW

INTRODUCTION

A mutual fund is a trust that pools the savings of a number of investors that share a

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

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

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

through these investments and the capital appreciation realized by the scheme are shared

by its unit holders in proportion to the number of units owned by them (pro rata). Thus a

mutual fund is the most suitable investment for the common man as it offers an

opportunity to invest in a diversified, professionally managed portfolio at a relatively

low cost. Anybody with an investible surplus of as little as a few thousand rupees can

invest in mutual funds. Each mutual fund scheme has a defined investment objective

and strategy.

A mutual fund is the ideal investment vehicle for today’s complex and modern financial

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

estate, derivatives and other assets have become mature and information driven. Price

changes in these assets are driven by global events occurring in faraway places. A

typical individual is unlikely to have the knowledge, skills, inclination and time to keep

track of events, understand their implications and act speedily. An individual also finds

it difficult to keep track of ownership of his assets, investments, brokerage dues and

bank transactions etc.

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

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




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

each investor. In effect, the mutual fund vehicle exploits economies of scale in all three

areas- researches, investments and transaction processing. While the concept of

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

its present form is a twentieth century phenomenon.




TYPES OF MUTUAL FUNDS

Mutual fund schemes may be classified on the basis of its structure and its investment

objective.

(1) By Structure/Operational classification:

♦ Open-ended Funds-

An open-ended fund is one that is available for subscription all through the year.

These do not have a fixed maturity. Investors can conveniently buy and sell units at

Net Asset Value (NAV) related prices. The key feature of open- ended schemes is

liquidity.

♦ Closed-ended Funds-

A closed-ended fund has a stipulated maturity period that generally ranges from 3 to

15 years. The fund is open for subscription only during a specified period. In order to

provide an exit route to the investors, some close-ended funds give an option of

selling back the units to the mutual fund through periodic repurchase at NAV related

prices.

♦ Interval Funds-

Interval funds combine the features of open-ended and closed-ended schemes. They

are open for sale or redemption during pre-determined intervals at NAV related

prices.




(2) By Investment Objective/ Portfolio Classification:

♦ Growth Funds-

The aim of growth funds is to provide capital appreciation over the medium to long

term. Such scheme normally invests a majority of their corpus in equities. It has

been proven that returns from stocks, have outperformed most other kind of

investments held over the long term. Growth schemes are ideal for investors having a

long-term outlook seeking growth over a period of time.

♦

Income Funds- The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate

debentures and Government securities. Income funds are ideal for capital stability

and regular income.

♦ Balanced Funds-

The aim of these funds is to provide both growth and regular incomes. Such schemes

periodically distribute a part of their earnings and invest both in equities and debts.

These are ideal for investors looking for a combination of income and moderate

growth.

♦ Money Market Funds-

The aim of money market funds is to provide easy liquidity, preservation of capital andmoderate income. These schemes generally invest in safer short-term instruments such

as treasury bills commercial paper etc. These




are ideal for Corporate and individual as a means to park their surplus funds for

short-term periods.

(3) Tax Saving Scheme

♦ These schemes offer tax rebates to the investors under specific provisions of the

Indian Income Tax laws as the government offers tax incentives for investment in

specified avenues. Investments made in Equity Linked Savings Schemes and

pension schemes re allowed as deduction u/s 88 of I T Act 1961.

(4) Special Schemes

♦ Industry Specific Scheme –

Industry specific scheme invest only in the industries specified in the offer

document. The investment of these funds is limited to specific industries like

InfoTech, FMCG, and Pharmaceuticals etc.

♦ Index Scheme-

Index Funds attempt to replicate the performance of a particular index such as the

BSE Sensex or the NSE 50

♦ Sectoral Scheme –

Sectoral Funds are those, which invest exclusively in a specified industry or a group

of industries or various segments such as ‘A’ group shares or initial public offerings.




HISTORY OF MUTUAL FUNDS

Structure of the Indian Mutual Fund Industry

The Unit Trust of India dominates the Indian mutual fund industry. The UTI has many

funds/schemes in all categories i.e. equity, balanced, income, etc with some being open-

ended and some being close-ended. UTI was floated by financial institutions and is

governed by a special act of Parliament. Most of its investors believe that the UTI is

government owned and controlled, which, while legally incorrect, is true for all practical

purposes.

The second category of mutual funds is the ones floated by nationalized banks. Canbank

Asset Management floated by Canara Bank and SBI Funds Management floated by the

State Bank of India are the largest of these. GIC AMC floated by General Insurance

Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other

prominent ones.

