A MINOR PROJECT REPORT

ON

A STUDY OF MUTUAL FUNDS

BBA IIIRD SEMESTER (M)

BATCH 2016-2019

Submitted to:

Shilpa Lalwani Submitted by: Sonia Gursahaney

Assistant Professor 35514101716

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL KALKAJI

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 STUDENT DECLARATION

This is to certify that I have completed the Minor Project Report titled” (A STUDY
ON MUTUAL FUNDS)” under the guidance of “(Ms. SHILPA LALWANI)” in
partial fulfillment of the requirement for the award of Degree of “Bachelor of
Business Administration” at “Jagannath International Management School
Kalkaji”, Delhi. This is an original piece of work & I have not submitted it earlier
elsewhere.

Project Guides: Shilpa Lalwani

(By SONIA)

Faculty: Shilpa Lalwani

CONTENTS OF THE SYNOPSIS

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 Description Page No.
Acknowledgement (i) (i)

Certificate of completion

Contents with page no.

List of tables

List of figures

Executive Summary

Certificate of completion 1

Ch- 1 Introduction to topic

Ch- 2 2.1 Company Profile

Ch- 2.2 Literature review

Ch- 2.3 Objectives

Ch- 2.4 Research Methodology

Ch- 3 Findings & Inferences

Limitations

Recommendations and Conclusion

Appendices

Bibliography

ACKNOWLEDGEMENT
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A lot of effort has gone into this training report. My thanks are due to many
people with whom I have been closely associated. I would like to thank all those
who have contributed in completing this project. First, I would like to send my
sincere thanks to Ms Shilpa Lalwani for his helpful hand in the completion of my
project.

I would like to thank my entire beloved family & friends for providing me monetary
as well as non – monetary support, as and when required, without which this
project would not have completed on time. Their trust and patience is now
coming out in form of this thesis.

SONIA GURSAHANEY

EXECUTIVE SUMMARY

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A mutual Fund is a scheme in which several people invest their money for a
common financial cause. The collected money invests in the capital market and
the money, which they earned is divided based on the no of units which they
hold. The mutual fund industry started in India in a small way started in India in a
small way with a UTI act creating what was effectively a small savings decision
within the RBI.

The advantages of mutual funds are professional management, diversification,

and economies of scale, simplicity and liquidity. The disadvantages are high cost,
over diversification, possible tax consequences and the inability of management
to guarantee a superior return. There are many types of mutual funds, you can
classify fund based structure (open ended& close ended), Nature (equity, debt,
balanced), investment objective (growth, income, money market etc). An equity
fund is a mutual fund that invests principally in stocks. It can be actively or
passively (index fund) managed. Equity funds are also known as stock funds.
Stock mutual funds are principally categorized according to company size, the
investment style of the holdings in the portfolio and geography.

The main aim of the study is to assess the individual willingness to invest into
mutual funds and their bifurcations. To study the preferences of the investors for
investment in mutual funds. Also, to know about the certain factors like literacy,
population into work, salary, investments made in mutual funds and what equity
mutual fund scheme they would choose.

The study has been done based on descriptive research and the analysis has
been done with the survey done with a sample size of 120 investors and data
collected from the company itself with the help of a questionnaire prepared and
duly surveyed.

CERTIFICATE OF COMPLETION

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This is to certify that the Project work entitled “A STUDY ON MUTUAL FUNDS“
submitted by “SONIA GURSAHANEY” in fulfillment for the requirements of the
award of “Bachelor of Business Administration” from “Jagannath
International Management School”, Kalkaji New Delhi is an authentic work
carried out by his/her under my supervision and guidance. To the best of my
knowledge, the matter embodied in the project has not been submitted to any
other University / Institute for the award of any Degree.

Project Guides: Shilpa Lalwani

(By SONIA)

Faculty: Shilpa Lalwani

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 CHAPTER 1- INTRODUCTION

To state in simple words, a mutual fund collects the savings from small
investors, invest them in Government and other corporate securities and

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earn income through interest and dividends, besides capital gain. It works
on the principle of ‘small drop of water makes a big ocean’.

DEFINITION

The Securities and Exchange Board of India (Mutual Funds) Regulation,

1993 defines a mutual fund “a fund established in the form of a trust by a
sponsor, to raise monies by the trustees through the sale of units to the,
public, under one or more schemes, for investing in securities in
accordance with these regulations”

According to Weston J. Fred and Brigham, Eugene, F, Unit trusts are

“corporations which accept dollars from savers and then use these dollars
to buy stock, long term bonds, short term debt instruments issued by
business or government units; these corporations pool funds and thus
reduce risk by diversification”.

WHY SELECT MUTUAL FUNDS ?

The risk return trade-off indicates that if investor is willing to take higher risk
then correspondingly he can expect higher returns and vice-versa if he
pertains to lower risk instruments, which would be satisfied by lower
returns. For example, if an investors opt for bank FD, which provide
moderate return with minimal risk. But as he moves ahead 10 invest in
capital protected funds and the profit-bonds that gives us more return which
is slightly higher as compared to the bank deposits but the risk involved
also increases in the same proportion.

Thus investors choose mutual funds as their primary means of investing, as

Mutual funds provide professional management, diversification,
convenience and liquidity.
That doesn't mean mutual fund investments risk free.

This is because the money that is pooled in are not invested only in debts
funds which are less riskier but are also invested in the stock markets which
involves a higher risk but can expect higher returns. Hedge fund involves a

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very high risk since it is mostly traded in the derivatives market which is
considered very volatile.

