Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
PGD. 2000-2002
Post Graduate Diploma is the result of my own efforts and this project
has not been provided to any other Institute and the work done is original
and authentic.
I would like to thank all the people of Birla, Alliance and Pioneer ITI
products and their kind support. A special thanks to Ms. Neena Madhura
Sector and also for her kind support for showing the right track.
OBJECTIVES
1. To study the growth and profitability of Mutual Fund sector for the
past 3 years.
India
PROJECT
The project was done on Mutual funds in Birla Mutual Fund, Alliance
The tern mutual fund itself gives its meaning. It means the fund,
♦ Trusts
♦ Sponsor
Equity funds
Debt/Income funds
Balanced funs
MUTUAL : AN INTRODUCTION
bonds and equity shares of joint stock companies. A mutual fund is a pool
experience and resources for directly accessing the capital market, they
The raison d’être of mutual funds is their ability to bring down the
transaction costs. The advantages for the investors are reduction in risk,
investment and tax benefits. By pooling their assets through mutual funds,
MUTUAL FUNDS FOR WHOM? These funds can survive and thrive
only if they can live upto the hopes and trusts of their individual members.
These hopes and trusts echo the peculiarities which support the emergence
and growth of such insrescue of such investors who come to the rescue of
investments:
(a) Limited resources in the hands of investors quite often take them away
portfolio.
(d) To buy shares, investors have to engage share brokers who are the
(f) It is difficult for them to know the development taking place in share
(g) Firm allotments are not possible for small investors on when there is a
into one or combination of the two broad categories, i.e., Income and
opt for mutual funds. Mutual fund route offers several important
advantages.
diversification which is the idea of not putting all your eggs in one basket.
from unexpected drop in values of some shares. The small investors can
funds at his disposal. Mutual funds on the other hand, pool funds of lakhs
in the fund. The professional fund managers who supervise fund’s portfolio
such buy and sell. They have extensive research facilities at their disposal,
can spend full time to investigate and can give the fund a constant
other investments is that there is always a market for its unit/ shares.
mutual funds in India have to ensure liquidity. Mutual funds units can
either be sold in the share market as SEBI has made it obligatory for
ended schemes investors can always approach the fund for repurchase at
net asset value (NAV) of the scheme. Such repurchase price and NAV is
mutual funds.
provides for the safety of investments. Mutual funds have to broadly follow
the laid down provisions for their regulations, SEBI acts as a watchdog and
vi. Tax Shelter: Depending on the scheme of mutual funds, tax shelter is
regular returns, etc. Mutual funds are also relevant in national interest. The
Any mutual fund has an objective of earning income for the investors and/
A. Operational Classification
(a) Open Ended Schemes: As the name implies the size of the scheme
always open to the investor who can subscribe at any time. Such fund
stands ready to buy or sell its securities at any time. It implies that the
their shares. Further, the shares or units are normally not traded on the
stock exchange but are repurchased by the fund at announced rates. Open-
ended schemes have comparatively better liquidity despite the fact that
these are not listed. The reason is that investor can any time approach
in rates haunt the investors. The portfolio mix of such schemes has to be
investments, which are actively traded in the market. Otherwise, it will not
new and smaller companies since these are not generally traded. In such
funds, option to reinvest its dividend is also available. Since there is always
two fronts, one is, that unexpected withdrawals require funds to maintain a
high level of cash available every time implying thereby idle cash. Fund
managers have to face questions like ‘ what to sell’. He could very well
have to sell his most liquid assets. Second, by virtue of this situation such
cash payments, funds cannot have matching realisation from their portfolio
which their shares/ units are redeemed. Unlike open-ended funds, these
funds have fixed capitalisation, i.e., their corpus normally does not change
throughout its life period. Close ended fund units trade among the investors
the engaged broker. Their price is free to deviate from NAV, i.e., there is
every possibility that the market price may be above or below its NAV. If
one takes into account the issue expenses, conceptually close ended fund
package of investments, i.e., cannot exceed the sum of the prices of the
schemes.
Pattern, (c) Specialised sector of investment, (d) Leverage and (e) Others.
To meet the diversified needs of the investors, the mutual fund schemes are
i. Income Funds: For investors who are more curious for returns, Income
funds distribute periodically the income earned by them. These funds can
relatively low risk and those that attempt to achieve maximum income
possible, even with the use of leverage. Obviously, the higher the expected
ii. Growth Funds: Such funds aim to achieve increase in the value of the
iii. Conservative Funds: The fund with a philosophy of “ all things to all”
rate of return, (ii) To protect the value of investment and, (iii) To achieve
objectives. Such funds which offer a blend of immediate average return and
Such funds divide their portfolio in common stocks and bonds in a way to
achieve the desired objectives. Such funds have been most popular and
Mutual funds may also be classified on the basis of securities in which they
classification.
i. Equity Fund: Such funds, as the name implies, invest most of their
associated with the investment in equity shares. Such funds are clearly
expected to outdo other funds in rising market, because these have almost
all their capital in equity. Equity funds again can be of different categories
ii. Bond Funds: such funds have their portfolio consisted of bonds,
risk is low in such funds. In this category we may come across the funds
iii. Balanced Fund: The funds, which have in their portfolio a reasonable
mix of equity and bonds, are known as balanced funds. Such funds will put
more emphasis on equity share investments when the outlook is bright and
will tend to switch to debentures when the future is expected to be poor for
shares.
(c) Sector Based Funds:
putting all their all eggs in one basket, the policy of specialising has the
the specific sector in which they are investing. Sector based funds are
bright future for a particular sector. These funds are characterised by high
Sponsors: The sponsors initiate the idea to set up a mutual fund. It could
has to satisfy certain conditions, such as capital, record (at least five
their interests. Trustees float and market schemes, and secure necessary
limits, whether the fund’s assets are protected, and also ensure that
unitholders get their due returns. They also review any due diligence by the
AMC. For major decisions concerning the fund, they have to take the
investors get an annual report. Trustees are paid annually out of the fund’s
Fund Managers/ AMC: They are the ones who manage money of the
to the trustees. A fund’s AMC can neither act for any other fund nor
undertake any business other than asset management. Its net worth should
not fall below Rs. 10 crore. And, its fee should not exceed 1.25 percent if
collections are below Rs. 100 crore and 1 percent if collections are above
Rs. 100 crore. SEBI can pull up an AMC if it deviates from its prescribed
role.
schemes. Their charges range between 0.15-0.2 percent of the net value of
SPONSOR REGISTRAR
ACT AS
MUTUA INVESTO
APPOINTS TRUSTEE TO SUBSCRIBE
L FUND RS
THE THE UNITS OF
(AS A
UNITHOLDERS
TRUST)
OF
ASSET
MANAFEME
NT MANGES
COMPANY SAFE KEEPS
THE CUSTODIAN
THE ASSETS
INVESTMEN
OF
T OF
SEBI GUIDELINES
The SEBI issued a set of regulations and code of conduct of
follows:
AMC
business.
