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A
Project Report
On
“INVESTMENT ANALYSIS AND PROSPECT OF MUTUAL FUND”
Submitted for the partial fulfillment of
“MASTER OF BUSINESS ADMINISTRATION”
Session (2009-2011)
SUBMITTED TO:- SUBMITTED BY:-
CONTROLLER OF EXAMINATION PAWAN KUMAR
M.D UNIVERSITY ROHTAK MBA IV Sem.
Roll No. 21 REG. NO -09-KITG-6815
KIIT COLLEGE OF ENGINEERING
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ACKNOWLEDGEMENT
The satisfaction which accompanies the successful completion of any task would be incomplete without the mention of people who made it possible. Because the success is the epitome of hard work, perseverance, undeterred missionary zeal, determination and most encouraging guidance and advice serving as a beacon light and crowing out effort with success.
I express my sincere thanks to my project guide Mrs. Priyanka Thakur for his whole-hearted support, inspiring guidance and encouragement throughout the project work
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TABLE OF CONTENTS
S.No. Particulars Page No.
1 Executive Summary 4
2 Company profile 5
Objective &scope of study 7
2 Introduction to the topic 9
3 Concept of mutual fund 12
4 Organization of mutual fund 15
5 Advantages of mutual Funds. 16
6 Drawbacks of mutual Funds. 18
7 Evolution of mutual Funds 20
8 Types of mutual Funds 23
9 Major mutual Fund companies 26
10 How to compare mutual fund 34
11 Future of mutual fund 36
12 Regulatory aspects 39
13 Research Methodology 43
14 Questionnaire & Information Analysis Through
Graphical Representation
46
15 Observation & Findings 65
16 Suggestions 66
17 Limitations 68
18 Bibliography & References 69
EXECUTIVE SUMMARY :
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The project titled “INVESTMENT ANALYSIS AND PROSPECT OF MUTUAL FUND”
was carried out for ANANDRATHI FINANCIAL SERVICES.
Anand Rathi Financial Services is the brokerage
firm. In this project report I have made an analysis that what is the investment pattern, what
is the prospect and how Mutual Funds have emerged a better investment option in India in
recent years giving the investors higher returns, liquidity, safety against traditional
investment avenues like- bank FD, post office savings, investment in volatile stock market
etc.
With the growth of the Indian economy due to various economic factors including
industrialization, growth of infrastructure & services industries, increased foreign direct
investment & foreign institutional investments, the Indian companies have grown to
become Global Business Giant .
So, the market capitalization of the Indian companies has grown which has resulted in the
building of a strong capital market. People are also now more willing to invest and are
ready to take risk. All this development has proved to be
a good atmosphere for Mutual Fund investments in India.
Now a day’s investment of savings has assumed great importance. Mutual Funds offer a
wide array of schemes to suit the customers different investment objectives as per their
financial position, risk taking capability, age etc.
COMPANY PROFILE:-
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Anand Rathi (AR) is a leading full service securities firm providing the entire gamut
of Financial Services. The firm, founded in 1994 by Mr. AnandRathi, today has a
pan India presence as well as an international presence through offices in Dubai and
Bangkok.
AR provides a breadth of financial and advisory services
including wealth management, investment banking, corporate advisory, brokerage &
distribution of equities, commodities, mutual funds and insurance - all of which are
supported by powerful research teams.
The firm's philosophy is entirely client centric, with a clear focus on providing long
term value addition to clients, while maintaining the highest standards of excellence,
ethics and professionalism. The entire firm activities are divided across distinct
client groups: Individuals, Private Clients, Corporate and Institutions.
1994:
Started activities in consulting and Institutional equity sales with staff of 15 .
1995:
Set up a research desk and empanelled with major institutional investors
1997:
Introduced investment banking businesses Retail brokerage services launched.
1999:
Lead managed first IPO and executed first M & A deal
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2001:
Initiated Wealth Management Services
2002:
Retail business expansion recommences with ownership model.
2003:
Wealth Management assets cross Rs1500 croreRetail Branch network exceeds 50
Insurance broking launched Launch of Wealth Management services in Dubai.
2004:
Retail Branch network expands across 100 locations within Indian Commodities
brokerage and real estate services introduced Wealth Management assets cross
Rs3000croresInstitutional equities business relaunched and senior research team put
in place.
2005:
Retail Branch network expands across 180 locations within India
Real Estate Private Equity Fund Launched.
OBJECTIVE OF THE STUDY
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The objective is to check the popularity & growth of Mutual Funds and whether Mutual
Funds are really having a better prospect in India. The needs and wants of the client is
taken into consideration
In this project the great emphasis is given to understand what investor want out of their
investments in different schemes of Mutual Fund, how they compare it with traditional
investment instruments, what is the number of increase in the investor base.
SCOPE OF THE STUDY
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The scope of the study is inform & guide the investors about the various Mutual Fund
Schemes and helps them to select the best scheme as per their requirement.
Investors are the customers of the different company’s mutual funds schemes during my
project I worked with Anand Rathi Financial Services, Bhilwara.