RETURN RISK MATRIX

HIGHIER RISK HIGHER RISK

MODERATE HIGHIER RETURNS
RETURNS

Venture
Capital Equit
y

Bank FD Mutual
Funds
Postal
Savings
LOWER RISK LOWER RISK
LOWER RETURNS HIGIER RETURNS

HISTORY OF MUTUAL FUNDS

An open-end fund is one that is available for subscription all

through the year. These do not have a fixed maturity. Investors can
conveniently buy and sell units at Net Asset Value ("NAV") related
prices. The key feature of open-end schemes is liquidity.
The Mutual fund industry in India started in 1963 with the formation of UTI (united
trust of India), at the initiative of government of India. The history of Mutual Funds
in India can be broadly divided into Four Phases.

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First Phase- 1964-87

Unit Trust of India was established 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 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. 6700 crores of assets under
management.

Second phase- 1987-1993 (entry of public sector funds)

1987 marketed 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 can bank Mutual fund (Dec 1987), Punjab
national bank mutual fund (August 89). India bank mutual fund (Nov 89). Bank of
India (June 90), bank of Baroda mutual fund (Oct 92). LIC established its mutual
fund in Nov 1989 while GIC had set up its mutual fund in December 1990 at the
end of 1993, the mutual fund industry had asset 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, an 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 Kothari pioneer (now merged with Franklin
Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (mutual funds ) registrations were substituted by a more
comprehensive and revised mutual funds regulations in 1996 the number of
mutual funds houses went on increasing, with many foreign mutual funds
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setting up funds in India and also the industry has witnessed several
mergers and acquisition. As at the of Jan 2003, there were 33 mutual funds
with total assets of Rs. 1,21,805 crores. The UTI with Rs. 44,541 crores of
assets under management was way ahead of other mutual funds.

Fourthphase-2003-2005:

This phase had bitter experience for UTI. It was bifurcated into two separate
entities. One is the Specified Undertaking of the Unit Trust of India with
AUM of Rs.29,835 crores (as on January 2003). 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 AUM and with the setting up of a UTI
Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with
recent mergers taking place among different private sector funds, the
mutual fund industry has entered . At the end of September 2004, there
were 29 funds, which manage assets of Rs.153108 crores under 421
schemes.

TYPES OF MUTUAL FUNDS

Closed-ended Funds

A closed-end fund has a stipulated maturity period which generally ranging from
3 to 15 years. The fund is open for subscription only during a specified period.
Investors can invest in the scheme at the time of the initial public issue and
thereafter they can buy or sell the units of the scheme on the stock exchanges
where they are listed. In order to provide an exit route to the investors, some

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close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate
that at least one of the two exit routes is provided to the investor.

Interval Funds

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.

CHAPTER 2

2.1 COMPANY PROFILE

2.2 LITERATURE REVIEW

2.3 OBJECTIVES

2.4 RESEARCH METHODOLGY

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INVESTMENT OBJECTIVE:

Equity Funds Dividend

The aim of Equity Funds Dividend is to provide capital appreciation over the
medium to long- term. Such schemes normally invest a majority of their corpus in
equities. It has been proven that returns from stocks, have outperformed most
other kind of investments held over the long term.

Equity Funds Growth

The aim of Equity Funds growth is to provide capital appreciation over the
medium to long- term. Such schemes normally invest a majority of their corpus in
equities. It has been proven that returns from stocks, have outperformed most
other kind of investments held over the long term.

Balanced Funds Dividend

The aim of balanced funds dividend is to provide both dividend and regular
income. Such schemes periodically distribute a part of their earning and invest

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both in equities and fixed income securities in the proportion indicated in their
offer documents.

Balanced Funds Growth

The aim of balanced funds is to provide both growth and regular income. Such
schemes periodically distribute a part of their earning and invest both in equities
and fixed income securities in the proportion indicated in their offer documents.

SPECIAL SCHEMES:

Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer
document. The investment of these funds is limited to specific industries like
InfoTech, FMCG, and Pharmaceuticals etc.

Index Schemes

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

the BSE Sensex or the NSE 50.

Spectral Scheme

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

group of industries or various segments such as 'A' Group shares or initial public
offerings.

BRIEF PROFILE OF MUTUAL FUNDS

MUTUAL FUND COMPANIES IN INDIA:

The first introduction of a mutual fund in India occurred in 1963, when the
Government of India launched UNIT TRUST OF INDIA (UTI).

Until 1987, UTI enjoyed a monopoly in the Indian Mutual Fund market.
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 Then a host of other government controlled Indian Financial companies came
up with their own funds, these included STATE BANK OF INDIA, CANARA
BANK, AND PUNJAB NATIONAL BANK.

This market was made open to private players in 1993, as a result of

the historic constitutional amendments brought forward by the then Congress-
led Government under the regime of Liberalization, Privatization and
Globalization.

Kothari Pioneer was the first private sector mutual fund company in
India which has now merged with Franklin Templeton. Just after ten years with
private sector player’s penetration, the total assets rose up to Rs. 1218.05
bn.

Mutual Funds are an under tapped market in India. Despite being

available in the market for over two decades now with Assets under
Management equaling Rs. 78,171,152 Lakhs (as of 28th February 2010)
less than 10% of Indian households have invested in mutual funds.

A recent report on Mutual Fund Investments in India published by

research and analytics firm BOSTON ANALYTICS suggests investors are
holding back their money into mutual funds due to their perceived high risk
and a lack of information on how mutual’s funds work. This report is based
on a survey of approx 10000 respondents in 15 Indian cities and towns
as of March 2010. There are 43 Mutual’s funds recently in India.

TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as
financial position, risk tolerance and return expectations etc. thus mutual funds
has Variety of flavors, Being a collection of many stocks, an investors can go for
picking a mutual fund might be easy. There are over hundreds of mutual funds

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scheme to choose from. It is easier to think of mutual funds in categories,
mentioned below.

