A PROJECT REPORT

ON
PERFERENCE OF THE ADVISORS TOWARDS MUTUAL
FUND
AT
KARVY SECURITIES LTD., LUCKNOW

SUBMITED BY
SHAILESH KUMAR RAO
(MBA – III SEM.)

ACEDAMIC YEAR
2008-10
SUBMITTED TO
LUCKNOW INSTITUTE OF MANAGEMENT &
TECHNOLOGY
AFFILIATED TO
UTTAR PRADESH TECHNICAL UNIVERSITY
LUCKNOW.

1
 ACKNOWLEDGEMENT

I am really happy and exited in representing this summer training project report before
you.

I must express my gratitude towards KARVY Stock Broking LTD for giving mean
opportunity to work with on this report.

And of course I am very much thankful to our honorable Dy. Director Prof. Ajay Shah
(PROJECT GUIDE) for giving me opportunity and his guidance help me through out
preparing this report. He has also provided me a valuable suggestions and excellence
guidance about this training, which proved very helpful to me to utilize my theoretical
knowledge in practical field.

At last I am also thankful to my friends, to all known and unknown individuals who have
given me their constructive advise, educative suggestion, encouragement, co-operation
and motivation to prepare this report.

2
 EXECUTIVE SUMMARY

India’s economy is highly developing. The development is taken place due to the growth
in the financial system. This financial system provides the background to various
investors regarding varied options to invest. Thus, development of the economy depends
on how these investors invest for the well being in long run.

As financial markets become more sophisticated and complex, investors need a financial
intermediary who provides the required knowledge and professional expertise on
successful investing. Mutual Funds represent perhaps the most appropriate investment
opportunity for investors. No wonder the concept of Mutual Fund was initially developed
in the U.S. market, but the entry of the concept in the Indian Financial Market was in the
year 1964 with the formulation of the UTI, at the initiative of the RBI and Govt. of India.

For most people, money is a delicate matter and when it comes to investing they are wary.
Simply because there are many investment options out there, each out promising the
other. An important question facing many investors is whether to invest in Banks,
National Savings, Post office, Non-banking finance companies, Fixed deposits, Shares
etc. or to invest distinctively in Mutual Funds.

It has been perceived that there is huge potential market in the region of Saurashtra. Thus
an exploratory research with the hypothesis “The region of Saurashtra being progressively
industrializing & developing should provide a large & wider market share for Mutual
Fund” has been done.

Thus the purpose of this research was to find why people do not actively invest in mutual
fund in spite of various benefits like Professional management, Diversification,
Convenience liquidity, Flexibility, Tax benefits etc. as well as to find out potential of
business of KARVY in distribution of Mutual Fund in Jamnagar City.

After performing the detailed exploratory research by interviewing different persons who
act as investment advisor like Insurance advisor and Post office advisor etc. with the help
of questionnaire, certain facts were revealed regarding the view about Mutual Funds in the
mind of investors.

I have observed that approximately 60% of the people are unaware of Mutual Funds but
most of them are interested to know about Mutual Funds and ready to attend seminar
arranged by KARVY. They are also interested to work with KARVY if sufficient
information is provided to them about Mutual Fund and KARVY.

People from service class prefers safety of income plus the regular income as well as tax
benefits while on the other hand Professional and Businessman focus on high return with
some risk.

For growth and development of the Mutual Fund Industry, the misconception regarding
Mutual Fund should be removed & the awareness for the same should be made.

3
 INTRODUCTION
COMPANY DETAILS
Background

Karvy Consultants Limited was established in 1982 at Hydrabad. It was established by a

group of Hydrabad-based practicing Chartered Accountants. At initial stage it was very
small in size. It was started with a capital of Rs. 1,50,000.

In starting it was only offering auditing and taxation services. Later, it acts into the
Registrar and Share transfer activities and subsequently into financial services and other
services like Financial Product Distribution, Investment Advisory Services, Demat
Services, Corporate Finance, Insurance etc.

All along, Karvy’s strong work ethics and professional background leveraged with
Information Technology enabled it to deliver quality to the individual. A decade of
commitment, professional integrity and vision helped Karvy achieving a leadership
position in its field when it handled largest number of corporate and retail that proved to
be a sound business synergy.

Today, Karvy has access to millions of Indian shareholders, besides companies, banks,
financial institutions and regulatory agencies. Over the past one and half decades, Karvy
has evolved as a veritable link between industry, finance and people.

In January 1998, Karvy became first Depository Participant in Andhra Pradesh. An ISO
9002 Company, Karvy’s commitment to quality and retail reach has made it an Integrated
Financial Services Company.

Today, company has 230 branch offices in 164 cities all over the India. The company adds
5 new offices every month to the company’s ever growing national network in every nook
and corner of the country. The company service over 16 million individual investors, 180
corporate and handle corporate disbursements that exceed Rs.2500 Corers.

4
WHERE KARVY STAND IN THE MARKET?

KARVY is a legendary name in financial services, Karvy’s credit is defined by its mission
to succeed, passion for professionalism, excellent work ethics and customer centric
values.

Today KARVY is well known as a premier financial services enterprise, offering a broad
spectrum of customized services to its clients, both corporate and retail. Services that
KARVY constantly upgrade and improve are because of company’s skill in leveraging
technology. Being one of the most techno-savvy organizations around helps company to
deliver even more cost effective financial solutions in the shortest possible time.

What bears ample testimony to Karvy’s success is the faith reposed in company by valued
investors and customers, all across the country. Indeed, with Karvy’s wide network
touching every corner of the country, even the most remote investor can easily access
Karvy’s services and benefit from company’s expert advice.

5
KARVY GROUP

Karvy Consultants Limited

Karvy Securities Limited

Karvy Investor Services Limited

Karvy Stock broking Limited

Karvy Computer Shares Pvt. Ltd.

Board of Directors

Karvy Consultants Limited

Parthasarathy C
Yugandhar M
Ramakrishna M S
Prasad V Potluri
Robert Gibson
Sanjay Kumar Dhir
R Shyamsunder

[Table1: BODs of Karvy Consultants Limited]

Karvy Investor Services Limited

Parthasarathy C
Yugandhar M
Ramakrishna M S

[Table2: BODs of Karvy Investor Services Limited]

6
Karvy Securities Limited

Parthasarathy C
Yugandhar M
Ramakrishna M S
Ajay Kumar K
William Samuel
Nicholas Tully

[Table3: BODs of Karvy Securities Limited]

Karvy Stock Broking Limited

Parthasarathy C
Yugandhar M
Ramakrishna M S
Ajay Kumar K
Kutumba Rao V
William Samuel
Nicholas Tully

[Table4: BODs of Karvy Stock Broking Limited]

7
Mission Statement of ‘Karvy’

An organization exists to accomplish something or achieve something. The mission

statement indicates what an organization wants to achieve. The mission statement may be
changed periodically to take advantage of new opportunities or respond to new market
conditions.

Karvy’s mission statement is “To Bring Industry, Finance and People together.”

Karvy is work as intermediary between industry and people. Karvy work as investment
advisor and helps people to invest their money same way Karvy helps industry in
achieving finance from people by issuing shares, debentures, bonds, mutual funds, fixed
deposits etc.

Company’s mission statement is clear and thoughtful which guide geographically

dispersed employees to work independently yet collectively towards achieving the
organization’s goals.

Vision of Karvy

Company’s vision is crystal clear and mind frame very directed. “To be pioneering
financial services company. And continue to grow at a healthy pace, year after year,
decade after decade.” Company’s foray into IT-enabled services and internet business
has provided an opportunity to explore new frontiers and business solutions. To build a
corporate that sets benchmarks for others to follow.

8
 Behind the Picture: What Customers matter for KARVY?

The underlying picture forming answer for above question is given below.

Market Brand Customer

Power Preference Value

RELATIONSHIPS
OUR COMPETITIVE ADVANTAGE

[Fig.1 Competitive Advantage of Karvy]

Every year with this picture keeping in mind ‘Karvy accelerate with Recovery, Revival
and Reappearance.’

