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Abstract

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. The Project dealt with studying the awareness of mutual funds among

financial advisors in Hyderabad.

A Descriptive cum Analytical research design was adopted in this study. Data was collected

using questionnaire and interviews. The sample size taken for the project was 43. It was found

that most of the respondents were aware of mutual funds, but most of them were interested in

doing mutual funds business some time later

This aims at knowing the demand for a new Courier Service, What are the Problems facing by
the courier service, customer preferences towards vendor classification, vendor Evaluation,
Satisfaction Level with current Vendors (Top 3) and Value Added Services presently used &
expected.

A Descriptive Analytic research design is adopted in this study since it describes the degree of
customer satisfaction that is perceived by the participants of the study.
At the end of the day, it is the opportunities and not compulsions, which would drive the old
and the new players to the Indian Courier Service. In nutshell it can be said that there is huge
potential for courier service business in the Indian Courier Service market. Hence it is great to
say that “There is a high demand for a New Courier Service in Hyderabad and Secunderabad”.
Entry into the market at right time & right place with new mergers, acquisitions and Joint
ventures. Customer reaction to new brand, Provide a long term forecast for your new brand and
pricing. Finally the new brand has to improve the solutions to the problems currently facing by
the customers and pricing.
INTRODUCTION:

The Project dealt with studying the awareness of mutual funds among financial advisors in
Hyderabad.

A Descriptive cum Analytical research design was adopted in this study. Data was collected
using questionnaire and interviews. The sample size taken for the project was 43.

It was found that most of the respondents were aware of mutual funds, but most of them were
interested in doing mutual funds business some time later. Some of them were already working
and doing insurance business as a part time job, hence they don’t have time to do mutual funds
business in this hectic schedule. Some others who were interested in doing mutual funds
business, did not wish to write Association of Mutual Funds in India (AMFI) exam at present.
Though 72 % of the respondents were aware of mutual funds only 3 % of them have cleared
the AMFI exam. Therefore the respondents should be convinced to write the AMFI exam.
Thus more number of mutual fund advisors would be available to do the business.
OBJECTIVES OF THE STUDY:

 The objectives of the study are:


 To find out how many financial advisors are aware of mutual funds.
 To find out how many financial advisors have cleared AMFI exam.
 To find out as to how many financial advisors are interested in doing mutual funds
business.

RESEARCH DESIGN:

A Descriptive cum Analytical design was adopted in this study to know the degree of
awareness of mutual funds among financial advisors and their interest in doing the mutual
funds business.

SCOPE OF THE STUDY:

This study includes studying the theoretical aspects of mutual funds.


The study dealt with studying the awareness of mutual funds among financial advisors in
Hyderabad
The study was confined to Chaithanyapuri Hyderabad only
The study was conducted during 16th january2016 to 15th february2016.

SAMPLING:

A convenient sample of 50 was chosen from the list of financial advisors in Hyderabad and
was approached, of which 43 have responded.
RESEARCH METHODOLOGY

“Research Methodology” is a term made up of two words, research & methodology.


‘Research’ means ‘search for knowledge’. It is a scientific and systematic search for potential
information on a specific topic. It is an art of scientific investigation. It is careful investigation
or inquiry especially for search of new fact in any branch of knowledge.

Research is a systematic method of finding solutions to problems. According to


Clifford woody, “research comprises of defining and redefining problem, formulating
hypothesis or suggested solutions, collecting, organizing and evaluating data, reaching
conclusions, testing conclusions to determine whether they fit the formulated hypothesis”

For the purpose of study, both primary and secondary data has been collected. The
observational method and survey research method is used to collect the primary data.

The necessary data has also been collected from official records and other published
sources. The collected data is classified, tabulated, analyzed and interpreted later.

Methods Of Data Collection


Data can be of two type’s primary and secondary data. Primary data are those which are
collected afresh and for the first time, and it is in original form. Primary data can be collected
either through experiment or through survey. The researcher has chosen the survey method for
data collection.

The two types of data collection:

1. Primary data

2. Secondary data
Primary data

 Primary data is personally developed data and it gives latest information and offers
much greater accuracy and reliability.

 There are various sources for obtaining primary data i.e., Mail survey, personal
interview,

 Field survey, panel research and observation approach etc.

 The study to maximum extent dependent on primary data, which is collected by way of
structures personal interview with customers.

Secondary data

Secondary data is the published data. It is already available for using and its saves time.
The mail source of secondary data are published market surveys, government publications
advertising research report and internal source such as sales, sales records orders, customers
complaints and other business record etc. the study has also depended on secondary data to
little extent, which is collected through internal source.

DATA PROCESSING AND ANALYSIS:

The analysis was conducted by using MS-Excel, firstly, the answers given by the respondents
were entered into a master sheet and later with the help of a code book these numerical values
were further entered into the spreadsheet format on the computer, and this raw data was
processed with the help of the simple statistical techniques. In order to present the results and
analyze them percentage tables, bar diagrams and pie diagrams were used.
LIMITATIONS:

 The major limitation of the study is the time factor.


 The tenure of the study was restricted to 45 days only.
 The study was restricted to Hyderabad and Chaithanyapuri only and thus the results
cannot be generalized to other regions.
 The sample size selected was only 43, which may not be a representative of the
population.
2.1 INTRODUCTION TO MUTUAL FUNDS:

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. The flow chart below describes broadly the working of a mutual fund:

Source: www.amfiindia.com

Mutual fund is a mechanism for pooling the resources by issuing units to the investors and
investing funds in securities in accordance with objectives as disclosed in offer document.

Investments in securities are spread across a wide cross-section of industries and sectors and
thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the
same direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of mutual funds
are known as unit holders.
The investors in proportion to their investments share the profits or losses. The mutual funds
normally come out with a number of schemes with different investment objectives that are
launched from time to time. A mutual fund is required to be registered with Securities and
Exchange Board of India (SEBI), which regulates securities markets before it can collect funds
from the public.

Different investment avenues are available to investors. Mutual funds also offer good
investment opportunities to the investors. Like all investments, they also carry certain risks.
The investors should compare the risks and expected yields after adjustment of tax on various
instruments while taking investment decisions

ORGANISATION OF A MUTUAL FUND:

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management
Company (AMC) and custodian. The trust is established by a sponsor or more than one
sponsor who is like promoter of a company. The trustees of the mutual fund hold its property
for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI
manages the funds by making investments in various types of securities. Custodian, who is
registered with SEBI, holds the securities of various schemes of the fund in its custody. The
trustees are vested with the general power of superintendence and direction over AMC. They
monitor the performance and compliance of SEBI Regulations by the mutual fund SEBI
Regulations require that at least two thirds of the directors of trustee company or board of
trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of
the directors of AMC must be independent. All mutual funds are required to be registered with
SEBI before they launch any scheme.
MUTUAL FUND STRUCTURE:

The structure consists of:

Sponsor:

Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the
Investment Managed and meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or
liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial
contribution made by it towards setting up of the Mutual Fund

Trust:

The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts
Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908

Trustee:

Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals).


The main responsibility of the Trustee is to safeguard the interest of the unit holders and inter
alia ensure that the AMC functions in the interest of investors and in accordance with the
Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of
the Trust Deed and the Offer Documents of the respective Schemes. At least 2/3rd directors of
the Trustee are independent directors who are not associated with the Sponsor in any manner
Asset Management Company:
The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. The AMC is
required to be approved by the Securities and Exchange Board of India (SEBI) to act as an
asset management company of the Mutual Fund. Atleast 50% of the directors of the AMC are
independent directors who are not associated with the Sponsor in any manner. The AMC must
have a net worth of atleast 10 crore at all times

Some of the AMCs operating currently are:

Name of the AMC Ownership Nature


Alliance Capital Asset Management (I) Pvt. Ltd. Private Foreign
Birla Sun Life Asset Management Company Ltd. Private Indian
Bank of Baroda Asset Management Company Ltd. Banks
Bank of India Asset Management Company Ltd. Banks
Canara Bank Investment Management Services Ltd. Banks
ICICI Asset Management Company Ltd Private Foreign
Sun F and C Asset Management (I) Private Ltd. Private Foreign
Sundaram Newton Asset Management Company Private Foreign
Tata Asset Management Company Ltd. Private Indian
Credit Capital Asset Management Company Ltd. Private Indian

Registrar or Transfer agent:

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the
Mutual Fund. The Registrar processes the application form; redemption requests and
dispatches account statements to the unit holders. The Registrar and Transfer agent also
handles communications with investors and updates investor records
2.2 HISTORY OF MUTUAL FUNDS EMERGENCE OF MUTUAL FUNDS:

The idea of mutual fund has its formal origin in Belgium (society’ general’ de belgiue, 1822)
as an investment company to finance investments in national industries associate with risks. In
1860’s this movement started in England. In 1868, the foreign and colonial government trust
was established to spread risks for investors over a large number of securities. In U.S.A the
idea took route in the beginning of the 20th century. Three investment companies were
organized:
Massachusetts investors trust, state street investment companies and issue its share to
general public was the Canadian investment fund in 1932. Many countries in Europe, the Far
East and Latin America. In recent years mutual funds in Japan and Far East countries and
performance of the economies of these countries and their capital market. Countries in pacific
area like honking, Thailand Singapore and Korea have also entered these fields in a long way.
Mauritius and Netherlands are emerging as tax heavens for offshore mutual funds. Thus mutual
fund culture is now global in scope.