ADVANTAGES OF MUTUAL FUNDS:

If mutual funds are emerging as the favorite investment vehicle, it is because of

the many advantages they have over other forms and the avenues of investing,
particularly for the investor who has limited resources available in terms of capital
and the ability to carry out detailed research and market monitoring. The
following are the major advantages offered by mutual funds to all investors:

1. Portfolio Diversification:
Each investor in the fund is a part owner of all the fund’s assets, thus enabling
him to hold a diversified investment portfolio even with a small amount of
investment that would otherwise require big capital.
2. Professional Management:
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Even if an investor has a big amount of capital available to him, he benefits from
the professional management skills brought in by the fund in the management of
the investor’s portfolio. The investment management skills, along with the
needed research into available investment options, ensure a much better return
than what an investor can manage on his own. Few investors have the skill and
resources of their own to succeed in today’s fast moving, global and
sophisticated markets.
3. Reduction/Diversification Of Risk:
When an investor invests directly, all the risk of potential loss is his own, whether
he places a deposit with a company or a bank, or he buys a share or debenture
on his own or in any other from. While investing in the pool of funds with
investors, the potential losses are also shared with other investors. The risk
reduction is one of the most important benefits of a collective investment vehicle
like the mutual fund.

A. BY STRUCTURE

1. Open - Ended Schemes:

An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy and sell
units at Net Asset Value ("NAV") related prices. The key feature of open-end
schemes is liquidity.

2. Close - Ended Schemes:

A closed-end fund has a stipulated maturity period which generally ranging
from 3 to 15 years. The fund is open for subscription only during a specified
period. Investors can invest in the scheme at the time of the initial public issue
and thereafter they can buy or sell the units of the scheme on the stock
exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the
Mutual Fund through periodic repurchase at NAV related prices. SEBI
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Regulations stipulate that at least one of the two exit routes is provided to the
investor.

3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-
ended and close-ended schemes. The units may be traded on the stock
exchange or may be open for sale or redemption during pre-determined intervals
at NAV related prices.

B. BY NATURE
1. Equity Fund:
These funds invest a maximum part of their corpus into equities holdings.
The structure of the fund may vary different for different schemes and the fund
manager’s outlook on different stocks. The Equity Funds are sub-classified
depending upon their investment objective, as follows:
 Diversified Equity Funds
 Mid-Cap Funds
 Sector Specific Funds
 Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds
rank high on the risk-return matrix.

2. Debt Funds:
The objective of these Funds is to invest in debt papers. Government
authorities, private companies, banks and financial institutions are some of the
major issuers of debt papers. By investing in debt instruments, these funds
ensure low risk and provide stable income to the investors. Debt funds are further
classified as:

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  Gilt Funds: Invest their corpus in securities issued by Government,
popularly known as Government of India debt papers. These Funds carry
zero Default risk but are associated with Interest Rate risk. These
schemes are safer as they invest in papers backed by Government.

 Income Funds: Invest a major portion into various debt instruments such
as bonds, corporate debentures and Government securities.

 MIPs: Invests maximum of their total corpus in debt instruments while they
take minimum exposure in equities. It gets benefit of both equity and debt
market. These scheme ranks slightly high on the risk-return matrix when
compared with other debt schemes.
 Short Term Plans (STPs): Meant for investment horizon for three to six
months. These funds primarily invest in short term papers like Certificate
of Deposits (CDs) and Commercial Papers (CPs). Some portion of the
corpus is also invested in corporate debentures.

 Liquid Funds: Also known as Money Market Schemes, These funds

provides easy liquidity and preservation of capital. These schemes invest
in short-term instruments like Treasury Bills, inter-bank call money market,
CPs and CDs. These funds are meant for short-term cash management of
corporate houses and are meant for an investment horizon of 1day to 3
months. These schemes rank low on risk-return matrix and are considered
to be the safest amongst all categories of mutual funds.

3. Balanced Funds:
As the name suggest they, are a mix of both equity and debt funds. They
invest in both equities and fixed income securities, which are in line with pre-
defined investment objective of the scheme. These schemes aim to provide
investors with the best of both the worlds. Equity part provides growth and the
debt part provides stability in returns.
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Further the mutual funds can be broadly classified on the basis of
investment parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-
defined in the objectives of the fund. The investor can align his own investment
needs with the funds objective and invest accordingly.

C). BY INVESTMENT OBJECTIVE:

Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These
schemes normally invest a major part of their fund in equities and are willing to
bear short-term decline in value for possible future appreciation.

Income Schemes:
Income Schemes are also known as debt schemes. The aim of these
schemes is to provide regular and steady income to investors. These schemes
generally invest in fixed income securities such as bonds and corporate
debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes:
Balanced Schemes aim to provide both growth and income by periodically
distributing a part of the income and capital gains they earn. These schemes
invest in both shares and fixed income securities, in the proportion indicated in
their offer documents (normally 50:50).

Money Market Schemes:

Money Market Schemes aim to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer, short-
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term instruments, such as treasury bills, certificates of deposit, commercial paper
and inter-bank call money.

Load Funds:
A Load Fund is one that charges a commission for entry or exit. That is,
each time you buy or sell units in the fund, a commission will be payable.
Typically entry and exit loads range from 1% to 2%. It could be worth paying the
load, if the fund has a good performance history.

No-Load Funds:
A No-Load Fund is one that does not charge a commission for entry or
exit. That is, no commission is payable on purchase or sale of units in the fund.
The advantage of a no load fund is that the entire corpus is put to work.

OTHER SCHEMES
Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws
prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions
made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes:
Index schemes attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50. The portfolio of these schemes will
consist of only those stocks that constitute the index. The percentage of each
stock to the total holding will be identical to the stocks index weightage. And
hence, the returns from such schemes would be more or less equivalent to those
of the Index.

