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A
Summer Training Report
on
MUTUAL FUNDS AND THEIR COMAPARATIVEANAYLIS
Submitted to Punjab Technical University in partial fulfillment of
the requirement for the degree of
BACHELOR OF BUSINESS ADMINISTRATION
By
BILAL AHMED BHATT
80906320013
SWAMI VIVEKANAND INSTITUTE OF MANAGEMENT AND
TECHNOLOGY
BANUR, PATIALA
2010
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Certificate I
This is to certify that this research project entitled Mutual funds andtheir Comparative analysis submitted for the partial fulfillment of
requirements for the degree of Bachelor of Business Administration at Swami
Vivekanand Institute of Management and Technology, affiliated to Punjab
Technical University, Jalandhar is a bonafide research work carried out by
Bilal Ahmed Bhatt, of BBA, University Roll No. 80906320013, under my
supervision and that no part of this project has been submitted for any other
degree.
The assistance and help received during the course of this project have been
fully acknowledged.
Major Advisor
..
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ACKNOWLEDGEMENT
No work is considered complete unless due acknowledgement is given to those who made itpossible. Therefore, I am very thankful to the entire team of SBI BANK for their cooperation,
without which completion of this project would not have been possible.
Words at my command are inadequate both in form and spirit to express my sincere and
profound gratitude to Mr. M. Sharma (branch manager)ofSBI for having confidence in my
abilities and giving me all the liberties to perform. Sirs meticulous guidance, keen supervision
and whole hearted help has made me capable to complete this project. I would also like to thank
Mr. Hitesh Mehta and Mr.Dinesh (Advisor- Mutual Funds) for sharing with me all the details
of the project and providing me with valuable insights about the product. I would also like to
thankMs. Meenu (Advisor credit cards), Mr.Deepak bajaj(personal banker) for the patience
shown by them and being of such a great help to all my queries and above all making the
environment more comfortable for me.
Last but not the least I would like to thank my co-trainees Ms sheetal and
Ms rachna, they have been a great support in preparing this report as well as in discussing about
the related data and creating a cozy environment for my research work.
.
(BILAL AHMED BHATT)
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CONTENTS
S. No. Particulars Page
no.
1 Abstract
2. Overview of banking industry
3. Introduction to the mutual funds4. Profile and history of SBI
5. Performance and financial structure of SBI
6. Review of literature
7. Research methodology
8. Data presentation,analysis and interpretation
9. Summary,conclusion &recommendations
Appendix
Bibliography
ABSTRACT
In todays world where people are more concerned about protecting their future, they need to
plan out their investments in a judicious manner. Investment goals vary from person to person.
While somebody wants security, others might give more weight age to returns alone. Somebody
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else might want to plan for his childs education while somebody might be saving for life after
retirement.
With different objectives their main aim is that they want their money to grow in a safe and
secure manner. but there is a phrase which states that Higher the Risk Higher is the Return
everyone is not that strong that he could risk his earning but they do want to earn at minimum
possible risk
This project basically concentrates on the study of Mutual Funds as investment avenues, which
are currently attracting investors from all walks of life. This project also enhanced my
knowledge about the subject and enabled me to understand the terms more easily by knowing the
funds behind the name and its implications. This project aims at understanding the customer
knowledge and satisfaction towards mutual funds.
Lastly Enough work has not been done on this subject hence I have chosen this project for
further research to guide .This Analysis can help in relating the availability of investment
avenues and satisfaction of people about them.
Objectives of the research:
To gain knowledge about MUTUAL FUNDS as it has wider scope.
For the fruitful results to the organisation by making public aware about the mutual funds
provided by the SBI limited.
To know the public perception towards mutual funds such as level of usage, factors influencing
the investment in mutual funds, benefits accruing to the investors in mutual funds, problems
encountered etc.
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CHAPTER 1
INTRODUCTION STATE BANK OF INDIA
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Introduction to STATE BANK OF INDIA
Profile:
State Bank of India (SBI) is a Public Sector Banking Organisation (PSB), in which theGovernment of India is the biggest shareholder. It is the largest bank in India and is ranked at
380 in 2008 Fortune Global 500 list, and ranked 219 in 2008 Forbes Global 2000. Measured by
the number of branch offices, SBI is the second largest bank in the world. SBI traces its ancestry
back to the Bank of Calcutta, which was established in 1806; this makes SBI the oldest
commercial bank in the Indian subcontinent. SBI provides various domestic, international and
NRI products and services, through its vast network in India and overseas. With an asset base of
$126 billion and its reach, it is a regional banking behemoth.
In recent years the bank has focused on four priorities, first, reducing its huge staff through the
Golden Handshake scheme known as the Voluntary Retirement Scheme, second, computerizing
its operations, third, implementation of Business Process Re-Engineering(BPR), and fourth,
trying to change the rude attitude of its staff through a program aptly named 'Parivartan' or
'change'. On the whole, the Bank has been successful in the first three initiatives but has failed in
Parivartan.
After a 20 year hiatus, the Bank is recruiting 20000 clerks and 3500 officers. The pick of the
universities aspire to join the Bank and more than 2.5 million applications have been received.
History
Offices of the Bank of Bengal
1806: On June 2, the Bank of Calcutta was established.
1809: On January 2, the Bank of Calcutta changed its name to the Bank of Bengal.
1840: On April 15, the Bank of Bombay was established.
1843: On July 1, the Bank of Madras was established.
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These three banks Bank of Bengal, Bank of Bombay, and Bank of Madras were known as
Presidency banks, were the result of royal charters, and were incorporated as joint stock
companies.
1861: The government passed the Paper Currency Act, limiting the right to issue paper
currency to the three Presidency banks, .
1921: On January 27, the government amalgamated the three Presidency banks to form
the Imperial Bank of India. The Imperial Bank of India continued as a joint stock
company. Until the establishment of a central bank in India, the Imperial Bank and its
early predecessors served as India's central bank, at least with respect to the issuing of
currency.
1955: On30 April, theParliament of Indiaenacted the State Bank of India Actauthorizing the Reserve Bank of India (RBI), which is thecentral bank, to acquire a
controlling interest in the Imperial Bank of India. The RBI then took a 60% ownership
stake. On July 1, Imperial Bank of India became State Bank of India.
1959: theGovernment of Indiapassed the State Bank of India (Subsidiary Banks) Act,
which enabled SBI to take over eight former State-associated banks as its subsidiaries.
1980s When Bank of Cochin in Keralafaced a financial crisis, the government merged it
with State Bank of India.
2007: OnJune 29, the Government of India acquired the entire Reserve Bank of India
(RBI) shareholding in State Bank of India (SBI), consisting of over 314 million equity
shares, with a market value of over 355 billion rupees.