History of Mutual Funds in India and role of SEBI in mutual funds industry:
Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s,
Government allowed public sector banks and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The
objectives of SEBI are to protect the interest of investors in securities and to promote the
development of and to regulate the securities market.
As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds
to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993.
Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital
market. The regulations were fully revised in 1996 and have been amended thereafter from
time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect
the interests of investors.
All mutual funds whether promoted by public sector or private sector entities including those
promoted by foreign entities are governed by the same set of Regulations. There is no
distinction in regulatory requirements for these mutual funds and all are subject to monitoring
and inspections by SEBI. The risks associated with the schemes launched by the mutual funds
sponsored by these entities are of similar type.

History of the Indian Mutual Fund Industry:

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
First Phase – 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 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.

GROWTH IN ASSETS UNDER MANAGEMENT

Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of
the Unit Trust of India effective from February 2003. The Assets under management of the
Specified Undertaking of the Unit Trust of India has therefore been excluded from the total
assets of the industry as a whole from February 2003 onwards.
2.3TYPES OF MUTUAL FUND SCHEMES

Mutual funds schemes according to maturity period:


A mutual fund scheme can be classified into open – ended scheme depending on its maturity
period.
Open – Ended Period Fund/Scheme:
An open – ended fund or scheme is one that is available for subscription and repurchase
on a continuous basis. These schemes do not have a fixed maturity period. Investors can
conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on
a daily basis. The key feature of open-end schemes is liquidity.

Closed – Ended Fund/Scheme


Close-Ended fund or scheme has a stipulated maturity period E.g. 5-7 years. The fund is open
for subscription only during specified period at the time of launch of the scheme. Investor’s
can buy or sell the units of the scheme on the stock exchanges where the units 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 through periodic repurchase at

NAV related prices. SEBI regulations stipulate that at least one of the two exit routes listing on
stock exchanges. These Mutual funds schemes disclose NAV generally on weekly basis.
Key Differences between close and open ended schemes:
S.No Feature Open end Close end
1 Capitalization Unlimited Limited
2 Any time entry Yes No
3 Any time exit Yes No
4 Tax advantages Yes No
5 Listed on exchange Generally no Yes
6 Available for a No Yes
fixed mutual fund

Interval Fund/Scheme:

Internal Funds combine the features of Open-ended and Close – ended schemes. They are open
for sale or redemption during Pro-determined intervals at NAV related prices.
SCHEMES ACCORDING TO INVESTMENT OBJECTIVE

A Scheme can also be classified as growth scheme or balanced scheme considering its
investments objective. Such schemes may be open-ended or close- ended schemes as described
earlier. Such schemes may be classified mainly as follows.
Growth / Equity Oriented Scheme:

The aim of growth Funds is to provide capital application over the medium of long-
term. Such schemes normally invest a major part of there corpus in equities. Such funds have
comparatively high risks. These schemes provide different options to the investors like
dividend option, capital appreciation, etc. and the investors may choose a depending on their
preferences. The investors must indicate the option in the application form. The mutual funds
also allow the investors to change the options at a later date. Growth schemes are good for
investors are having along – term outlook seeking appreciation over a period of time.
Income/debt oriented scheme:

The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate debentures,
government securities and money market instruments. Such funds are less risky compared to
equity schemes. Theses funds are not affected because of fluctuations in equity markets.
However, opportunities of capital appreciation are also limited in such funds. The NAV’s of
such funds are affected because of change in interest rates in the country. If the interest rates
fall, NAV’s such funds are likely to increase in the short run and vice – versa. However, long –
term investors may not bother about these fluctuations.
Balanced Fund:

The aim of balance funds is to provided both growth and regular income as such
schemes invest both in equalities and fixed securities in the proportion indicated in their offer
documents. These are appropriate for investors looking for moderate growth. They generally
invest 40% - 60% in equity and debt instruments. These funds are also affected because of
fluctuations in share prices in the stock markets. However, NAV s of such funds are likely to
be less volatile compared pure equity funds.
Money market or liquid fund:

These funds are also income funds and their aim is to provide easy liquidity,
preservation capital and moderate income. These schemes invest exclusively in safer short –
term instruments such as treasury bills, certificates of deposit, commercial paper and inter –
bank money, government securities, etc returns on these schemes fluctuate much less
compared to other funds.

These funds are appropriate for corporate and individuals sectors as means to park their funds
for short periods.

Tax saving schemes:

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 savings schemes (ELSS). Pension schemes launched by the mutual
funds also offer tax benefits. These schemes are growth oriented and invest predominantly in
equalities. Their growth opportunities and risks associated are like any equity – oriented
schemes.

2.4 SOME FACTS FOR THE GROWTH OF MUTUAL FUNDS IN INDIA:

100% growth in the last 6 years.

Numbers of foreign AMC’s are in the queue to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management worldwide.
Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual
funds sector is required.
We have approximately 29 mutual funds, which is much less than US having more than 800.
There is a big scope for expansion.
'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating
on the 'A' class cities. Soon they will find scope in the growing cities.
Mutual fund can penetrate rural areas like the Indian insurance industry with simple and
limited products.

SEBI allowing the Mutual Funds to launch commodity mutual funds.


Emphasis on better corporate governance.
Trying to curb the late trading practices.
Introduction of Financial Planners who can provide need based advice
Review of Literature
Mutual Funds – Overview:

There are a lot of investment avenues available today in the financial market for an
investor with an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and
Bonds where there is low risk but low return. He may invest in Stock of companies where the risk
is high and the returns are also proportionately high. The recent trends in the Stock Market have
shown that an average retail investor always lost with periodic bearish tends. People began opting
for portfolio managers with expertise in stock markets who would invest on their behalf. Thus we
had wealth management services provided by many institutions. However they proved too costly
for a small investor. These investors have found a good shelter with the mutual funds.

A mutual fund, also referred to as an open-end fund, is an investment company that


spreads its money across a diversified portfolio of securities -- including stocks, bonds, or money
market instruments. Shareholders who invest in a fund each own a representative portion of those
investments, less any expenses charged by the fund.

Mutual funds have been around for a long time, dating back to the early 19th century.
The first modern American mutual fund opened in 1924, yet it was only in the 1990’s that mutual
funds became mainstream investments, as the number of households owning them nearly tripled
during that decade. With recent surveys showing that over 88% of all investors participate in
mutual funds, you're probably already familiar with these investments, or perhaps even own some.
In any case, it's important that you know exactly how these investments work and how you can use
them to your advantage.

A mutual fund is a special type of company that pools together money from many
investors and invests it on behalf of the group, in accordance with a stated set of objectives. Mutual
funds raise the money by selling shares of the fund to the public, much like any other company can
sell stock in itself to the public. Funds then take the money they receive from the sale of their shares
(along with any money made from previous investments) and use it to purchase various investment
vehicles, such as stocks, bonds and money market instruments. In return for the money they give to
the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect,
in each of its underlying securities. For most mutual funds, shareholders are free to sell their shares
at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the
performance of the securities held by the fund.

Mutual fund investors make money either by receiving dividends and interest from
their investments, or by the rise in value of the securities. Dividends, interest and profits from the
sale of any securities (capital gains) are passed on to the shareholders in the form of distributions.
And shareholders generally are allowed to sell (redeem) their shares at any time for the closing
market price of the fund on that day.

Concept Of Mutual Funds:

A mutual fund is a common pool of money into which investors place their contributions that
are to be invested in accordance with a stated objective. The ownership of the fund is thus joint or
“mutual”; the fund belongs to all investors. A single investor’s ownership of the fund is in the same
proportion as the amount of the contribution made by him or her bears to the total amount of the
fund.

Mutual Funds are trusts, which accept savings from investors and invest the same in diversified
financial instruments in terms of objectives set out in the trusts deed with the view to reduce the
risk and maximize the income and capital appreciation for distribution for the members. A Mutual
Fund is a corporation and the fund manager’s interest is to professionally manage the funds
provided by the investors and provide a return on them after deducting reasonable management
fees.

The objective sought to be achieved by Mutual Fund is to provide an opportunity for lower
income groups to acquire without much difficulty financial assets. They cater mainly to the needs
of the individual investor whose means are small and to manage investors portfolio in a manner that
provides a regular income, growth, safety, liquidity and diversification opportunities.
Definitions:

“Mutual funds are collective savings and investment vehicles where savings of small (or
sometimes big) investors are pooled together to invest for their mutual benefit and returns
distributed proportionately”.