• The Mutual fund should have a custodian, not associated
in any way with the AMC and registered with the board.
account.
the investors
regulations.
The Indian Mutual Fund industry is dominated by the Unit Trust of India
which has a total corpus of 700 Billion collected from over 20 million
investors. The UTI has many funds/ schemes in all categories i.e. Equity,
balanced, income etc. With some being open ended and some being closed
balanced fund, is the biggest scheme with a corpus of about 200 billion.
Parliament. Most of its investors believe that the UTI is government owned
and controlled, which, while legally incorrect, is true for all practical
purposes.
The second largest category of mutual funds are the ones floated by
and SBI Funds Management floated by State Bank of India are the largest
Bima Sahayog AMC floated by the LIC are some of the other prominent
The third largest category of mutual funds are the ones floated by the
these are Birla Capital AMC and Prudential ICICI AMC . The aggregate
billion.
explosion of the foreign owned mutual funds companies and the decline of
players.
Many nationalized banks got into the mutual funds business in the early
nineties and got of to a good start due to the stock market boom prevailing
then. These banks did not really understand the mutual funds business and
staff and generally chose to transfer staff from parent organisations. The
good. Some schemes had offered guaranteed returns and there parent
money as the difference between the guaranteed and actual returns. The
service levels were also very bad. Most of these AMC’s have not been able
to retain staff, float new schemes etc. And it is doubtful whether, barring a
major way.
The experience of some of the AMC’s floated by the private sector Indian
companies was also very similar. They quickly realized that the AMC
business is a business, which makes money in the long term and requires
deep- pocketed support in the intermediate years. Some have sold out to
foreign owned companies, some have merged with others and there is a
The foreign owned companies have deep pockets and have come here with
the expectations of a long haul. They can be credited with the introduction
education and support etc. In fact, they have forced the industry to upgrade
provided by these.
For instance, collection figures for April-February 1998-99 show that the
net outflow from UTI has been Rs. 20 billion, while private sector funds
Repurchases 12 8 85 106
Redemption’s 39 6 56 101
GIC Institutions
UTI Institutions
MARKETING STRATEGIES ADOPTED BY THE
MUTUAL FUNDS
The present marketing strategies of mutual funds can be divided into two
main headings:
Ø Direct marketing
Ø Joint Calls
Direct Marketing:
This constitutes 20 percent of the total sales of mutual funds. Some of the
Personal Selling: In this case the customer support officer of the fund at a
particular branch takes appointment from the potential prospect. Once the
Associate (BDA) in some funds then meets the prospect and gives him all
details about the various schemes being offered by his fund. The
fund. The names and phone numbers of the people are picked at random
profession are also contacted through phone and are then informed about
the fund. Generally the conversion rate in this form of marketing is 15% -
20%.
Direct mail: This one of the most common method followed by all mutual
The customer support officer (CSO) then mails the literature of the
mailing the literature. The CSO calls on the people to whom the literature
appointments with those people. It is then the job of BDA to try his best to
dailies. The purpose to keep investors aware about the schemes offered by
fund are put at important locations of the city where the movement of the
people is very high. Generally such hoardings are put near UTI offices in
order to tap people who are at present investing in UTI schemes. The
These are the people/ distributors who are in direct touch with the
Most of these intermediaries are also involved in selling shares and other
investors to invest in mutual funds. A lot depends on the after sale services
those intermediaries who give them right information about the fund and
keep them abreast with the latest changes taking place in the market
especially if they have any bearing on the fund in which they have
invested.
Regular Meetings with distributors: Most of the funds conduct
hear their complaints regarding service aspects from funds side and other
programmes are also conducted for the new agents/ distributors. Training
involves giving details about the products of the fund, their present
performance in the market, what the competitors are doing and what they
Joint Calls:
This is generally done when the prospect seems to be a high net worth
investor. The BDA and the agent (who is located close to the HNI’s
residence or area of operation) together visit the prospect and brief him
about the fund. The conversion rate is very high in this situation, generally,
around 60%. Both the fund and the agent provide even after sale services in
Meetings with HNI’s: This is a special feature of all the funds. Whenever
a top official visits a particular branch office, he devotes atleast one to two
hours in meting with the HNI’s of that particular area. This generally
we cannot judge an elephant by its trunk or by its tail but we have to see it
Ø Product designing;
market itself.
The above are the aspects of marketing of mutual funds, in totality. Even if
there is a single weak-link among the factors which are mentioned above,
There are certain issues that are directly linked with the marketing of
the market for the mutual fund products. Consider the geographical spread
of the investors in the mutual fund industry. Almost 80% of the funds are
mobilised from less than 10 centres in the country. In fact there are only
around 35 centres in the country, which account for almost 95% of the
funds mobilised. Considering the vast nature of this country, the first
priority is that the geographic spread has to be widened and the market has
to be deepened. Secondly, the mutual funds must try to spread their wings
not only within the country, but also outside the country.
population of about one lakh, which normally has access to only post office
savings and bank deposits. This is the single largest untapped market for
Rural marketing, unlike the marketing of mutual funds in the metros and
rural and semi-urban areas are not well educated and are inadequately
The mutual fund industry can collectively undertake this job of creating
awareness among the rural population about the mutual funds as a new
and the collection centres can be best utilised to create such awareness and
meetings in these semi-urban and rural areas, visits by mobile vans with
some audio visual aids and the like, should help develop these markets. In
other words, the untapped markets in the country should ideally be the first
thing that the mutual funds in India should endeavour to tap, not entirely
concentrating on these areas, the investor base will get more broad based.
mutual funds, it will naturally give the much needed stability to the market.
B. Overseas Markets
The second aspect with respect to the widening and deepening the market
retaining these funds. NRI’s will also require a continuous presence in their
market, because that generates trust and confidence, which translates into
A. Investor Preferences
The challenge for the mutual funds is in the tailoring the right products that
that the common investor understands very clearly and loudly the salient
features of funds, and distinguishes one fund from the another. The funds
that are being launched today are more or less look-alikes, or plain vanilla
funds, and not necessarily designed to take into account the investors’
varying needs.
The Indian investor is essentially risk averse and is more passive than
uncertain market, are not attractive to him. He prefers one bird in the hand
The investor is ready to invest his money over a long periods, provided
therefore appeals to his sentiments and emotions. That purpose may be his
after retirement, or the need for steady and sure income after retirement. In
a country where social security and social insurance are conspicuous more
by their absence, mutual funds can pool their resources together and try to
B. Product Innovations
With the debt market now getting developed, mutual funds are tapping the
investors who require steady income with safety, by floating funds that are
designed to primarily have debt instruments in their portfolio. The other
area where mutual funds are concentrating is the money market mutual
funds, sectoral funds, index funds, gilt funds besides equity funds.