2008: 9 March2008State Bank of India on Sunday became the second bank in the world
to have 10,000 branches when Union Finance Minister P Chidambaram inaugurated its
latest branch at his native place Puduvayal.
http://en.wikipedia.org/wiki/April_30http://en.wikipedia.org/wiki/April_30http://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/July_1http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Keralahttp://en.wikipedia.org/wiki/Keralahttp://en.wikipedia.org/wiki/June_29http://en.wikipedia.org/wiki/June_29http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/March_9http://en.wikipedia.org/wiki/March_9http://en.wikipedia.org/wiki/2008http://en.wikipedia.org/wiki/2008http://en.wikipedia.org/wiki/Puduvayalhttp://en.wikipedia.org/wiki/April_30http://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/July_1http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Keralahttp://en.wikipedia.org/wiki/June_29http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/March_9http://en.wikipedia.org/wiki/2008http://en.wikipedia.org/wiki/Puduvayal8/8/2019 Bilal Projects
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Associate banks
There are seven other associate banks that fall under SBI. They all use the "State Bank of" namefollowed by the regional headquarters' name. These were originally banks belonging toprincely
statesbefore the government nationalized them in 1959. In tune with the first Five Year Plan,
emphasizing the development of rural India, the government integrated these banks with the
State Bank of India to expand its rural outreach. The State Bank group refers to the seven
associates and the parent bank. All the banks use the same logo of a blue keyhole. Currently, the
group is merging all the associate banks into SBI, which will create a "mega bank", and one
hopes, streamline operations and unlock value.
State Bank of Bikaner & Jaipur
State Bank of Hyderabad
State Bank of Indore
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra
State Bank of Travancore
Foreign Offices
State Bank of India is present in 32 countries, where it has 84 offices serving the international
needs of the bank's foreign customers, and in some cases conducts retail operations. The focus of
these offices is India-related business.
Growth
State Bank of India has often acted as guarantor to theIndian Government, most notably during
Chandra Shekhar's tenure asPrime Minister of India. With 10,000 branches and a further 4000+
http://en.wikipedia.org/wiki/Indian_Princely_Stateshttp://en.wikipedia.org/wiki/Indian_Princely_Stateshttp://en.wikipedia.org/wiki/Indian_Princely_Stateshttp://en.wikipedia.org/wiki/Indian_Princely_Stateshttp://en.wikipedia.org/wiki/State_Bank_of_Bikaner_%26_Jaipurhttp://en.wikipedia.org/wiki/State_Bank_of_Hyderabadhttp://en.wikipedia.org/wiki/State_Bank_of_Indorehttp://en.wikipedia.org/wiki/State_Bank_of_Mysorehttp://en.wikipedia.org/wiki/State_Bank_of_Patialahttp://en.wikipedia.org/wiki/State_Bank_of_Saurashtrahttp://en.wikipedia.org/wiki/State_Bank_of_Travancorehttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Chandra_Shekharhttp://en.wikipedia.org/wiki/Chandra_Shekharhttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttp://en.wikipedia.org/wiki/Indian_Princely_Stateshttp://en.wikipedia.org/wiki/Indian_Princely_Stateshttp://en.wikipedia.org/wiki/State_Bank_of_Bikaner_%26_Jaipurhttp://en.wikipedia.org/wiki/State_Bank_of_Hyderabadhttp://en.wikipedia.org/wiki/State_Bank_of_Indorehttp://en.wikipedia.org/wiki/State_Bank_of_Mysorehttp://en.wikipedia.org/wiki/State_Bank_of_Patialahttp://en.wikipedia.org/wiki/State_Bank_of_Saurashtrahttp://en.wikipedia.org/wiki/State_Bank_of_Travancorehttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Chandra_Shekharhttp://en.wikipedia.org/wiki/Prime_Minister_of_India8/8/2019 Bilal Projects
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associate bank branches, the SBI has extensive coverage. Following its arch-rival ICICI Bank,
State Bank of India has electronically networked all of its metropolitan, urban and semi-urban
branches under its Core Banking System(CBS), with over 10800+ branches being incorporated.
With this, 'SBI has become the largest bank in the world, covering 10800+ offices on a single
core banking platform. The bank has the largest ATM network in the country having more than
8000+ ATMs. The State Bank of India has had steady growth over its history, though the
Harshad Mehtascam in 1992 marred its image.
In recent years, the bank has sought to expand its overseas operations by buying foreign banks. It
is the only Indian bank to feature in the top 100 world banks in the Fortune Global 500 rating
and various other rankings. According to the Forbes 2000 listing it tops all Indian companies.
Fortune Global 500 Ranking - 2008
In 2008 SBI was ranked 380 from a rank of 495 in 2007. As per fortune 500-2008 following are
the data for SBI in $ million.
Revenues: 22,402.2
Profits: 2,225.0
Assets: 255,854.9
Stockholders' Equity: 15,263.3
ITInitiatives
According to PM Network (December 2006, Vol. 20, No. 12), State Bank of India launched a
project in 2002 to network more than 14,000 domestic and 70 foreign offices and branches. Thefirst and the second phases of the project have already been completed and the third phase is still
in progress. As of December 2006, over 10,000 branches have been covered.
The new infrastructure serves as the bank's backbone, carrying all applications, such as the IP
telephone network,ATM network,Internet banking and internale-mail. The new infrastructure
http://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/Automatic_Teller_Machinehttp://en.wikipedia.org/wiki/Harshad_Mehtahttp://en.wikipedia.org/wiki/Harshad_Mehtahttp://en.wikipedia.org/wiki/Fortune_Global_500http://en.wikipedia.org/wiki/Fortune_Global_500http://en.wikipedia.org/wiki/Forbes_2000http://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Voice_over_IPhttp://en.wikipedia.org/wiki/Automated_banking_machinehttp://en.wikipedia.org/wiki/Automated_banking_machinehttp://en.wikipedia.org/wiki/Internet_bankinghttp://en.wikipedia.org/wiki/Internet_bankinghttp://en.wikipedia.org/wiki/E-mailhttp://en.wikipedia.org/wiki/E-mailhttp://en.wikipedia.org/wiki/ICICI_Bankhttp://en.wikipedia.org/wiki/Automatic_Teller_Machinehttp://en.wikipedia.org/wiki/Harshad_Mehtahttp://en.wikipedia.org/wiki/Fortune_Global_500http://en.wikipedia.org/wiki/Forbes_2000http://en.wikipedia.org/wiki/Information_technologyhttp://en.wikipedia.org/wiki/Voice_over_IPhttp://en.wikipedia.org/wiki/Automated_banking_machinehttp://en.wikipedia.org/wiki/Internet_bankinghttp://en.wikipedia.org/wiki/E-mail8/8/2019 Bilal Projects
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has enabled the bank to further grow its ATM network with plans to add another 3,000 by the
end of 2007 raising the total number to 8,600. As of September 20, 2007 SBI has 7236 ATMs.
SBI MUTUAL FUND
SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country with an
investor base of over 5.4 million. With over 20 years of rich experience in fund
management, SBI MF brings forward its expertise in consistently delivering value to its
investors.
SBI MF draws its strength from India's Largest Bank State Bank of India and Socit
Gnrale Asset Management, France
SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable
track record in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI - Indias largest banking enterprise. The institution
has grown immensely since its inception and today it is India's largest bank, patronized
by over 80% of the top corporate houses of the country.
SBI Mutual Fund is a joint venture between the State Bank of India and Socit
Gnrale Asset Management, one of the worlds leading fund management
companies that manages over US$ 500 Billion worldwide.
Exploiting expertise, compounding growth
In twenty years of operation, the fund has launched 38 schemes and successfully
redeemed fifteen of them. In the process it has rewarded its investors handsomely with
consistently high returns.
A total of over 5.4 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund.
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Schemes of the Mutual fund have consistently outperformed benchmark indices and have
emerged as the preferred investment for millions of investors and HNIs.