“A mutual fund is an investment that pools your money with the money of an unlimited
number of other investors. In return, you and the other investors each own shares of the fund. The
fund's assets are invested according to an investment objective into the fund's portfolio of
investments. Aggressive growth funds seek long-term capital growth by investing primarily in
stocks of fast-growing smaller companies or market segments. Aggressive growth funds are also
called capital appreciation funds”.

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 vise 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 to invest in capital protected
funds and the profit-bonds that give out 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 very high risk since it is mostly traded in the derivatives market
which is considered very volatile.
History 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 history of mutual
funds in India can be broadly divided into four distinct phases

First Phase – 1964-87 (UTI Monopoly):

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 Can bank 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 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.
Recent Trends in Mutual Funds Industry

The Indian Mutual fund industry, despite all that has been said about it is still in a nascent stage
and has extremely bright future ahead. The industry is still one-tenth size of the banking deposits in
the country.

The private sector mutual fund industry in its resent ‘avatar’ is barely 7 years old. The total
asset under management over the past 4 to 5 tears has almost remain stagnant around the Rs 100,
000 crore mark.

This has put a question mark in front of the claims that mutual funds are growing part of the
financial savings and planning industry in India. It holds scope for growth. In India this industry
began with the setting up of the Unit Trust Of India (UTI) in 1964 by the government of India in
order to mobiles small saving. During the past 37 years, UTI has grown to be a dominant player in
the industry with assets with over Rs 76,547 crore as of March2000. However, trouble hit UTI has
lost its dominant position in the industry and the asset under management has slipped drastically to
Rs 46,396 crore.

Private sector mutual funds, which were permitted along with foreign partners in 1993, now
enjoy a dominant position in the country. Kothari Pioneer Mutual fund was the first fund to be
established in the private sector with foreign fund. The private sector now controls around RS
45,818 crore assets under management, almost half the size of the industry.

The mutual fund industry has become a fastest growing sector in the country’s capital and
financial market with an average compounded growth rate of 20 percent over the past five years.
This is despite increasing competition with more than 30 asset management companies for
investor’s money. As on June 2002, the industry has Rs 100,703 crore asset under management
spread across 36 funds with more than 390 schemes.

Substantial development have made; spurred on by changes and amendments in regulation as


the mutual fund regulation that established a comprehensive legal framework for the mutual fund
industry to develop coherently. The securities and Exchange Board Of India (SEBI) came out with
comprehensive regulation in 1993 which defined the structure of the mutual fund and asset
management Companies for the first time.
“The industry is in the process of evolving into a bigger and better investment medium for all
market segment”, Say Kavita Hurry, CEO ING Investment Management, further, currently, ING
Investments manages around Rs.364 crore as on June 2002.

Structure Of Mutual Funds


Sponsor Establishes MF as a
Company Trust
Registers MF with SEBI

Managed by a Board of Hold Unitholders’ Fund


Trustees Mutual Fund in MF
Ensure Compliance to
SEBI Enter into
Agreement with MC

Appointed by
Board of Trustees

Asset Management Float, MF Funds


Company Managers Fund as Per
SEBI guidelines &
AMC Agreement

Appointed by
Trustees
Provides Necessary
Custodian Custodian Services

Appointed by
AMC
Provide Banking
Bankers Services

Appointed by
AMC
Registrars and Provide Registrars Services
Transfer Agents and act as transfers Agents
The formation and operations of mutual funds in India is solely guided by SEBI
(Mutual Fund) Regulations, 1993, which came into force on 20 January 1993. The regulations have
since been replaced by the Securities and Exchange Board of India (Mutual Funds) Regulations,
1996, through a notification on 9 December 1996.

The above figure gives an idea of the structure of Indian mutual funds. A mutual fund
comprises four separate entities, namely sponsor, mutual fund trust, AMC and custodian. They are
of course assisted by other independent administrative entities like banks, registrars and transfer
agents. We may discuss in brief the formation of different entities, their functions and obligations.

The sponsor for a mutual fund can by any person who, acting alone or in combination
with another body corporate establishes the mutual fund and gets it registered with SEBI. The
sponsor is required to contribute at least 40 per cent of the minimum net worth (Rs 10 crore) of the
asset management company. The sponsor must have a sound track record and general reputation of
fairness and integrity in all his business transactions.

As per SEBI Regulation, 1996, a mutual fund is to be formed by the sponsor and
registered with SEBI. A mutual fund shall be constituted in the form of a trust and the instrument of
trust shall be in the form of a deed, duly registered under the provisions of the Indian Registration
Act, 1908, executed by the sponsor in favour of trustees named in such an instrument.

The board of trustees manages the mutual fund and the sponsor executes the trust deeds
in favor of the trustees. The mutual fund raises money through sale of units under one or more
schemes for investing in securities in accordance with SEBI guidelines. It is the job of the mutual
fund trustees to see that the schemes floated and managed by the AMC appointed by the trustees,
are in accordance with the trust deeds and SEBI guidelines. It is also the responsibilities of the
trustees to control the capital property of mutual funds schemes.

The trustees have the right to obtain relevant information from the AMC, as well as a
quarterly report on its activities. They can also dismiss the AMC under specific condition as per
SEBI regulations.

A t least half the trustees should be independent persons. The AMC or its employees cannot act
as a trustee. No person who is appointed as a trustee of a mutual fund can be appointed as a trustee
of any other mutual fund unless he is an independent trustee and prior permission is obtained from
the mutual fund in which he is a trustee. The trustees are required to submit half-yearly reports to
SEBI on the activities of the mutual fund. The trustees appoint a custodian and supervise their
activities. The trustees can be removed only with prior approval of SEBI.

Benefits Of Mutual Fund Investments

1. Professional Management:

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

2. Diversification:

Mutual Funds invest in a number of companies across a broad cross-section of


industries and sectors. This diversification reduces the risk because seldom do all stocks decline at
the same time and in the same proportion. You achieve this diversification through a Mutual Fund
with far less money than you can do on your own.

3. Convenient Administration:

Investing in a Mutual Fund reduces paperwork and helps you avoid many problems
such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds
save your time and make investing easy and convenient.

4. Return Potential:

Over a medium to long-term, Mutual Funds have the potential to provide a higher
return as they invest in a diversified basket of selected securities.
5. Low Costs:

Mutual Funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial and other fees
translate into lower costs for investors.

6. Liquidity:

In open-end schemes, the investor gets the money back promptly at net asset value
related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock
exchange at the prevailing market price or the investor can avail of the facility of direct repurchase
at NAV related prices by the Mutual Fund.

7. Transparency:

You get regular information on the value of your investment in addition to disclosure
on the specific investments made by your scheme, the proportion invested in each class of assets
and the fund manager's investment strategy and outlook.

8. Flexibility:

Through features such as regular investment plans, regular withdrawal plans and
dividend reinvestment plans, you can systematically invest or withdraw funds according to your
needs and convenience.

9. Affordability:

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


mutual fund because of its large corpus allows even a small investor to take the benefit of its
investment strategy.
Structure And Constituents Of Fund

Figure 1: Types Of Mutual Funds Schemes

TYPES OF
MUTUAL FUNDS
BY INVESTMENT OTHER
BY STRUCTURE BY NATURE
OBJECTIVE SCHEMES
Open - Ended Growth Tax Saving
Equity Fund
Schemes Schemes Schemes

Close - Ended Income


Debt Funds Index Schemes
Schemes Schemes

Interval Balanced Sector Specific


Balanced Funds
Schemes Schemes Schemes

Money Market
Schemes

Source: Secondary Data

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

1. By Structure:

A. Open–ended 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.

B. Closed-ended funds:

A closed –end funds has a stipulated maturity period which generally raging from 3 to
15 years. The funds are 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 exist route to the
investors, some close –ended funds give an option of selling back the units to the Mutual fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of
the two exit routes is provided to the investor.

C. Interval Funds:

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

2. By Nature:

A. Equity Funds:

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.

B. 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:
 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.

C. 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.

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. In a rising stock market, the NAV of
these schemes may not normally keep pace, or fall equally when the market falls. These are ideal
for investors looking for a combination of income and moderate growth.
D. Money Market Funds:

The aim of money funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer short-term instruments such as treasury
bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these
schemes may fluctuate depending upon the interest rate prevailing in the market. These are ideal
for Corporate and individual investors as a means to park their surplus funds for short periods.

E. Load Funds:

A Load Funds is one that charges a commission for entry of exit. That is, each time
you buy or sell units in the fund, a commission will be payable. Typically entry exit loads range
from 1% to 2%. It could be corpus is put to work.