The third largest category of mutual funds is the ones floated by the private sector and

by foreign asset management companies. The largest of these are Birla Sun Life AMC,

Standard Chartered AMC, Kotak AMC etc.




CONSTITUTION OF THE MUTUAL FUND

An attempt was made for first time in SEBI GUIDELINES 1992 to spell out for

managing the affairs of mutual funds ensuring arm’s length distance between the

sponsor and the fund. The four custodians and asset management company. Moreover in

reality pooled funds of small investors were being put to use for the advantage of the

sponsors. Four constituents for the management of mutual fund are presented in chart


Sponsors

(Promoters)

Asset

Manageme

ntCompany

(Managing

the

investments

of fund

CUSTODIANS

(SAFE

CUSTODY OF

FUND

SECURITIES

Mutual

Fund

(A Trust)

TRUSTEES (Holding

property of

Fund)



SPONSORS

It refers to anybody corporate which initiates the launching of a mutual fund. It is this

agency, which of its own or in collaboration with other body corporate comply the

formalities of establishing a mutual fund. SEBI ensures that sponsors should have

professional competence, financial soundness and general reputation of fairness and

integrity in business transactions. Sponsor is normally not responsible for any loss or

shortfall resulting from the operations of any scheme of the fund beyond its initial

contribution towards the constitution of the trust fund.

TRUSTEES

A trustee is a person who holds the property of the mutual fund in trust for the benefits

of the units holders. A company is appointed as a trustee to manage the mutual fund. To

ensure fair dealings, mutual fund regulations require that one cannot be a trustee or a

director of a trustee company in more than one mutual fund.

Further at least fifty percent of the trustees are to be independent of the sponsors.

Trustees take into their custody, or under their control all the property of the mutual

fund. It is trustee’s duty to observe and ensure that AMC is managing schemes in

accordance with the trust deed. Trustees for their services are paid trusteeship fee, which

is to be specified in the trust deed.

CUSTODIANS




SEBI requires that each mutual fund shall have a custodian for managing the scrips

bought from the market who is not in anyway associated with the AMC. He cannot act

as sponsor or trustee of any mutual fund. Further he is not permitted to act as a

custodian of more than one mutual fund without the approval of SEBI. Custodian’s

main assignment is safekeeping of the securities or participation in any clearing system

on behalf of the client to effect deliveries of the securities.

Depending on the volume there can be co-custodian for a mutual fund. These custodians

are entitled to receive custodianship fee based on the average weekly value of net assets

or sale and purchase of securities along with per certificate custody charges.

Asset Management Company (Investment manager)

Asset Management Company as the name implies is to be a body corporate whose

Memorandum and Articles of Association are to be approved by SEBI. It is the AMC,

which operates all the schemes of the fund. AMC can act as AMC an AMC of only one

mutual fund and cannot act as a trustee of any other mutual fund. To ensure efficient

management SEBI desires that existing AMC should have a sound track record,

dividend paying capacity and profitability, etc. Regulations require that at least 50% of

the directors should be such who do not have any association with the sponsors or the

trustees.




WORKING OF ASSET MANAGEMENT COMPANY

It is not required that AMC performs all its functions of its own. It can hire services of

outside agencies as per its requirements or perform all functions of its own. The main

agencies services of which an AMC may require are depicted in the chart.

ASSET MANAGEMENT COMPANY

Registrar Lend Legal Auditors

And Managers advisors

Transfer

Agent

Fund Investment Fund

Accounting Advisors Manager

♦ REGISTRAR AND TRANSFER AGENT.

♦ FUND ACCOUNTING.

♦ LEND MANAGERS.

♦ INVESTMENT ADVISORS.

♦ LEGAL ADVISORS.

♦ FUND MANAGER.

♦ AUDITORS.

REGISTRAR AND TRANSFER AGENTS are assigned the job of receiving and

processing the application forms of investors, issuing unit certificates, sending refund




Functions of AMC

The two main functions of an Asset Management Company are discussed in detail here.

{A} Investment

The major strength of any AMC lies in its investment function. The investment

department may be classified in four segments. These can be:

Fund Manager

Research and Planning Cell

Dealer

Underwriter

[1] Fund Manager

Asset Management Companies manage the investment of fund through a fund manager.

His basic function is to decide about which, when, how much and at what rate securities

are to be sold or bought. To a great extent the success of any scheme depends on the

caliber of the fund manager.