The industry can also design separate funds to attract semi-urban and rural
DISTRIBUTION NETWORK
lead managers and brokers along with sub-brokers, for selling units. The
provided to the retailer agents, they are likely to be more successful than
and the trust and credibility that has been generated or will be generated by
being loyal to one institution. Statistics reveal that the wastage ratio of
application forms in the lead manager concept, is much higher than in the
educator. The reduced cost benefit will ultimately accrue to the investor in
continuous interaction and contact with the mutual fund. Therefore, retail
distribution through the agents is a preferred alternative for distributing
By their very nature, mutual funds require higher advertisement and sales
markets, where investors are not adequately aware of the product and do
and offer documents, which deserve attention. Most of the mutual fund
offer documents, mutual funds are required to mention the fund objectives
in clear terms. Immediately thereafter, the first risk factor that has to be
without luring investors through false promises, and will certainly improve
the situation.
must before a mutual fund can launch its fund. In the regulation itself, a
period of one month has been provided. But in a month’s time, perhaps the
situation may so change, that the timing of launch gets affected. The
time, defeats the purpose for which the fund was designed also.
along with procedural simplicity, that the fund gradually builds its brand
and its class of loyal investors. The quality of services are broadly
categorised as:
Mutual fund managers must give due attention and evaluate their
service.
come to the fund again and again. When the investor sends his application,
it is not only an application, but it also contains vital information. Most of
deeper loyalty and reduced costs. It is in this context that direct marketing
for mutual fund industry to test market and have pilot projects before
geographic area where the fund has a strong presence and proven
marketing network, can help reduce network, can help reduce issue
expenses and ultimately translate into higher returns for the investor. Very
collectively have a data bank, and share the information for appropriate
use.
return criteria, on the basis of which they take investment decisions. Not
asking for yet different risk-return attributes, and differential preference for
various investment attributes of financial product. different investment
Ø Liquidity,
Ø Capital appreciation,
Ø Safety of principal,
Ø Tax treatment,
Ø Regulatory restrictions,
On the basis of these attributes the mutual fund market may be broadly
1) Retail Segment
These may be further classified on the basis of their income levels. It has
preferences for urban and rural prospects would differ and therefore the
strategies for tapping this segment would differ on the basis of differential
life style, value and ethics, social environment, media habits, and nature of
work. Broadly, this class requires security of the principal, liquidity, and
2) Institutional Segment
This segment characterises less number of participants, and large individual
pension funds. This class normally looks for more specialised professional
than a ready-made product. The tax features and regulatory restrictions are
3) Trusts
family trust, social trust, etc. each with different objectives. Its basic
investment need would be safety of the principal, regular income and hedge
against inflation rather than liquidity and capital appreciation. This class
offers vast potential to the fund managers, if the regulators relax guidelines
as ‘fair weather friends.’ They need the highest cover against political and
exchange risk. They normally prefer easy exit with repatriation of income
and principal. They also hold a strategic importance as they bring in crucial
foreign countries depending upon the provisions of tax treaties. The range
of suitable products are required to design to divert the funds flowing into
bank accounts.
5) Corporates
surplus funds that earn returns more than what they have to pay on account
of holding them. Alternatively, they also get surplus fund due to the
seasonality of the business, which typically become due for the payment
within a year or quarter or even a month. They need short term parking
place for their fund,. This segment offers a vast potential to specialised
money market managers. Given the relaxation in the regulatory guidelines,
Thus, each segment and sub-segment have their own risk return
analyse in detail the intrinsic needs of the prospects and design a variety of
suitable products for them. Not only that, the products are also required to
AD’S THE WAY Increasing sales have given mutual fund promoters the
The Atheists are turning believers. Mutual funds, private sector ones in
money” have nearly tripled their press media spend from Rs.12.20 crore in
the period January to April 1998 to Rs. 31.6 crore in January to April 1999,
What’s interesting is that in this period the share of the private sector
mutual funds in the category’s total media spending has surged from 20
For proof, take a look at some figures. PIAMC – which spent Rs. 3 crore
on advertising in the entire fiscal year 1998-99 has spent the same amount
during the first four months of the current fiscal itself. Kothari Pioneer
and Rs.50 lakhs in 1998-99 has already spent Rs. 50 lakhs in the first
quarter.
Birla Mutual fund, which spent Rs. 1 crore on advertising in the year 1998-
Clearly advertising types have something to cheer about. But what’s caused
funds are being pushed into advertising more by intermediaries like banks
Besides, since more open-ended schemes are now available, some form of
ongoing support to keep sales booming has been deemed necessary by the
funds.
In the words of Mr. Rajiv Vij, vice president marketing, Templeton Asset
advertising in the changed climate today, when investors are most receptive
part of the consumer’s decision to invest in a category that is not yet clearly
brand awareness from five percent in June 1993 to 34 percent now, as per a
helped the fund post a redemption-to-sales ratio of just about five percent
But what mode of advertising do these funds choose? “To sell the
category,” avers VIJ, “mass media is more effective because one needs to
target a large segment of the population.” Mutual Fund marketers feel that
since the category is ‘information – centric’, press is the best medium to get
across one’s message. Within the print media, most marketers feel that a
Direct mail is another medium, which some funds have successfully used.
But rather than sending out mailers to all and sundry, there is a need for
appropriate targeting.
Educational seminars are the final leg in the marketing and communication
Another very successful media niche, which has been exploited to the hilt
But why is advertising suddenly working for mutual funds when it doesn’t
instead of a few, scrappy ads is now seen to be the key to investor demand.
exercise. Just like mutual funds advocate that investors take a long-term
brand building.
Fund marketers and industry observers however, caution against the danger
of selling the product for the wrong reasons. Funds need to focus on
goals.
Inspired Marketing will help Mutual Funds walk away with the bank
Deposits
Bankers better watch out! The Indian mutual fund industry will soon start
savings into the lap of the Indian Mutual Fund industry in the next
increased awareness, would lead to more investors putting their money into
mutual funds. The day was not far , they said , when small savings account
Significantly, fund chiefs were unanimous that the credibility gap which
the industry suffered for the past few years did not exist any more. All the
fund chiefs were unanimous that performance, service and support were all
imperative for growth. “Performance, transparency and after sales service
important contributor to many mutual fund schemes, will drive the industry
important contributor to many mutual fund schemes, will drive the industry
growth, “ Tata Mutual Fund chief K.N. Atmaramani said. On the state of
pharmaceuticals and consumer goods stocks - or the BSE Sensex for that
matter – might have peaked, new opportunities are opening up in areas like
Fund chiefs also made a case for the code to prevent mutual funds from
schemes. They were of the view that, “ Mutual Funds have to agree to
retail market, via government securities or gilt funds. Even savings bank
accounts, where investors earns 3-4 percent, have been converted into a
retail product via money market MFs the best part is that even confidence
However , even if you assume that the in the next four-five years MFs can
tap 10 percent of these, the assets under management will double. Second,
MFs could be a good substitute for all other financial instruments available
in the market. Funds are quite safe because of the present regulations and
MF product would easily be a substitute for all this. When one combines all
these characteristics, one can definitely sell the product. What one requires
is Concept Selling.”