F. 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 is that
the entire corpus is put to work.

3. Schemes in Mutual Funds

I. Tax Saving Schemes

These schemes offer tax rebates to the investor under specific provisions of the Indian
Income Tax laws as the Government offers tax incentives for investment in specified avenues.
Investments in Equity Linked Saving Schemes (ELSS) and Pension Schemes are allowed as
deduction u/s 88 of the Income Tax Act. The Act also provide opportunities to investors to save
capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital asset has been
sold to April 1, 2000 and the amount is invested before September 30, 2000.

II. Industry Specific Schemes:

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

III. Index Schemes:

Index Funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE
IV. Sectoral Schemes:

Sectoral Funds are those, which invest exclusively in a specified industry or a group of
industries or various segments such as ‘A’ Group shares or initial public offerings.

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.

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:

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.

4. Reduction Of Transaction Costs:

What is true of risk as also true of the transaction costs. The investor bears all the costs
of investing such as brokerage or custody of securities. When going through a fund, he has the
benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit passed
on to its investors.

5. Liquidity:

Often, investors hold shares or bonds they cannot directly, easily and quickly sell.
When they invest in the units of a fund, they can generally cash their investments any time, by
selling their units to the fund if open-ended, or selling them in the market if the fund is close-end.
Liquidity of investment is clearly a big benefit.

6. Convenience And Flexibility:

Mutual fund management companies offer many investor services that a direct market
investor cannot get. Investors can easily transfer their holding from one scheme to the other; get
updated market information and so on.

7. Tax Benefits:

Any income distributed after March 31, 2002 will be subject to tax in the assessment of
all Unit holders. However, as a measure of concession to Unit holders of open-ended equity-
oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a
concessional rate of 10.5%.

In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from the Total
Income will be admissible in respect of income from investments specified in Section 80L,
including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-
Tax and Gift-Tax.

Disadvantages Of Mutual Funds:

1. No Control Over Costs:

An investor in a mutual fund has no control of the overall costs of investing. The
investor pays investment management fees as long as he remains with the fund, albeit in return for
the professional management and research. Fees are payable even if the value of his investments is
declining. A mutual fund investor also pays fund distribution costs, which he would not incur in
direct investing. However, this shortcoming only means that there is a cost to obtain the mutual
fund services.

2. No Tailor-Made Portfolio:

Investors who invest on their own can build their own portfolios of shares and bonds
and other securities. Investing through fund means he delegates this decision to the fund managers.
The very-high-net-worth individuals or large corporate investors may find this to be a constraint in
achieving their objectives. However, most mutual fund managers help investors overcome this
constraint by offering families of funds- a large number of different schemes- within their own
management company. An investor can choose from different investment plans and constructs a
portfolio to his choice.

4. Managing A Portfolio Of Funds:

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

5. The Wisdom Of Professional Management:

That's right, this is not an advantage. The average mutual fund manager is no better at
picking stocks than the average nonprofessional, but charges fees.
6. No Control:

Unlike picking your own individual stocks, a mutual fund puts you in the passenger
seat of somebody else's car

7. Dilution:

Mutual funds generally have such small holdings of so many different stocks that
insanely great performance by a fund's top holdings still doesn't make much of a difference in a
mutual fund's total performance.

8. Buried Costs:

Many mutual funds specialize in burying their costs and in hiring salesmen who do not
make those costs clear to their clients.

Types of Returns on Mutual Fund:

There are three ways, where the total returns provided by mutual funds can be enjoyed
by investors:

 Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all
income it receives over the year to fund owners in the form of a distribution.

 If the fund sells securities that have increased in price, the fund has a capital gain. Most
funds also pass on these gains to investors in a distribution.

If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in
price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a
choice either to receive a check for distributions or to reinvest the earnings and get more shares.
Return Risk Matrix:

HIGHIER RISK HIGHER RISK


MODERATE RETURNS HIGHIER RETURNS

Venture
Capital Equity

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

Risk Factors Of Mutual Funds:

The Risk-Return Trade-Off:

The most important relationship to understand is the risk-return trade-off. Higher the
risk greater the returns / loss and lower the risk lesser the returns/loss.

Hence it is up to you, the investor to decide how much risk you are willing to take. In
order to do this you must first be aware of the different types of risks involved with your investment
decision.

Market Risk:

Sometimes prices and yields of all securities rise and fall. Broad outside influences
affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-
sized companies. This is known as Market Risk. A Systematic Investment Plan (“SIP”) that works
on the concept of Rupee Cost Averaging (“RCA”) might help mitigate this risk.
Credit Risk:

The debt servicing ability (may it be interest payments or repayment of principal) of a


company through its cashflows determines the Credit Risk faced by you. This credit risk is
measured by independent rating agencies like CRISIL who rate companies and their paper. A
‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poor credit quality. A well-
diversified portfolio might help mitigate this risk.

Inflation Risk:

Things you hear people talk about: "Rs. 100 today is worth more than Rs. 100 tomorrow."
"Remember the time when a bus ride casted 50 paisa?" "Mehangai Ka Jamana Hai."

The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of
times people make conservative investment decisions to protect their capital but end up with a sum
of money that can buy less than what the principal could at the time of the investment. This
happens when inflation grows faster than the return on your investment. A well-diversified
portfolio with some investment in equities might help mitigate this risk.

Interest Rate Risk:

In a free market economy interest rates are difficult if not impossible to predict.
Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices
of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate
environment. A well-diversified portfolio might help mitigate this risk.

Political / Government Policy Risk:

Changes in government policy and political decision can change the investment
environment. They can create a favorable environment for investment or vice versa.

Liquidity Risk:

Liquidity risk arises when it becomes difficult to sell the securities that one has
purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as
well as internal risk controls that lean towards purchase of liquid securities.
Major Players In Mutual Fund Industry

Name Of The Fund No. Of Asset Under Management (RS.


Schemes Crore)

Alliance Mutual Fund 36 3309.03


Bench Mark Mutual Fund 1 6.1
Birla Mutual Fund 35 3436.79
Bob Mutual Fund 8 31
CAN Bank Mutual Fund 14 692.04
Chola Mutual Fund 25 812.67
India Infoline Mutual Fund 20 3154.67
Dundee Mutual Fund 19 20.72
Escorts Mutual Fund 13 83.91
First India Mutual Fund 5 0.7
Franklin Tempeltion Mutual Fund 25 3919.52
GIC Mutual Fund 13 333.29
HDFC Mutual Fund 22 4707.32
IDBI-Principal Mutual Fund 33 1346.61
IL & FS Mutual Fund 18 537.72
ING Mutual Fund 15 396.31
JF Mutual Fund 3 201.8
JM Mutual Fund 21 1199.2
Kotak Mutual Fund 30 1907.35
Morgan Stanley Mutual Fund 1 793.87
Pioneer ITI Mutual Fund 62 3517.77
PNB Mutual Fund 8 149.76
PRU ICICI Mutual Fund 52 7006.72
Reliance Capital Mutual Fund 15 2913.25
SBI Mutual Fund 42 3215.40
Standard Chartered Mutual Fund 30 3294.63
SUN F& C Mutual Fund 26 413.11
Sundaram Mutual Fund 11 702.25
Tata Mutual Fund 20 893
Taurus Mutual Fund 11 59.76
UTI Mutual Fund 103 509.83
Zurich India Mutual Fund 39 255.11
LIC Mutual Fund 27 2340.3
3.1 COMPANY PROFILE
ABOUT KARVY:

Building a heritage of Confidence.

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 interface between these players.

Our ability to mass customize and offer a diverse range of products for a diverse range of
customers has helped corporate 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 and has brought home the benefits of technology to customers, middle men
and corporate.

Going forward, we will create new products and services, which would address the needs of
the end customer. Our single minded focus in delivering products for customers has given us
the distinguished position of being the preferred provider of financial services in the country.

Commodities market, contrary to the beliefs of many people, has been in

existence in India through the ages. However the recent attempt by the

Government to permit Multi-commodity National levels exchanges has given it, a shot in the
arm. As a result two exchanges Multi Commodity Exchange

(MCX) and National Commodity and derivatives Exchange (NCDEX) have come into being.
These exchanges, by virtue of their high profile promoters and stakeholders, bundle in
themselves, online trading facilities, robust surveillance measures and a hassle-free settlement
system. The futures contracts available on a wide spectrum of commodities like Gold, Silver,
Cotton, Steel, Soya oil, Soya beans, Wheat, Sugar, Chana etc., provide excellent opportunities
for hedging the risks of the farmers, importers, exporters, traders and large scale consumers.
They also make open an avenue for quality investments in precious metals. The commodities
market, as it is not affected by the movements of the stock market or debt market provides
tremendous opportunities for better diversification of risk. Realizing this fact, even mutual
funds are contemplating of entering into this market

Karvy Comtrade Limited is another venture of the prestigious Karvy group. With our well
established presence in the multifarious facets of the modern Financial services industry from
stock broking to registry services, it is indeed a pleasure for us to make foray into the
commodities derivatives market which opens yet another door for us to deliver our service to
our beloved customers and the investor public at large.