Sector Specific Schemes:

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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,
Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in
these funds are dependent on the performance of the respective
sectors/industries. While these funds may give higher returns, they are more
risky compared to diversified funds. Investors need to keep a watch on the
performance of those sectors/industries and must exit at an appropriate time.

AMC wise quarterly Average AUM

Definitions of key terms:-

Net Asset Value (NAV)

A Fund’s net asset value or NAV equals the current market value of a fund’s
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holdings minus the fund’s liabilities (sometimes referred as “net assets”). It is
usually expressed as a per-share amount, computed by diving net assets by the
number of fund shares outstanding. Funds must compute their net asset value
according to their prospectus which is typically at the end of each day the New
York Stock Exchange is open, though some funds compute their NAV more than
a once daily.

Sale Price

Sale price is the price you pay when you invest in a scheme also called Offer
Price. It may include a sales load.

Repurchase Price

It is the price at which a close-ended scheme repurchases its units and it may
include a back-end load. This is also called Bid Price.

Redemption Price

It is the price at which open-ended schemes repurchase their units and close
ended schemes redeem their units on maturity. Such prices are NAV related.

Sales Load

It is a charge collected by a scheme when it sells the units. Also,called as

'Front-end' load.

Schemes that do not charge a load are called 'No Load' schemes.

Repurchase or 'Back-end' Load

It is a charge collected by a scheme when it buys back the units from the unit
holders.

Expenses Ratio
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The expenses ratio allows investors to compare expenses across funds. The
expense ratio equals the 12b-1 fee plus the other fund expenses divided by
average daily net assets. The expenses ratio sometimes referred to as the “total
expense ratio” or TER.

CHAPTER 2.1 COMPANY PROFILE

(SPA CAPITAL SERVICES LTD.)

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 ORIGIN team of finance professionals in 1995 with an objective to
provide value added financial services. Initially, the Group focused as a
niche financial solutions provider in corporate finance and wealth
management to Indian companies an

SPA Group was promoted by a d high net worth individuals. In January

2000, the Group expanded its operations and the range of services.
Today, SPA provides services for securities broking, merchant banking,
wealth management, financial advisory, corporate finance, risk
management and insurance broking.

SPA is being managed by its promoters along with a young and

dynamic team of over 500+ professionals with rich experience, in
their respective fields. The Group has established itself as one of
India’s leading financial advisory house, offering various financial
solutions to its Institutional, corporate and individual
clients. .

Customer centric approach of SPA’s dedicated professional team

has helped carve a niche for itself in financial services arena and
won confidence of its clients. Clients of SPA are from a wide
spectrum and comprise of Banks and other financial institutions,
Mutual funds, Insurance companies, foreign institutional investors,
public sector undertakings and government departments, private
corporates, trusts and individuals.

PRESENT STATUS OF THE ORGANIZATION

25
 SPA CAPITAL SERVICES LTD is a financial services provider
and deal with all financial products like insurance, mutual funds,
Equity broking, securities broking and Merchant banking.

As a financial consulting firm, our major specialty is valuing

businesses and corporate securities. We are providing valuation
services to various corporate and have done more than 1000
valuations across industries. Our clientele consist of domestic and
multinational companies including various Fortune 500 companies.
The Team consists of very senior professional from Industry,
Chartered Accountants,CFAs,andCompanySecretaries.

We prepare independent, unbiased business and professional practice

valuations for a variety of reasons including acquisition, investment,
disposal, buyout, merger, restructuring, accounting, statutory / legal
etc.

Sample Size = Number Of Correspondents

Sampling Type :- Simple Random Sampling = 10

Objective:

 To provide quality goods and services those are reliable and allow
customers to receive the performance that they expect.
 To produce a given output efficiently.
 Corrective actions taken to respond to customer needs.
 Improving responsiveness to customers.
 Maximizing output of goods and services with minimum resources
output.

26
  Maximizing utilization of manpower, machines etc.

Mission:

 To formulate progressive tax policies.

 To make compliance easy.
 To enforce tax laws with fairness.
 To deliver quality services.
 To continuously upgrade skills and build a professional and
motivated workforce.
Vision:

“To partner in the nation building process through

progressive tax policy, efficient and effective administration and
improved voluntary compliance.”

SPA believes in attaining customer satisfaction, on continuing

basis, by providing highest standard of financial services in India.
The philosophy at SPA is to provide services to clients after
assessment of their profile, needs and risk-appetite.

The basic work theme at SPA is

 Dedicated, competent and honest team of professional

customer
 Centric work environment
 Insight of customer perspectives
 Strong research base

27
 Clear understanding of applicable laws

MILESTONES

Since 1994, with the coming into existence of the SPA Group,
we have diversified into a complete financial solution providing
house, catering varied needs of our clients ranging from investment
advisory services to investment banking, corporate re-structuring,
distribution and broking services, risk management and insurance
advisory. Within a short span of time, the Group has made a place
for itself in the midst of the top financial solutions provider in the
country.

FUNCTIONAL DEPARTMENT IN AN ORGANISATION

The main purpose of functional departments is to ensure that all

important business activities are carried out efficiently. This is
essential if the business is to achieve its aims and objectives.

FINANCE

This is the most important function in the business. This is

because all businesses need a regular stream of income to pay the
bills. Finance staff record all the money earned and spent so that the
senior managers always know how much profit (or loss) is being made
by each product or each part of the business and how much money is
currently held by the business. This enables critical decisions to be
made rapidly and accurately because they are based on accurate
information.

Finance staff supports the accountants by keeping financial

records, chasing up late payments and paying for items purchased.