Reasons For Selecting The Topic
To Study the Investment Pattern and what is the prospect of mutual
fund.
In the primary capital market, Mutual Funds serve as a link between the saving public and
the corporate sector, as they channelize savings from investors and corporations.
In the secondary capital markets, they participate as investors and trade with other
investors. By the very nature of their activities and by virtue of being knowledgeable and
informed investors, they influence the markets and play an active role in promoting good
corporate governance, investor protection and the health of capital markets.
Mutual funds have imparted much needed liquidity into the financial system and have
provided an alternative to the dominant role of banking and financial institutions in the
financial markets.
INTRODUCTION
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We can study the growth of Mutual Funds in broadly two parts :-
1. Global Scenario
2. Indian scenario
Global Scenario
Mutual Funds have emerged as relatively new attractive option for the investments
worldwide in recent years.
The traditional investment options Like- Bank FD, post office Savings, Govt. Bonds and
Investment in the Shares are no longer very attractive , because Govt. deposits give lesser
returns and Stock market is very much volatile which makes the investments risky .
So, all this has resulted into the emergence of Mutual Funds which gives Comparatively
Higher returns with safety.
Mutual Funds now represent the most appropriate investment opportunity for the small
investors. As financial markets become more sophisticated and complex, investors need a
financial intermediary who provides the required knowledge and professional expertise on
successful investing.
The popularity of Mutual Funds can be imagined from the fact that in the birthplace of
Mutual Funds – the U.S.A. - the fund industry has already overtaken the banking industry,
with more money under Mutual Fund management than deposited with banks.
Indian Scenario
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The Indian Mutual Fund industry has opened up many exciting opportunities to Indian
investors. A new phenomenon has started under which more savings now being entrusted
to the funds .Despite the expected continuing growth in the industry, Mutual Fund is still a
new financial intermediary in India.
Hence, it is important that the investors, the Mutual Fund agents/distributors, financial
planners, investment advisors and even the fund employees acquire the better knowledge of
what Mutual Funds are, what they can do for investors and what they cannot, and how they
function differently from other financial intermediaries such as banks.
Place of Mutual Funds in Financial Markets
Indian households started allocating more of their savings to the capital markets in 1980s,
with investments flowing into equity and debt instruments, besides the conventional mode
of bank deposits.
With greater volatility in the stock markets, many investors who bought highly priced
shares lost money, and withdrew from the markets altogether. Even those investors who
continued as the direct investors in the stock markets realized that the key to successful
Besides, selecting the securities with growth and income potential from the capital market
involved careful research and monitoring of the market , which was not possible for all
investors.
Under similar circumstances in other countries, Mutual Funds had emerged as professional
intermediaries. Besides providing the expertise in the stock market investing, these funds
allow investing in small amounts and yet holding a diversified portfolio to limit risk, while
providing the potential for income and growth that is associated with debt and equity
instruments.
Investment
Features
Stocks Fixed-Income
Investments
Annuities Money Market
Funds
Time Deposits
(CDs)
Risk/return
potential
High Moderate Low
(fixed)High
Low Low
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10
(variable)
Key
objective
Growth of
capital
Regular
income
Retirement
income
Competitive
interest on
cash reserves
Competitive
interest on
cash reserves
Suitability Aggressive
growth
investors
Income-
oriented
investors
Retirement
investors
Conservative
investors
Conservative
investors
Time frame Long term Long or
intermediate
term
Long term Intermediate
or short term
Intermediate
or short term
Issuer Corporations Government
or
corporations
Insurance
companies
Mutual fund
companies
Financial
institutions
FDIC
insurance
No No No No Yes
Tax
advantages
No Yes (tax-free
municipal
bonds)
Yes (tax-
deferred
growth)
Yes (tax-free
money market
funds)
No
CONCEPT OF MUTUAL FUND
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities.
The income earned through these investments and the capital appreciation realized are
shared by its unit holders in proportion to the number of units owned by them.
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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 fund issues units to the investors in accordance with quantum of money invested by
them. Investors of mutual funds are known as unit holders
The investors in proportion to their investments share the profits or losses. The mutual
funds normally come out with a number of schemes with different investment objectives,
which are launched from time to time.
A mutual fund is required to be registered with Securities and Exchange Board of India
(SEBI), which regulates securities markets before it, can collect funds from the public.
Thus, a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost. The flow chart below describes broadly the working of a mutual fund:
The flow chart below describes broadly the working of a mutual fund:
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Mutual Fund Operation Flow Chart
ORGANISATION OF A MUTUAL FUND
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There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:
Advantages Of Mutual Funds
If the Mutual Fund is emerging as the favorite investment vehicle, it is because of many
advantages it has over other forms and avenues of investing, particularly for the investors
who has limited resources available.