With the high quality infrastructure already in place and a committed Government providing
continuous impetus, it is the responsibility of us, the intermediaries to deliver these benefits at
the door-steps of our esteemed customers. With our

expertise in financial services, existence across the lengths and breadths of the country and an
enviable technological edge, we are all set to bring to you, the pleasure of investing in this
burgeoning market, which can touch upon the lives of a vast majority of the population from
the farmer to the corporate alike. We are confident that the commodity futures can be a good
value addition to your portfolio.

The company provides investment, advisory and brokerage services in Indian Commodities
Markets. And most importantly, we offer a wide reach through our branch network of over 225
branches located across 180 cities.

To open a commodities trading account, click here else contact the nearest Karvy branch.

Registered Office:

Karvy Comtrade Limited.


46, Avenue 4, Street No. 1,
Banjara Hills, Hyderabad – 500 034.
Andhra Pradesh, India.

Mail : commodity@karvy.com
Telephone : +91-40–23431569/23388708/32946279/32946313
Fax : +91-040-

About KARVY Insurance Broking Ltd. (KIBL):


Introduction :
At KIBL we provide both life and non-life insurance products to retail individuals, high net-
worth clients and corporate. With the opening up of the insurance sector, we are in a position to
provide holistic and tailor made policies for different segments of customers. With Indian
markets seeing a sea change, both in terms of investment pattern and attitude of investors,
insurance is no more seen as only a tax saving product but also as a product which provides a
financial solution for the customer. Our wide national network, spanning the length and
breadth of India, further supports these initiatives. Our strengths include personalized service
provided by a dedicated team committed in giving hassle-free service to the clients.

Welcome to Karvy Investor Services Limited

Deepening of the Financial Markets and an ever-increasing sophistication in corporate


transactions, has made the role of Investment Bankers indispensable to organizations seeking
professional expertise and counseling, in raising financial resources through capital market
apart from Capital and Corporate Restructuring, Mergers & Acquisitions, Project Advisory and
the entire gamut of Financial Market activities.

Karvy Investor Services Limited (‘KISL’), a SEBI registered Merchant Banker has emerged
as a leading Investment Banking entity in the country with over a decade of experience. KISL
has built its reputation by capitalizing on its qualified.
Professionals, who have successfully executed a large number of complex and unique
transactions.

Our quality professional team and our work-oriented dedication have propelled us to offer
value-added corporate financial services and act as a professional navigator for long term
growth of our clients, who include leading corporate, State Governments, Foreign Institutional
Investors, public and private sector companies and banks, in Indian and global markets.

We have also emerged as a trailblazer in the arena of relationships, both at the customer and
trade levels because of our unshakable integrity, seamless service and innovative solutions that
are tuned to meet varied needs. Our team of committed industry specialists, having extensive
experience in capital markets, further nurtures this relationship.

KARVY REALTY (INDIA) LIMITED


Karvy Realty (India) Limited (KRIL) is promoted by the Karvy Group, India’s largest financial
services group. The group carries forward its legacy of trust and excellence in investor and
customer services delivered with passion and the highest level of quality that align with global
standards.
Karvy Realty (India) Limited is engaged in the business of real estate and property services
offering:

Buying/ selling/ renting of properties


Identifying valuable investments opportunities in the real estate sector Facilitating financial
support for real estate and investments in properties Real estate portfolio advisory services.
KRIL is your personal real estate advisor guiding and hand holding you through real estate
transactions and offering valuable investment opportunities.

Building on the KARVY brand as a leading industry benchmark for world class customer
servicing and quality standards, KRIL brings to investors a reputation of reliability,
dependability and honesty. Our understanding of the needs and preferences of ourClients and
our teams of qualified realty professionals help us to establish fruitful relationships with buyers
and sellers of properties alike.

INTRODUCTION
As we all know financial sector is growing very fast. One aspect every financial company is
emphasizing is that its different offers should reach to its targeted customer within time. For
fulfillment of this purpose the term of “financial marketing” was introduced. Financial
marketing basically deals with marketing of various financial instrument like bonds, securities,
mutual funds and all other services provided by various NBFC’s. Todays as per capital income
is growing up people are getting into investment business.

The factors that investors should considers while deciding any investment is the track
records of company liability side of company.

MUTUAL FUNDS:
A mutual fund is a trust that pools together the saving of a number of investors who share a
common financial goal. All such investor buy units of a fund that best suits their needs be its
capital growth regular returns or safety of capital. The fund manager then invests this pool of
money in securities coming from shares to debentures to money market instrument depending
on the objective of the scheme.

The money thus collected is then invested by the fund manager in different of
Securities. These could ranges from shares to debentures to money market
Instrument depending upon the scheme started objective. The income earned
Through this investment and the capital appreciation realized by the scheme are shared by its
unit holder in proportion to the numbers of unit owned by them.

Mutual funds are a pool of investments. In simple words a collection of money from
small investors and then in returns giving them a portfolio i.e. a variety of investment. it is not
wise for an investor to put all his investment in a single security. For ex. You are investing all
your money in a share of single company in any time of slowdown you may incur losses. If
you hav invested money in different companies loss from one get compensated from profit of
others. This is what a mutual fund does. These dates buying hundred shares of infosys will cost
you more than a four lack rupees. That’s a fortune? But if you zeal’s to be the proud owner of
these pricey stocks is bit extinguished by the astronomical price tag. What do you do? The
simplest thing to do is of course to walk up to your father in law for the ransom or you could
sell the dreams to colleges who pool in money to jointly buy the hundred stocks. Or you can
invest in mutual fund that holds infosys stocks.

While we leave it on you to decide whether the first two option are safe and risk free,
let us tell you that crores of Indian have found mutual funds a great way to invest when they
don’t have enough money to buy more than a few stocks.

Mutual funds have many benefits. They offer an easy and inexpensive way for an
individual to get returns from stocks and bonds without:

· Incurring the risk involved in buying them directly .


· Needing the capital to buy quality stocks.
· Having the expert knowledge to buy or sell stocks.

Type of mutual funds:

There are wide variety of mutual fund schemes that cater to investors needs, whatever the age
financial position, risk tolerance and return exceptations.
MUTUAL FUND

DEBT EQUITY BALANCE


How to sell Mutual Funds

The essence of professional selling toda is building and maintaining of high quality
relationship, based on establishing a high level of trust and credibility with customer
indefinitely. You keep your customer by continually investing in the quality of your
relationship. You should approach your customer as a consultant not as a vendor and help them
achieve their financial goal. The following chart explain the selling process of mutual funds.

Know your product

Know your client

Prioritize your client

Understand your clients need

Help them choose their investments

Encourage regular investments

Commit them to invest

Provide personalized after sales service


Type of clients

• Young and accumulating under 40 seeking capital appreciation. They are willing to
take high returns.
• Middle aged with family commitments. Aged between 40-60 and looking at stable
investment and lower risk.
• Retired persons, which are aged above 60. Seeking income to meet institution and high
net worth individuals. Include corporate, banks, trust and wealthy investors who seek an
appropriate combination of tax efficient growth and income depending upon their returns
expectations.

MUTUAL FUND INDUSTRY:

An overview:
The mutual fund industry in India began with the setting of the Unit Trust of India (UTI) in
1964 by the Government of India. During the last 36 years. UTI has grown to be a dominant
player in the industry with assets of over Rs. 76,547 crores as on March 31, 2013. The UTI is
governed by a special legislation, the Unit Trust of India Act, 1963. In 1987 public sector
banks and insurance companies were permitted to set up mutual funds and accordingly since
1987, 6 public sector banks have set up mutual funds. Also the two Insurance companies LIC
and GIC established mutual funds. Securities Exchange Board of India (SEBI) formulated the
mutual fund (Regulation) 1993. Which for the first time established a comprehensive
regulatory framework for the mutual fund industry.
Since then several mutual funds have been set up by the private and joint sectors.

Special Schemes:
The category include index schemes that attempt o replicate the performance of a particular
index such as the BSE Sensex of the NSE 50, or industry specific schemes which invest in
specific industries or sectoral schemes which invest exclusively in segments such as ‘A’ group
shares or initial public offering.

Index fund schemes are ideal for investors who are satisfied with a return approximately equal
to that of an index.
Sectoral fund schemes are ideal for investors who have already decided to invest in a particular
sector or segment.
Distribution of Income earned on Mutual Fund:

The income by the investment of the scheme, net of recurring expenses subject to a maximum
ceiling of 2.5% in equity schemes and 2.25% in debt schemes, is already by way of dividends
or capital gains by the unit holders of the scheme proportionately. These recurring expenses
include asset management fees, not exceeding 1.25% in case of equity funds and lower than
1% in case of debt funds.