“ The professional distributors are keeping a check on the fund houses and
are setting client expectations at the right level. This augurs well for the
model. There is a whole new distribution channel opened up over the last
two to three years where most international banks, private sector banks
have started distributing funds. That can give you an idea of what the
The US mutual fund industry in 1997 was about $50 billion, we are talking
about $18-19 Billion in India. In 22 odd years in the U.S.A, the industry
Internet marketing and (c) Gone are the days big names would sell.
Fund )
the legs of the package. I don’t think people are willing to leave their
promising.”
fulfill the needs of the customer and the investor. In terms of range and
package products, funds are far superior than banks. The number of people
transacting has gone up five, six times .And even if people are pulling out
the money, it is not a bad thing because the investor tests the efficiency of
the system.
Analytics of the customer is again very important and today we have some
This is why fund delivery today is largely at the upper retail segment.
Birla Advantage Fund The Fund is a growth scheme and aims primarily at
Indian economy (and hence, for Indian capital markets as well), normally
instruments or cash.
expenses, and other liquidity needs. A portion of funds may also be kept in
including the National Stock Exchange and the OTC Exchange of India.
(IPOs), other public offers, placements, rights offers, negotiated deals, etc.
Investment policies of the Fund shall reflect restrictions for mutual fund
Fund.
instruments of good quality will enable the Fund to earn competitively high
yields for a sustained period. Short-term debt considerations for this open-
Investment policies of the Fund shall reflect restrictions for mutual fund
portfolio.
The Scheme will invest the entire net assets in fixed income and money
and money market instruments. Depending upon liquidity needs and other
considerations, the Scheme may also hold cash or cash equivalents
safety.
and other Government securities, PSU bonds, listed, and unlisted corporate
equivalents.
An attractive equity linked saving scheme (ELSS) from Birla Mutual Fund.
Get a rebate u/s 88 of the Income Tax Act, 1961 @ 20% of any investment
upto Rs. 10,000/- Minimum amount Rs. 500/- and in multiple thereof. Also
available is full exemption from capital gain tax u/s 54 EA & EB of the
Income Tax Act. Now is the best time for the scheme since blue chip
Birla Taxplan
Fund, has launched India's first open-end, equity linked (ELSS), tax saving
scheme, Birla Taxplan. This is the first scheme launched under revised
notification from the Central Board of Direct Taxes, which has permitted
its Initial Public Offer on Saturday, the 13th February 1999 and has re-
opened for subscriptions from Monday, the 15th February 1999. The
minimum investment is Rs.500 and in multiples thereof without any limit
on maximum investment.
It's an ideal way to get regular returns Post dated cheques are issued to the
basis. You can have the monthly withdrawals as per your requirements.
KP Blue-chip
dividend of 35% in July 99 in its dividend plan. Ever since its inception,
Blue-chip Fund has been ranked consistently among India’s top performing
fund.
K.P. Prima
Prima Fund has the distinction of being India’s first truly authentic
K.P.Income Builder
seeks to provide investors steady returns with relative safety.And now, you
can decide the frequency of your dividends. Choose from the Monthly,
Plan is Rs. 25,000 and for the half-yearly and annual options the minimum
is Rs. 5,000. Investors opting for the growth plan too can get a monthly
Fund Stability: For investors seeking liquidity, safety and regular income
through
a portfolio of debt and money market instruments. Ideal for a time horizon
of 6 months to 3 years.
K.P.Infotech
technology sector. Launched in August 22, 1998 the fund has already given
a return of over 249.34 since inception. Infotech Fund has been ranked as
Micropal.The fund has also declared a 40% tax-free dividend (highest ever
Infotech sector.
started with the government falling and in turn pulling down the markets
15%. The healthy economic numbers, however, helped the markets recover
smartly and gain almost 30% in less than two months. However, the gains
the fundamentals. Since then the markets have remained in a trading zone
and fluctuated with the news/rumours about the ongoing conflict on the
Kashmir front. We believe that the markets will remain range-bound till the
Once again the results declared for the full year by the three sectors -
expectations. The IT sector has not participated in the recent rally despite
the excellent results. This is largely due to concerns that the industry is too
IT companies will continue to log a healthy growth during the next couple
respectively, during the last quarter. However, for the calendar year to date,
the Fund has appreciated by 43.96% and has outperformed the BSE
wholesale primary debt market. The major reason for the dip in interest
rates could be attributed to the sluggish credit off-take from the banking
system. The excess liquidity in the system and the low inflation rate of 3%
on the back of a good agricultural crop reduced the difference between the
The fund continued its focus on safety and liquidity. The investment has
the last quarter, the fund has done well with 13.45% p.a. return in the Bond
Brief Introduction
Alliance Capital Asset Management (India) Pvt. Ltd. (ACAM) is
an affiliate of Alliance Capital Management L.P., a leading global
investment adviser based in New York, USA. Since 1993, Alliance
Capital has maintained a presence in India when it was registered
as a Foreign Institutional Investor (FII). As an FII, Alliance Capital
launched an "off-shore" fund, the India Liberalization Fund in
December 1993. The Indian Asset Management Company, ACAM,
has launched ten open-ended schemes, each designed to meet a
specific investment objective. ACAM is headquartered in Mumbai
and has sales offices in New Delhi, Pune, Bangalore, Chennai,
Calcutta, Hyderabad and Ahmedabad. The company has built a
reputation as a professional asset manager, focussed on providing
investors superior investment performance and quality servicing.
Besides the offering and management of collective investment
schemes the Asset Management Company may undertake activities
in the nature of management and advisory services to offshore
funds, pension funds, provident funds, venture capital funds,
management of insurance funds and financial consultancy and
exchange of research on commercial basis.
No. of schemes 11
• Equity Schemes 9
• Debt Schemes 15
• Gilt Fund 4
Dave William (Chairman), John D
Carifa (President), Karan Trehan, Ajay
Key Personnel Piramal, James J. Posch, Prakash Shah,
Vineet Udeshie, Sameer C. Arora
(CIO), Nikhil Johri (CEO)
Corpus under
2881.446 Crs. as on Sep 28 , 2001
management
Fund
30 91
Scheme Name Date 1 Year 3 Year Size FundSize Date
Days Days
( in Cr.)