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The following are the major advantages offered by mutual Funds to all investors
Diversification :- The best mutual funds design their portfolios so individual
investments will react differently to the same economic conditions. For example,
economic conditions like a rise in interest rates may cause certain securities in a
diversified portfolio to decrease in value. Other securities in the portfolio will
respond to the same economic conditions by increasing in value. When a portfolio
is balanced in this way, the value of the overall portfolio should gradually increase
over time, even if some securities lose value.
Professional Management: Most mutual funds pay topflight professionals to
manage their investments. These managers decide what securities the fund will buy
and sell.
Regulatory oversight: Mutual funds are subject to many government
regulations that protect investors from fraud.
Liquidity : It's easy to get your money out of a mutual fund. Write a check, make
a call, and you've got the cash.
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Convenience: You can usually buy mutual fund shares by mail, phone, or over
the Internet.
Low cost: Mutual fund expenses are often no more than 1.5 percent of your
investment. Expenses for Index Funds are less than that, because index funds are
not actively managed. Instead, they automatically buy stock in companies that are
listed on a specific index.
Transparency: Mutual Fund schemes are said to be Transparent because they
show the clear allocation of Funds to Investors.
Flexibility: Mutual funds are flexible because they change time to time and if
Investors wants his money back before the maturity of the Fund He/she can easily
redeem.
Drawbacks Of Investing Through Mutual Funds
While the benefits of investing through Mutual Funds far outweigh the disadvantages ,an
investor and his advisor should be aware of a few shortcomings of using the the Mutual
Fund as an investment vehicle :-
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No Guarantees:
No investment is risk free. If the entire stock market declines in value, the value of
mutual funds 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.
Fees and commissions:
All funds charge administrative fees to cover their day-to-day expenses. Some funds
also charge sales commissions or "loads" to compensate brokers, financial consultants,
or financial planners. Even if you don't use a broker or other financial adviser, you will
pay a sales commission if you buy shares in a Load Fund.
Taxes:
During a typical year, most actively managed mutual funds sell anywhere from 20 to
70 percent of the securities in their portfolios. If your fund makes a profit on its sales,
you will pay taxes on the income you receive, even if you reinvest the money you
made.
Management risk:
When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's 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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No Control Over Costs : -
Since investors do not directly monitor the funds operations they cannot control the
costs effectively. Regulators therefore usually limit the expenses of mutual fund.
Managing a Portfolio of funds: -
As the number of mutual funds increases, in order to tailor a portfolio for himself, an
investor may b holding a portfolio of funds, with the costs of monitoring them and
using them, incurred by him.
EVOLUTION OF MUTUAL FUNDS IN INDIA
The Indian Mutual Fund industry has come a long way since the inception of UTI in 1963.
According to AMFI the evolution of industry can be broadly divided into four phases,
which mark its transaction from the period when UTI ruled the roost to a period of
competition and increased awareness among investors.
FIRST PHASE (1964-87)
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The Unit Trust of India was the sole player in the industry. Created by an Act of
parliament in 1963,UTI launched its first product, the UTI Scheme 1964, which is even
today the single largest mutual fund scheme. UTI created a numbe4r of products such as
monthly income plans, Children’s plans, equity-oriented schemes and offshore funds
during this period. UTI managed assets of Rs 6700 crore at the end of this phase.
SECOND PHASE (1987-93)
In 1987 public sector banks and financial institutions entered the mutual fund industry’s
mutual fund was the first non UTI fund to be set up in 1987, Significant shift of investors
from deposits to mutual fund industry happened during the period .Most funds where
Growth oriented closed ended funds. By the end of this period, assest under UTI
management grew to Rs 38,247 crore and public sector funds managed Rs 8750 crore
THIRD PHASE (1996-1999)
.
The implementation of the new SEBI regulations and the restructuring of the mutual fund
industry led to rapid asset growth. Bank mutual funds were re-cast according to the SEBI
recommended structure, and UTI came under voluntary SEBI supervision.
FOURTH PHASE (1999-2003)
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This phase was marked by very rapid growth in the industry, and significant increase in
market of private sector players. Assests crossed Rs 1,00,000 crore. The tax break offered
to mutual funds in 1999 created arbitrage opportunities for a number of institutional
players. Bond funds and liquid funds registered the highest growth in this
period ,accounting for nearly 60% of the assests. UTI share of the industry dropped below
50%..
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GROWTH IN ASSETS UNDER MANAGEMENT
The graph indicates the growth of assets over the years.
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Types of Mutual Fund Schemes
Mutual Funds have specific investment objectives such as growth of capital, safety of
principal or tax exemption, an investor can select one fund or any number of different
funds to meet the specific goals. In general mutual fund fall under 3 general categories: -
Schemes according to Maturity Period
Schemes according to Investment Objective
Other Schemes.
1. Schemes according to Maturity Period : -
a) Open ended Scheme - An open-ended fund or scheme is one that is
available for subscription and repurchase on a continuous basis. These schemes do not have
a fixed maturity period. The key feature of open-end schemes is liquidity.
b) Close ended Scheme - The fund is open for subscription only during a
specified period at the time of launch of the scheme. A close-ended fund or scheme has a
stipulated maturity period e.g. 5-7 years
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Schemes according to Investment Objective : -
Growth / Equity Oriented Scheme - The aim of growth funds is to provide capital
appreciation over the medium to long- term. Such schemes normally invest a major part of
their corpus in equities.