Many mutual funds especially in bank sponsored funds, the entire investment exercise is

not left to one individual. One mutual fund has created two committees. First is

Investment Committee which is broad based committee having even nominees of the




sponsor. It collectively decides about the primary market investment. The second is

Market Operation Committee having the assignment of disinvestments and interacting

with secondary market.

[2] Research and Planning Cell

This performs a very sensitive and technical assignment. Depending upon on the

operational policies, such unit can be created by AMC on its own or research findings

can be with respect of securities as well as prospective investors. This section also

assists planning new schemes and designing innovations in schemes.

[3] Dealer

To executive the sale and purchase transactions in capital or money market, a separate

section may be created under the charge of a person called dealer having deep

understanding of stock market operations.

Sometimes, this division is under charge of marketing division of AMC. Such brokers

are to be approved Board of Directors of AMC.

[4] Underwriter

Recently mutual funds have been permitted by SEBI to go in for underwriting of public

issues to generate additional income for their schemes. Activity will be subject to the

following underwriting restrictions:




For the purposes of the SEBI underwriter’s regulations, the capital adequacy of the

mutual fund shall be the original corpus of any of the scheme(s) and the

undistributed gains lying to the credit of the scheme(s).

The total underwriting obligations of the scheme shall not exceed the total value of

the corpus of any scheme together with undistributed profits lying to the credit of the

scheme.

No understanding commitment may be undertaken in respect of the scheme during

the period of six months prior to the date of redemption of any scheme.

{B} MARKETING

Marketing is a big challenge in business especially for mutual fund. Mutual funds deal

with small investors hard earned money. The main challenge of marketing to mutual

fund is that with same product, customers with diversified profile viz demographic,

socio-economic background, life style and psychographics’ are to be served.

It is the marketing division, which complies with the formalities to market the product

i.e. a new scheme. Marketing people also evolve the target amount of a scheme. The

most crucial ‘marketing strategy’ is evolved to the best advantage of the fund.

Marketing division has to evaluate the market potentials, strengths and weaknesses. For

each scheme, what is its market share is very crucial question to design its future

strategies. To identify which section of society is under serviced, is another important

assignment of marketing division.




A mutual fund is an investment vehicle for those who want to spread their risk and seek

returns, which are better than those available from bank deposits. Such investor

education should also be taken up by marketing division to avoid facing situations of

loose of faith of investor heavy off-loading, resulting in the huge discount to NAV.

Marketing people also have a say in dividend policy of the mutual fund. Sufficient

infrastructure facilities are to be created for quality and prompt services.

Marketing a scheme is to be taken as marketing a consumer product.

Marketing for mutual fund is not deal-based but is relationship –based. The psychology

of investor needs deep insight. There are potential investors in the present investors of

the scheme. So understanding and responding to their needs obviously will bring mutual

funds new investors besides retaining the present.




NET ASSET VALUE (NAV)

The net asset value of the fund is the cumulative market value of the assets fund net of

its liabilities. In other words, if the fund ids dissolved or liquidated, by selling off the

entire asset in the fund, this is the amount that the shareholders would collectively own.

This give rise to the concept of net asset value per unit, which is the value represented

by the ownership of one unit in the fund.

CALCULATION OF NAV

The most important part of the calculation is the valuation of the asset owned by the

fund. Once it is calculated, the NAV is simply the net asset value of assets divided by

the number of units outstanding the detailed methodology for the calculation of the asset

value is given below:

Asset value is equal to

Sum of market value of shares/ debentures

+Liquid assets/ cash held, if any

+Dividend/ interest accrued

-Amount due on unpaid assets

-Expenses accrued but not paid




NAV is computed as follows: -

(Market or Fair Value of scheme’s investments+ Current assets including

accrued income-Current liabilities and Provisions including accrued expenses) / Number

of units outstanding at the end of the day.

DETAILS OF THE ABOVE ITEMS

For liquid shares/debentures, valuation is done on the basis of the last closing market

price on the principal exchange where the security is trading. For illiquid and unlisted

and /or thinly traded shares and debentures

The value has to be estimated. For shares, this could be the book value per share or may

be market price. For debentures and bonds, value is estimated on the basis of yields of

comparable liquid securities after adjusting liquidity. The value of fixed interest bearing

securities moves in the direction opposite to the interest rate changes valuation of

debentures and bond is a big problem since most of them are unlisted and thinly traded.