Today, the fund manages over Rs. 31,794 crores of assets and has a diverse profile of
investors actively parking their investments across 36 active schemes.
The fund serves this vast family of investors by reaching out to them through network of
over 130 points of acceptance, 28 investor service centers, 46 investor service desks and
56 district organisers.
SBI Mutual is the first bank-sponsored fund to launch an offshore fund Resurgent
India Opportunities Fund.
Growth through innovation and stable investment policies is the SBI MF credo.
REVIEW OF LITERATURE
A s ur vey o f Invest or per cept ion by Mar ch Mar ke ti ng Consu lt ancy and
Research at tempts to know the mutual funds investor better . I t examines some
interest ing choices of the inves tor including the reason behind inves ting in
mutual funds and the inves tors knowledge about mutual funds . I t s object ive
was to measure the investor sensi tivi ty to manage the port fo l io to achieve
objective l ike tax incentives, capital gain, t ime horizon of investment and r isk,
return expectat ions. Knowing the perception of the customers is very important
in any indust ry . This provides ins ights in to the cus tomer behavior and his
expec ta ti ons f rom t he i ndus tr y p laye rs . A p roper under st andi ng o f t he
perceptions would definitely benefits the players.
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The survey was conducted across seven ci ties- Delhi , Mumbai , Hyderabad,
Bangalore, Chennai, Kolkata and Ahmedabad. The sample size was 200 per city.
From the micro perspective the company image of AMC acts as a major deciding
factor for buying mutual fund.
Growth scheme is the most preferred for investment.
The investors confidence level in stocks and mutual funds is almost the same.
A study conducted by Associated Chamber of Commerce and Industry of India
(Assocham) and AMFI Indicates that shift in investor preference towards mutual
funds has been faci l itated by f iscal incent ives , increas ing returns f rom debt
mutual fund investments due to the secular decline in interest rates, availabil ity
o f var ied cho ices t o i nves to rs , g radual change i n t he r is k p ro fi le o f t he
investors.
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CHAPTER 2
MUTUAL FUNDS & THEIRCOMPARATIVELY ANALYSIS
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INTRODUCTION TO THE BANKING SECTOR
Indias financial service industry is dominated by the banking sector that contributes
significantly to the revenue of this industry. To be sure, the industry has generated tremendous
employment opportunities for the large sector of the strength and flexibility of its banking
structure. In the Indian context; banking is verily the proxy and indeed the cornerstone of the
overall economic growth of the country. Before liberalization, the Indian banking structure was
largely controlled and parameters like branch size and location were given paramount
importance.
The Indian banking industry has come from a long way from being a sleepy business institution
to a highly proactive and dynamic entity. This transformation has been largely brought about by
the large dose of liberalization and economic reforms that allowed banks to explore new
business opportunities rather than generating revenues from conventional streams (i.e. borrowing
and lending). The banking industry in India is highly fragmented with 30 banking units
contributing to almost 50% of deposit and 60% of advances. Indian nationalized banks (bank
owned by the government) continue to be the major lenders in the economy due to their sheer
size and penetrative networks which assures them high deposit mobilization. The Indian banking
industry can be broadly categorized into nationalized, private banks and the specialized banking
institutions.
The Reserve Bank of India acts as a centralized body monitoring any discrepancies and
shortcomings in the system. It is foremost monitoring body in the Indian financial sector. The
nationalized banks (i.e. government owned banks) continue to dominate Indian banking arena.
Industries estimates indicate that out of 274 commercial banks operating in India, 223 banks are
in public sector 51 are in private sector. The private sector grid also includes 24 foreign banks
that have started their operations here. Under the ambit of the nationalized banks comes the
specialized banking institution. These institutions (i.e. co-operatives, rural development, imports
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and exports etc. these banks nimble footed in approach and armed with efficient branch networks
focus primarily on high revenue, rich retail segments.
Unlike the commercial banks the co-operative do not lend on the basis of a prime-lending
structure and hence have lower overheads. This enables them to give a marginally higher
percentage on saving deposits. Many of these co-operative banks diversified in specialized areas
(catering to the vast retail audience) like car finance, housing loans, truck finance etc. In order to
banks too have invested heavily in information technology to offer high-end computerized
services to its clients.
Global Scenario
Some basic facts-
The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S.
against a corpus of $ 100 million in India.
Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and
Capital are non-bank mutual funds in this group.
In the U.S. the total number of schemes is higher than that of the listed companies while
in India we have just 277 schemes
Internationally, mutual funds are allowed to go short. In India fund managers do not have
such leeway.
On- line trading is a great idea to reduce management expenses from the current 2 % of
total assets to about 0.75 % of the total assets.
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ANALYTICAL STUDY OF MUTUAL FUNDS
Introduction
Different investment avenues are available to investors. Mutual funds also offer good
investment opportunities to the investors. Like all investment, they also carry certain risks. The
investors should compare the risks and expected yield after adjustment of tax on various
instruments while taking investment decisions. The investors may seek advice from experts and
consultants including agents and distributors of mutual funds schemes while making investmentdecisions.
With an objective to make the investors aware of functioning of mutual funds, an attempt has
been made to provide information in question-answer format which may help the investors in
taking investment decisions.
During the last few decades the global scenario has witnessed several significant developments,
including initiation of new and innovative financial services. The phenomenal growth of the
capital market has been accompanied by the advent of equity cult among the household sector.
The household sector does not possess the surplus funds, but psychologically it is either risk-
neutral or risk-averse. Therefore, institutional shields have been created, whose main role is to
act as intermediaries between the people, who have the ability and propensity to save, and those
who require money. This is a historical necessity, which has given rise to the concept of Mutual
Funds.
An investor normally prioritizes his investment needs before undertaking an investment. So
different goals will be allocated different proportions of the total disposable amount. Investments
for specific goals normally find their way into the debt market as risk reduction is of prime
importance. This is the area for the risk-averse investors and here, mutual funds are generally the
best option. Capital markets interest people, albeit not all for there are several problems
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associated. First issue is that of expertise. While investing directly into capital market one has to
be analytical enough to judge the valuation of the stock and understand the complex undertones
of the stock. One needs to judge the right valuation for exiting the stock too.
It is very difficult for a small investor to keep track of the movements of the market. Entrusting
the job to experts, who watch the trends of the market and analyze the valuations of the stocks
will solve this problem for an investor. Mutual funds specialize in identification of stocks
through dedicated experts in the field and this enables them to pick stocks at the right moment.
Next problem is that of funds/money. A single person cant invest in multiple high-priced stocks
for the sole reason that his pockets are not likely to be deep enough. This limits him from
diversifying his portfolio as well as benefiting from multiple investments. Here again, investing
through MF route enables an investor to invest in many good stocks and reap benefits even
through a small investment. This not only diversifies the portfolio and helps in generating returns
from a number of sectors but reduces the risk as well. Though identification of the right fund
might not be an easy task, availability of good investment consultants and counselors will help
investors take informed decision.
Why Mutual Fund ?
A Mutual Fund is an institutional arrangement which mobilizes savings of millions of investors
for investment in a diversified portfolio of securities, with a view to spread risk and to ensure
adequate and consistent return, both in the form of dividend and capital appreciation. It is, in
fact, a financial intermediary that receives money from shareholders, invest it, earn on it, and
make it grow to share it with them. These institutions are managed by professional money
managers who make portfolio investment decision on behalf of unsophisticated investors.