10/12/ 270.324
Alliance 95- Dividend -5.91 -11.49 -24.35 28 9/28/01
01 5788
10/12/ 270.324
Alliance 95- Growth -5.89 -11.51 -27.99 22.78 9/28/01
01 5788
10/12/ 474.958
Alliance MIP - Growth -0.14 0.65 8.88 NA 9/28/01
01 832
10/12/ 474.958
Alliance MIP - Monthly -0.1 0.52 7.6 NA 9/28/01
01 832
10/12/ 474.958
Alliance MIP - Quarterly -0.79 0 7.21 NA 9/28/01
01 832
Alliance New Millennium 10/12/ 144.652
-16.82 -34.4 -64.3 NA 9/28/01
- Dividend 01 5089
No. of schemes 11
• Equity Schemes 8
• Debt Schemes 6
Corpus under
3621.46 Crs. as on Sep 28 , 2001
management
Fund
30 91
Scheme Name Date 1 Year 3 Year Size FundSize Date
Days Days
( in Cr.)
10/12/ 287.039
Birla Balance - Growth -2.76 -4.79 -27.71 NA 9/28/01
01 7
10/12/ 724.080
Birla Cash Plus - Growth 0.62 1.96 8.82 9.32 9/28/01
01 2
10/12/
Birla Equity Plan -4.73 -7.75 -41.47 NA 23.1731 9/28/01
01
10/12/
Birla GPI Plan - Dividend 1.19 3.23 19.4 NA 21.4439 9/28/01
01
10/12/
Birla GPI Plan - Growth 1.59 3.5 22.13 NA 21.4439 9/28/01
01
10/12/
Birla GPLT - Dividend 0.65 2.54 21.04 NA 80.884 9/28/01
01
10/12/
Birla GPLT - Growth 1.14 2.99 23.86 NA 80.884 9/28/01
01
10/12/
Birla IT Fund - Dividend -4.28 -22.74 -59.2 NA 27.3045 9/28/01
01
10/12/
Birla IT Fund - Growth -4.2 -22.85 -59 NA 27.3045 9/28/01
01
10/12/
Birla MIP - Dividend 0.33 1.96 NA NA 66.7379 9/28/01
01
10/12/
Birla MIP - Growth 0.36 2.12 NA NA 66.7379 9/28/01
01
10/12/
Birla MIP - Payment 1 4.45 NA NA 66.7379 9/28/01
01
Brief Introduction
No. of schemes 29
• Equity Schemes 20
• Debt Schemes 21
• Money Market 1
Fund
30 91
Scheme Name Date 1 Year 3 Year Size FundSize Date
Days Days
( in Cr.)
10/12/
Pioneer ITI FMCG Fund -2.89 -4 -9.69 NA 22.24 9/28/01
01
10/12/
Pioneer ITI MIP - Growth 0.18 2.05 NA NA 66.2179 9/28/01
01
10/12/
Pioneer ITI Pharma Fund -6.5 -4.05 -15.42 NA 41.7457 9/28/01
01
investment options and to test awareness among the consumer about the
experiments.
Advantages
degree of accuracy.
Disadvantages
other methods.
b. The investigator may have to face relatively more difficulties in
difficult to detect.
2. TELEPHONE SURVEY
This form of the survey technique has become more popular in recent years
Advantages
interviews.
But this does not mean that the findings obtained from non-probability
sampling are of questionable value. If properly conducted their findings
a. Convenience Sampling
expedience (e.g., items are selected because they are easy or cheap to
conducted.
Sample Size
constraints like cost and time. As any other method used in sampling would
interviews by 2 person)
= 60 + 100
= 400 + 60 = 460
This is because the fall in the value is maximum for longer dated
instruments (equity funds) and negligible for short dated instruments
( income funds ). Hence, the risk is higher in a fund that has an investment
portfolio with a higher average maturity. This can again be checked from
the investment portfolio, which is published by the funds. For example
,even if interest rates rise by 2-3%, the fall in NAV for most mutual funds
is unlikely to exceed 5%. Similarly, a portfolio with as high as 10% of poor
quality instruments will result in a fall in NAV by 10%. Regular interest
income will take care of the losses in a few months. Thus, there is unlikely
to be permanent erosion of capital in most reasonable circumstances.
Hence, debt or income funds have a much lower risk than equity funds,
which can have permanent erosion in value.
RISK - Again the general belief is that the risk involved is high in case of
mutual fund because of the recent experience " US 64 BONDS'"
In this case, the main problem was that for a period of 2-3 years, the UTI
distributed more dividends to the unit holders of US 64 than the return
earned from the investments in the scheme. This reduced the value of the
residual investments in the scheme. This problem was compounded by the
persistent fall in the prices of shares , especially the shares of companies in
basic commodity industries like cement, steel, manmade fibers etc. and
shares of public sector units. Throughout this period, when the NAV of US
64 was going down, UTI kept increasing the sale and repurchase prices of
US 64 units. The stock market collapse after the Pokhran II nuclear tests
was the last straw, which resulted in the erosion of the scheme's book
reserves and a wide difference between the actual NAV and the
sale/repurchase price.
When this became known, it set a panic amongst investors of US 64. Many
people felt that if there were large-scale redemptions, UTI would not be
able to meet them without support of outside bodies like the RBI. Further,
theoretically, if all investors wanted to redeem their US 64 units on the
same day, the US 64 simply did not have the money to meet the
redemptions on its own (due to the difference between NAV and the
repurchase price).
With such experience the people have become more cautious and banks
such as HDFC are taking greater precautions by coming up with more
lucrative and diversified schemes
BENEFITS -On the basis of our research we found that the various benefits
sought by investors in mutual fund are tax benefits, return potential
diversification convenience, liquidity and well regulated investment.
According to the banking official the tax benefit for investing in mutual
fund units offered are tax free dividend ,exemption from long term capital
gain and 20% rebate on contribution up to Rs 10,000 under section 88 .
INCOME FUND
From the table 1 in the annexure and the graph we observed that the over
all return of the debt funds are 10-14%. It is clearly visible from the graph
that the CORPORATE SECTOR is investing more in the income fund
because these funds
COMPOSITION OF ASSETS (INCOME FUND)
CASH &
OTHER
ASSETS
CORPORATE 4%
DEBT GILTS
38% 38%
PSU/PFI
BONDS
20%
are flexible, as corporate sector likes to invest more in those funds which
gives stable returns with less exit load as its only 0.5% of NAV if
redeemed within 3 months. Also it is safer to invest in income fund as it
involves low risk and the fund manager strives to earn steady returns in the
fixed income market by actively managing the funds portfolios on interest
rate movement and credit risks.