28
 Finally, businesses will often need money to fulfill specific aims
and objectives linked to growth, expansion or simply updating their
equipment or machinery. These items may be bought from money held
back (reserved) from past profits, but usually additional money will be
needed. If the business needs to borrow money it will want the
cheapest interest rates possible and also want good repayment terms.
Deciding where to obtain these funds is a specialist job and normally
the task of the senior financial manager.

FINANCE FUNCTION IN AN ORGANISATION

Finance Concerned with money and future plans

 Preparing accounts, e.g. invoices, management accounts,

financial accounts for shareholders and Inland Revenue.
 Preparing wages and salaries.
 Obtaining capital and resources, e.g. money for expansion or to
pay for resources such as, equipment and materials.

ORGANIZATION STRUCTURE OF THE SPA CAPITAL COMPANY

Managing Director

29
↓

President

Senior Vice president

Vice president

Senior Manager

Manager

Senior Relationship Manager

Relationship Manager

Senior Executive

Executive

PRODUCT AND SERVICE PROFILE OF THE ORGANIZATION

SPA CAPITAL PVT LTD is a financial services provider and deal with all financial
products like insurance, mutual funds, Equity broking, securities broking and
Merchant banking.

SPA provides following services:

30
1. Merchant Banking

2. Insurance

3. Mutual Funds

4. Securities broking

5. Debt broking

6. Equity Services.

SWOT ANALYSIS

31
STRENGTH WEAKNESS

 Strong client base

 Individual client base specific  Lack of ground agent

services

 Very good corporate contacts

 More than 16 years of

experience

OPPORTUNITY THREATS

 Rapid expanding asset  High market competition

management market
 More demand for quality
advisor provider
 Increase number of people
interested in investing
 Competing with already
established big market
leaders like Kotak Securities,
ICICI Securities
 Growing individual
competitor

CHAPTER 2.2 Literature Review

According to Fred and Brigham, Eugene, F, Unit trusts are “corporations

which accept dollars from savers and then use these dollars to buy stock,
long term bonds, short term debt instruments issued by business or
32
government units; these corporations pool funds and thus reduce risk by
diversification”.

Mutual funds have already attracted the attention of world wide investors and
academicians but most of the existing research available is on either accelerating
the return on funds or comparing it with benchmark fund schemes. Few studies
are available that focus on investor’s objective and considering risk associated
with the mutual funds investors that some of are as following:
Investors are generally more careful while making investment decision and
presence of rationality in every investor demands higher return at minimum level
risk but when markets are efficient it is not possible to gain abnormal returns.
Risk is generally, associated with various applications differently but in common it
means negative connotation such as harm or loss or some undesirable action.
Risk expressed by Kaplan and Garrick (1981) demonstrates that risk involves a
factor of uncertainty and potential loss that might be incurred.
Sahadevan and Thiripalraju, in their research paper (2001), analyzed the
performance of private sector funds they compiled and analyzed the monthly
average return and standard deviation of 10- selected private sector funds. The
investigation reveals that in terms of the rate of return, 5 funds viz., Alliance 95,
ICICI Power, Kothari Prima, Kothari Pioneer Blue Chip and Morgan Stanley
Growth Fund out performed the market, during the period of comparison. The
analysis also shows that, by and large, performance of a fund is not closely
associated with its size.

Gupta & Sehgal, in their research paper (2003), tried to find out the investment
performance of 80 schemes managed by 25 mutual funds, 15 in private sector
and 10 in public sector for the time period of June 2002-2006. The study has
examined the performance in terms of fund diversification and consistency of
performance. The paper concludes that mutual fund industry’s portfolio
diversification has performed well. But it supported the consistency of
performance.

33
Bijan Roy, et. al., conducted an empirical study on conditional performance of
Indian mutual funds. This paper uses a technique called conditional performance
evaluation on a sample of eighty-nine Indian mutual fund schemes .This paper
measures the performance of various mutual funds with both unconditional and
conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton model.
The effect of incorporating lagged information variables into the evaluation of
mutual fund managers’ performance is examined in the Indian context. The
results suggest that the use of conditioning lagged information variables
improves the performance of mutual fund schemes, causing alphas to shift
towards right and reducing the number of negative timing coefficients.

Vijayalakshmi Sundar conducted a study on—Mutual funds in India that they are
becoming an ideal investment choice compared to safe investments such as
Fixed Deposits and postal which gives comparatively low returns. Since the year
2003 from which the present stage of bull run in the Indian capital markets
began, the mutual fund industry While the growth in terms of the AUM was
subdued over the period from 2009-2013, it has gained unprecedented
momentum over the four year period until March 2013. The growth of the capital
markets in terms of BSE -30 shares Sensex has been still higher, and the
banking sector has been on a roll over the last couple of years, throwing up huge
opportunities for wealth creation on the way. As the Indian economy does well
with over recent times, banks tend to be one of the biggest beneficiaries. In fact,
post the global financial crisis of 2008 and 2009, the banking index delivered a
return of 82% during May 2009 until October 2010, compared to a return of 40%
delivered by the broader market. Investment in banking sector funds is one of the
best avenue which guarantees stable return with medium risk when compare to
other sectors.

34
 CHAPTER 2.3 OBJECTIVES

The specific objectives of the study are as follows:-

1. To analyze the trends in return of selected mutual funds.

35
2. To understand the functions of an Asset Management Company.

3. To understand the performance of various schemes using various tools to

measure the performances.

4. To measure and compare the performance of selected mutual fund scheme of

different mutual fund companies and other Asset Management Companies.

CHAPTER 2.4 RESEARCH METHODOLOGY

Research Design: Descriptive Design

Data Source: Internet, company site

Research Tool: Secondary data and primary data both .