Mutual fund is a mechanism for pooling the resources by issuing units to the investors and
investing funds in securities in accordance with objectives as disclosed in offer document.
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Investments in securities are spread across a wide cross-section of industries and sectors and thus
the risk is reduced. Diversification reduces the risk because all stocks may not move in the same
direction in the same proportion at the same time. Mutual funds issues units to the investors in
accordance with quantum of money invested by them. Investors of Mutual funds are known as
Unit Holders.
The profits and losses are shared by the investors in proportion to their investments. Mutual
funds normally comes out with a number of schemes with different investments objectives which
are launched from time to time. A mutual fund is required to be registered with Securities and
Exchange Board of India which regulates securities markets before it can collect funds from
public.
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RISK RETURN GRID (types of funds)
Risk
Tolerance/ReturnExpected
Focus Suitable Products Benefits offered by MFs
Low DebtBank/ Company FD,Debt based Funds
Liquidity, Better Post-Tax returns
Medium
Partially
Debt,Partially
Equity
Balanced Funds, SomeDiversified Equity
Funds and some debtFunds, Mix of shares
and Fixed Deposits
Liquidity, Better Post-Tax returns,Better Management, Diversification
High Equity
Capital Market, Equity
Funds (Diversified aswell as Sector)
Diversification, Expertise in stock
picking, Liquidity, Tax freedividends
Their appeal is not just limited to these categories of investors. Specific goals like career
planning for children and retirement plans are also catered to by mutual funds. Children funds
have found their way in a big way with many of the fund houses already having launched a
children fund. Essentially debt oriented, these schemes invite investments, which are locked till
the child attains majority and requires money for higher education. You can invest today and
assure financial support to your child when he/she requires them. The schemes have given very
good returns of around 14 percent in the last one-year period. These schemes are also designed
to provide tax efficiency. The returns generated by these funds come under capital gains and
attract tax at concessional rates.
Besides this, if the objective was to save taxes, the industry offers equity linked savings
schemes as well. Equity-based funds, they can take long-term call on stocks and market
conditions without having to worry about redemption pressure as the money is locked in for
three years and provide good returns. Some of the ELSS have been exceptional performers in
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past and cater to equity investor with good performances. The industry offered tax benefits under
various sections of the IT Act. For e.g. dividend income is free in the hands of the investor while
capital gains are taxed after providing for cost inflation indexation. Hitherto, the benefits under
section 54 EA/EB were available to take benefits of the tax provisions for capital gains but have
now been removed.
The benefits listed so far have essentially been for the small retail investor but the
industry can attract investments from institutional and big investors as well. Liquid funds offer
liquidity as well as better returns than banks and so attract investors. Many funds provide
anytime withdrawal enabling a big investor to take maximum benefits.
The appeal of mutual funds cuts across investor classes. In other developed countries, mutual
funds attract much more investments as compared to the banking sector but in India the case is
reverse. We lack awareness about the benefits that are offered by these schemes. It is time that
investors irrespective of their risk capacities, made intelligent decisions to generate better returns
and mutual funds are definitely one of the ways to go about it.
HISTORY OF INDIAN MUTUAL FUND INDUSTRY
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, atthe initiative of the Government of India and Reserve Bank the. The history of mutual funds in
India can be broadly divided into four distinct phases:-
First Phase 1964-87
An Act of Parliament established Unit Trust of India (UTI) on
1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the
RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme
1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
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Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI,
public sector mutual funds set up by public sector banks and Life Insurance Corporation of
India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund
(Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov
89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its
mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the
end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the
entry of private sector funds in 1993, a new era started in the Indian mutual fund industry,
giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds,
except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund registered in July
1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions
under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went
on increasing, with many foreign mutual funds setting up funds in India and also the
industry has witnessed several mergers and acquisitions.
As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805
crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way
ahead of other mutual funds.
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Fourth Phase since February 2003
In February 2003, following the repeal of
the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under management of
Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64
scheme, assured return and certain other schemes. The Specified Undertaking of Unit
Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund
Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of
assets under management and with the setting up of a UTI Mutual Fund, conforming to
the SEBI Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421 schemes.
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MUTUAL FUND DATA FOR THE MONTH ENDED MAR 31, 2008
GROWTH IN ASSETS UNDER MANAGEMENT
DEFINITION:ACCODING TO INVESTMENT COMPANY INSTITUTE OF U.S;
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A mutual fund is a financial service organization that receives money fromshareholders , invest it , earn return on it , attempts to make it grow and agreesto pay the shareholders cash on demand for the current value to make of hisinvestment.
STRUCTURE OF A MUTUAL FUND
SOURCE : AMFI
FEATURES OF MUTUAL FUNDS
The essential features of the mutual funds distinguishing from other routes of investments are:-
The mutual fund is a trust into which many relatively small investors invest their money to
form a large pool of cash which is then invested in securities by the manager of the trust.
The price at which units can be bought and sold is governed solely by the value of the
underlying securities held by the mutual fund and dealings in units are on the basis of the net
market value of the investment per unit.
The managers of the mutual funds are obliged to redeem any units in issue on demand or on
certain specified period.
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All dividend income that the mutual fund receives on its investments is paid out to unit
holders.
MUTUAL FUND CYCLE
ADVANTAGES OF MUTUAL FUNDS
If one does not have the time, the inclination or the expertise to make and manage investments in
the complex equity or the debt market directly, should consider investing in mutual funds andreap the benefits of research and a wider range of low cost information services. A risk-averse
investor can expect above the market returns at a lower cost and lower risk. The major
advantages of investing in mutual funds are:
A. Professional Management-
Mutual funds are managed by highly skilled managers with sound knowledge of the market
and wide experience in investment.
B. Affordability (low initial investment)-
Mutual fund investments are usually very low. For egg: In Franklin Templeton schemes
you can invest minimum Rs.5000 (one time investment) or the Systematic Investment Plan
of Rs.500 every month.
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C. Portfolio Diversification and Reduction in Risk-
Individual investors have to face company-related risks and market-related risks. These risks
can be reduced through diversification of portfolios. When an investor invests in mutual fundhis portfolio automatically gets diversified and the risk tolerance capacity of a mutual fund is
much higher.
D. Convenient Record-keeping-
Record keeping is simplified in mutual funds. Bookkeeping of the investments is handled by
the fund.
E. Switching-
Mutual funds allow investors to switch from one fund to another based on their investment
objective at that particular moment.
F. Liquidity-
In case of open ended schemes investors can sell their existing units, or buy new units at any
point of time at related NAV of the fund. This gives investors a high level of liquidity on
their investments.
G. Tax Benefits-
Mutual fund investors all over the world enjoy certain tax benefits which increases the net
yield of investments.
H. Minimize Operating Costs-
Mutual funds having large investible funds at their disposal avail economies of scale. The
brokerage fee or trading commission may be reduced substantially. The reduced operating
cost obviously increases the income available for investors. Investing in securities through
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mutual funds has many advantages like option to reinvest dividends, strong possibility of
capital appreciation, regular returns, etc. Mutual funds are also relevant in national interest.
The test of their economic efficiency as financial intermediary lies in the extent to which
they are able to mobilize additional savings and channelizing to more productive sectors of
the economy.