Income / 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, Government securities and money market
instruments.
Balanced Fund - The aim of balanced funds is to provide both growth and regular
income as such schemes invest both in equities and fixed income securities
Money Market or Liquid Fund - These funds are also income funds and their aim is
to provide easy liquidity, preservation of capital and moderate income
Gilt Fund - These funds invest exclusively in government securities
Index Funds - Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty),
Other Schemes: -
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Sector Specific Funds/schemes - These are the funds/schemes, which invest in the
securities of only those sectors or industries as specified in the offer documents. e.g.
Pharmaceuticals, Software
Tax Saving Schemes - These schemes offer tax rebates to the investors under specific
provisions of the Income Tax Act, 1961 . E.g. Equity Linked Saving Schemes (ELSS).
Fund of Funds (FoF) scheme - A scheme that invests primarily in other schemes of
the same mutual fund or other mutual funds is known as a FoF scheme
Load or no-load Fund - A Load Fund is one that charges a percentage of NAV for
entry or exit.
Major Mutual Fund Companies: -
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Franklin Templeton India Mutual Fund
The group, Franklin Templeton Investments is a California (USA) based company with a
global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial
services groups in the world. Investors can buy or sell the Mutual Fund through their
financial advisor or through mail or through their website. They have Open-end Diversified
Equity schemes, Open-end Sector Equity schemes, Open-end Hybrid schemes, Open-end
Tax Saving schemes, Open end Income and Liquid schemes, closed end Income schemes
and Open end Fund of Funds schemes to offer.
HDFC Mutual Fund
HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing
Development Finance Corporation Limited and Standard Life Investments Limited.
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Reliance Mutual Fund
Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The
sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is
the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund, which
was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of
various schemes under which units are issued to the Public with a view to contribute to the
capital market and to provide investors the opportunities to make investments in diversified
securities.
State Bank of India Mutual Fund
State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch
offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today
it is the largest Bank sponsored Mutual Fund in India. They have already launched 35
Schemes out of which 15 have already yielded handsome returns to investors. State Bank
of India Mutual Fund has more than Rs. 5,500 Corers as AUM. Now it has an investor base
of over 8 Lakhs spread over 18 schemes.
Tata Mutual Fund
Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsors for
Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The
investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt.
Limited. Tata Asset Management Limited is one of the fastest in the country with more
than Rs. 7,703 corers (as on April 30,2005) of AUM.
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Unit Trust of India Mutual Fund
UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages
the UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTI
Asset Management Company presently manages a corpus of over Rs.20000 Corer. The
sponsors of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB),
State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of
UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index
Funds, Equity Funds and Balance Funds.
Bank of Baroda Mutual Fund (BOB Mutual Fund)
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under
the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the
AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank
AG is the custodian.
HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets
(India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the
Trustee Company of HSBC Mutual Fund.
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ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India)
Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd.
was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN
AMRO Mutual Fund.
Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life
Financial. Sun Life Financial is a global organization evolved in 1871 and is being
represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from
India. Birla Sun Life Mutual Fund follows a conservative long-term approach to
investment. Recently it crossed AUM of Rs. 10,000 corers.
ING Vysya Mutual Fund
ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee
Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management
(India) Pvt. Ltd. was incorporated on April 6, 1998.
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Prudential ICICI Mutual Fund
The mutual fund of ICICI is a joint venture with Prudential Plc. of America; one of the
largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup
on 13th of October 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee
Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset
Management Company Limited incorporated on 22nd of June 1993.
Sahara Mutual Fund
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation
Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on
August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the
AMC stands at Rs 25.8 crore.
Kotak Mahindra Mutual Fund
Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is
presently having more than 1,99,818 investors in its various schemes. KMAMC started its
operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to
investors with varying risk - return profiles. It was the first company to launch dedicated
gilt scheme investing only in government securities.
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Standard Chartered Mutual Fund
Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard
Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard
Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with
SEBI on December 20,1999.
Morgan Stanley Mutual Fund India
Morgan Stanley is a worldwide financial services company and its leading in the market in
securities, investment management and credit services. Morgan Stanley Investment
Management (MISM) was established in the year 1975. It provides customized asset
management services and products to governments, corporations, pension funds and non-
profit organizations. Its services are also extended to high net worth individuals and retail
investors. In India it is known as Morgan Stanley Investment Management Private Limited
(MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close
end diversified equity scheme serving the needs of Indian retail investors focusing on a
long-term capital appreciation.
Escorts Mutual Fund
Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as its
sponsor. The
Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on
December 1, 1995 with the name Escorts Asset Management Limited.
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Alliance Capital Mutual Fund
Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital
Management Corp. of Delaware (USA) as sponsor. The Trustee is ACAM Trust Company
Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. with the
corporate office in Mumbai.
Benchmark Mutual Fund
Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt.
Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company.
Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset
Management Company Pvt. Ltd. is the AMC.
Can bank Mutual Fund
Can bank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the
sponsor. Can bank Investment Management Services Ltd. incorporated on March 2, 1993 is
the AMC. The Corporate Office of the AMC is in Mumbai.
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Chola Mutual Fund
Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance
Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the
Trustee Company and AMC is Cholamandalam AMC Limited.
LIC Mutual Fund
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It
contributed Rs. 2 Corers towards the corpus of the Fund. LIC Mutual Fund was constituted
as a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Company
started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed
Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for
LIC Mutual Fund.
.
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How to compare mutual funds
Choosing a mutual fund seems to have become a very complex affair lately. There are no
dearth of funds in the market and they all clamor for attention. The most crucial factor in
determining which one is better than the rest is to look at returns. Returns are the easiest to
measure and compare across funds.
At the most trivial level, the return that a fund gives over a given period is just the
percentage difference between the starting Net Asset Value (price of unit of a fund) and the
ending Net Asset Value.
Returns by themselves don't serve much purpose. The purpose of calculating returns is to
make a comparison. Either between different funds or time periods. And, you must be
careful not to make a mistake here. Or else, you could end up investing in the wrong funds.
Invest in various funds, not one
Absolute returns
Absolute returns measure how much a fund has gained over a certain period. So you look at
the NAV on one day and look at it, say, six months or one year or two years later. The
percentage difference will tell you the return over this time frame.
But when using this parameter to compare one fund with another, make sure that you
compare the right fund. To use the age-old analogy, don't compare apples with oranges.
So if you are looking at the returns of a diversified equity fund (one that invests in different
companies of various sectors), compare it with other diversified equity funds. Don't
compare it with a sector fund which invests only in companies of a particular sector. Don't
even compare it with a balanced fund (one that invests in equity and fixed return
instruments).
Why has my fund not declared a dividend?
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Benchmark returns
This will give you a standard by which to make the comparison. It basically indicates what
the fund has earned as against what it should have earned.
A fund's benchmark is an index that is chosen by a fund company to serve as a standard for
its returns. The market watchdog, the Securities and Exchange Board of India, has made it
mandatory for funds to declare a benchmark index.
In effect, the fund is saying that the benchmark's returns are its target and a fund should be
deemed to have done well if it manages to beat the benchmark.
Let's say the fund is a diversified equity fund that has benchmarked itself against the
Sensex. So the returns of this fund will be compared vis-a-viz the Sensex.
Now if the markets are doing fabulously well and the Sensex keeps climbing upwards
steadily, then anything less than fabulous returns from the fund would actually be a
disappointment.
If the Sensex rises by 10% over two months and the fund's NAV rises by 12%, it is said to
have outperformed its benchmark. If the NAV rose by just 8%, it is said to have
underperformed the benchmark.
But if the Sensex drops by 10% over a period of two months and during that time, the
fund's NAV drops by only 6%, then the fund is said to have outperformed the benchmark.
The best mutual fund scheme for you
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FUTURE OF MUTUAL FUNDS IN INDIA
Mutual Fund AUM’s Growth
Month/YearMar-
99
Mar-
00
Mar-
01
Mar-
02
Mar-
03Mar-05 Sep-06 7-Dec
MF AUM's 68984 93717 83131 94017 75306 137626 151141 149300
Change in % over last
yr 26 13 12 25 45 9 1
Some facts for the growth of Mutual Funds in India :-
100% growth in the last 6 years.
Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management
worldwide.
Our saving rate is over 23%, highest in the world. Only channelizing these savings
in mutual funds sector is required.
We have approximately 29 mutual funds which is much less than having more than
800. There is a big scope for expansion.
'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing cities.
Mutual fund can penetrate rural like the Indian insurance industry with simple and
limited products.
SEBI allowing the MF's to launch commodity mutual funds.
Emphasis on better corporate governance.
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Trying to curb the late trading practices.
Introduction of Financial Planners who can provide need based advice
.
REGULATORY ASPECT :-
Schemes of mutual funds:-
The Asset management company shall launch no schemes unless the trustees
approve such scheme and a copy of the offer has been filed with the Board.
Every mutual fund shall along with the offer documents of each scheme pay filing
fees.
The offer document shall contain disclosures, which are adequate in order to enable
the investors to make informed investment decision including the disclosure non
maximum investments proposed to be made by the scheme in the listed securities of
the group companies of the sponsor. A close-ended scheme shall be fully redeemed
at the end of the maturity period. “Unless a majority of the unit holders otherwise
decide for its rollover by passing a resolution”.
The mutual fund and asset management company shall be liable to refund the
application money to the applicants:-
If the mutual fund fails to receive the minimum subscription amount referred to in
clause (i) of sub- regulation.
If the moneys received from the applicants for units are in excess of subscription as
referred to in clause (ii) of sub-regulation.