Karvy has started 2004 on a strong note with the realization to signal some of the
challenges it faced previous year. In a competitive market and a branded business, Karvy
need to carefully manage itself to avoid down trading or brand shifts by consumers.

For Karvy, Jamnagar branch 2003 was truly exhilarating because of:

• Successful implementation of a carefully crafted strategy.

• Excellence in execution.
• Immense learning enabling to set up a launch pad for revitalizing
itself.

Some competitive advantages are long lasting. These are intangible, difficult to replicate
and thus more sustainable. Karvy has focused on some of these to gain competitive
advantages. There are:

• Winning culture and a desire to excel in everything Karvy do.

• Strong meaningful relationships with Customers along with
Strategic Partners in which Karvy operate and above all, its own staff.

Karvy value and carefully nurture relationships with customers. Karvy truly believe that
more than technological prowess and business process innovations, it is the ‘focus on
relationships’ which has been the corner stone of satisfying and successful presence in
India over many years.

This has been possible with deep insight of consumer behavior as well as market demand
drivers, understanding of the arena where to operate and quality execution – all thanks to a
‘greater team’ that makes this happen.

9
Karvy’s customers consider themselves part of Karvy family and share their experiences
and dreams with other customers and thus Karvy becomes successful not only in relating
customers but also gains new customers from satisfied prevailing customers.

Karvy want to create a strong emotional bond with new customers promoted by prevailing
customers.

10
Karvy Values:

Integrity
Responsibility
Reliability
Unity
Understanding
Excellence
Confidentiality

Karvy has adequate internal control systems and procedures commensurate with the size
nature of its business. These system and procedures provide reasonable assurance of
maintenance of proper accounting records, reliability of financial information, protection
of resources and safeguarding of assets against unauthorized use.

11
 KARVY SERVICES – AN OVERVIEW

1. Stock broking
2. Demat services
3. Investment product distribution
4. Investment advisory services
5. Corporate finance & Merchant banking
6. Insurance
7. Mutual fund services
8. IT enabled services
9. Registrars & Transfer agents
10. Loans

1. Stock Broking:

KARVY is working as Capital Market Intermediaries. Stockbrokers are regulated by

SEBI [Stock-brokers and Sub-brokers] Regulations, 1992. The stockbroker is a member
of the stock exchange. Stockbrokers are the intermediaries who are allowed to trade in
securities on the exchange of which they are members. They buy and sell on their own
behalf as well as on behalf of their clients.

Stockbrokers expand their business by engaging sub-broker. Sub-brokers mean “any

person not being a member of a stock exchange who acts on behalf of a stock broker as an
agent or otherwise for assisting the investors in buying, selling or dealing in securities
through such stock-brokers.”

2. Demat Services:

Karvy is a depository participant with the National Securities Depository Limited (NSDL)
for trading and settlement of dematerialized shares.

Depository Participants (DPs) are described as an agent of the depository. They are
intermediaries between the depository and the investors. The relationship between the
DPs and the depository is governed by an agreement made between the two under
Depositories Act.

A DP can offer depository-related services only after obtaining a certificate of registration

from SEBI.

Since Karvy is also in the broking business, investors who use Karvy’s depository
services get a dual benefit. They can use Karvy’s brokerage services to execute
transactions and Karvy’s depository services to settle them.

3. Investment Products Distribution:

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Company is also concern with the distribution of investment products like

(a). Fixed Deposit

(b). Bonds
(c). IPO

(a). Fixed Deposit:

KARVY is dealer of 34 fixed deposits of various types which includes fixed deposits of
Public Sector, Non Banking Finance Companies, Housing Finance Companies and
Manufacturing Companies.

Company is dealer of following Fixed Deposits

PUBLIC SECTOR
Sl. No. Company Name
1 HUDCO
2 Sardar Sarovar Narmada Nigam Ltd.
3 Tamilnadu Power Finance Corporation Ltd.
4 NTPC

[Table5: Public Sector FD with which Karvy deals]

NON BANKING FINANCE COMPANIES

Sl. No. Company Name
1 Ashok Leyland Finance Ltd.
2 Bajaj Auto Finance Ltd.
3 Birla Home Finance Ltd.
4 Cholamandalam Investment & Finance Co. Ltd.
5 Escorts Finance Ltd.
6 First Leasing Company of India Ltd.
7 IDBI Suvidha
8 Nicco Uco Alliance Credit Ltd.

[Table6: FD of Non Banking Finance Companies with which Karvy deals]

HOUSING FINANCE COMPANIES

Sl. No. Company Name
1 Can Fin Homes Ltd.
2 Dewan Housing Finance Corporation Ltd.
3 Gruh Finance Ltd.
4 HDFC Ltd.
5 PNB Housing Finance Ltd.
6 Sundaram Home Finance Ltd.

[Table7: FD of Housing Finance Companies with which Karvy deals]

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MANUFACTURING COMPANIES
Sl. No. Company Name
1 A P Paper Mills Ltd.
2 Amtek India Ltd.
3 Atul Ltd.
4 Ballarpur Industries Ltd.
5 Chambal Fertilizers & Chemicals Ltd.
6 Escort Ltd.
7 Greaves Ltd.
8 Gujarat Alkalies & Chemicals Ltd.
9 Indian Express
10 Ind-Swift Ltd.
11 JK Industries Ltd.
12 Jindal Steel & Power Ltd.
13 Sound Craft Industries Ltd.
14 Supreme Industries Ltd.
15 Zuari Industries Ltd.

[Table8: FD of Manufacturing Companies with which Karvy deals]

(b). Bonds:

Karvy is dealer of following bonds

• RBI Saving Bonds

• NHB
• REC

(c). IPO:

Company is also provides services related to Initial Public Offer of company. Company
provides stationary at the time of IPO as well as provides information to investors
regarding IPO and solves their queries.

4. Investment Advisory Services:

This division provides portfolio management services to high net-worth individuals and
corporate. The expertise of Karvy in research and stock broking gives it the right
perspective to provide investment advisory services. Company provides advisory services
to its clients.

Financial goal of each individual investor varies according to his dream, ambition and
family size and future financial planning for the children & old age pension for self and
wife so does the pathway to achieve it. Karvy apply the principles of Financial Planning
as both science & art, it understands the time horizon, risk bearing capacity and
investment goals of investors keeping in mind their psyche and financial needs. Based
upon this Karvy helps individual investors to plan their entire life up to retirement, Taxes,
Insurance needs and other important personal financial goals. It designs portfolio for

14
investor to invest their saving in various financial products like shares, bonds, debentures,
mutual funds, fixed deposits, insurance etc., Company design portfolio by considering
following factors.

• Investor’s requirement of getting money back,

• Investor’s willingness to take risk,
• Investor’s tax planning etc.

5. Corporate finance & Merchant banking:

Corporate finance is the financial activity of corporation. It deals with the firm's
operations with regard to investing and financing. It concerned with how firms raise
capital and the consequences of alternative methods of raising capital. Firm’s capital can
be raised by raising loans, issuing shares, and acquiring or merging with other businesses
by public or private companies.

Merchant banking is a financial intermediation that matches entities that need capital and
those that have capital. Hence they facilitate the flow of capital in the market.

Karvy enjoys SEBI category (I) authorization for Merchant Banking. Karvy offers the full
spectrum of Merchant Banking Services, beginning from identifying the best time for an
issue to final stage of marketing it, to harvest unparalleled success.

As a merchant banker Karvy offer following services:

• Issue management
• Instrument designing
• Pricing of the issue
• Registration process for the issue of shares
• Marketing efforts
• Final allotment to investors
• Listing details on stock exchanges
• Loan syndication
• Lease financing
• Corporate advisory services
• Underwriting
• Portfolio management

6. Insurance:

Karvy is also dealer of many private life insurance companies. At Jamnagar branch,
company is associated with dealing of following companies.