MONEY MARKETS
From the graph we can see that the corporate debt is as high as 55.7%. This
is because every corporate sector would like to have liquid funds as it is for
short-term period. Thus they invest in liquid funds as it can be transferred
into cash whenever they are in need for further growth of the organization.
The Fund Managers strive to provide optimum returns with prudent
exposure to money market instruments while maintaining focus on capital
preservation.
MONEY
MARKET
PSU BOND 5%
32%
CORPORAT
E DEBT
OTHER 55%
ASSETS
8%
QUESTIONS ANALYSIS OF
QUESTIONNAIRE (INVESTOR)
PERCIEVED
INVESTMENT
Analysis of revenue account of the respective various mutual funds taken for the
study:
FIGURES TAKEN IN CRORES
All the equity funds were marked with high increase in unrealised deprication. There was si
equity
and Pioneer ITI Bluechip Expenses which was majorly contributed by the increase in Invest
expenses
Income & Gains 0.963 2.4 -59.9% 65.2 114.1 -42.9% 25.3 65.35 -61.3
Expense & Loses 5.09 0.5 918.0% 11.3 8.16 38.5% 18.65 13.5 38.1
Net Income before -7.4 1.9 -489.5% -312 217.6 -243.4% -10.25 48.25 -121.2
unrealised
Apprcn/Deprcn
Net income -11.55 1.901 -707.6% -258.01 323.6 -179.7% -12.39 50.2 -124.7
All the Balance funds saw huge losses in their net profiatbility with pioneer ITI showing the least. There was a huge jump in the Birlas
expenses as it was incurred due to loss on sale of investments. Further the unrealised depriciation was high for every fund in March 20
which was primarily due to heavy downfall in stock market and sensex.
IMPACT ANALYSIS OF BUDGET 2001
Finance Minister continues with his pro-reforms march and
stage and the size is around Rs. 1 lac crores. Despite very
percent to 10 percent.
percent.
announced.
• Capital Account convertibility pacified through sops to
the market yield and hence increases the demand for long
of the debt funds and the returns from these funds are
planning."
booster for the industry as the post tax returns from these
level of RS. 2500/- p.a. and will again deter the investors
80L of the IT Act from Rs. 12,000 to Rs. 9000 will shun away
regard. This segment has a huge size and will lead to the
growth of the segment to a large extent. The growth in the
Mutual Fund said, "A large part of the growing middle class
funds have been intact but the short term capital loss
arising from the dividend announcement have been denied.
small and long term investor and will remove the loop hole
investment climate.
The cut in excise and customs duty are another booster for
performance".
report. The issue has however, failed to cut much ice with
the ADR/ GDR market will come down and the prices of the
Tax Benefits
I) To Unit-holders (Resident)
unit, to the extent such loss does not exceed the amount of
of 25%.
gains:
· Cost of acquisition as adjusted by Cost Inflation Index
To Non-Residents/OCBs
1961
Redemptions/Exchanges/Switches by non-
will be issued.
To Charitable Trusts
1. Non availability of past data, Balance Sheet and profit and loss
account.
conservative fashion.
of opportunity.
GLOSSARY
ASK/OFFER PRICE:
NAV.
BALANCED FUND:
stocks.
BID/SELL PRICE:
means the current net asset value per share less any
CAPITAL MARKET:
redeemed, with the fee reduced each year the units are
held.
GOVERNMENT SECURITIES:
GROWTH FUND:
INDEX FUND:
INVESTMENT COMPANY:
LOAD:
MONEY MARKET:
O= other assets
L= total liabilities
PORTFOLIO:
investor.
PROSPECTUS:
An official document that each investment company must publish,
describing the mutual fund and offering its shares for sale. It contains
RECORD DATE:
The date the fund determines who its shareholders are; “shareholders of
record” who will receive the fund’s income divided and/or net capital gain
date.
REDEMPTION FEE:
The date on which a share’s dividend and/ or capital gains will reinvested
The sale of a security, which is not owned by the seller. The “short seller”
borrows stock delivery to the buyer, and must eventually purchase the
SPREAD:
drawn from fund’s dividend income gain distributions, if any, and from
YEILD:
YIELD CURVE:
It is a graphic line chart that shows interest rates at a specific point for all
securities having equal risk but different maturity dates. For bonds it
YIELD TO MAUTRITY:
1. NAME : __________________________________
4. CITY: __________________________
5. PROFESSION : a) professional
b) business
c) retired
d) Housewife
e) service
f) Student
g) Others(specify) _____________
6. GROSS MONTHLY INCOME:
c) Rs10000-Rs.20000 d) Rs.20000-Rs.30000
e) Rs.30000& above
b) Rs.1000-Rs.5000
c) Rs.5000-RS.10000
d) Rs.10000& above
a) Shares
b) PO savings
c) Property
d) Gold
e) Mutual Fund
f) Bonds/debentures
g) Bank FD
a) Shares
b) PO savings
c) Property
d) Gold
e) Mutual Fund
f) Bonds/debentures
g) Bank FD
a) Shares
b) PO savings
c) Property
d) Gold
e) Mutual Fund
f) Bonds/debentures
g) Bank FD
b) Banks
c) Private Indian
d) institutions
BIBLIOGRAPHY
2. Economic Times
4. www.mutulfundindia.com
5. www.indiainfoline,com
6. www.alliancecapitalindia.com
Fig – 3
Table – 3
Taxation structure of mutual funds is divided into two parts. One angle looks at
taxation from the point of view of the fund itself and the other looks at the
taxation aspect with respect to the fund investor.
1) Tax Deduction at Source - The important point to note about mutual funds, for
resident investors, is that for any income credited or paid by the fund no tax is
deducted at source. This provision applies both to dividend payouts made by
funds and to proceeds of redemption. Except for NRI’s, TDS is supposed to be
made whenever NRIs redeem their investment in a mutual fund scheme.
2) Wealth Tax - No wealth tax is leviable on mutual fund units. This benefit
comes to mutual funds by virtue of the fact that mutual fund units are not treated
as 'assets' under the Wealth Tax Act.
3) Capital Gains Tax - Capital gains tax needs to be paid on all mutual fund
units. The difference between the purchase and redemption price (in case of
open-end funds) is used to calculate capital gains. Time is also a factor for this
purpose. Units held for a period of less than one year are eligible for short term
capital gains while those held for a period of longer than one year are eligible for
long term capital gain.
Further, in the case of long term capital gain, the investor is given the option of
choosing between a) 20 per cent tax rate with indexation benefit and b) 10 per
cent tax rate without the benefit of indexation.
The latest budget has exempted capital gains from tax if the amount of gain is
invested in Initial Public offerings (IPO).
Capital loss – It can be set off against other capital gains. But losses on the
transfer of long-term capital assets can be set off only against gains from transfer
of long-term capital assets; the balance long-term capital loss can be carried
forward separately for eight assessment years to be set off only against LTCG.