Features of Mutual Funds:


Mutual Funds offer a wide variety of schemes. Many of these schemes, which only invest in
debt instruments like company debentures, government securities and money market
instruments. Such schemes do not invest at all in equity markets and offer safe investment
alternative for your hard-earned money. Infact both internationally and in India, mutual funds
manage more money in debt schemes than in equity schemes.

TYPES OF MUTUAL FUNDS:

Debt Funds/Bonds Funds:


It invest only in debt instrument, government securities and money market instruments,
completely avoiding any investment in the stock markets. Hence they are safer than equity
funds. At the same time the expected returns from debt funds would be lower.

Gift Funds
It is debt fund, which invest only in government securities and hence have zero credit risk.

Liquid Funds:
They are debt funds, which invest in short term paper, with maturities usually not exceeding
180 days and hence are safe from interest rate risk.
Balanced Funds:
It invest in a mix of equity and debt investments. Hence they are less risk than equity funds,
but at the same time provide commensurately lower returns. They provide a good investment
opportunity to investor who do not wish to be completely exposed to equity markets, but are
looking for higher returns than those provided by debt funds.
Equity Funds:

Invest entirely in the stock markets and attempt to provide investors the opportunity to benefit
from the higher returns, which stock markets can provide. However they are also exposed to
the volatility and attendant risks of stock market investment and hence should be chosen by
investors who have risk taking capabilities. Sectoral funds also specialized equity funds, which
restrict their in vestment only to shares of a particular sector and hence, are riskier than
diversified equity funds.

Detailed Analysis of Mutual Funds:

The Mutual Fund market in India is still in its early stages. Investors regard mutual fund as safe
and ideal investment instruments which helps them meet their varied investment.
Mutual Funds are still considered a good invest but the investor should achieve his financial
goals.
Today many investor have started to see mutual funds as the best way to invest their savings.
They see mutual funds as safer bet as compared to bank fixed deposits.

1. Mutual Funds are more transparent than any other form if investment.
2. The investor is aware where his money is used.
3. Mutual funds are less risky than direct investment I equities.
4. There no need to maintain paper work for transfer of instrument. Dividend
warrants and redemption dated.

DEBT/INCOME FUNDS:
A class of debt funds that invest in corporate debt with the expectation of safety of principal
and steady income generation.
To service to Investment objective most income funds invest a bulk of their corpus in debt
paper of financially strong companies.
Fund managers look beyond safe debt paper at securities issued by less credit worthy
companies.
Such companies offer higher returns. It’s a high return strategy which has backfired money a
time in India market.
The debt performing income funds are those which has struck to safe debt those that ventured
into risk debt are mostly languishing near the bottom of the pile.

Advantage:
For the purpose of computing NAV debt securities are valued differently from equities. Funds
equity holdings are valued on the basis of their market price. Since debt securities are not
traded actively or not traded at all the market price do not always accurately reflect their true
worth. Therefore mutual funds value debt securities held by them on the basis of yields
specified in the handful of approved valuation models, revised weekly.

Default Risk:
Many issuers do default increases as one goes down the rating scale. In credit rating parlance
dept paper rated BBB and above is considered to be investment grade from BB to B
speculative grade.
Although the issuer is servicing the debt, his financial position is precarious and C & D default
grade, the issuer is defaulting AA is widely considered to be the safety floor.

Liquidity Risk:
The other problem with low rated paper is poor liquidity. On an average corporate debt worth
just Rs. 150 crore is traded in a day. Of this AAA paper accounts for 90% and AA another 5%.
There is partially no liquidity in low rated paper and a fund often has no option but to hold the
paper through the company’s journey.
SHORT TERM GILT FUNDS:
As an investor one has a little longer investment horizon than few months to a year and we also
want to pay it safe and moreover the investor seeks current income also. The short term gilt
funds could just be well suited.

Credit Risk – : These funds invest primarily in govt. bonds and treasury bills, so do not carry
any credit risk, By owing short maturity gilts, these funds are less Susceptible, too big saving
in value. Hence much less risky than other investments besides being highly liquid.

Features:
1. Investors friendliness
2. Higher returns
3. Lower risk
4. Differ in portfolio maturity.

Example: The average life of a sovereign bond term gilt fund was 8.16 on March 31, 2015.
On the other hand it was little over two year under short term gilt funds.
5. Lower average maturity
6. Interest rate sensitivity is lower
7. Low on volatility
While this category so low on volatility it surely does not mean that the investor’s
investment are absolutely insulated here from the vagaries of the market. This category did
witness a fail in net asset value when interest rates hardened in July, 2013.
8. Conservative Investment:
Due to this the funds carry lower risk but also offer lower returns for the financial year
2014-02 while long term gilt funds cover up to 25.49% These gained an average of
11.59%.
Risk They could be a little more volatile than the liquid funds as measured by standard
deviation of returns.

Comparative Advantage:
Investment is default free sovereign bonds-these bonds offer better credit quality than medium
term debt funds.
Parking a large part of assets in corporate bonds of varying qualities Mandate to stretch
portfolio maturity up to 3-4 year. Can beat debt funds in softening interest rates, since gilts can
be actively traded.

Sectoral Funds:
The mutual fund industry is expending to cover all the ends of the general investor. The launch
of sector funds is one step in this direction. With sector funds, the MF sector has expanded its
products range, and helped fund managers widen their products designs. Sector finds are more
focused as their instruments are aimed at a particular industry so that maximum benefit can be
achieved from the market cycles. However they work well when the market timing is perfect,
caution experts.
1. since sector funds comprise instruments of a particular sector.
2. The investment is at a greater risk. That is, the effect of any movement in the sector.
Upward or downward is clearly.
3. The diversified funds have some protection against markets odds since the instruments
are spread across various sectors. Sliding show in one can be countered with the other
super hit sector.

4. In sector funds, is the gains will be stupendous, the losses too may be high. It is
therefore suggested that sector funds should constitute very small proportion of
investor’s portfolio.

Balanced Funds:

This fund is suitable for anyone who can put away money for the medium-term (upwards of 3
years). It suits the busy saver who would like to adapt a sensible approach to investing with a
well-balanced portfolio of stock and bonds but does not have the time and expertise to
constantly keep re-balancing his portfolio to stay on the sensible path.
While there is a tendency for many to classify 9 stocks as “risk” and bonds as safe research
shows many interesting facts. If the investor takes time to look up the section he can get a
better understanding of various investment options and their performance over varying time
periods

SYSTEMATIC WITHDRAWAL PLAN:


Systematic withdrawal Plan is an option from mutual funds by which the investors can get
regular by steadily redeeming small amount of their holding month,
where as their investment remains same. This can help in recording a far lower taxable income,
but same as dividend payout, thus resulting in lower tax outgo and higher post tax value of
investment.

Key Features:
1. Option of receiving month/quarterly income as specified by the investor based on
his needs and investment goals.
2. Withdrawal can be fixed amount or fixed number of units.
3. Withdrawal is normally processed on the 30of each month and cheques couriered
on the first of the month.
4. Additionally facility to receive payouts directly into his bank account through the
Electronic Clearing Service
5. TDS deduction on SWP on growth option
6. No entry or exit load
In case of normal divided payout the dividend amount is distributed which the investor
receives as income and the units that he has bought are left intact.
When one withdraws some amount under SWP there is a simultaneous reduction in the number
of units being held by the investor? But the real benefit would be on the tax aspect.
As the dividend become taxable in this budget @ 31% to investor would be far better off using
the withdrawal route.
Time of purchase is Rs. 10 which means a total of Rs. 10000 units are allotted to the investor.
Under the dividend plan, dividend is distributed @ 7.5% there is payment of Rs.750 each
month for a period of 12 months amounting to Rs. 9000 over a period. As per the budget the
entire amount will be taxable in the hands of the investor. In the second option the investor
opts for growth option of the income fund and Redeems units allotted to him by an amount
equivalent to Rs. 750 each month. The NAV of the fund if assumed to increase by 10 paisa
every month and at the end of the every month redemption takes place at the prevailing
NAV. According to this calculation the NAV at the end of the month is Rs. 10.70. When
redemption occurs at this stage a amount of Rs.750 is paid out just Rs. 5.58 becomes his
taxable income.

Reason
The reason behind this is that every withdrawal results in short term capital gain, which is the
difference between the withdrawal amount ad the respective cost of acquisition ad taxed as per
respective slab applicable to the investor. The same process continues every month.
Now the capital gain is taxable @ 10% which is lower than the dividend tax.