• ICICI Prudential Life Insurance

• HDFC Life Insurance
• TATA AIG Life Insurance
•

7. Mutual Fund Services:

15
Since its inception in 1982, Karvy has demonstrated a dedication coupled with dynamism
that has inspired trust from various segments – corporate, government bodies and
individuals. Karvy has since been performing a pivotal role as the intermediary – the
interface – between these players.

With Mutual Funds emerging as a distinct asset class, Karvy has made a strategic choice
to leverage the power of latest technology to provide a cutting edge to its services. Karvy,
today, service nearly 80% of the asset management companies (AMCs) across an
extensive network of service centers with assets under service in excess of Rs.10,000
crores.

Karvy's ability to mass customize and offer a diverse range of products for a diverse range
of customers has helped mutual fund companies to uniquely position themselves in the
market place. These diverse range of services cut across multiple delivery channels –
service centers, web, mobile phones, call center – has brought home the benefits of
technology to investors, distributors, and the mutual funds.

Going forward, Karvy shall strive to create new products and services, which would
address the needs of the end customer. Company’s single minded focus in delivering
products for customers has given it the distinguished position of being the preferred
provider of financial services in the country.

16
List of Mutual Fund Clients of KARVY:

1 Alliance Mutual Fund

2 Birla Mutual Fund
3 Bank of Baroda Mutual Fund
4 Can Bank Mutual Fund
5 Chola Mutual Fund
6 Deutsche Mutual Fund
7 DSP Merrill Lynch Mutual Fund
8 Franklin Templeton Investments
9 GIC Mutual Fund
10 HDFC Mutual Fund
11 HSBC Mutual Fund
12 IL & FS Mutual Fund
13 JM Mutual Fund
14 Kotak Mutual Fund
15 LIC Mutual Fund
16 Punjab National Bank Mutual Fund
17 Prudential ICICI Mutual Fund
18 Principal Mutual Fund
19 Reliance Mutual Fund
20 State Bank of India Mutual Fund
21 Standard Chartered Mutual Fund
22 Sundaram Mutual Fund
23 SUN F&C Mutual Fund
24 Tata Mutual Fund
[Table9: List of MF Companies with which Karvy deals]

8. Income Tax enabled services:

Karvy has been started this service since March, 2004. Karvy is work as TIN Facilitation
Centre it provides following IT enabled services.

a. Distribution of PAN Card.

b. Distribution of TAN Card.
c. Services related to e-TDS.

Karvy work as an intermediary between NSDL and IT payers. Karvy provides various
form for different IT enabled services and guide people to fill that forms. It also solves
queries of the tax payers. It also distributes PAN and TAN card to the tax payers.

TIN Overview

National Securities Depository Ltd. (NSDL) has established a nationwide Tax Information
Network (TIN) on behalf of the Income Tax Department (ITD). This is designed to make

17
the tax administration more effective, furnishing of returns convenient, reduce compliance
cost and bring greater transparency.

While NSDL will be the primary agency responsible for the design, implementation and
maintenance of TIN as per the requirements of ITD, other agencies will also play key
roles in the TIN system.

Karvy has established infrastructure required to provide IT enabled services so, Karvy
provides TIN facilitation centers all over India on behalf of NSDL. Besides Karvy
following companies can also work as intermediary between NSDL and customers.

• Alankit Assignments Ltd.

• Integrated Enterprise (I) Ltd.
• Shell Tran source Ltd.

[Fig.2 TIN System]

The banking system, being the agency that collects the money on behalf of the ITD
against tax obligations from the tax payers will be linked to the TIN central system to
provide accounting information on tax paid by various entities under various heads. As
banks are relatively technology-enabled entities, they will directly be linked electronically
to the TIN central system enabling online tax accounting.

On the other hand, the entities depositing the tax (deductors) vary substantially with
respect to their computer skills and hence TIN design provides for TIN Facilitation
Centers managed by NSDL to help digitization and upload of tax payment related
information to the TIN central system.

18
Besides NSDL, UTI Investor Services Ltd. may also provides IT Enabled services.

19
 9. Registrars & Transfer agents:

In 1985, Karvy entered the Registrar and Share Transfer Business to create a market niche
in the competitive field of financial services. In 1994-95, it reached a milestone when it
processed 104 Public Issues constituting 46 per cent market share. Now in its second
decade of existence, Karvy is the leader in the industry: In an opinion poll conducted by
an independent market research agency - MARG, Karvy has been rated as India’s Most
Admired Registrar on various parameters: -

• Overall Excellence.
• Handling of Volumes
• Timely Dispatch
• Quality Management and Technological Up gradation.

A SEBI Category 1 Registrar, So far, Karvy has handled over 675 ISSUES as Registrars
to public issues processed over 52 million applications and is servicing over 16 million
investors from various locations spread over 205 clients.

10. Loan:

Karvy has recently started this service at selected branches of metro cities. This service
has not been started in Saurashtra-Kucch region. Karvy provides loans for following.

• Vehicle Loan
• Home Loan
• Personal Loan

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 MARKETING STRATEGY OF KARVY

Market Positioning:

Market positioning statements of Karvy are “At Karvy we give you single window
service” and “We also ensure your comfort”.

So, Karvy focus on the consumers who prefer almost all investment activities at same
place by providing number of various financial services. At Karvy a person can
purchase or sell shares, debentures etc. and at the same place also demat it. Karvy
also provides other investment option to the same person at same place like Mutual
Fund, Insurance, Fixed Deposit, and Bonds etc. and help the person in designing his
portfolio. By this way Karvy provides comfort to its customers.

Karvy is also positioned according to Ries and Trout. Karvy is promoted as a no. 1
investment product distributor and R & T agent of India.

Target Market:

Karvy uses demographic segmentation strategy and segment people based on their
occupation. Karvy uses selective specialization strategy for market targeting. Target
person for the Karvy Stock Broking and Karvy Investment Service are persons who can
work as sub-broker for the companies. Companies focus on Advisors of Insurance and
post office, Tax consultants and CAs for making sub-broker.

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Marketing channel System:

Karvy uses one level marketing channel for investment product distribution. Sub-brokers
work as intermediary between consumer and company. Company has both forward and
backward flow of activity through channel. Company distributes stationery, brokerage,
and information forward to its sub-broker. The sub-brokers send filled forms, queries,
amount of investment etc. back to the company.

Training Channel Members:

Karvy provides training to the sub-brokers because they will be viewed as the company by
the investors. The executives of Karvy explain various new schemes of investment to the
sub-brokers with its objective, risk factors and expected return. Company also periodically
arrange seminar to guide sub-brokers.

Advertising and Promotion:

The objective of advertising of Karvy is to create awareness about services of Karvy

among investors and sub-brokers and increase sub-brokers of Karvy.

Company doesn’t give advertisement in media like TV, Newspapers, and Magazines etc.
Karvy’s advertisement is made indirectly by the companies associate with it. Karvy is R
& T agent of around 700 companies. They publish name, address and logo of Karvy on
their annual report.

Karvy also publish its weekly Stock Market Newsletter ‘Karvy Bazaar Baatein’ and
monthly magazine ‘The Finapolis’ to guide investors and sub-brokers about market.

22
 HR POLICY OF KARVY

Karvy’s HR Department is located at Hyderabad.

Recruitment and Selection Policy:

The upper level members like zonal managers, regional managers, branch managers and
senior executives are recruited by publishing recruitment advertisement in leading
national level newspaper. The qualified applicant are then called for interview and
selected.

The regional manager has authority to select lower level employee like peon, marketing
executives, accountant etc. by approval of zonal manager.

Training and Development:

Continuous training and upgrading technical, behavioral and managerial skills is a way of
life in Karvy. Karvy encourages employees to hone their skills regularly to enable them to
face the challenges of the changing requirements of customers that fit market up and
down.

Training needs analysis is done on a regular basis and systematic methodologies are
ensured that skills and capabilities of all employees are constantly upgraded to enable
them to perform in the challenging work environment.