Funds are required to pay a tax of 12.5 per cent (plus surcharge and education
cess) for dividends distributed to individuals and Hindu Undivided Families, and
20 per cent for dividends distributed to other persons. Dividends declared by
equity-oriented funds (MFs with more than 50 per cent of assets in equities) are
exempt from the dividend distribution tax (DDT).
Though investors are not liable to pay DDT but it indirectly affects the NAV of
the schemes.
Mutual Fund schemes that carry the benefit of Section 88 can essentially be
spread across three categories - ELSS, Insurance Linked and Pension.
1) ELSS - Equity Linked Savings Schemes carry a tax rebate of 20 per cent of
amount invested. However, only a maximum of Rs 10,000 is eligible for rebate
in this category of schemes. These schemes come with a lock in period of 3
years. Further, appropriate legislation stipulates that atleast 80 per cent of the
total corpus of these funds shall be invested in equity and related instruments.
Currently, most mutual funds offer open-ended ELS schemes in which one can
invest throughout the year.
2) Insurance Linked Schemes - Apart from ELSS schemes, mutual fund schemes
with insurance benefits carry the benefit of Section 88. Such schemes piggy
backs an insurance benefit with a mutual fund.
3) Pension Plans - the mutual fund industry in India is constrained by law from
offering full fledged pension plans on the lines of the 401 K plans available in
the United States. So far, UTI and Kothari Pioneer Mutual Fund are the only two
mutual funds offering full-fledged Pension Plans with benefit under Section 88.
While UTI offers Retirement Benefit Plan, Kothari Pioneer Mutual Fund offers
KP Pension Plan.
The U.S. Securities and Exchange Commission (SEC) regulates funds according
to the provisions of the Investment Company Act of 1940.
When fund sponsors sell fund shares to the public they are subject to regulation
as broker-dealers under the Securities Exchange Act of 1934.
A mutual fund generally distributes all of its earnings each year and is taxed only
on amounts it retains. This specialized “pass-through” tax treatment of mutual
fund income and capital gains was established under the Revenue Act of 1936
.To qualify for this favorable tax treatment under the Code, mutual funds must
meet, among other conditions, various investment diversification standards and
pass a test regarding the source of their income.
Fund investors are liable for paying tax on a fund’s earnings, whether or not they
receive the distributions in cash or reinvest them in additional fund shares.
Types of Distributions
ordinary dividends
Capital gains.
Dividend distributions come primarily from the interest and dividends earned by
the securities in a fund’s portfolio, after expenses are paid by the fund. These
distributions must be reported as dividends on an investor’s tax return.
Capital gain distributions represent a fund’s net gains, if any, from the sale of
securities held in its portfolio for more than one year. When gains from these
sales exceed losses, they are distributed to shareholders.
To help mutual fund shareholders understand the impact that taxes can have on
the returns generated by their investments, the SEC adopted a rule that requires
mutual funds to disclose standardized after tax returns for one-, five-, and 10-
year periods.
Chapter – 3
But in India only 2% of the population invest in equity assets reason being like
other Asian countries, Indians also are not willing to experiment with new
investment avenues like insurance mutual funds, insurance, ETFs etc and prefer
only age-old instruments like PPF, Fixed Deposits etc.
In US there are around 600 organizations selling more than 8,000 mutual fund
schemes but in India there are only 40-60 organizations selling about only 800
schemes, which speak for its untapped potential.
Despite all differences there exists some similarities also, for instance both the
Indian and US investors have same set of financial goals depending on their age
group, i.e., younger investors wants to save to buy home or other large items,
savings for their retirement etc.
With the increase in life expectancy older investors are saving for their post
retirement life. But saving for retirement is by far the most frequently mentioned
primarily financial goal for equity holders.
Percentage of equity owners in each Age Group
Fig – 4
% of Equity owners in each Age Grp - US
% of Equity Owners
19% 15%
in eacg Age Group
Less than 35
35-49
33% 50-64
33%
More than 64
Fig – 5
% of Equity owners in each Age Grp - India
8%
Less than 35
27%
35-49
More than 50
65%
In India only young investors between the age group of 25-35 invest in
individual stock or stock mutual fund reason being people from 18-25 age group
either studying or earning very minimal which limits them from investment but
older investors avoid exposure to the equity market and invest in conventional
instruments like PPF,Fixed Deposits etc. whereas in US almost all age group
invest in equities.
Source of Information for Investors
Fig – 6
S ource of Information - U S
1%
22% Direct S ource
36% Financ ial Advisor
Internet
S ourc e Unknown
41%
2%
14%
Fig – 8
Mutual Fund ownership-US
11% 15%
Fiduciaries
Households
Financial
Organizations
74%
In spite of the fact that India is an EMERGING country of this decade , only 2%
of the household own equity whereas in United States , household own the
maximum share of financial assets like IRA , individual stock or Exchange
Traded Funds , index funds etc.
Many fund managers argue that investors base has actually increased but
economists argue that it is not the retail investors who have started to participate
in mutual fund industry rather it is the corporate people who are using funds as a
strategic tool in their treasury operations.
10%
10%
Retirement
Education
House
20% 60%
Others
Fig – 10
Financial Goal of Investors - India
4%
24% Retirement
Education
52%
House
Others
20%
The present study attempts to identify the growth prospects of Mutual fund
industry in India and what limits it from moving on an explosive expansion path
in this country.
Review of the Problem
Table – 5
Comparison of Schemes
Return
1-Yr Nifty Stnd Ex. Entry
Scheme Eq Debt since Risk Beta AUM
Return Returns Dev. Ratio Load
Inception
Franklin
India
Bluechip
Fund 95 5 30.79 58.98 33.4 Avrge 6.87 0.93 20246 1.93 2.25
Franklin
India
Prima
Fund 90 10 26.97 58.3 33.4 Avrge 7.69 0.78 24252 1.93 2.25
HDFC
Equity
Fund 80 20 25.6 73.79 33.4 Low 6.59 0.86 25088 2 2.25
HDFC Top B.
200 Fund 90 10 36.81 66.2 33.4 Avrge 7.11 0.92 10135 2.2 2.25
Principal
Growth
Fund 90 10 31.95 30.46 33.4 Avrge 6.54 0.84 3766 2.3 2.25
Sundaram
Growth B.
Fund 90 10 26.56 58.73 33.4 Avrge 6.6 0.87 1151 2.47 2.25
Abbreviations: -
Eq. = Equity
Avrge = Average
B.Avrge = Below Average
Stnd Dev. = Standard Deviation
AUM = Asset under Management
Ex. Ratio = Expense Ratio
Note – Above data is as on 31st January 2006.
Franklin India Bluechip Fund
Investment Objective
This fund is a steady growth scheme that invests mainly in large cap blue-chip
shares. Launched in October 1993 as a 3-year closed end fund, this scheme was
converted into an open end fund from January 1997. Ever since its inception, this
fund has been ranked consistently among India’s top performing funds.