This gives considerably leeway to the AMCs on the valuation and some of the AMCs

are believed to take advantage of this and adopt flexible valuation policies depending on

the situation. Interest is payable on these on a periodic basis. Accrued interest on a

particular day is equal to the daily interest rate multiplied by the number o days since

the last interest payment date.

Usually, dividends are proposed at the time of the Annual General Meeting and becomedue on the record date. There is a gap between the dates on which it becomes due and

the actual payment date. In the intermediate period, it is deemed to be: “accrued”.

Expenses including management fees, custody charges etc. are calculated on a daily

basis.




BENEFITS OF MUTUAL FUND INVESTMENT

• PROFESSIONAL MANAGEMENTMutual fund provide the services of experienced and skilled professionals backed by a

dedicated investment research team that analyses the performance and prospects of

companies and selects suitable investments to achieve the objectives of the scheme.

• DIVERSIFICATION

Mutual fund invests in a number of companies across a broad cross-section of industries

and sectors. This kind of diversification enables to reducing the risk.

• CONVENIENT ADMINISTRATION

Mutual fund reduces paper work and helps to avoid many problems such as bad

deliveries, delayed payment etc and improves the administration efficiency.

• RETURN POTENTIAL

Over a medium to long term, mutual fund have the potential to provide higher return as

they invest in a diversified basket of selected securities.

• LOW COST

Mutual fund are 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, the investor gets the money back promptly at net asset value

related prices from the mutual fund. In closed ended, units can be sold on a stock

exchange at prevailing market price or the investor can avail of the direct repurchase at

NAV related prices by the mutual fund.

• TRANSPERENCY

You get regular information on the value of your investment in addition to disclosure on

the specific investment made by your scheme, the proportion invested in each class of asset and the fund manager’s investment strategy and outlook.

• FLEXIBILITY

Through features 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.

• AFFORDABILITY

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual

fund because of its large corpus allows even a small investor to take the benefit of its

investment strategy

• WELL REGULATED

All mutual funds are registered with SEBI and they function within the provision of

strict regulations designed to protect the interests of investors. The operations of mutual

funds are regularly monitored by SEBI




INVESTMENT ALLOCATION

KMMF mainly looks towards that area of investments where they deal in 100% debts

without taking leverage of equity so that risk level limits to its minimum. However,

their area of operation directly gets influenced through bank rate and policies. From the

above it can be concluded that:

Basic investment in debt market

Less risk

Influenced by bank rate

Categories of allocation

Govt. of India (GOI) Securities

7.46% GOI 2017

9.39% GOI 2011

8.07% GOI 2017

5.64% GOI 2019 etc.

PSU Bonds/ FIs

IRFC

National Thermal Power Company

IDBI LIMITED

Exim Bank etc.




Corporate Debentures

Reliance Industries Ltd.

HDFC

Indo Gulf Corporation Ltd.

Citibank NA

GE Capital Services India

Tata Power Co. Ltd. etc.

Call Money Market

T-Bill

CBLO

Bank Deposits

Call / Reverse Repo / Others

Note: -The investment portfolio varies from scheme to scheme. Subject to the

regulations, the asset allocation pattern may change from time to time, keeping in view

market conditions, market opportunities, applicable regulations and political and

economic factors. It must be clearly understood that the asset allocation between various

types of debt instruments can vary substantially depending upon the perception of the

investment Manager, the intention being at all times to seek to protect the interests of

the Unit holders. Such changes in the investment pattern will be for a short term and for

defensive considerations only.




SCHEMES of KOTAK MAHINDRA Mutual Fund




SWOT ANALYSIS

STRENGTHS WEAKNESSES

Fund manager skill. Lower Rate of Interest.

Portfolio Management. Lesser Goodwill.

Innovative Ideas.

OPPURTUNITIES THREATS

Security Transaction Tax. Rebate under section 88.

Long-term Investment Benefits. Providend Fund Benefit.

Liquidity.

Fixed Deposits andGovernment

Securities.

Lesser Risk.

Rise in Inflation.

Tax Efficient.

Unit Linked Insurance.




SWOT Analysis implies that judging the organization on the basis of it strengths,

weaknesses, opportunities, threats. So for the same purpose

generation of strengths and weaknesses come from the internal environment of theorganization and opportunities and threats come from external macro environment like

legal, economic, etc. The description of each is given below:

STRENGTHS

Fund manager’s skill: Investing the funds in the various debt schemes through fund

manager is one of the strength for SCMF because they had to constantly look upon a

well diversified sector for investment and investing in such a way as to provide optimal

and maximum return.