New employee has given training under experienced employee. The new employee work
under experience employee and observe his all activities. When company employs new
technology or there is any change in the working of company the training program is
arranged.

23
Employee Motivation:

Karvy’s employees are highly empowered. They don’t have to report any person of the
same branch but they report upper level branch. E.e. Marketing executive of Jamnagar
branch directly reports Senior Marketing executive of Baroda zonal office.

If particular branch earn certain profit then Karvy gives them special incentives. E.g. last
year Karvy had arranged two days tour of Div for their employees of Rajkot, Jamnagar,
Junagadh and Bhavnagar branch which was totally free of cost. This also helps in
maintaining co-operation between employees.

24
 NATIONAL LEVEL ORGANIZATION CHART

CM & MD
(Hyderabad)

GM GM GM
(Marketing) (Finance) (HRM)

Zonal Manager
(Baroda)

Regional Manager
(Rajkot)

) Branch Mgr. Branch Mgr. Branch Mgr.

(Junagadh) (Jamnagar) (Bhavnagar

Accountant Sr. Executives

Executives

[Fig.3 National Level Organization Chart of Karvy]

25
 BRANCH LEVEL ORGANIZATION CHART

Branch Manager

Sr. Executive Executives Executive

(Investment) (SB - 4) (IT)

Marketing Clerk
Executives-3

Executive
(Demat) Accountant

Peon Peon

[Fig.4 Branch Level Structure of Karvy]

26
Quality Policy Of Karvy:

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial
services. In the process, Karvy will strive to exceed Customer’s expectations.

Quality Objectives of Karvy

• Build in-house processes that will ensure transparent and

harmonious relationships with its clients and investors to provide high quality of
services.

• Establish a partner relationship with its investor service agents and

vendors that will help in keeping up its commitments to the customers.

• Provide high quality of work life for all its employees and equip
them with adequate knowledge & skills so as to respond to customer's needs.

• Continue to uphold the values of honesty & integrity and strive to

establish unparalleled standards in business ethics.

• Use state-of-the art information technology in developing new and

innovative financial products and services to meet the changing needs of investors
and clients.

• Strive to be a reliable source of value-added financial products and

services and constantly guide the individuals and institutions in making
a judicious choice of same.

• Strive to keep all stake-holders (shareholders, clients, investors,

employees, suppliers and regulatory authorities) proud and satisfied.

27
 Achievements of Karvy:

• Largest mobilizer of funds as per PRIME DATABASE

• First ISO - 9002 Certified Registrar in India

• A Category- I Merchant banker

• A Category- I Registrar to Public Issues

• Ranked as "The Most Admired Registrar” by MARG

• Handled the largest- ever Public Issue - IDBI

• Strategic tie-up with Jardine Fleming India Securities Ltd

• Handled over 500 Public issues as Registrars

• Handling the Reliance Account which accounts for nearly 10

million account holders

• First Depository Participant from Andhra Pradesh

28
 SWOT ANALYSIS OF KARVY

Strengths:

• Employees are highly empowered.

• Strong Communication Network.
• Good co-operation between employees.
• Number 1 Registrar and Transfer agent in India.
• Number 1 dealer of Investment Products in India.

Weaknesses:

• High Employee Turnover.

Opportunity:

• Growth rate of mutual fund industry is 40 to 50% during last year

and it expected that this rate will be maintained in future also.
• Marketing at rural and semi-urban areas.

Threats:

• Increasing number of local players.

• Past image of Mutual Fund.

29
About Jamnagar Branch:

Jamnagar branch comes under Rajkot branch which is a regional office of Karvy for
Saurashtra Kutch region. It was established on Jan. 2002. In Saurashtra there are four
Branch Offices of Karvy:

• Rajkot
• Jamnagar
• Junagadh
• Bhavnagar

In Jamnagar Karvy has started Demat Services on 21 June 2002.

DP ID of Karvy is IN300394.

In Jamnagar Karvy has started IT enabled services on Mar. 2004.

30
 INDUSTRY DETAILS

Following are list of Mutual Fund companies in India.

Sr. No. Mutual Fund Name No. of

Schemes
1 Alliance Mutual Fund 36
2 Benchmark Mutual Fund 5
3 Birla Mutual Fund 74
4 Bank of Baroda Mutual Fund 17
5 Can Bank Mutual Fund 25
6 Chola Mutual Fund 45
7 Deutsche Mutual Fund 40
8 DSP Merrill Lynch Mutual Fund 40
9 Escorts Mutual Fund 15
10 Franklin Templeton Investments 130
11 GIC Mutual Fund 5
12 HDFC Mutual Fund 79
13 HSBC Mutual Fund 32
14 IL & FS Mutual Fund 43
15 ING Vysya Mutual Fund 55
16 JM Mutual Fund 55
17 Kotak Mutual Fund 56
18 LIC Mutual Fund 35
19 Morgan Stanley Mutual Fund 1
20 Punjab National Bank Mutual Fund 4
21 Prudential ICICI Mutual Fund 124
22 Principal Mutual Fund 68
23 Reliance Mutual Fund 74
24 Sahara Mutual Fund 12
25 State Bank of India Mutual Fund 59
26 Standard Chartered Mutual Fund 100
27 Sundaram Mutual Fund 52
28 SUN F&C Mutual Fund 1
29 Tata TD Mutual Fund 100
30 Taurus Mutual Fund 9
31 Unit Trust of India 42
32 UTI Mutual Fund 66

[Table10: Mutual Funds in India]

Development of Mutual Funds in India

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank the. The history of
mutual funds in India can be broadly divided into four distinct phases

31
FirstPhase-1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. 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.

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.

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

32
 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.
The graph indicates the growth of assets over the years.

180000

160000
154018

140000

120000 121805 121778

Rs. In Crores

100000

80000 79464

60000

47000
40000

20000

4564
0 25
Mar-65 Mar-87 Mar-93 Jan-03 Mar-03 Sep-03 May-04

Years

[Fig. 5: Growth in Assets Under Management]

[Source: www.amfiindia.com]

Mutual Funds – Organisation

There are many entities involved and the diagram below illustrates the organizational set
up of a mutual fund:

33
34
45% 42%
40%
36%
35%
30%
25%
20%
15% 14%
10%
5% 3% 4%
1%
0%

ELSS
Market

Gilt
Income

Growth

Money
Balanced
Fund Type

[Fig. 6: Assets Under Management By Fund Type]

[Source: www.amfiindia.com]

40% 38%
35%
30% [Fig.
25%
21%
20% 19%
17%
15%
10%
5%
5%
0%
Bank

Joint-I
Joint-F

Private
Institutions

Fund Type

7 Assets Under Management By AMC]

[Source: www.amfiindia.com]

35
 REGULATORY BODIES

Financial System is basically responsible for the major up and downs in the economy. So,
there are some regulatory bodies on it which ensures effectiveness in the management of
fund of the investors and transparency in the transactions.

Ministry of Finance

SEBI RBI Dept. of IT

Stock Brokers Commercial PAN

R & T Agent Banks TAN
Mutual Fund NBF Co. e-TDS

[Fig.8: Regulatory bodies]

36
 COMPETITORS DETAILS

1. Bajaj Capital

It was established in 1964 at Delhi. In 1965 it innovates a new financial instrument

‘Companies Fixed Deposits’ and becomes the first company to raise Fixed Deposits. The
objective of company is to provide professional guidance to investors on where, when
and how to invest and to assist the corporate sector in its resource raising activities.
Bajaj Capital became the first company to set up ‘Investment Centers’ all over India
for this purpose. Today, Bajaj Capital has 90 offices in over 40 important Indian
Cities and has a team of around 500 employees nationwide.