Asset Allocation
Diversified 18.83
Automobile 16.30
Technology 13.70
Financial Services 11.98
FMCG 6.95
Basic/Engineering 6.59
Energy 5.71
Metals & Metal Products 4.52
Services 3.28
Chemicals 2.13
Construction 1.47
Company in %
Investment Objective
Company in %
Other Current Assets 7.10
A.B Nuvo 6.11
Jaiprakash Ass. 5.97
Mphasis BFL 4.55
Goodlass 3.73
HDFC Equity Fund
Investment Objective
HDFC Equity Fund is a pre-dominantly large cap equity fund. It has a decade-
long track record of impressive returns across market cycles. HDFC Equity Fund
pursues an aggressive investment style. It usually invests in about 25 stocks.
For investors with a high risk appetite, HDFC Equity Fund makes an ideal
investment option. The fund's ability to keep turbulence at bay despite managing
a concentrated portfolio is a major positive.
In order to provide long term capital appreciation, the Scheme will invest
predominantly in growth companies. Companies selected under this portfolio
would as far as practicable consist of medium to large sized companies. The aim
will be to build a portfolio, which represents a cross-section of the strong growth
companies in the prevailing market. In order to reduce the risk of volatility, the
Scheme will diversify across major industries and economic sectors.
Asset Allocation
Automobile 24.81
Technology 23.41
Basic/Engineering 15.35
Financial Services 8.60
Energy 8.59
Chemicals 5.35
FMCG 3.94
Services 2.84
Textiles 2.04
Metals & Metal Products 1.85
Investment Objective
Asset Allocation
Technology 23.17
FMCG 18.02
Automobile 13.96
Energy 13.50
Basic/Engineering 12.00
Financial Services 7.44
Chemicals 3.02
Services 3.02
Diversified 2.31
Health Care 0.95
Textiles 0.36
Top 5 Portfolio holdings as on 28-Feb-06
Company in %
ONGC 7.36
ITC 5.33
SBI 4.68
Infosys Technology 4.09
TCS 3.90
Investment Objective
Asset Allocation
Recommendation
One of the major confusion that every investor face is whether to opt for
dividend option or growth option, therefore, our recommendation is in terms of
its effect on returns from the fund, the dividend re-investment option is no
different from the growth option, the dividend re-investment option is the
superior one for investors who want the tax efficiency of the dividend option and
are also willing to remain invested in equities through its ups and downs.
Equity funds usually offer three options for investors to choose from — the
Dividend Payout option, the Dividend Re-investment option and the Growth
option. A few funds have also started to offer a Bonus option. These options
differ only in their method of distribution of returns.
Investors cash in on the returns earned by the fund from time to time through the
dividend it declares, in growth option these returns are retained which is reflected
in the appreciated NAV.
The Dividend re-investment option allows the investors to plough back the
dividends declared by fund house into the scheme at the prevailing NAV.
This option is recommended for investors who are seeking tax efficiency and
willing to remain invested in the scheme and this option is preferred for its
liquidity.
In the Growth Option, he would not receive any payout, but the value of his
holdings would be Rs 1,200 at the end of six months, as the value of the100 units
you hold would have grown from Rs 10 to Rs 12 per unit. In the Dividend Re-
investment option, the Rs 200 declared as dividends would be reinvested in the
fund at the prevailing ex-dividend NAV and he would be left with 120 units
worth Rs.10 each.
His investment value at Rs 1,200 would be the same as in the Growth option.
The Dividend option (whether Reinvestment or Payout) is the more tax- efficient
way of receiving your returns from an equity fund.
Table – 6
Debt Total
Equity MF Balanced MF MIPS Fixed Inc. Total Equity
MF Debt
Mutual fund is quite a new concept for many of the investors in India, therefore
before investing into any scheme every investor should try to find out the
following facts apart from the recommended mix of equity and debt as given in
Table – 7 : -
Although analysis of this project matches the macro and micro environment of
the mutual fund industry, but there are a few limitations in the study. Some of the
limitations are mentioned below:
Appendix
Sample Composition for Primary Data
Fig – 11
Gender Distribution
48% Male
52% Female
Fig – 12
Occupation Structure
14% 18%
Students
16% Professional
Business
24% Self-employed
Retired
28%
Fig –13
Income Distribution
18%
25%
Fig – 14
Targeted Area
20%
South Delhi
50% North Delhi
East Delhi
30%
Mutual Funds are essentially investment vehicles where people with similar
investment objective come together to pool their money and then invest
accordingly. Each unit of any scheme represents the proportion of pool owned by
the unit holder (investor). Appreciation or reduction in value of investments is
reflected in net asset value (NAV) of the concerned scheme, which is declared by
the fund from time to time. Mutual fund schemes are managed by respective
Asset Management Companies (AMC). The benefits on offer are many with
good post-tax returns and reasonable safety being the hallmark that we normally
associate with them. Some of the other major benefits of investing in them are:
By Structure
1) Open-ended schemes
2) Close-ended schemes
3) Interval schemes
By Investment Objective
1) Growth schemes
2) Income schemes
3) Balance schemes
4) Money Market schemes
Open-end 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
Close-ended Funds
Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to
long term. Such schemes normally invest a majority of their corpus in equities.
Growth schemes are ideal for investors who have a long term outlook and are
seeking growth over a period of time
Income Funds
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 and Government securities. Income Funds are ideal for
capital stability and regular income
Balanced Funds
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.
These are ideal for investors looking for a combination of income and moderate
growth
These schemes offer tax rebates to the investors under specific provisions of the
Indian Income Tax laws as the Government offers tax incentives for investment
in specified avenues. Investments made in Equity linknewed Savings Schemes
(ELSS) and Pension Schemes are allowed as deduction under Section 88 of the
Indian Income Tax Act, 1961
Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the
BSE Sensex or the NSE S&P CNX 50.
Sectoral Schemes
Sectoral Funds are those which invest exclusively in a specified sector(s) such as
FMCG, Infotech, Pharmaceuticals, etc. These schemes carry higher risk as
compared to general equity schemes as the portfolio is less diversified, i.e.
restricted to sector(s) / industry (ies).
Questionnaire
Q.6 What is your expected rate of return for your ideal investment?
□ 5-10 % □ 11-14 %
□ 15-20 % □ 21-40 %
Q.9 What is the principal reason behind making investments in the market?
□ Children education □ House
□ Retirement □ Recommended by your Bank
Q.10 What are the reasons for not investing in the Stock Market/Mutual Funds?
□ High risk □ Huge investment
□ No expertise
Personal Information:
Name: - ____________________________________________________
Address: - ____________________________________________________
____________________________________________________