DRAWBACKS OF MUTUAL FUNDS:
A. No Guarantees:
No mutual funds guarantee you the exact returns. If the entire stock market declines in
value the value of mutual fund shares will go down as well, no matter how balanced the
portfolio. Investors encounter fewer risks when they invest in mutual funds than when
they buy and sell stocks on their own. However, anyone who invests through a mutual
fund runs the risk of losing money.
B. Fees and Commissions:
All funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge entry or exit loads to compensate brokers, financial consultants etc.
C. Management Risk:
Investment in a mutual fund depend on the funds manager capability (except in Index
Funds) to make the right decisions regarding the funds portfolio. If the manager does not
perform as well as you had hoped, you might not make as much money on your
investment as you expected. Of course, if you invest in Index Funds, you forego
management risk, because these funds do not employ managers.
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KEY CONSTITUENTS OF MUTUAL FUND INDUSTRY:
Despite the differences, all Mutual Funds comprise of four constituents: Sponsors, Trustees,Asset Management Companies (AMCs) and Custodians.
A. Sponsor:
The sponsor initiates the idea to set up a mutual fund. It could be a registered company,
scheduled bank or financial institution.
A sponsor has to satisfy certain conditions, such as on capital, track record (at least five
years' operation in financial services), default-free dealings and a general reputation of
fairness, has to be ascertained. The sponsor appoints the trustees, AMC and custodian.
Once the AMC is formed, the sponsor is just a stakeholder.
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B. Trust/Board of Trustees:
Trustees hold a fiduciary responsibility towards unit holders by protecting their interests.
Sometimes, as with Canara Bank, the trustee and the sponsor are the same. For others,
like SBI Funds Management, State Bank of India is the sponsor and SBI Capital Markets
the trustee. Trustees float and market schemes; and also they secure necessary approvals.
They check whether the investments of the AMC are within defined limits, whether the
fund's assets are protected, and also whether the unit holders get their due returns.
C Fund Managers/AMC:
They are the ones who manage the investors money. An AMC takes investment
decisions, compensates investors through dividends, maintains proper accounting and
information for pricing of units, calculates the NAV, and provides information on listed
schemes and secondary market unit transactions. It also exercises due diligence on
investments, and submits quarterly reports to the trustees.
D. Custodian
It is often an independent organization, and it takes custody of securities and other assets
of a mutual fund. Among public sector mutual funds, the sponsor or trustee generally
also acts as the custodian.
Risk Profiles
Equity Diversified Funds
Diversification - Mutual Funds reduces the risk by investing in all the sectors. Instead of putting
all your money in one sector or company it's better to invest in various good performing sectors
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as you reduces the risk of getting involved in a particular sector/company which may perform or
may not.
Who should invest - This is an ideal category for those who want to participate in stock market
& knows the risk involved in stock market but have few rupees to invest in bluechip stocks.
How they performed - Though the short term out look is volatile in long-term equity diversified
funds have outperformed other categories & stock markets will lesser amount of risk than stock
markets. The average returns of equity diversified funds are 102%.
Index Funds -
Follow the index - These are the index-based funds, which move with the likes of Sensex &
Nifty. These fund charges NIL or very low entry/exit loads.
Who should invest - if Nifty & Sensex have come down from their tops, it is a good time to
invest in Index funds with the principal of "Investing at the lower levels".
How they performed - Though the short term out look is volatile in long-term Sensex & Nifty
could do well with improving economic conditions. It has been seen that these Index funds have
outperformed the indices making them more attractive.
Sector Fund -
Sector - Sector Schemes follow particular sector.
Who should invest - You have to be selective while investing in these funds, as you need to
select particular sector, which will perform better in the future. Investing in these funds carries
some amount of risk but also give you more returns.
How they performed - Sector funds have given average returns of 73% for 1 year period. Auto,
Steel, Cement have done well the year '03 & the trend will continue in year '04 but IT, FMCG
sectors are experiencing downward trend due to $ depreciation, price war in FMCG respectively.
Though short-term trend for pharma sector looks down in long term we look forward to lot more
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action in the sector, as there exists a long-term, strong fundamental story backed by immense
growth potential for the Indian pharmaceutical companies.
Balanced Funds -
Balanced Act - Balanced funds gives you the stability with the potential to grow with the equity
help of equity investments. These funds invest in both Equity & Debt markets.
Who should invest - The balanced funds are for those, who want to enjoy the appreciation
effects of equity market but at the same time like to play safe with less volatile debt market. In
this volatile market it is good to invest in balanced funds as they carries less risk compare to
equity funds.
How they performed - In the last 12 months balanced funds have given descent returns with the
up trend in the equity markets. Balanced funds average returns are 60% for 1-year period.
Equity Linked Tax Savings Schemes (ELSS) -
Enjoy tax benefits - These schemes are becoming more popular as traditional ways of taxsaving becoming less interesting with declining interest rates.
Who should invest - Equity Linked Savings Schemes (ELSS) is an ideal way to save on tax as
well as staying invested in equity mutual funds.
How they performed - In last 1 year these funds have given above average returns to keep you
more & more interested in saving tax as well as counting returns on your investment. The
average returns for this category are 98%.
Debt Funds -
Banking on Debt Markets - Debt funds invest in the government securities, Corporate Bonds,
Treasury Bills, etc.
Who should invest - The conservative investors like to go for capital safety.
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How they performed - From Last 12 months in the declining interest rate scenario debt funds
remained flat. In 3 years debt funds have given average returns of 12%. As equity market is
looking volatile its better to invest part of your money in these funds.
Gilt Funds -
Government Sec. - Gilt funds invest in government securities.
Who should invest - The investors who like to avail the benefits of capital safety with
government security.
How they performed - From Last 6-12 months Gilt funds have given average returns. As equity
market is looking volatile its better to invest part of your money in these funds as they provide
adequate security to your investments.
MIP
Monthly Income - These schemes gives you monthly income.
Who should invest - Those who seek monthly income. In the current scenario where debt
market is very volatile it's better to invest in hybrid funds like MIP with suitable time horizon forcapital appreciation.
How they performed - In Last 6-12 months MIP's have given descent returns compare to debt
funds. The average returns of MIP's stands at 15.68%, which looks good, compared to income
funds.
STP
Short-term Plans - These schemes provides short-term saving option with more liquidity than
FD's to park your investments.
Who should invest - Those who seeking for income in short-term investments of 6-10 months
with more liquidity than Bank fixed deposit.
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How they performed - While savings accounts would give you 3.5% per anum, bank FD's
annually return up to 6.5%, Liquid funds would typically give you more than 5% and short-term
plans 6 to 6.5% per anum. In Last 6-12 months STP's have given descent returns.
Various Types of Mutual Fund Schemes
Schemes according to Maturity Period :-
A mutual fund scheme can be classified into open-ended scheme or close-ended scheme
depending on its maturity period.
Open-Ended Fund Or Scheme :-
An open-ended scheme or fund is one that is available for subscription or repurchase on a
continuous basis. These schemes do not have a fix maturity period. Investors can conveniently
buy and sell units at net asset value related price which are declared on a daily basis. The key
feature on an open-ended scheme is liquidity.
Close-Ended Fund Or Scheme :-
A close-ended scheme of fund has a stipulated maturity period e.g. 5-7 years. The fund isopen for subscription only during a specified period at the time of launch of the scheme.