36
  Population
Sr. no. Respondent Number of respondents

1. Users 100-200 (As some of

them didn’t answer
couple of questions)

 Sampling Method/Technique /Sample size, sampling

frame/unit ,
Different types of data analysis techniques used in the research project should
be specifically mentioned. Such as:

 Basic analytical tools, which include Tabular Analysis, Graphical

Analysis, Percentage Analysis.
 Sample procedure:-

I have prepared this project as descriptive type, as the objective of the study.

 Sources of data
It involves use of secondary and primary sources such as web and other
research articles printed by various companies and other journals and
magazine.
Methods of data collection
 Primary data:
It is original data, first hand and for the specific purpose of the
research project. For this project, I have used the following common
research instrument:-
 Questionnaire:
Questionnaire development is the critical part of primary data collection
job. For this I have prepared a questionnaire in such away that it is able to
collect all relevant information regarding the project.
In this questionnaire, I have used mostly close-ended questions that are
easier to be answered by respondents (consumers) and also easier for
interpretation and tabulation & one open-ended question to take the

37
 opinion of the respondents in their own words. The questions were asked
to the consumers covering perception towards their purchase, price of the
product, purpose for using the product, characteristic of the product, brand
image, effectiveness of the advertisements, sales promotional activities,
overall opinion about the product, etc.
For collecting the answers from the above questionnaire, I have used the
following common method:-
 Interview:
It is the most common method for contacting consumers &
collecting primary data. For this project I have used following type of
interview:-
 Personal interview:
It is the most extensively used method. It enables better
control of the sample and ensures answers from the respondents. It also
provides for a tactful approach to the respondent since it is based on a
person-to-person talk. But this method is generally more expensive and
time consuming.
For this project each interview was taking 15 to 20 minutes to
complete. Interview was also delayed due to un-availability of respondent
in house.

Secondary data.
It was collected to add the value to the primary data. Data
regarding IMRB, International (Indian Marketing Research Bureau) history,
its profile and other necessary records and information was collected by
referring to website, magazines, annual reports, reference books, daily
newspapers, etc.

Tools and techniques of analysis E.g. Ratio Analysis

Basic analytical tools, which include Tabular Analysis, Graphical Analysis,
Percentage Analysis.
Statistical/ Instrument used E.g. Ms. Excel, SPSS etc

38
39
 CHAPTER 3
ANALYSIS AND FINDINGS

DATA COLLECTION & INTERPRETATION

Survey Analysis (primary and Secondary)

1. (a) Age distribution of the Investors of Delhi

Age <= 30 31-35 36-40 41-45 46-50 >50

Group

No. of 12 18 30 24 20 16
Investors

40
Interpretation: According to this chart out of 120 Mutual Fund investors of Delhi
the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors
are in the age group of 41-45yrs i.e. 20% and the least investors are in the age
group of below 30 yrs.

(b) Educational Qualification of investors of Delhi

Educational Qualification Number of Investors

Graduate/ Post Graduate 88

Under Graduate 25

Others 7

41
 Total 120

Interpretation: Out of 120 Mutual Fund investors 71% of the investors in Delhi
are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under
HSC).

c). Occupation of the investors of Delhi

Occupation No. of Investors

Govt. Service 30

Pvt. Service 45

Business 35

Agriculture 4

Others 6

42
Interpretation:

In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are
Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in
others.

(d) Monthly Family Income of the Investors of Delhi.

Income Group No. of Investors

<=10,000 5

10,001-15,000 12

15,001-20,000 28

20,001-30,000 43

>30,000 32

43
Interpretation:

In the Income Group of the investors of Delhi, out of 120 investors, 36% investors
that is the maximum investors are in the monthly income group Rs.20, 001 to Rs.
30,000, Second one i.e. 27% investors are in the monthly income group of more
than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income
group of below Rs. 10,000

(2) Investors invested in different kind of investments

Kind of Investments No. of Respondents

Saving A/C 12
Fixed deposits (FD) 14

Insurance 18

Mutual Fund (MF) 40

Post office (NSC) 15

Shares/ Debentures (S/D) 5

Gold/ Silver (G/S) 9

Real Estate (RE) 7

44
 Interpretation: From the above graph it can be inferred that out of 120 people,
12% people have invested in Saving A/C, 18% in Insurance, 14% in Fixed
Deposits, 40% in Mutual Fund, 15% in Post Office, 5% in Shares or Debentures,
9% in Gold/Silver and 7% in Real Estate.

(3) Preference of factors while investing

Factors Liquidity Low Risk (LR) High Return (HR) Trust

No. of
20 30 60 10
Respondents

45
Interpretation:-Out of 120 People, 60% People prefer to invest where there is
High Return, 30% people to invest where there is Low Risk, 20% prefer easy
Liquidity and 10% prefer Trust.

(4) Awareness about Mutual Fund and its Operation

Response Yes No

No. of Respondents 65 55

46
Interpretation: - From the above chart it is inferred that 65% People are aware
of Mutual Fund and operations and 55% are not aware of Mutual Fund and its
operations.

(5) Source of information for customers about Mutual Fund

Source of Information No. of Respondents

Advertisement 18

Peer Group (PG) 25

Bank 30

Financial Advisors (FA) 62

Interpretation:-From the above chart it can be inferred that the Financial Advisor
is the most important source of information about Mutual Fund. Out of 135
Respondents, 46% know about Mutual fund Through Financial Advisor, 22%
through bank, 19% through Peer Group and 13% through Advertisement.

(6) Investors invested in Mutual Fund

Response No. of Respondents

YES 72
47
 NO 48

TOTAL 120

Interpretation:

Out of 120 People, 60% have invested in Mutual Fund and 40% do not have
invested in Mutual Fund.