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Procedure for Action In Case Of Default:-
On and from the date of the suspension of the certificate or the approval, as the case
may be, the mutual fund, trustees or asset management company, during the period
of suspension and shall be subject to the direction of the Board with regard to any
records, documents, or securities that may be in its custody or control relating to its
activities as mutual funds, trustees or the asset management company.
Restrictions on Investments:
A mutual fund scheme shall not invest more than 15% of its NAV in debt
instrument issued by a single issuer, which are rated not below investment grade by
a credit rating agency authorize to carry out such activity under the act. Such
investment limit may be extended to 20% of the NAV of the scheme with the prior
approval of the Board of Trustees and the Board of Asset Management Company.
A mutual fund Scheme shall not invest more than 10% of its NAV in unrated debt
instrument issued by a single issuer and the total investment in such instruments
shall not exceed 25% of the NAV of the Board of Trustees and the Board of Asset
management.
No mutual funds under all its schemes should own more than 10% of any
company’s paid up capital carrying voting rights.
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Such transfers are done at the prevailing market price for quoted instrument on spot
basis.
The securities so transferred shall be in conformity with the investment objectives
of the scheme to which such transfer has been made.
An scheme may invest in another scheme under the same asset management
company or any other mutual fund without charging any fees, provided that
aggregated intercourse inter scheme investment made by all schemes under the
same management or in schemes under the management of any other asset
management company shall not exceed 5% of the net asset value of the mutual
fund. The initial issue expenses in respect of any scheme may not exceed 6% of the
funds raised under that scheme.
Every mutual fund shall buy and sell securities on the basis of deliveries and shall
in all cases of purchases, take delivery of relative securities and in all cases of sale,
deliver the securities and shall in no case put itself in a position whereby it has to
make short sale or carry forward transaction or engage in Badla finance.
Every mutual fund shall get the securities purchased or transferred in the name of
the mutual fund on account of the concerned scheme, wherever investments are
intended to be of long-term nature.
Pending deployment of funds of a scheme a mutual fund can invest the funds of the
scheme in short term deposits of scheduled commercial banks.
No mutual fund scheme shall make any investment in ;
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o Any unlisted security of an associate or group company of the sponsor or
o Any security issued by way of private placement by an associate or group
company of the sponsor.
The listed securities of group companies of the sponsor which is in excess of 30% of
the net assets (of all the schemes of a mutual fund)
No mutual fund scheme shall invest more than 105 of its NAV in the equity shares
or equity related instrument of any company. Provided that, the limit of 10 percent
shall not be applicable for investments in index fund or sector or industry specific
schemes.
RESEARCH METHODOLOGY
1. Data requirements : –
a. Name, address and phone number of
individuals.
b. Investment about Share Market.
c. Investment Pattern of individuals.
d. Awareness about Mutual Funds.
2. Primary data:-
a. Data collected by meeting people who come into the branches of Anand Rathi
Financial Services in Bhilwara.
b. Data collected with the help of Venue Operation.
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3. Secondary data:-
Data collected by referring to the database already maintained in the Anand Rathi
Financial Services.
4. Data Collection Techniques :-
a. Filling of questionnaire by the customers of the Anand Rathi Financial Services,
b. Reference of branch manager of Anand Rathi Financial Services.
Literature Survey:-
The project is based on pure findings of facts. Development of Working Hypothesis:-The
Hypothesis could be developed by discussing with the concerning department heads and
guides about this exploratory research and reached to the conclusion that the data is to be
collected by personal interaction with the customers, asking them about the services and
the improvement required. First of all they are aware of mutual funds or not and then
analyzing the findings to reach to the objectives of research.
Collection of Data:-There was secondary data available for the study and also primary data
collected by carrying out by the survey which has been carried out to through personal
interviews of the customers. The sample size was roughly 100.
a. Sampling methods: - A sample is the representative of the population which will
predict the behavior of the whole universe.
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b. The sampling size put under two categories: Probability sampling and non
probability sampling.
Probability sampling:-
This is the process of selecting the elements or group of elements from as well defined
population by such procedure which gives every element in the population an equal chance
of being selected for observation. The sampling method use for this survey is the area
sampling which is a sub type of probability sampling.
Sampling size:-
Large sample gives reliable result than small sample. However, it is not feasible to target
entire population or even a substantial portion to achieve a reliable result. So, in this aspect
selecting the sample to study is known as sample size. Hence, for my project my sample
size was 100.The Sample Size of 100 is not enough to draw a conclusion but as per the
time assigned it was difficult to take a sample size more than 100.The Sample Size consist
of both the Professional and Business class people.
Execution of the project:-
It is the very important step in the research process accuracy findings depends on how
systematically the study has been carried out in time so that it can make some sense when
required. I have executed the project after prior discussion with the guide and structured in
following steps:
a. Preparation of questionnaire.
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b. Collection of list of some of the clients interview of the customer so that more
interaction is impossible and the variety of responses can be registered to have a
good data for analysis.
c. Visiting the corporate and asking about their feedback on the mutual funds
services they are availing. Try to find out their satisfaction level with the
existing mutual fund
Q1. Do you believe in the concept of investment ?