Investors can invest in the scheme at the time of the initial public issue and thereafter they can
buy and sell the units of the schemes on the stock exchanges where the units are listed. In order
to provide the 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. SEBI regulations
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stipulate that at least one of the two exit routes is provided to the investors i.e. either repurchase
facility or through listing on the stock exchanges. These mutual funds schemes disclose NAV
generally on weekly basis.
Schemes According ToInvestment Objective :-
Considering its investment objective, a scheme can also be classified as :-
Growth Scheme
Income Scheme
Balanced Scheme
Such schemes can be Open-ended or be Close-ended as described earlier. These schemes may
be classified mainly as follows -:
Growth Or Equity Oriented Scheme :-
The aim of the Growth fund is to provide capital appreciation over the medium to long term.
Such schemes normally invest a major part of their corpus in equities. Such funds have
comparatively high risks. These schemes provide different options to the investors like dividend
option, capital appreciation etc. and the investors may choose an option depending on their
preferences. The investor must indicate the option in the application form. Mutual funds also
allow the investors to change the options at the later date. Growth schemes are good for investors
having a long-term outlook seeking appreciation over a period of time.
Income Or Debt Oriented Scheme
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,
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Government Securities and Money Market Instruments. Such funds are less risky compared
to equity schemes. These funds are not affected because of fluctuations in equity markets.
However opportunities of the capital appreciation are also limited in such funds.
The NAV of such funds are affected because of change in interest rates in country. If the interest
rate falls, NAVs of such funds are likely to increase in the short run or vice-versa. However,
Long-term investors may not bother about these fluctuations.
Balanced Fund
The Aim of the Balanced fund is to provide both regular income as such schemes invest both in
equities and fixed income securities in the proportion indicated in their offer documents. These
are appropriate for investors looking for moderate growth. They generally invest 40-60% in
equity and debt instruments. These funds are also affected of fluctuation in share prices in the
stock markets. However, NAVs of such funds are likely to be less volatile compared to pure
equity funds.
Money market Or Liquidity Funds
These funds are also income funds and their aim is to provide easy liquidity, preservation of the
capital and moderate income. These schemes invest exclusively in safer short-term instruments
such as Treasury Bills, Certificate of Deposit, Commercial Paper and Inter Bank Call
money, Government Securities etc. Return on these schemes fluctuates much less compared to
other funds. These funds are appropriate for corporate and individual investors as a means of
park their surplus funds for short periods.
Gilt Fund
These funds invest exclusively in government securities. Government securities have no default
risk. NAVs of these schemes also fluctuate due to change in interest rates and economic factors
as is the case with income or debt oriented schemes.
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Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE sensitive index, S&P
NSE 50 index(Nifty), etc. These schemes invest in the securities in the same weight age
comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or
fall in the index, though not exactly by the same percentage due to some factors known as
Tracking Error in technical terms. Necessary disclosure in this regard are made in the offer
document of the mutual fund scheme. There are also exchange traded index funds launched by
the mutual funds which are traded on the stock exchanges.
Sector Specific Fund or Schemes
These are the funds or schemes which invest in the securities of only those sectors or industries
as specified in the offer documents. E.g. Pharmaceuticals, software, Fast Moving Consumers
goods(FMCG), petroleum stocks, etc. the return on these funds are dependent on the
performance of the respective sector/industries. While these funds may give higher returns, they
are more risky compared to the diversified funds. Investors need to keep a watch on the
performance of these sectors/industries and must exit at an appropriate time. They may seek an
advice of an expert.
Tax Saving Schemes
These schemes offer tax rebate to the investors under the specific provisions of the Income tax
act, 1961 as the government offers tax incentives for investment in the specific avenues. E.g.
Equity Linked Saving Schemes (ELSS). Pension schemes launched by the mutual funds also
offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities.
Their growth opportunities and risk associated are like any equity-oriented scheme.
Load And No-Load Fund
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A load fund is that charges a percentage of NAV for entry or exit. That is, each time one buys or
sells units in the fund, a charge will be payable. This charge is used by the mutual fund for
marketing and distribution expenses. Suppose the NAV per unit is Rs.10.if the entry or exit load
charged is 1% then the investors who buy would be required to pay Rs.10.10 and those who
offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors
should take the loads into consideration while making investment as these affect their
yield/returns. However, the investor should also consider the performance track record and
service standards of mutual funds which are more important. Efficient funds may give higher
returns in spite of loads.
A Non-Load fund is one that does not charge for entry or exit. It means that the investors can
enter the fund/scheme at NAV and no additional charges are payable on the purchase or sale of
the units.
Procedure to be followed to Invest in a Mutual Fund Scheme
Mutual funds come out with an advertisement in newspapers publishing the launch of the new
schemes. Investors can also contact the agents and distributors of the mutual funds who are
spread all over the country for necessary information and application forms. Forms can be
deposited with mutual funds through the agents and distributors who provide such services. Now
a days, the post offices and banks also distribute the units of the mutual funds. However, the
investor should note that the mutual funds being marketed by banks and post offices should not
be taken as their own schemes and no assurance of return can be given by them. The only role
of the banks is to help in distribution of mutual funds schemes to the investors.
Investors should not be carried away by commission / gift given by agents / distributors for
investing in a particular scheme. On the other hand they must consider the track record of mutual
fund and should take objective decisions.
Provision for Non Resident Indian to Invest in Mutual Funds
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Non Resident Indians can also invest in mutual funds. Necessary details in this respect are given
in the offer documents of the schemes.
Distribution of Portfolio between Debt or Equity oriented schemes
An investor should take into account his risk taking capacity, age factor, financial position, etc.
As already mentioned, the schemes invest in different type of securities as disclosed in the offer
documents and offer different returns and risks. Investors may also consult financial experts
before taking decisions. Agents and distributors may also help in this regard.
Prospective of an Investor into an Offer document
An abridged offer document, which contains very useful information, is required to be given to
the prospective investor by the mutual fund. The application fund for subscription to a scheme is
an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer
document. An investor, before investing in a scheme, should carefully read the offer document.
Due care must be given to portions relating to main features of the scheme, risk factors, initialissue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsors
track record, educational qualification and work experience of key personnel including fund
managers, performance of other schemes launched by the mutual funds in the past, pending
litigations and penalties imposed, etc.
Dispatch of Certificate or Statement of Statement of Account to the Investor, after
Investing in a Mutual Fund
Mutual funds are required to dispatch certificates or statements of accounts within six weeks
from the date of closure of the initial subscription of the scheme. In case of close ended schemes,
the investors would get either a Demat account statement or unit certificates as they are traded
in the stock exchanges. In case of the open-ended schemes, a statement of account is issued by
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the mutual fund within 30 days from the date of closure of initial public offer of the scheme. The
procedure of repurchase is mentioned in the offer document.
Transfer of Units after Purchase from Stock Markets in case of Close Ended Schemes
According to SEBI regulations, transfer of units is required to be done within thirty days from
the date of lodgment of certificates with the mutual fund.
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 is dissolved or liquidated, by selling off all the assets in the
fund, this is the amount that the shareholders would collectively own. This gives rise to the
concept of net asset value per unit, which is the value, represented by the ownership of one unitin the fund. It is calculated simply by dividing the net asset value of the fund by the number of
units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit".
We also abide by the same convention.