Portfolio management: Investment is made in diversified securities wit varying

maturity period so as to provide reasonable and less risky returns to the investors.

Innovative ideas: Standard Chartered AMC has innovative and objective oriented ideas

regarding investments. Looking the current situation prevailing this mutual fund

provides different schemes like short-term-cash funds schemes and long-term floaters.

According to the needs of the investors like buying houses or children education, this

mutual fund enables to provide satisfactory investment schemes.




WEAKNESSES

Lower rate of Interest: One of the weaknesses which is usually suffered by this debt

house is providing lesser rate of return as compared to what investor gets in investinggovernment securities and public provident fund and other schemes like insurance.

Lesser goodwill: Being a foreign and private sector organization it has lesser goodwill

than public sector funds like SBI mutual funds that has government backing.

OPPORTUNITIES

Security Transaction Tax: As per the current budget debt fund house is exempted

from security transaction tax and thus has an edge over other equity mutual funds.

Long-term Investment Benefits: The long-term investment schemes provided by the

debt house not only gives a faster growth of NAV but also provides long-term capital

gain tax benefits (10% without indexation and 20% with indexation).

Liquidity: The schemes of SCMF provide high liquidity as the amount can be

withdrawn any time with a lock in period of just 6 months in few schemes.

Lesser Risk: Keeping the above points in the mind the possibility of uncertainty and

risk comes to its minimal because of the fact that principal amount always remain intactand no kind of loss booking on it.




THREATS

Rebate under section 88: The schemes do not enjoy the benefits of rebate under

section 88 on investments.

PF Benefits: As the PF provides stable 8% return on savings, which is not necessarily

available in schemes.

FD and the Government Securities: The investment in these schemes provides 100%

safety of the amount, which is not as appropriate in the schemes.

Rise in Inflation: In the current scenario because of the rise of crude oil prices and the

delayed monsoons economy of India has touched 7.5% inflation rate and this has

discouraged the investment in debt funds.

Unit linked Insurance Plan: This scheme provides safety of investments as well as

returns on the basis of market conditions, which proves to be the biggest threat to debt

funds.




RECOMMENDATIONS

1. Investor friendly environment – Company should lay emphasis to create investor

friendly environment by helping the investors in selecting the right type of the schemes.

Hence manpower should be increased to handle the back office responsibilities.

2. Service Centers – Few of the potential cities of Rajasthan should have some kind of

representation of the Kotaki Mutual Fund in the form of Investors service centers.

3. Investors education Programme – Timely organizing such kind of programmes by

calling professionals from various fields of Finance and especially from the members

from the Fund managing team at Mumbai will increase investors trust in the investment

with the company.

4. Survey indicated Jaipur to be a highly potential city in terms of the potential

customers of the Mutual Fund in near future. This can only increase by their continuous

liasioning through advertising and properly coordinated promotional program.

1. The Jaipur Branch office – the only at Rajasthan should undertake a really planned

promotional program keeping in purview the whole of Rajasthan. Local newspapers,

T.V. channels, Billboards and catchy hoarding should do it.

2. The company should focus its attention on those schemes, which have given good

returns over the years. This will give boost to the investor’s confidence in the

company and also help the company in increasing its clientele.




3. The company should categorize the investors into investors – potential investors

– high net worth investors and so on, there profile should be properly maintained

which will help in better understanding the needs of its customers and suggesting the

optimum mix of the schemes accordingly.

4. The recent launches like Kotak twin Advantage series III and All Seasons Bond

Fund (Funds of Funds) looking at the volatility in the current market has proved to

be efficient for the fund. The KMMF should look more forward to such schemes.




BIBLIOGRAPHY

1. Bansal, Lalit, K., Mutual Funds – Management & Working, Deep & Deep

Publications New Delhi, 1996.

2. Griffeth, Bill, The Mutual Fund Masters, Probus Publishing, Chicago, Illinois,

Cambridge, England, 1995.

3. Jain Nabhi Kumar, Manuals of SEBI – Guidelines, Nabhi Publications, New

Delhi, August 1996.

4. Kothari C.R., Research Methodology, New Delhi, Wishwa Prakashan, 1990.

5. Kotler P., Marketing Management, Prentice Hall of India Private Limited, NewDelhi, 1999.

6. Kulshrestha C.M., Mastering Mutual Funds, New Delhi, Vision Books Pvt. Ltd.,

1994.

Kotak Muctual Fund PROJECT REPORT

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