Services provided

• Merchant banking
• Buying and Selling of Money Market Investments
• Distribution of financial products
• Investment Advisory Service

» Company fixed deposits

» Bonds
» Mutual funds
» Life insurance
» General insurance
» Pension schemes
» Post office schemes
» Tax saving schemes
» Insurance linked investment schemes
» Initial public offerings
» Housing loans
» NRI schemes
» Car insurance

37
• Financial Planning

» Investment planning
» Retirement planning
» Insurance planning
» Children's future planning
» Tax planning
» Short-term cash flow planning

2.MCS Ltd.

It is established in 1985 in Delhi. It is one of the largest Data Processing House employing
more than 600 people.

MCS Ltd. has 8 branches all over India including 2 in Gujarat,

Ahmedabad and Baroda.

Volumes Handled

• Share registry activities for over 100 corporate servicing over 10

million investors.
• Mutual fund operations for 25 funds, servicing over 4.5 million
investors.
• Billing & settlement plan for Indian operations of IATA Geneva for
1.2 million tickets per annum covering (26 airlines & over 1200 agents).

Services Offered:

• Registrars and Transfer Agents

• Registrars to IPO’s /Right Issues
• Registrars to Open Offers
• Registrars to Mutual Funds
• Data Processing for Airlines
• Print Shop Services

MCS is a major player in these activities in the Country with a market share of about 25%.
MCS today provides these services to over 140 Corporate and Mutual Funds for a total
investor base of 15 million.
3. N.J.India Investments Pvt. Ltd.

NJ India Invest (formerly known as NJ Capital stocks) was started in 1994 to cater to the
growing financial services sector. NJ India Invest evolved out as a client focused need
based investment advisory firm. NJ regards mutual fund as one of the best investment
avenue available to satisfy any kind of investment need.

NJ India Investment has 11 branches in Gujarat including 3 branches in Saurashtra.

• Rajkot
• Jamnagar

38
• Bhavnagar

4. ICICI Securities Ltd.

ICICI Securities Limited (i-SEC) is a wholly owned investment-banking subsidiary of

ICICI Limited. ICICI is the only non-Japanese Asian financial institution to be listed on
the New York Stock Exchange (NYSE). ICICI Securities was formed on 22nd Feb. 1993,
when ICICI's Merchant Banking Division was spun off into a new company, ICICI
Securities today is India's leading Investment Bank and one of the most significant players
in the Indian capital markets.

ICICI Brokerage Services Limited (IBSL) set up in March 1995, IBSL is a 100%
subsidiary of i-SEC. It commenced its securities brokerage activities in February 1996 and
is registered with the National Stock Exchange of India Limited and The Stock Exchange,
Mumbai.

ICICI has started a website ICICIdirect.com which is the most comprehensive website,
which allows you to invest in Shares, Mutual funds, Derivatives (Futures and Options)
and other financial products.

ICICI has a large network of branches all over India.

39
 Services offered:

• Merchant Banking
• Demat Service
• Stock Broking

5. HDFC

HDFC is the leading financial company in India. IT has large network of branches all over
India. HDFC Securities which is fully subsidiary of HDFC provides demat service.

HDFC and its subsidiary provides following services.

• Demat Service
• Life Insurance
• Banking Service
• Housing Finance
• Vehicle Finance
• Education Loan
• Personal Loan
• Mutual Fund

6. Kotak Securities Ltd.

Kotak Securities needs no introduction as one of the largest stock broking houses in the
country and a leading distributor of primary market offerings. Kotak Securities limited is a
joint venture between Kotak Mahindra Bank and Goldman Sachs, the international
investment banking and brokerage firm.

Kotak Securities is a corporate member of both the BSE and the NSE. It is also a
depository participant with the National Securities Depository Limited (NSDL) for trading
and settlement of dematerialized shares.

40
 Services offered:

• Stock Broking
• Financial Product Distribution
• Demat Services
• Investment Advisory Services

7. Motilal Oswal Securities Ltd.

Motilal Oswal Securities Ltd (MOSt) is one of the leading equity research and broking
houses of India. MOSt has a 20-member research team, which is engaged round the clock
in analyzing the Indian economy and corporate sectors to identify equity investment ideas.
Asia Money Broker's Poll 2002 has rated MOSt as one of the best Indian broking house,
for research, for the second time since 2000.

Motilal Oswal is member of NSDL and CDSIL for DP. It has wide network of branches.
It has 158 branches all over India.

Services Offered:

• Demat Services
• Stock Broking
• Investment Advisory Service

41
 PRODUCT DETAILS

Mutual funds serve as a link between the saving people and the capital market in that they
mobilize saving from investors and bring them to borrowers in the capital markets. In
short, it is a common pool of money into which investors place their contribution that is to
be invested in accordance with a stated objective.

A mutual fund uses the money collected from the investors to buy those assets, which are
specially permitted by its stated investment objective. When an investor subscribes to a
mutual fund, he/she buys a part of asset or the pool of funds that are outstanding at that
time.

A mutual fund is constituted as an investment company and an investor buys into the
fund, means he buys the share of the fund and is known as a unit holder. Since each unit
holder is a part of owner of a mutual fund, it is necessary to establish the value of his part.
Since the unit held by an investor evidences the ownership of the fund’s assets, the value
of the total asset of the fund when divided by the total number of units issued by the
mutual fund gives us the value of one unit. This is called as Net Asset Value (NAV).

42
 STRUCTURE OF INDIAN MUTUAL FUNDS

Mutual fund industry is highly regulated by the government keeping in view of the
protection of investor’s interest as well as to maintain operational transparency.

In India SEBI Regulations Act, 1996, guides the formation and operation of Mutual
Funds. A Mutual Fund comprises of 4 separate entities.

1. Sponsor
2. Board of Trusties
3. Asset Management Company
4. Custodian and Depositories
5. Distributors

1. Sponsor:

“Sponsor” is defined under SEBI regulation as any person who, acting alone or in
combination with another body corporate, establishes a mutual fund. The sponsor gets the
fund registered with SEBI. The sponsors form a trust and appoint a Board of Trustees.

• The sponsor must contribute at least 40% of the net worth of the
AMC.
• The sponsor must posses a sound financial track record over 5 years
prior to registration.

43
 2. Board of Trustees:

Mutual funds are managed by Board of Trustees. Trust is created by a document called the
Trust Deed that is executed by fund sponsor in favour of trustees.

• The trustees appoint the AMC and custodian with the prior
approval of SEBI.
• They also approve all the schemes floated by the AMC.
• They have right to dismiss the AMC, with the approval of SEBI.
• Half of the trustees should be independent persons. Neither the
AMC, nor its employees can act as trustee.
• A trustee can not be appointed as a trustee of two or more mutual
funds until and unless he is an independent person or has permission from the Mutual
Fund where he is trustee.
• Trustees can be removed only by prior approval of SEBI.

3. Asset Management Company:

The role of an AMC is to act as the investment manager of the Trust under the Board
supervision and direction of the Trustees.
The AMC is required to be approved and registered with SEBI.

• The AMC of a Mutual Fund must have a net worth of at least Rs.
10 crore at all time.
• The AMC can not act as a trustee of any other Mutual Fund.
• They will float schemes only after obtaining the prior approval of
the Trustees and SEBI.
• The director of AMC should be a person of reputed of high
standing and at least have five years experience in relevant field.
• AMC can be terminated with 75% unit holders or majority of
trustees.

44
4. Custodian and Depositories:

As per SEBI Regulations Mutual Funds shall have a custodian who is not any way
associated with the AMC. It carry outs the activity of safe keeping the securities or
participating, in any clearing system. The custodian should be independent from sponsors
and AMC and should have a sound track record and adequate relevant experience.

As Indian capital markets are moving away from having physical certificates to ownership
of these securities in “dematerialized” form with Depository. Mutual Fund’s
“dematerialized” securities are hold by depository participant.

5. Distributors:

For a fund to sell units across a wide retail base of individual investors, an established
network of distribution agents is essential. AMCs usually appoint Distributors or Brokers,
who sell units on behalf of the fund. A broker usually acts on behalf of several mutual
funds simultaneously and may have several sub-brokers under him for the purpose of
distribution of units.