Calculation of NAV
The most important part of the calculation is the valuation of the assets owned by the fund. Once
it is calculated, the NAV is simply the net 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
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+ Liquid assets/cash held, if any
+ Dividends/interest accrued
Amount due on unpaid assets
Expenses accrued but not paid
NAV= ASSET-LIABILITIES
NO.OF UNITS
Research Methodology
Research is common refers to the search for knowledge one can also def ine
research as a sc ienti fi c & sys temat ic search for pert inent information on a
specific topic. Research comprises defining & refining problems, formulated,
hypothesis or sugges ting solut ions , col lecting, organizing, evaluat ing data &
searching the end conclusion.
Methodology str ict ly speaking is the study & knowledge of methods but
this term is also used for a method or a set of methods. In other words i t is the
study of how we approach problems & seek answers. Research Methodology is
the a tt empt to va lida te the r a tionale behind the selec ted research design &
provide just if ication of why i t is appropriate in solving the selected research
problem. It is the process by which we produce knowledge
Objective:
1. Understanding the customers knowledge, satisfaction and perception
of Mutual Funds (MF).
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2. Understand the target customer better.
3. To understand & know the requirements of the clients
Scope of the study:
The leverage of this project l ies in unders tanding the cus tomers knowledge,
sa ti sfac tion and percept ion of Mutual Funds (MF) and Equi ty market as an
inves tment tool . I t wi l l help, know and unders tand the target cus tomer bet ter
and how t o l ur e t hem t o i nves t mor e. Thi s wou ld be done, by adopt ing a
research-based approach. I t deals with customer sat isfaction and involves direct
interviews with questionnaire method for market research. This study will help
to r eport the scope of such f inancia l ins truments as a product of sa le . The
project gives an oppor tuni ty to unders tand the changing and var ied cus tomer
needs and the strategies adopted by various banks to fulfill them. It also enables
the use of various marketing research instruments such as questionnaires and
methodologies like prototyping and articulate interviewing.
Research Purpose
1 .To know the markets awareness of SBI Mutual funds in Lucknow.
2. To know the customers knowledge & satisfaction in MF.
3. To suggest recommendations.
Research Design
This is a Descriptive Research. Research design is the basic framework, which
provides the guidelines for the research process; i t acts l ike a blueprint used to
guide a research study towards its objective.
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Data design
The data design involves different aspects like the nature of the data, the data sources, the data
frequency and the tools used for the analysis of data.
Nature of data
Both primary and secondary data has been used to achieve the objectives of the study.
Data Collection
Keeping in mind the objectives of the study, the primary data was collected from a sample of
100 respondents belonging to Lucknow by personally administering the
research schedule. A structured schedule was designed as per the objectives of the study. The
research schedule contained questions relating to different dimensions of mutual funds
preferences among the users such as level of usage, benefits accruing to the investors of mutual
funds, problems encountered etc. An attempt was also made to elicit reasons for its non usage.
The questions included in the research schedule were open-ended, dichotomous and offering
multiple choices. The data so collected was analyzed with the help of various statistical
techniques like percentages, correlation.
Data collection method
Primary data
Questionnaire
Secondary data
Visual media
Newspaper
Business magazine
Internet
Sampling method: Random Sampling
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Analysis of Data and discussion
Data so collected was tabulated and analyzed with the help of computer and interpretation has
been carried out with the help of tables and pie charts.
Limitations of the study:
1. Applicability :
The proposed study would be based on the data collected from the residents ofLUCKNOW City so, its results may not be applicable to other parts of the
country.
2. Limited sample :
Sample size to be taken may not be sufficient to predict the results with 100%accuracy.
3. Variations :
The study proposes to use certain statistical tools that may give differentresults in varying situations.
4. Personal biasness :The data collected for the purpose of carrying out this survey may contain
several types of personal biasness which leads to inaccuracy in results.
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5. False information :Sometimes respondents do not provide true information which leads to
misconceptions in result.
DATA ANALYSIS & INTERPRETATION
The study has been conducted to develop an understanding of consumers attitude and
satisfaction level about mutual funds.. The study include various aspects such as awarenessabout mutual funds, level of usage, factors influencing the investment in mutual funds, benefits
accruing to the investors of mutual funds, problems encountered etc.
For the purpose of research the sample of 100 respondents is taken. The data is collected through
structured questionnaire. The data so collected was analyzed with the help of various statistical
techniques like percentages, weighted average score and interpretation has been done with the
help of tables and pie charts. The analysis revealed the satisfaction level of mutual fund users.
Q .Do you have any Mutual fund scheme under Principle Mutual fund?
Ans
RESPONSE %AGE OF
RESPONDENTS
Yes 65%
No 35%
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65%
35%
Yes
No
Interpretation : We can conclude that 65% Respondents have purchase mutualfund & Rest 35 % Respondents say no.
Q. Why did you choose Principle Mutual Fund?
Ans The objective of this question is to know what the main reason forpurchasing Principle Mutual fund is.
Reasons %AGE OF
RESPONDENTS
As Investment 5%
As good return 50%
As Tax Saving 35%
Others 10%
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% age
0
10
20
30
40
50
60
1 2 3 4
%age
%age
% age
Interpretation : We can conclude that 5% Respondents say they purchased as asinvestment, 50% Good return, 35% say as Tax saving, others say 10%.
Q. Where do you rate Principle Mutual fund services?
Rationale:
RESPONSE %AGE OF
RESPONDENTS
Grade-I 73%
Grade-Ii 20%
Grade-III 7%
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Percenage of response
0
73
20
7
0
10
20
30
40
50
60
70
80
Response Grade-I Grade-II Grade-III
Interpretation: We can conclude that 73% respondents say Grade-I, 20% sayGrade-II, and 7% say Grade-III
Q Which type of mutual fund scheme you purchased ?
Rationale :
RESPONSE %AGE OF
RESPONDENTSLarge Cap 45%
Child Benefit 10%
Global Opportunity 5%
Tax Saving 40%
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%AGE OF RESPONDENTS
45%
10%5%
40% Large Cap
Child Benefit
Global Opportunity
Tax Saving
Interpretation : We can conclude that 45% respondents say we have purchasedLarge Cap Plane, 40% say Tax Saving, 10% says Child benefits and 5% says wehave purchased Global Opportunity.
Q. Are you satisfied with payment premium option with Principal Mutual
Fund ?
Rationale :
Response %AGE OFRESPONDENTS
Yes 95No 5
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%age of response
,
Yes, 95
No, 5
Yes No
Interpretation: We can conclude tha t 95% respondent s say Yes , they aresatisfied with premium option and 5% says No.
Q. Which premium payment option is best for you?
Rationale:
Mode of Payment %AGE OFRESPONDENTS
Cheque 85
Cash 10
Online 5
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%AGE OF RESPONDENTS
Cheques,
85
Cash, 10Online, 5
Cheques
Cash
Online
Interpretation: We can conclude that 85% respondents say by cheques becausecheque transaction are easy according to them,just 5% says by online. 10% saysthrough cash.
Q. Are you happy the services provided by Principal Mutual Fund in
Lucknow?
Ans:
Response %AGE OFRESPONDENTS
Yes 95
No 5
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%age of response
,
Yes, 95
No, 5
Yes No
Interpretation: We can conclude tha t 95% respondents say Yes, they aresatisfied with premium option and 5% says No.