YES 89NO 11
TOTAL 100
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It has been observed that approximately 90% of the correspondents invest in some or the other financial instrument. Though the percentage of choice of investment may vary due to different factors such as age, education, risk etc.
Q2. Who manages your Portfolio ? a. Help of Brokerage House b. By Yourself
Brokerage House 47
By Yourself 53
Total 100
It has been observed that there is no major difference between the percentage of people
who invest using scientific tools and those whose who believe in their intuition but it is
seen that the younger generation is more leaning towards usage of scientific tools than their
peers.
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Q3. Name of the tools you have invested in ?
a. Insurance
YES 77NO 23
TOTAL 100
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A major chunk who have been interviewed it has been observed that almost 80% have
some kind of insurance policy. It has also been observed that though LIC is a public sector
undertaking, people of all ages have more faith in it as compared to other private sector
companies.
B. Bank (Fixed deposit)
YES 49NO 41
TOTAL 100
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There is no major difference between the number of people who prefer keeping their
money in fixed deposit and who don’t opt for it. There is however a growing concern about
the falling interest rate in banks on fixed deposit.
C. Mutual Funds
YES 34NO 66
TOTAL 100
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It has been observed that only 34% they have invested in Mutual Funds AS compared to
those who have not. This may be due to less knowledge about it or the time of re-demption.
D. Equities & Share Market
YES 45NO 55
TOTAL 100
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By the chart, we observe that the percentage of people investing in equity and share market
is not much but there is a going interest among people especially the younger generation to
invest so as to make quick bucks with the market boom.
E. Post Office Savings
YES 31NO 69TOTAL 100
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Out of the total correspondent only, 31% they invest in post office savings. This could be
due to falling interest rate and better return by other tools
F. Real Estate
YES 42NO 58
TOTAL 100
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The correspondent who said YES are 42% and who said NO is 58% but this will change, as
people are more comfortable in real estate and with falling interest rate people try to find
new avenue of investments.
G. Gold
YES 41NO 59
TOTAL 100
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50
Gold
41%
59%
YES
NO
Out of the total correspondent questioned 41% say they prefer to invest in gold while 59%
say they don’t.
H. Others
YES 39NO 61
TOTAL 100
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Of all the correspondents asked, only 39% said they have other options to invest other than
the conventional options.
Q4. What Features of a Brokerage House attract you ?
Good Services 30Low Brokerage 57
Friendly Environment 10 Expert Advice 3
About 60% of people said that they invest between 10%-60% of their total income in some
or other types of financial tools. A major chunk of people belonging to this segment are
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from IT sector who are young, large disposable income and have a little knowledge about
investment and are willing to take risk.
Q5. Are you aware about mutual funds?
YES 65NO 35
TOTAL 100
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Only 35% of correspondent said they don’t know any thing about mutual fund and 65%
said they know about mutual funds but what we found that they have just a primary or very
negligible knowledge about mutual funds and not really aware of the concept called
MUTUAL FUND.
Q6. Do you know different type of mutual scheme present in the market?
YES 36NO 64
TOTAL 100
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Out of total corresponds only 36% said that they know about various mutual schemes as
this number is very small it explains that people still don’t know about various schemes in
the market. It also shows that even those who have bought mutual funds are still ignorant
about the different schemes.
Q7. Which mode of investment have you chosen in mutual funds?
SIP 15Lump sum 45OTHERS 40TOTAL 100
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The percentage of person who say that mutual fund is SIP is 15%, an those who say it is
Lump sum is 45% but a major percentage of corresponds opt as other which is about 40%.
These are people who say that mutual funds are high risk and high gain or even people who
have no opinion.
Q8. Have you ever invested in mutual fund?
YES 41NO 59TOTAL 100
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Out of the total correspondents asked about 41% have said that they had invested in mutual
funds before while 59% said NO. Out of the total people who have said yes a majority of
them are young, having disposable income and willingness to take risk.
Q9. How you choose a mutual fund?
BRAND NAME 35HIGH NAV 26
HIGH RETURNS 15ADVERTISING 12
OTHERS 12TOTAL 100
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It has been observed that brand name does matter when people are choosing a mutual fund
as 35% said brand name. The next is NAV at about 26%. These two factors play a major
role during selection of mutual funds
THE RISK RETURN GRAPH FOR VARIOUS MUTUAL FUNDS:-
Liquid Funds
Income Funds
Balanced Fund
Equity Funds
Sector Funds
RISKS
RETURNS
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The above Graph shows the Risk and Returns generated by different Funds. Liquid Funds
are less Risky and also generate less Returns where as Sector Funds are more Risky but
generate more Returns.
By the example of above two Funds it is clear that Risk and Returns are directly
proportional to each other. Other Funds like Equity Funds, Balanced Funds and Income
Funds also give the same percentage of Returns as the Risk involved
OBSERVATIONS & FINDINGS
Based on the study and research done following is the list of my observation
and findings: -
1. People in Bhilwara have a handsome earning of income from various
2. People save and invest regularly, a part of their income
3. Among the investors a large number is of Businessman.
4. People are investing into different schemes of Mutual Fund, and are increasing
their investments in Mutual Funds industry.