45
 MUTUAL FUND – A GLOBALLY PROVEN INVESTMENT

Worldwide, the mutual fund has a long and successful history. The popularity of mutual
fund has increased manifold. In developed financial market, like US mutual funds have
almost overtaken bank deposits and total assets of over US $ 3 trillion.

In India, Mutual Fund industry started with the setting up of UTI in 1964. Public sector
banks and financial institution began to establish Mutual Funds in 1987. The private
sector and foreign institutions were allowed to set up Mutual Fund in 1993.

WHAT IS 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 is shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.

46
 Critical View About Mutual Fund

Advantages:

1. Portfolio Diversification:

Each investor in a fund is a part owner of all the funds assets, thus enabling investor to
hold a diversified investment portfolio even with a small amount of investment, which
would otherwise require big capital.

2. Professional Management:

Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyze the performance and prospect of
companies and selects suitable investments to achieve the objectives of the scheme.

3. Diversification:

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

and sectors. This diversification reduces the risk because all stock can not go through a
downtrend at the same time and in the same proportion. You achieve this diversification
through a mutual fund with powerless money that you can do on your own.

4. Reduction of Transaction Cost:

The investors bear all the cost of investing such as brokerage or custody of securities.
When going through the fund investor has the benefit of economies of scale; the funds pay
lesser cost because of larger volumes, a benefit passed on to its investors.

5. Liquidity:

By investing in Mutual Funds the investors can cash their investment by selling their units
to the fund if open-ended, or selling them in the stock market if the fund is close ended.

6. Convenience & Flexibility:

Mutual Funds Companies offer investor to transfer their holding from one scheme to
other.

7. Tax Benefits:

The investors are totally exempt from paying any tax on the income they receive from the
Mutual Funds.
Investment up to 10000 in ELSS qualifies for tax rebate of 20%.

8. Regulatory oversight:
Mutual funds are subject to many government regulations that protect investors from
fraud.

9. Convenience:

47
You can usually buy mutual fund shares by mail, phone, or over the Internet.

10. Well regulated

Limitations:

1. No Control over Costs:

An investor in a mutual fund has no control over the overall cost of investing. He/she has
to pay investment management fees as long as he/she remains with the fund. Fees are
payable even while the value of the investment may be declining.

2. No Tailor made Portfolios:

Investors who invest on their own can build their own portfolios of shares and bonds and
other securities. Investing through fund means he/she delegates this decision to the fund
managers.

3. Managing a Portfolio of Funds:

Availability of a large number of funds can actually mean too much choice for the
investor. He/she may again need advice on how to select a fund to achieve his/her
objectives, quite similar to the situation when he/she has to select individual shares or
bonds to invest in.

4. Entry and Exit Cost:

When large bodies like a fund invest in shares, the concentrated buying or selling often
result in adverse price movements i.e. at the time of buying, fund has to pay high and vise-
versa.

5. No Guarantees:

No investment is risk free. 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.

48
 MUTUAL FUND CYCLE

[Fig.9: Mutual Fund Cycle]

[Source: amfiindia.com]

From above cycle, it can be observed clearly that how the money from the investors flow
and they get returns out of it. With a very small amount of fund, investors pool their
money with fund managers.

After studying the market, the fund manager invests money of the investors in various
securities like shares, bonds, debentures, government securities etc. to achieve goal of the
investors.

With ups and downs in the market returns are generated and they are passed on to the
investors in form of dividend or capital gain or lost. The above cycle is very clear and also
very effective.

The fund manager while investing on behalf of investors takes into consideration various
factors like time, risk; amount etc. so that he/she can make proper investment decision.

49
 Types of Mutual Fund

Types of Mutual Fund

By Objective

Balanced Money
Equity Fund Debt Fund Gilt Fund
Fund Market

By Duration

Open Ended Close Ended Interval

By Load

Load Fund No Load Fund

Other Fund

Tax Saving Index Fund Sector Fund Comm. Fund Offshore

[Fig.10: Types of Mutual Funds]

50
 1. By objective:

Investment goals vary from person to person. While somebody wants security, others
might give more weightage to returns alone. Somebody else might want to plan for his
child’s education while somebody might be saving for the proverbial rainy day or even
life after retirement. With objectives defying any range, it is obvious that the products
required will vary as well. So, Mutual funds can be classified based on the objectives of
the investor.

(a). Equity Fund:

Equity funds invest a major portion of their corpus in equity shares issued by companies.
NAV of equity funds are fluctuated by fluctuation in price of shares that it holds. So there
is a high risk as well as high return in equity fund. Potential to earn in such funds is higher
when they are invested for long term.

The leading example of such funds are

Prudential ICICI Growth Plan,

Tata Pure Equity Fund,
Reliance Vision,
Franklin India Prima Fund etc.

(b). Debt Fund:

Debt funds invest in debt instruments debt instruments issued by governments, private
companies, banks and financial institutions. By investing in debt, these funds target low
risk and stable income investors. These funds are low risk low return funds.

The leading examples are

Birla Income Plus,

Principal Income Fund,
HDFC Income Fund,
UTI Bond Fund etc.

(c). Balanced Fund:

A balanced fund is one that has a portfolio comprising debt instruments as well as
preference and equity shares. The idea is to reduce volatility of funds, while providing
some upside for capital appreciation. They are best suitable for the people looking for a
combination for capital appreciation and regular income and best time spend for such
investment is more than 3 years.

The leading examples are

Prudential ICICI Balanced Fund,

Birla Balance Fund,
Franklin India Balance Fund,
Sundaram Balance Fund etc.

51
(d). Money Market Fund:

Money market funds invest in securities of a short-term nature, which generally means
securities of less than one-year maturity such as Treasury Bills issued by governments,
Certificates of deposit issued by banks and Commercial paper issued by companies.

The major strength of money market funds are the liquidity and safety of principal that the
investors can normally expect from short term investments.
The leading examples are

Prudential ICICI Liquid Plan,

Templeton India Liquid Fund,
Grindlays Cash Fund etc.

(e). Gilt Fund:

These funds are sort of government funds wherein the investments are made in debt
instrument of government, which carry no risk of non payment of interest as the RBI
manages the payment of interest and principal on the investments. These funds are best
suited for regular income and long term investment objectives.

The leading examples are

Prudential ICICI Gilt Fund,

Tata Gilt Securities Fund,
Templton India Government Securities Fund etc.

2. By Duration:

(a). Open-ended Fund:

An open ended fund is one that is available for subscription and repurchase on a
continuous basis. These schemes do not have a fixed maturity period. Investors can
conveniently buy and sell units at NAV related prices which are declared daily basis. The
key feature of this fund is liquidity.

(b). Close-ended Fund:

A close ended fund has a stipulated maturity period e.g. 5-7 years. The fund is open 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 initial public issue and thereafter they can buy or
sell units on stock exchange where the units are listed at NAV. These mutual fund
schemes disclose NAV generally on weekly basis.

(c). Interval Fund:

Interval funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during pre determined intervals at NAV related prices.

52
Risk Return Grid

Risk
Tolerance/Return Focus Suitable Products Benefits offered by MFs
Expected
Bank/ Company FD, Debt Liquidity, Better Post-
Low Debt
based Funds Tax returns
Partially Balanced Funds, Some Liquidity, Better Post-
Debt, Diversified Equity Funds and Tax returns, Better
Medium
Partially some debt Funds, Mix of Management,
Equity shares and Fixed Deposits Diversification
Diversification, Expertise
Capital Market, Equity Funds in stock picking,
High Equity
(Diversified as well as Sector)Liquidity, Tax free
dividends

[Table11: Risk Return Grid of various MF]

3. By Load:

(a). Load Fund:

Marketing of new mutual fund scheme involves initial expenses. These initial expenses
may be recovered from the investors by entry or exit load.

(i). Entry Load or Front-end Load:

If initial expenses recovered from investors at the time of investor’s entry into the fund, by
deducting a specific amount from his initial contribution it is called Entry Load.