Q. Are you satisfied with the employee behaviour?
Rationale
RESPONSE %AGE OF
RESPONDENTS
Satisfied 44%
Highly satisfied 50%
Not satisfied 5%
Highly Dissatisfied 1%
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%AGE OF RESPONDENTS
44%50%
5%1%
0%
10%
20%30%
40%
50%
60%
Satisfie
d
Highly
satisfie
d
Nots
atisfie
d
HighlyDi
ssatisfie
d
%AGE OF
RESPONDENTS
Interpretation:
We can conclude that 44% respondents say that they are satisfied withemployees behaviour , 50% says highly satisfied, 5% says not satisfied & 1%says high dissatisfied.
Q. Do you want any change in Mutual fund terms?
Rationale:
%AGE OF
RESPONDENTS
No 70
Yes 30
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70
30
1
2
Interpretation: We can conclude that 97% respondents say that they do notwant change in mutual fund terms. And just 3% respondents say that they wantminor change in mutual fund terms.
Findings and Suggestions
From this survey we found that 95% of the respondents have purchasedmutual fund and only 5% respondent does not have. I t means that this product is very popular among the customers .People l ike to have investin mutual fund for the purpose of get high rate of return or Tax saving.
Another impor tant fact we f ind f rom this survey that about 50% of our
respondents want to purchase mutual fund as good return & 35% due toTax Saving.
We f ind f rom this survey that 73% gives grade I & 20% gives Grade I IRest gives Grade III
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Due to high return. of LARGE CAP investors more in this fund &40% intax saving 10% in child benefit & 5% in global fund.
Transact ion mode of cheque is more convient to cus tomers . So 85%respondents purchased by this mode.10% by cash. Less awareness of
online only 5% are interested by this.
95% are sat isf ied by the services provided by Principal mutual fund& 5%are not satisfied by this.
only 50% respondents are Highly sat isfied with employee behaviors 1%are dissatisfied &40% are only satisfied b by this company
70% interested for investing in this company & others wants to change.
Mutual funds are divers i f ied inves tments , so people prefer inves t ing in
them rather than in stock market as there is less r isk in mutual funds as
compared to share market.
In o rde r to in crea se th e p rop ortion of sa tisfied inv estors it is
recommended to insist the investor to invest for the period of three years.
This wi l l minimize the r isk factor and maximize the rate of return on
investment.
SWOT ANALYSIS
STRENGTHS
Convenience in investing in mutual funds
Customer Satisfaction
Understanding Market scenario
Depend upon the kind of investor.
Returns on investment in mutual funds
Low entry Load
WEAKNESSES
Transparency.
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Risks associated in terms of professional organization through which an investor
invests as new organizations keep coming up everyday
OPPORTUNITIES
Due to more MNCs coming in , the income of people r is ing. Hence, opening up
the doors for investment in mutual funds.
THREATS
Mutual fund deals wi th market so, inves tors would prefer t rading in equi ty
market rather investing in mutual funds. Hence companies offering mutual funds
would have to come up wi th bet ter expected rate of returns as wel l as r i sks
associated to keep upt ime should be adopted to reach the potent ial inves tors .
SEBI regulate these mutual fund companies so they should play a more active
role to protect investors trust & their interest.
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CONCLUSION
Lucknow, where I done my survey. People in this area are very much aware
about the concept of mutual fund. The study shows that they shows their interest
to invest there money in mutual fund. As mutual fund has more s tabil ity,
growth, return than share market and i ts minimum investment is also low. This
attracts more and more peoples to buy the mutual fund of different companies.
Its return on investment is also good.
The pas t s tudy concludes that , mutual fund is a good source of income.
Peoples are highly sat is f ied on return of mutual fund. The percept ion of the
people regarding the mutual fund is good. Customers interest increases day by
day and they invest heavily in the mutual fund.
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Appendix:
QUESTIONNAIRE
Dear Respondent,
I am Bilal Ahmed, pursuing BBA from Swami Vivekanand Institute of Manangement andTechnology,Banur, conducting a survey on customer satisfaction towards mutual funds inChandigarh. I will appreciate your cooperation in this regard by filling up the research schedulecarefully. All the information provided by you will be kept confidential and it would be strictlyused for academic purpose only.
1 . Personal Deta il s: -
Name:- _______________________
Age:-
a) Below 25 yrs b) 25-30 yrs
c) 30-40 yrs d) 40-50 yrs
e) 50-60 yrs f) Above 60 yrs
Date of Birth:- ___/____/_______
Gender :-
a) Male b) Female
Marital status:-
a) Single b) Married
If married, number of children:- ______________Number of male children ______, age ____________(yrs)
Number of female children ______, age ____________(yrs)
Education / professional qualification:-
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a) Post graduate b) Graduate
c) Diploma d) Under Graduate
e) Degree f) Any other (specify)___________ __
Employment type:-
a) Salaried b) Self Employed
c) Retired d) Unemployed
e) Student f) Other (specify)__________ ___
Number of earning members:-
a) 1 b) 2-4 c) 4-6
Monthly income:-
a) Up to 10000 b) 20000-25000
d) 60000-80000 0 e) 90000-100000
Q1 .Do you have any Mutual fund scheme under Principle Mutual fund?
Ans
a) Yes b) No
Q2. Why did you choose Principle Mutual Fund?
Ans
a) As Investment b) As Good Return
c) As Tax Saving d) Other
Q3.Where do you rate Principal SBI Mutual fund?Ans
a) Grade-I b) Grade-IIc) Grade-III
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Q4. Which type of mutual fund scheme you have purchased?Ans
Name of mutual fund Response
Large CapChild Benefit
Global Opportunity
Tax Saving
Q5. . Are you satisfied with payment premium option with Principal Mutualfund?Ans;
a) Yes b) No
Q6 Which premium payment option is best for you?Ans
Mode of Payment RESPONSES
Cheque
Cash
Online
:
Q7. Are you happy the services provided by Principal Mutual Fund in Lucknow?
Ans
a) Yes b) No
Q8. Are you satisfied with the employees behaviour?
Ans
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RESPONSE %AGE OF
RESPONDENTS
Satisfied
Highly satisfied
Not satisfied
Highly Dissatisfied
Q9. Do you want any change in Mutual fund term?Ans
a) Yes b) No
Q10. Do you want to invest in mutual funds in future?
Ans
a) Yes b) No
Q11 Your suggestion regarding mutual fundAns
_______________________________________
Thanks
Abbreviations:
SBI-State Bank of IndiaAMC-Asset management company.NAV-Net Asset value
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MF-Mutual funds
References:
Kothari C.R. Research Methodology Method and techniques, Wishwa Prakashan 1990 New
Delhi
www.sbi.comwww.amfi.comwww.secinfo.comwww.deadpresidentblogspot.comwww.financialexpress.comwww.mutualfundindia.comwww.valueresearchonline.com
http://www.sbi.com/http://www.amfi.com/http://www.secinfo.com/http://www.deadpresidentblogspot.com/http://www.financialexpress.com/http://www.mutualfundindia.com/http://www.valueresearchonline.com/http://www.sbi.com/http://www.amfi.com/http://www.secinfo.com/http://www.deadpresidentblogspot.com/http://www.financialexpress.com/http://www.mutualfundindia.com/http://www.valueresearchonline.com/