5. The awareness about Mutual Funds & Share market.
6. Major investor in Mutual Funds are the people from middle income group.
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7. People keep their money in the mutual Funds for a short period and longer
period.
SUGGESTIONS:
1. The Anand Rathi Financial Service on the wide scale should conduct
investor awareness programs.
2. While the firms should conduct such programs in their locality to inform
its existing customers about various mutual fund schemes.
3. The investors should analyze and identify their objective of investment
in Mutual Funds and the period.
4. The incentives given to the brokers should be revised and enhanced to
keep the staff motivated.
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5. In Bhilwara, the customers have huge money and intention to invest but
they are either not fully aware of the various schemes or not happy with
the service rendered.
6. There is a huge potential in the bhosari . In order to tap the potential
effective campaign should be started.
HOW LONG TO KEEP INVESTMENTS TO GET
MAXIMUM RETURNS:-
Technically, in case of open-ended funds investor can withdraw their investments even
within a week, but to get desired returns positive time frame is required.
Funds Time Period
Equity Funds 3 Years (plus)
Balanced Funds 18 months to 3 Years
MIP’s 1 Year (plus)
Income Funds 6 months to 1 Year
Liquid Funds few days to 6 months
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WHAT RETURNS CAN A INVESTOR EXPECT IF HE/SHE
KEEP MONEY FOR SUGGESTED TIME FRAMES:-
Funds Returns
Sector funds 22% to 25% p.a.
Balance funds 15% to 18% p.a.
MIP’s Pension Plans 12% to 15% p.a.
Income Funds 10% to 12% p.a.
Liquid Funds 7% to 9% p.a.
The above-mentioned returns in the table are indicative and not assured. All investments in
MUTUAL FUNDS are in trade-able securities and are subject to market risk .
The NAV’s of the schemes may go up and down depending upon the factors and forces
affecting the security market including the fluctuations in the internal rates .The past
performance of the MUTUAL FUNDS is not indicative of future performance.
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LIMITATIONS
Certain limitations have been encountered while doing this project due to which the information collected and conclusion that was arrived on may have some variance.
Following constraints were encountered while doing the project:
Respondents were not ready to give appointments.
Data had to be collected according to the convenience of the
respondents and therefore time management became a major hurdle.
Some of the questions were not answered properly by people because of
lack of time.
We were asked to target only a few area of Bhilwara, so our sample size
was small.
Some of them thought by filling questionnaire they will get some calls
from company which is very difficult to tackle.
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It was seen that sometimes the respondents postponed a meeting by
extending the date even after fixing an appointment, it made things
difficult.
BIBLIOGRAPHY & REFERENCES
Web sites:-
www.rathi.com
www.moneycontrol.com
www.amfi.com
www.indiainfoline.com
www.valueresearchonline.com
www.sebi.in.gov
www.bseindia.com
BOOKS :-
AMFI ADVISORS MODULE
Annexure (Sample Docs.)
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Questionnaire
QUESTIONAIRE
Contact person:_______________________________________
Address: _________________________________________
Contact no: _______________
Q1. Do you believe in the concept of investment ?
Yes
No
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Q2. . Who manages your Portfolio ? a. Help of Brokerage House b. By Yourself
Q3. Name of the tools you have invested in ?
A. Insurance B. Bank (Fixed deposit)
C. Mutual Funds
D. Equities & Share Market
E. Post Office Savings
F. Real Estate
G. Gold
H. Others
Q4. . What Features of a Brokerage House attract you ?
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Good Services
Low Brokerage
Friendly Environment
Expert Advice
Q5. Are you aware about mutual funds?
Yes
NO
Q6. Do you know different type of mutual scheme present in the market??
Yes
No
Q7. Which mode of investment have you chosen in mutual funds?
SIP
Lump sum
Others
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Q8. Have you ever invested in mutual fund ?
Yes
No
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Q9. How you choose a mutual fund?
BRAND NAME
HIGH NAV
HIGH RETURNS
ADVERTISING
OTHERS
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DECLARATION
I here by declare that this research project entitled “INVESTMENT ANALYSIS AND PROSPECT OF MUTUAL FUND”
prepared by me under guidenceof Mrs. Priyanka Mam Lect. In KIIT Gurgaon. It is a original work done by me and the information provided in the studyis authenticto the best of my knowledge .
This is study has not submitted to any other institution or university .
(Pawan kumar)
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CERTIFICATE
Subject – Certificate of project completation .
This is to certify Mr. Pawan kumar being a student of M.B.A 4th Sem of KIIT has being assigned a research project titled “INVESTMENT ANALYSIS AND PROSPECT OF MUTUAL FUND” . I found him disciplined his conduct and totally dedicated towards the workassigned him. I wish him all success in future endeavors in his life. The work is original and authentic to the best of my knowledge.
With RegardsMrs. Priyanka mam
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