53
 (ii). Exit Load or Back-end Load:

If initial expenses recovered at the time of the investor’s exit from the scheme, by
deducting a specified amount from the redemption proceeds payable to the investor it is
called exit load.

(iii). Deferred Load:

The load amount charged to the scheme over a period of time is called a deferred load.

(b). No Load Fund:

Funds that don’t charge entry, exit, or deferred load or any other charges for sales
expenses are called no load funds.

• Now, generally all Mutual Fund companies charge 2 to 2.5% entry

load on equity fund.

• Generally there is no exit load on equity and sectoral funds to

maintain liquidity of that funds.

• Generally there is no entry load on gilt scheme and income fund.

• There is 0.25 to 1% exit load on gilt and income fund if investors

exit from fund before specified time which is generally 3 to 6 months.

54
4. Other types of fund:

(a). Tax Saving Funds:

These schemes offer tax rebates to the investors under specific provisions of the Income
Tax Act, 1961 as the Government offers tax incentives for investment in specified
avenues. E.g. Equity Linked Saving Scheme (ELSS). Pension schemes also offer tax
benefits.

The leading examples are

Prudential ICICI Tax Plan,

Templeton India Pension Plan,
Franklin India Taxshield etc.

(b). 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
weightage comprising of an index. NAV of such funds are changed accordance with the
change in the index.

The leading examples are

Birla Index Fund,

HDFC Index Fund,
Prudential ICICI Index Fund,
UTI Index Fund etc.

55
(C). Sector Funds:

These are the funds which invest in the securities of only those sectors or industries as
specified in the offer documents. E.g. Pharmaceuticals, Software, Petroleum etc. These
types of funds are more risky compared to diversified funds.

The leading examples are

Birla IT Fund,
Pru. ICICI FMCG Fund,
Franklin India Pharma Fund etc.

(d). Commodity Funds:

Commodity funds invest into the different commodities directly or through shares of
commodity companies. E.g. Commodity fund invest in gold or shares of gold mines.
Commodity funds have not yet developed in India.

(e). Off Shore Funds:

These funds invest in equities in one or more foreign countries there by achieving
diversification across the country’s borders. However they also have additional risks such
as the foreign exchange rate risk and their performance depends on the economic
conditions of the countries they invest in.

56
 PROBLEM FORMULATION

Marketing Research being a logical process definitely follows our predetermined

sequence or steps in order to obtain the desired results or outcomes. Though the entire
process of Marketing Research is quite complex and requires a considerable degree of
knowledge and skill, the step of the Problem Formulation is the most challenging and
critical one for the researcher as well as the research. It is rightly said that a problem, well
defined is half solved.

In today’s competitive world companies can not afford to reactive, instead the trend is
toward proactive. It is due to the increasing competition that the companies can not afford
to undertake research until something goes wrong. This can curtail the future growth or
even affect the very existence of the organization seeing to the trend of being proactive in
the future; companies are allocating more resources to the disciplines of research. In such
case it becomes a duty of researcher to ensure that the organization gets an optimum
return on the resources it has invested. Thus, Problem Formulation assumes great
importance in Marketing Research.

The Marketing Research project undertaken by me for the ‘Karvy Securities Limited’
encompasses within its scope, the study of “The Mutual Fund and to find out market
potential of KARVY Investor Service Ltd. with special reference to distribution of
Mutual Fund in Jamnagar City. Company wants to increase it’s sub-brokers who
can work as intermediary between company and the investors.”

57
 RESEARCH OBJECTIVES

Any activity done without an objective in a mind cannot turn fruitful. An objective
provides a specific direction to an activity. Objectives may range from very general to
very specific, but they should be clear enough to point out with reasonable accuracy what
researcher wants to achieve through the study and how it will be helpful to the decision
maker in solving the problem.

The objective of any research is basically divided into two categories.

Primary Objective:

To find out market potential of Karvy Investor Service Ltd.

Secondary Objectives:

Following are secondary objectives.

• To assess an awareness of mutual funds in Jamnagar City.

• To find out level of awareness of mutual funds in Jamnagar City.
• To find out how many investment advisors are interested in dealing
of mutual fund.
• To find out how many investment advisors are willing to work with
Karvy.

58
 RESEARCH METHODOLOGY

1. Research Design:

A research design is a pattern or an outline of a research project’s working. It is a

statement of only the essential elements of a study, those that provide the basic guidelines
for the details of the project. It comprises a series of prior decision that taken together
provide master plans for executing a research projects.

A research design serves as a bridge between what has been established i.e., the research
objectives and what is to be done, in conduct of the study to relish those objectives. If
there were no research design, the research would have only foggy notions as about what
is to be done.

I have used ‘Cross-Sectional Design’ of ‘Exploratory Type’. The research is of both

qualitative as well as quantitative type.

2. Unit of Analysis:

Mutual Fund Advisors.

Characteristics of interest:

• Advisor’s knowledge about Mutual Fund

• Advisor’s knowledge about Karvy
• Advisor’s interest in getting knowledge of Mutual Fund
• Advisor’s willingness to deal in Mutual Fund with Karvy
• Advisor’s preference in selecting tax saving instrument of
investment
• Advisor’s preference in selecting dealer

59
3. Sources of Data:

a. Primary Source:

The primary data is collected using sampling method and by survey using questionnaire.

b. Secondary Source:

Secondary data includes information regarding present market scenario, Information

regarding Mutual Funds and competitors are collected by Internet, Magazines and News
papers and books.

4. Sample Planning:

Sample Size: 50 units

Sample Extent: Jamangar City

Sampling Design:

A Sample Design is a definite plan for obtaining a sample from a given population. It
refers to the technique or method the researcher would adopt in selecting items for the
sample.

I have used both ‘Convenience Sampling Method’ and ‘Snow Ball Sampling Method’.

60
5. Data Collection Method:

I have used ‘Survey Method’ to collect data. I have collected data using questionnaire.

Questionnaire Plan

I have used ‘Structured Questionnaire’ for gathering the required data through
contacting respondent personally.
Type of Information:

I have collected Fact, Awareness, Attitude, Future action plan and reason using
questionnaire.

Type of Questions:

‘Close-ended questions’ of ‘Dichotomous’ and ‘Multiple Choice’ type are asked in the
questionnaire for data collection.

6. Data Analysis & Interpretation:

Data Analysis is based on the data collected by way of Questionnaires. From the collected
data findings are extracted. The data is tabulated and frequency distribution chart is
prepared.

61
 RESEARCH ANALYSIS AND INTERPRETATION

Rate reason for choosing particular dealer.

Mutual Fund Advisors'

Suggestion

Shares
Mutual Fund
Insurance
FD
Tax Bond
PPF

[Fig.12: Mutual Fund Advisors’ Suggestions]

Reasons of Choosing Above

Returns
Risk
Safety
Tax Benefite
Others

[fig.13: Reasons of Choosing Above]

15 15

12
No. of Advisors

10
8
6
5 5
4

0
<100 100-300300-500500-750 750- >1000
1000
No. of Clients

[Fig.17: Differentiate advisors according to no of their clients}

62
 60% 55%
50%
40%
30%
20%
14% 14%
11%
10% 5%
1%
0%

ELSS
Insurance

PPF

Bond
Pension
NSC

Plan
Inve stme nt Options

[Fig. 18 Advisors gets invested IT payers in]

60%
60%
50%
40% 40%

30%
20%
10%
0%
Interested Not
Interested

[Fig.20: Advisors who are interested in dealing of Mutual Funds]

100%
90%
80%

60%

40%

20%
10%
0%
Know Don't KNOW

63
 [Fig.22: Advisor know about MF services provided by Karvy]

70% 66%
60%
50%
40% 34%
30%
20%
10%
0%
Interested Not
Interested

[Fig.23: Advisor who are interested to attend seminar on MF]

75% 70%

60%

45%

30% 24%

15%
6%
0%
No Time Not Answered Not Interested

[Fig.24 Reason for not attending Seminar]

60%
54%
50% 46%

40%

30%

20%

10%
Interested Not Inteested

[Fig.25: Advisors who are interested to work with KARVY]

64
60%
52%
50%
40%
30%
22%
20%
11%
10% 5%
0%
Not No time Lack of Don't want to
Answered Knowledge expand
services

[Fig.26: Reasons for not interested in work with KARVY]

65
 FINDINGS

• The awareness level about Mutual Funds is quite low in the

Jamnagar City among advisors.