(7) Reason for not invested in Mutual Fund

Reason No. of Respondents

Not Aware 95

Higher Risk 15

Not any Specific Reason 10

48
Interpretation: Out of 120 people, who have not invested in Mutual Fund, 81%
are not aware of Mutual Fund, 13% said there is likely to be higher risk and 6%
do not have any specific reason.

(8) Investors invested in different Assets Management Co. (AMC)

Name of AMC No. of Investors

SBIMF 24
UTI 23

HDFC 18

Reliance 14

ICICI Prudential 19

Kotak 8

Others 14

49
Interpretation: In Delhi most of the Investors preferred UTI and Reliance Mutual
Fund. Out of 120 Investors 62.5% have invested in each of them, only 24% have
invested in SBIMF, 19% in ICICI Prudential, 8% in Kotak and 18% in HDFC.

(9) Reason for invested in SBIMF

Reason No. of Respondents

Associated with SBI 95

Better Return 15

Agents Advice 10

50
Interpretation: Out of 120 investors of SBIMF 64% have invested because of its
association with Brand SBI, 27% invested on Agent’s Advice, 9% invested
because of better return.

(10) Reason for not invested in SBIMF

Reason No. of Respondents

Not Aware 56
Less Return 44

Agents Advice 20

Interpretation:- Out of 120 people who have not invested in SBIMF, 38% were
not aware with SBIMF, 28% do not have invested due to less return and 34% due
to Agent’s Advice

(11) Preference of Investors for future investment in Mutual Fund

Name of AMC No. of Investors

SBIMF 45
UTI 8

HDFC 12

51
 Reliance 17

ICICI Prudential 14

Kotak 12

Others 12

Interpretation: Out of 120 investors,17 % prefer to invest in Reliance, 14% in

ICICI Prudential, 45% in SBIMF, 12% in others, 12% in Kotak, 8% in UTI and
12% in HDFC Mutual Fund.

(12) Channel Preferred by the Investors for Mutual Fund Investment

Channel Financial Advisors Bank AMC

No. of Respondents 72 18 30

52
 Interpretation:-Out of 120 Investors 60% preferred to invest through Financial
Advisors, 25% through AMC and 15% through Bank.

(13) Mode of Investment Preferred by the Investors

Mode of Investment One time Investment Systematic Investment Plan (SIP)

No. of Respondents 78 42

53
Interpretation:-Out of 120 Investors 65% preferred One time Investment and 35
% Preferred through Systematic Investment Plan.

(14) Preferred Portfolios by the Investors

Portfolio No. of Respondents

Equity 56

Debt 20

Balanced 44

Interpretation: -From the above graph 46% preferred Equity Portfolio, 37%
preferred Balance and 17% preferred Debt portfolio

(15) Option for getting Return Preferred by the Investors

Option Dividend Payout Dividend Reinvestment Growth

No. of 25 10 85
Respondents

54
Interpretation: - From the above graph 71% preferred Growth Option, 21%
preferred Dividend Payout and 8% preferred Dividend Reinvestment Option.

(16) Preference of Investors whether to invest in Sectoral Funds

Response No. of Respondents

Yes 25

No 95

Interpretation:-Out of 120 investors, 79% investors do not prefer to invest in

Sectoral Fund because there is maximum risk and 21% prefer to invest in
Sectoral Fund.
55
7. Findings

56
 In Delhi in the Age Group of 36-40 years were more in numbers. The
second most Investors were in the age group of 41-45 years and the least
were in the age group of below 30 years.
 In Delhi most of the Investors were Graduate or Post Graduate and
below HSC there were very few in numbers.
 In Occupation group most of the Investors were Govt. employees, the
second most Investors were Private employees and the least were associated
with Agriculture.
 In family Income group, between Rs. 20,001- 30,000 were more in
numbers, the second most were in the Income group of more than Rs.30, 000
and the least were in the group of below Rs. 10,000.
 About all the Respondents had a Saving A/c in Bank, 76% Invested in
Fixed Deposits, Only 60% Respondents invested in Mutual fund.
 Mostly Respondents preferred High Return while investment, the
second most preferred Low Risk then liquidity and the least preferred Trust.
 Only 67% Respondents were aware about Mutual fund and its
operations and 33% were not.
 Among 200 Respondents only 60% had invested in Mutual Fund and40%
did not have invested in Mutual fund.
 Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told
there is not any specific reason for not invested in Mutual Fund and 6% told
there is likely to be higher risk in Mutual Fund.

 Most of the Investors had invested in Reliance or UTI Mutual Fund,ICICI

Prudential has also good Brand Position among investors, SBIMF places after
ICICI Prudential according to the Respondents.

 Out of 55 investors of SBIMF 64% have invested due to its association

with the Brand SBI, 27% Invested because of Advisor’s Advice and 9% due to
better return.

57
 Most of the investors who did not invested in SBIMF due to not Aware of
SBIMF, the second most due to Agent’s advice and rest due to Less Return.
 For Future investment the maximum Respondents preferred Reliance
Mutual Fund, the second most preferred ICICI Prudential, SBIMF has been
preferred after them.

 60% Investors preferred to Invest through Financial Advisors, 25%

through AMC (means Direct Investment) and 15% through Bank.

 65% preferred One Time Investment and 35% preferred SIP out of
both type of Mode of Investment.

 The most preferred Portfolio was Equity, the second most was Balance
(mixture of both equity and debt), and the least preferred Portfolio was Debt
portfolio.

 Maximum Number of Investors Preferred Growth Option for returns, the

second most preferred Dividend Payout and then Dividend Reinvestment.

 Most of the Investors did not want to invest in Sectoral Fund, only21%
wanted to invest in Sectoral Fund.