Parties involved in Mutual Fund:


Name of the parties involved Role and function
Sponcer * Established MF along with any individual corporate
* Liability limited to his contribution
* Contribution by the sponsor must be maximum 40% of
network of AMC (only who qualify the criteria
permitted by setup MF
Trustee * Board of trusty holding property of the benefit of the unit holders.
AMC (Asset Managing Company) * Company registered under the company Act,
(Investment Manager of the Fund) 1956 and approved by SEBI
* Entrusted with the task of managing scheme and
operations.
* Minimum network of Rs. 5 crore at least 50% of Board
of AMC are independent director i.e. not connected
with the spacing organization.
*Cannot act as an AMC/Trusty to any Mutual Fund
* No person can be a Director of more than AMC or
Director of Trust Company open by same AMC.
Custodian * Person holding a certificate to carry on ness of
custodian of securities under (Custodian
SEBI) (Custodian of security regulations to hold fund
assets and details from the AMC.
31.10.0 Entry Lad and Exit Load: A load is a sales fee charged by the fund.

Entry Load Charged at the time of entering into the scheme. The entry load percentage
is added NAV at the time of allotment of units.
For example, if an open-end fund’s per unit is Rs. 11 with frontload of 2%.
The funds which an investor can buy a unit is Rs. 11.22.
In other works, Rs. 100 would buy units=(100-2)=98/11=8.9 units.
Exit Load Charged at the time of receeming transfer between schemes. The exit load
percentage deducted from the NAV at the time of redemption or transfer
between schemes.
For example, if the redemption price is Rs. 10.70, with a back end load of
2% of exit charged by the fund amounts to Re. 0.21 so the net sale proceed
will be (10.70-0.21)=1049.
In other words , sale of 50 units would not fetch 50x10.70=Rs. 535 but
only 50x10.49=524.5

ENTRY LOAD AND EXIT LOAD


Return of Investment
The investor can receive returns in one of two ways.
Capital Appreciation Profit earned on sale of units at a higher NAV than the original
cost.
Income distribution When a fund makes a profit on its investments, this
(dividend) profit will give to investors as a dividend which can be re-
invested in the fund or retail the form of cash.
CHAPTER – IV
DATA ANALYSIS & INTERPRETATION

GROWTH OF MUTUAL FUNDS

The Indian Mutual funds has passed through three phases. The first phase was
between 1964 and 1987 the only player was the unit. Trust of India, which had a total asset of
Rs.6,700 cores at the end of 1988. the second phase is between 1987 and 1993 during which
period 8 funds were established (6 by banks and one each bye LIC and GIC). The total assets
under management had grown to 61,028 cores at the end of 1994 and the numbers of schemes
were 167.
The third phase began with the entry of private and foreign sectors in the Mutual Funds
industry 1n 1993. Kothari Pioneer Mutual fund was the first Fund to be established by the
private sector in association with a foreign fund.
As the end of financial year 2000(31st Marc) 32 Funds were functioning with Rs.1,13,005
cores as total assets under management. As one august end 2000. There were 33 funds with
391 schemes and assets under management with Rs. 1, 02,849 cores.
The securities and exchange Board of India (SEBI) came out with comprehensive regulation in
1993 which defind the structure of Mutual Fund and asset management companies for the first
time.
Several private sectors mutual funds where lunched in 1993 and 1994. The share of the private
players as raised rapidly since then. Currently there are 34 mutual funds organizations in India
managing 1, 02, 000 crores.

MAJOR MUTUAL FUNDS COMPANIES IN INDIA


ABN AMRO MUTUAL FUND
BANK OF BARODA MUTUAL FUND
BENCHMARK MUTUAL FUND
BIRLA SUN LIFE MUTUAL FUND
CAN BANK MUTUAL FUND
DBS CHOLA MUTUAL FUND.
DWS MUTUAL FUND
ESCORTS MUTUAL FUND
FIDELITY INDIA MUTUAL FUND
HDFC MUTUAL FUND
HSBC MUTUAL FUND
ING VYSYA MUTUAL FUND
KOTAK MUTUAL FUND
LIC MUTUAL FUND
MORAGAN STANLEY MUTUAL FUND
PRUDENTIAL ICICI MUTUAL FUND
PNB PRINCIPAL MUTUAL FUND
RELIANCE MUTUAL FUND
STANDARD CHARTERED MUTUAL FUND
RANKING OF INVESTMENT INSTRUMENTS:

The below table depicts the ranking of some of the investment instruments like Fixed deposits,
Provident fund, Postal Schemes, Insurance, Shares by the respondents based on their
importance.
Table 4.1:
Ranking of Investment Instruments
Ranks
R1 R2 R3 R4 R5

Investment Instruments
Fixed Deposits 1 18 14 10 0
Provident Fund 0 6 11 19 7

Postal Schemes 5 11 10 8 10
Insurance 35 2 3 1 1
Shares 2 7 4 5 25
Total 43 44 42 43 43

Chart 4.1
Ranking of Investment Instruments

Ranking of Investment instruments


respondents

40
30 Fixed Deposits
No. of

20 Provident Fund
10 Postal Schemes
0
Insurance
1 2 3 4 5
Shares
Ranks

Source: Based on the analysis of the Questionnaire From the diagram it can be noticed that
Insurance was ranked 1st by most (35) of the respondents Fixed deposits were ranked 2nd by
18 of the 43 respondents, 3rd by 14 of the 43 respondents. Most number (19) of respondents
ranked Provident fund as the 4th best investment instrument. 25 of the 43 respondents ranked
Shares as the 5th best investment instrument.
2. EXPERIENCE OF THE RESPONDENTS in the IR business:

The table below shows the experience of the respondents in their business and also the
percentage of respondents under each category.

Table 4.2

Experience of the Respondents


No. Of
No. Of years Respondents In %
<1 year 8 18.60
1-3 years 10 23.26
3-5 years 6 13.95
>5 years 19 44.19
Tot al 43 100%

Chart 4.2:
Experience of the Respondents

Experience of the Respondents

19% <1 year

1-3 years
44%
3-5 years
23%
>5 years
14%

Source: Based on the analysis of the Questionnaire It can be observed from the diagram that
Most of the respondents (44 %) had more than 5 years of experience. 14 % of the respondents
had 3-5 years of experience. Respondents with 1-3 years of experience were 23 %. 19 % of the
respondents had less than 1 year of experience.
3. RANKING OF INVESTMENT PARAMETERS: The table below shows the respondents’
ranking of the parameters they consider important while investing.

Table 4.3:

Ranking of investment parameters


Ranks 1 2 3 4
Parameters
Safety 33 8 2 0
Return 6 23 10 4
Tax Benefits 3 11 17 12
Liquidity 1 2 14 26
Tot al 43 44 43 42

Chart 4.3
Ranking of investment parameters Source

Ranking of Investment parameters


Respondents

40
30
No. of

Safety
20
10 Return
0 Tax Benefits
1 2 3 4 Liquidity
Ranks

Source: Based on the analysis of the Questionnaire From the above figure it can be known
‘Safety’ was considered the most important parameter while investing by 33 respondents. 23
respondents ranked ‘Return’ the second most important parameter. 17 of the 43 respondents
ranked ‘Tax benefits’ as the third important parameter while investing. Most of the respondents
(26) ranked ‘Liquidity’ as 4th.
4. AWARENESS OF MUTUAL FUNDS:
The table below shows the number of respondents who are aware of Mutual Funds.
Table 4.4:
Number of respondents who were aware of mutual funds

No. Of
Response Respondents
Yes 31
No 12
Total 43

Chart 4.4:

Awareness about Mutual Funds

28%
Yes
No
72%

From the above figure it can be known that most of the respondents (72 %) were aware of
Mutual Funds.
NOTE: Only those respondents who were aware of Mutual funds answered Questions 5-8 (31).
5. SOURCE THROUGH WHICH RESPONDENTS CAME TO KNOW ABOUT MUTUAL
FUNDS:

NOTE: For this question the respondents were allowed to opt for more than one option.
The table 4.4 below shows the different sources through which the respondents had come to
know about Mutual funds.

Table 4.5:
Sources of knowing about mutual funds
Source No. Of Respondents
Print Ads 8
Internet 5
Banners 4
TV Ads 10
Other Investment Advisors 7
Clients/Investors 8
Tot al 43

Chart 4.5:
Sources of knowing about mutual funds
Source of awareness

Print Ads

Internet

19% 19% Banners

17% 12% TV Ads


23% 10%
Other Investment
Advisors
Clients/Investors
6. THE RESPONDENTS WHO HAVE CLEARED AMFI EXAM:
The table 4.6 below shows the number of respondents who had cleared AMFI exam.

Table 4.6:
Respondents who cleared AMFI exam
Response No. Of Respondents
Yes 1
No 30
Tot al 31
The contents of the above table are put in a pie diagram as shown in the figure 4.6.

Chart 4.6:
Respondents who cleared AMFI exam

AMFI certified respondents

Yes
3%
Yes
No
No
97%

From the above figure it can be inferred that most of them (97 %) have not cleared AMFI
exam.
7. THE RESPONDENTS WHO SUGGEST MUTUAL FUNDS TO THEIR CLIENTS:
The table 4.7 below shows the respondents who suggest mutual funds to their clients

Table 4.7:
Respondents who suggest mutual funds to their clients
Response No. Of Respondents
Yes 17
No 14
Tot al 43

The chart 4.7 shows the number of respondents who suggest mutual funds to their clients in the
form of a pie diagram.