• Approximately 40% of advisers are aware of and interested in

dealing of Mutual Funds. The reason for not interested in dealing of Mutual Fund is
unawareness about Mutual Fund.

• Only 10% investment advisors are aware of MF services provided

by Karvy, so we can say that awareness level about MF services of Karvy is very low.

• Most of advisers are interested to know about Mutual Funds and

interested to attend seminar on Mutual Funds arranged by Karvy.

• Only 46% of advisers are interested to work with Karvy. Most of

advisors don’t want to work with Karvy because they have no time for expanding their
services.

• Most of people invest in insurance to save tax followed by PPF.

Insurance is widely used as tax-saving instrument.

66
 LIMITATIONS

• Due to limitation of time and cost constrains a sample size of only

50 respondents are chosen.

• Data Analysis and interpretation done may not be that strong due to
small sample and ‘Convenience Sampling Method’.

• The sample extent for research is only Jamnagar City.

• Some of the respondents may be biased in giving responses.

• My inexperience in research area might have affected results.

67
 CONCLUSIONS

• Mutual Fund Advisors give emphasis on mutual funds than other

investment options.

• Mutual Funds have given a new direction to the flow of personal

saving and enable small and medium investors in remote rural and semi urban areas to
reap the benefits of the stock market investment. Indian Mutual Funds are thus playing a
very important developmental role in allocation of scares resources in the emerging
economy.

• Karvy is not able to provide sufficient services to the investors due

to unawareness among advisors regarding services.

• The awareness level of investor is low in advisors are interested in

dealing in mutual fund.

• Very less advisors are knowing about services provided by karvy.

68
 RECOMMENDATIONS

• There is high potential market for Mutual Fund Advisors in

Jamnagar city, but this market needs to be explored as investors are still hesitated to invest
their money in Mutual Funds.

• In Jamngar investors have inadequate knowledge about Mutual

Funds, So proper Marketing of various schemes is required, company should arranges
more and more seminars on Mutual Funds.

• Awareness of MF services provided by Karvy is also very low so

company needs proper marketing of their all services by advertising, distribution of
pamphlet, arranging seminars etc.

• Most of advisors are not interested in dealing of Mutual Funds

because they don’t want to expand their services due to lack of time, so company should
provide them knowledge about single window services by which investor can get all
financial services from one place.

• Company should also provide knowledge about the growth rate and
the expected growth rate of Mutual Fund industry in India.

• Most of people aware of life insurance, NSC and PPF for tax saving
so, company should market various tax saving schemes of Mutual Funds and their
benefits.

• The interface among the investors and the Mutual Fund Companies
is the agents, so the agents should have proper knowledge about Mutual Funds as well as
market so that they can help investors in their investment decisions. The quality of agents
performance and investors trust on them can be improved only if they are permanent in
nature.

69
 ANNEXURE

QUESTIONNAIRE

We assure you that all the information that will be collected from you will remain fully
confidential and it is used for study purpose only.

1. As a financial investment adviser which investment options you

suggest to your customers?

Shares Mutual Fund

Insurance Fixed Deposit
Tax Bond PPF
Other

2. Please indicate reason for choosing above.

Returns Risk
Safety Tax Benefits
Timely Brokerage
Other

3. Approximately how many customers you have?

4. What is the brokerage Payment Period?
5. Expected Brokerage Payment Period

6. If a service person who pays Income Tax wants to invest, generally which
option do you suggest for investment?

Insurance
Pension Plan
PPF
Infrastructure Bond
ELLS Scheme
Other _______________________________________
7. Are you interested to deal in MF?

Yes
No
If No Why?

8. Do you know about MF services provided by Karvy’s Jamnagar Branch?

Yes
No

9. In future will you attend seminar arranged by Karvy to guide investors

about MF?

70
 Yes
No
If No Why?

10. Will you like to work with Karvy Securities Ltd for dealing in mutual fund?
Yes
No
If No Why?

11. Name :
Address :

Phone (O) (R)

Mobile :
Email :

Thank You

71
 GLOSSARY

Corporate advisory services

Merchant bankers offer customised solutions to solve the financial problems of their
clients. Merchant bankers study the working capital practices that exist within the
company and suggest alternative policies. They also advise the company on rehabilitation
and turnaround strategies, which would help companies to recover from their current
position. They also provide advice on appropriate risk management strategies.

Loan syndication

Arrangement of loans for clients, by analysing their cash flow pattern, so that the terms of
borrowing meet the client’s cash requirements and offer assistance in loan documentation
procedures.

Portfolio

Total number of all holdings held by a company is called portfolio. The portfolio mix is
aimed at spreading the risk over different sectors. It consists of all assets of company.

NAV

Net Asset Value is the current market worth of the mutual fund shares. It is calculated
daily by taking the funds total asset securities, cash and any accrued earning deducting
liabilities, and dividing the reminder by the number of shares outstanding.

72
Depository

The principal function of a depository is to dematerialize securities and enable their

transactions in book-entry form. A depository established under the Depositories Act can
provide any service connected with recording of allotment of securities or transfer of
ownership of securities in the record of a depository.

Capital gain

The profit made from selling shares, mutual funds etc.

IPO

Abbreviation for initial public offering. Generally associated with admission to listing of
the share capital on the stock exchange.

73
 DETAILS OF TABLES & FIGURES

Tables:

No. Particulars Page No.

1 BODs of Karvy Consultants Limited 5
2 BODs of Karvy Investor Services Limited 5
3 BODs of Karvy Securities Limited 6
4 BODs of Karvy Stock Broking Limited 6
5 Public Sector FD with which Karvy deals 12
6 FD of Non Banking Finance Companies with which Karvy deals 13
7 FD of Housing Finance Companies with which Karvy deals 13
8 FD of Manufacturing Companies with which Karvy deals 13
9 List of MF Companies with which Karvy deals 17
10 Mutual Funds in India 31
11 Risk Return Grid of various MF 53

74
Figures:

No. Particulars Pg. No.

1 Competitive Advantage of Karvy 8
2 TIN System 19
3 National Level Organization Chart of Karvy 25
4 Branch Level Structure of Karvy 26
5 Growth in Assets Under Management 33
6 Assets Under Management By Fund Type 34
7 Assets Under Management By AMC 34
8 Regulatory bodies 35
9 Mutual Fund Cycle 48
10 Types of Mutual Funds 49
11 Differentiate advisors according to yearly amount they get 62
invested
12
13
14
15
16
17
18 Instrument in which advisors gets invested to IT payers 64
19
20 Advisors who are interested in dealing of Mutual Funds 65
21 Reasons for not interested in dealing of Mutual Funds 65
22 Advisor know about MF services provided by Karvy 65
23 Advisor who are interested to attend seminar on MF 66
24 Reason for not attending Seminar 66
25 Advisors who are interested to work with KARVY 66
26 Reasons for not interested in work with KARVY 67

75
 BIBLIOGRAPHY

1. www.mutualfundsindia.com
2. www.amfiindia.com
3. www.themanagementor.com
4. www.dewb-vc.com
5. www.karvy.com
6. www.indiacorporateadvisor.com
7. www.nsdl.co.in
8. www.incometaxdelhi.nic.in
9. www.incometaxindia.gov.in
10. David J. Luck & Ronald S. Rubin, “Marketing Research”,
Ed. – 7 (ISBN)
11. D.C.Anjaria & Dhaivat Anjaria, “AMFI Workbook”, Ed. – 2 (Association of
Mutual Funds in India)

76