8. CONCLUSION

58
The most vital problem spotted is of ignorance. Investors should be made aware
of the benefits. Nobody will invest until and unless he is fully convinced. Investors
should be made to realize that ignorance is no longer bliss and what they are
losing by not investing.

Running a successful Mutual Fund requires complete understanding of the

peculiarities of the Indian Stock Market and also the psyche of the small
investors. This study has made an attempt to understand the financial behavior
of Mutual Fund investors in connection with the preferences of Brand (AMC),
Products, and Channels etc. I observed that many of people have fear of Mutual
Fund. They think their money will not be secure in Mutual Fund. They need the
knowledge of Mutual Fund and its related terms. Many of people do not have
invested in mutual fund due to lack of awareness although they have money to
invest. As the awareness and income is growing the number of mutual fund
investors are also growing.

“Brand” plays important role for the investment. People invest in those
Companies where they have faith or they are well known with them. There are
many AMCs in Mumbai but only some are performing well due to Brand
awareness. Some AMCs are not performing well although some of the schemes
of them are giving good return because of not awareness about Brand. Reliance,
UTI, SBIMF, ICICI Prudential etc. they are well known Brand, they are performing
well and their Assets Under Management is larger than others whose Brand
name are not well known like Principle, Sunderam etc.

Distribution channels are also important for the investment in mutual fund.
Financial Advisors are the most preferred channel for the investment in mutual
fund. They can change investors’ mind from one investment option to others.
Many of investors directly invest their money through AMC because they do not
have to pay entry load. Only those people invest directly who know well about
mutual fund and its operations and those have time.

59
60
 9. BIBLIOGRAPHY

1. Newspaper
a. Economic Times
b. Business Standard
c. Business Line
2. Magazine
Business World (Issue: 25th July, 2005)

3. Research Reports
a. Research report by UBS Warburg
b. Report by Pictet Fund
c. Report of The President’s Working Group on Financial Markets on
LTCM (April 1999)
https://www.treasury.gov/resource-center/fin-
mkts/Documents/hedgfund.pdf
d. Report of Pricewaterhouse Coopers on the regulation and
distribution of Portfolio management. (May 2003)
www.sebi.gov.in/cms/sebi_data/attachdocs/1378979660117.pdf
e. Fund Manager Performance Evaluation: Macro-factor model vs
Option-based model Applied to Market Neutral and Long/Short
Index Strategies by Leila ZAIRI & Nikoletta SIDERI.
https://brage.bibsys.no/xmlui//bitstream/.../Salwegter%20Mbaku
%20Okwen.pdf?...1
f. A Primer on portfolio management by William Fung and David A.
Hsieh
www.starkresearch.com/services/documents/hedge_funds/HFprimer
.pdf
g. Fund Style Allocation – A Risk Adjusted Fund of Hedge Funds
Perspective by Patrik Adlersson and Patrik Blomdahl
61
 https://core.ac.uk/display/36069279
h. DEMOCRATIZING THE mutual fund : Considering the Advent of
Retail Hedge Funds by Donald E. Lacey, Jr.
https://www.sec.gov/rules/final/ia-2333.pdf
4. Websites
a. Invetopedia.com
b. Economictimes.com
c. Vanguard.com

APPENDICES

62
 QUESTIONNAIRE

A study of preferences of the investors for investment in mutual

funds.

1. Personal Details:

(a). Name:-

(b). Add: - Phone:-

(c). Age:-

(d). Qualification:-

Graduation/PG Under Graduate Others

(e). Occupation. Please tick (√)

Pvt. Ser Business Agriculture Others

Govt. Ser

(g).What is your monthly family income approximately. Please tick (√).

Up to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001

Rs.10,000 15000 20,000 30,000 and above

2. What kind of investments you have made so far? Please tick (√). All
applicable.

a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund

e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver h. Real Estate

63
 3. While investing your money, which factor will you prefer?

. (a) Liquidity (b) Low Risk (c) High (d) Trust

Return

4. Are you aware about Mutual Funds and their operations? Please tick (√).
Yes /No

5. If yes, how did you know about Mutual Fund?

a. Advertisement b. Peer Group c. Banks d. Financial Advisors

6. Have you ever invested in Mutual Fund? Please tick (√).

Yes/No

7. If not invested in Mutual Fund then why?

(a) Not aware of MF (b) Higher risk (c) Not any specific reason

8. If yes, in which Mutual Fund you have invested? Please tick (√). All
applicable.

a. SBIMF b. UTI c. d. e. Kotak f. Other. specify

HDFC Reliance

9. If invested in SBIMF, you do so because (Please tick (√), all applicable).

a. SBIMF is associated with State Bank of India.

b. They have a record of giving good returns year after year.

c. Agent’ Advice

10. If NOT invested in SBIMF, you do so because (Please tick (√) all applicable).

a. You are not aware of SBIMF.

b. SBIMF gives less return compared to the others.

c. Agent’ Advice

64
11. When you plan to invest your money in asset management co. which AMC
will you prefer?

Assets Management Co.

a. SBIMF

b. UTI

c. Reliance

d. HDFC

e. Kotak

f. ICICI

12. Which Channel will you prefer while investing in Mutual Fund?

(a) Financial Advisor (b) Bank (c) AMC

13. When you invest in Mutual Funds which mode of investment will you prefer?
Please tick (√).

a. One Time Investment b. Systematic Investment Plan (SIP)

14. When you want to invest which type of funds would you choose?

a. Having only b. Having debt & equity c. Only equity portfolio.

debt portfolio portfolio.

15. How would you like to receive the returns every year? Please tick (√).

a. Dividend payout b. Dividend re- c. Growth in NAV

investment

16. Instead of general Mutual Funds, would you like to invest in sectorial funds?

Please tick (√).

Yes/No

65