Chart 4.7:
Respondents who suggest mutual funds to their clients
Respondents who suggest Mutual
funds to their clients

No
45% Yes
Yes
No
55%

The above chart shows that the respondents who suggest mutual funds to their clients
are slightly higher than those who don’t.
The table below shows the reasons why the respondents would suggest mutual funds to their
clients.

NOTE: The respondents were allowed to opt for more than one choice for this question.
Table 4.8:
Reasons why they suggest mutual funds to their clients
No. Of
If yes, why respondents
Professional
Management 8
Diversification 3
Easily Saleable 5
Low cost 2
Liquidity 4
Flexibility 7
Tax Benefits 8
Tot al 43

Chart 4.8:
Reasons why they suggest mutual funds to their clients

Reasons for suggesting Mutual funds


respondents

10
No. of

5 Respondents
0
Professi

Benefits
Saleabl

Liquidity
Easily
onal

Tax

Reasons

Source: Based on the analysis of the Questionnaire


From the above figure it can be said that professional management and tax benefits are the
most important reasons why the respondents suggest mutual funds to their clients, followed by
flexibility.
The below table shows the reasons why the respondents don’t suggest mutual funds to their
clients
Table 4.9:
Reasons why they don’t suggest mutual funds to their clients
If no, why No. Of respondents
High Risk 3
Lack of much information 5
Low commission rate 1
AMFI not cleared 5
Total 43

Chart 4.9:
Reasons why they don’t suggest mutual funds to their clients
Reasons for not suggesting Mutual
funds
6

5
No. of respondents

3 Series1

0
k on ate red
hR
is ati nr a
r m io cle
Hig i nf
o
mi
ss no
t
uc
h
om MFI
o fm wc A
ck Lo
La
Reasons

The main reasons why the respondents don’t suggest mutual funds to their clients are
lack of much information and because of AMFI not cleared.
8. RESPONDENTS WHO WERE AWARE OF ICICI
MUTUAL FUND:

The table below shows the number of respondents who were aware of ICICI MF
Table 4.10:
Respondents who are aware of ICICI MF
No. Of
Response Respondents
Yes 2
No 29
Total 31

The table values are put in the form of a pie diagram as shown in figure 4.10.
Chart 4.10:
Respondents who are aware of ICICI MF

Awareness HDFC MF

Yes
6%
Yes
No
No
94%
s
Source: Based on the analysis of the Questionnaire From the above figure it can be said that
very less (6 %) were aware of ICICI MF
9. RESPONDENTS WHO WERE INTERESTED IN DOING MUTUAL FUNDS BUSINESS:
The table below shows the number of respondents who were interested in doing mutual funds
business including those who were unaware of mutual funds.

Table 4.11:
Respondents interested in doing mutual fund business
Total Unaware
Response No. of No. of
respondents In % respondents In %
Yes 15 34.88 2 16.67
No 28 65.12 10 83.33

From the above table it can be inferred that not many are interested in doing mutual funds
business.
10. RESPONDENTS WHO WOULD LIKE TO ATTEND BUSINESS OPPORTUNITY
PROGRAM (BOP) offered by various mutual funds dealing ccompanies

The table below shows the number of respondents who were interested in attending the BOP.
Table 4.12:

Respondents interested in attending the BOP

Total Unaware
Response No. of No. of
respondents In % respondents In %
Yes 13 30.23 3 25
No 30 69.77 9 75
Total 31 100% 12 100%

From the above table it can be known that most of the respondents both aware and unaware
were not interested in attending the BOP.
11. RESPONDENTS WHO WOULD LIKE TO MEET THE REPRESENTATIVE OF ICICI
MF
The below table shows the number of respondents who were interested in meeting the
representative

Table 4.13:
Respondents interested in meeting the representative of ICICI MF

Total Unaware
Response No. of No. of
respondents In % respondents In %
Yes 10 23.26 1 8.3
No 33 76.74 11 91.7

It can be said from the above table that most of the respondents both aware and unaware
are not interested in meeting the representative.
FINDINGS:

 Among all the investment instruments available, Insurance was ranked number 1 by
81.3 % of the respondents, followed by fixed deposits.
 44 % of the respondents had more than 5 years of experience.
 Safety was considered the most important parameter while investing followed by
returns.
 72 % of the respondents were aware of mutual funds.
 23 % of the respondents came to know about mutual funds from TV ads, 19 % by print
ads and their clients/investors.
 Only 3 % of the respondents had cleared AMFI exam.
 55 % of those who were aware of mutual funds suggest it to their clients mostly
because of professional management and tax benefits.
 45 % of the ‘aware respondents’ do not suggest mutual funds to their clients mostly
because of lack of much information and AMFI not cleared.
 Only 6 % of the respondents were aware of ICICI Consultancy
 Only 35 % of the aware respondents were interested in doing mutual funds business.
 Only 17 % of the ‘unaware respondents’ were interested in doing mutual funds
business.
 Only 30 % of the aware respondents were interested in attending BOP.
 25 % of the unaware respondents were interested in attending BOP.
 Only 23 % of the aware respondents were interested to meet the representative of ICICI
MF.
 8 % of the unaware respondents were interested to meet the representative of ICICI
MF.
SUGGESTIONS

 Though 72 % of the respondents are aware of mutual funds only 3 % of them have
cleared the AMFI exam. So the respondents should be convinced to write the AMFI
exam. Thus more number of mutual fund advisors would be available to do the
business.
 45 % of the respondents, aware of mutual funds, do not suggest mutual funds to their
clients because of lack of much information about mutual funds. So more inputs should
be given to the advisors regarding how mutual funds work and commission rates related
to it.
 Only 6 % of the respondents were aware of ICICI MF. Hence steps should be taken to
spread awareness about ICICI MF.

 Only 35 % of the aware respondents were interested in doing mutual funds business so
necessary steps can be taken to induce the rest to do mutual funds business.
 17 % of the unaware respondents were interested in doing mutual funds business so
necessary steps can be taken to tap the opportunity of getting the business from them by
giving the inputs about mutual funds.

 Necessary steps can also be taken to create awareness among uninterested unaware
respondents and get the business done from them.

 As 25 % of the unaware respondents were interested in attending the BOP they can be
properly guided regarding mutual funds and can be made to write the AMFI exam.
CONCLUSIONS:

It was found that most of the respondents were aware of mutual funds, but most of them were
interested in doing mutual funds business some time later. Some of them were already working
and are doing insurance business as a part time thing so they don’t have time to do mutual
funds business in this hectic schedule. Some others who were interested in doing mutual funds
business, don’t want to write AMFI exam at present.
Books:

C. R. Kothari (2001) Research Methodology, Sultan Chand, New Delhi.


Gupta S P & Gupta M P (2001) Business Statistics, Kitab Mahal, New Delhi.
Websites:
http://www.icicimutualfund.com
http://www.amfiindia.com
http://www.google.com

http://www.valueresearch.com
APPENDIX-A

Questionnaire
Study the awareness of the Mutual Fund among Financial Advisor in Hyderabad.
Name: - _____________________________________________________
Address: - ___________________________________________________
____________________________________________________________
Contact No.:- ________________________________________________
Annual income: - _____________________________________________
Age: - _______________________________________________________
Gender: - ____________________________________________________

Which investment instruments/avenues do you suggest to your clients? (Rank 1 to 5)


□ Fix deposited □ Insurance
□ Provident fund □ Shares
□ Postal schemes □ others ___________________
Since how long you are in this business?
□ < 1-year □ 1 to 3 years
□ 3 to 5 years □ > 5 years

Which parameters do you consider more important while investing? (Rank 1 to 4)


□ Safety □ Tax benefits
□ Return □ Liquidity

Are you aware of mutual fund?


□ Yes □ No

If no, then directly go to Q. No. 9


From where did you come to know about Mutual Fund?
□ Print adds. □ Internet/website
□ Banners/Hoardings □ T.V. ads.
□ other investment advisor □ Client/ investors
□ others ______________

Have you cleared AMFI Exam?


□ Yes □ No

Do you suggest mutual fund to your client?


□ If yes, why? □ If no, why?
□ Professional management □ High risk
□ Diversification □ Lack of much information
□ Easily saleable □ Low commission rate
□ Low cost □ AMFI not cleared
□ Liquidity □ others _______________
□ Flexibility
□ Tax benefits
□ Others________________

Are you aware of NJ Indiainvest?


□ Yes □ No

Are you interested in doing Mutual Fund business?


□ Yes □ No

10.Would you like to attend Business Opportunity Programe (BOP) offered by


VARIOUS MUTUAL FUNDS DEALING COMPANIES?
□ Yes □ No

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