Sei sulla pagina 1di 55

A PROJECT REPORT ON A study of Preferences of mutual fund as an investment avenue for Tax Planning

For
ICICI PRUDENTIAL AMC LTD, ANAND

Submitted to
INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM) CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT) CHANGA

Prepared by
Shah Parth U ID No: - 10PGDM 013 PGDM, Quarter-4

Under the Guidance of Ms. Sheetal Thomas

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM) CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)

(AT. & PO. CHANGA 388 421 TA: PETLAD DIST. ANAND, GUJARAT)
January, 2012

Certificate from organization: This is to Certified that Mr Shah Parth is student of PGDM Program from Indukaka Ipcowala Institute of Management of Charotar University of Science and Technology, Changa, Gujarat has successfully completed his 34 days of summer training on Mutual Fund with our Company. In addition to the same, He has also mobilized very good SIP business by taking care of relationship with ICICI Bank, Anand. Duration of Training was 2nd Sep 2011 to 5th Oct 2011. We wish him All the Best for his Future Carrier ahead.

Thanks & Regards For, ICICI prudential AMC ltd. Anand.

Certificate from Institute:

This is to certify that this report A study of Preferences of mutual fund as an Investment avenue for Tax Planning is the bona fide work of Mr. PARTH SHAH, student of Second Year of PGDM Programme (2010-2012) at ICICI PRUDENTIAL ASSET MANAGEMENT COMPANY. Ltd. submitted to INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT, CHANGA in partial fulfillment of their academic requirement of the PGDM PROGRAMME.

Project Guide: Ms. Sheetal Thomas Project Guide: Darshan Patel Date: 12-12-2011 Place: Changa

Prof.G Krishnamurthi (Principal)

DECLARATION

I Parth Shah, student of the two-year PGDM programme at Indukaka Ipcowala Institute of Management (I2IM) hereby declare that the report on summer training and project work entitled A study of Preferences of mutual fund as an investment avenue for Tax Planning is the result of my / our own work. I also acknowledge the other works / publications cited in the report. (Signature) Place: Changa Date: 25.12.2011 Parth Shah

Acknowledgement
I, Parth Shah, am thankful to the CHARUSAT University for providing me such an opportunity to get a first step in the corporate environment through gateway of Mutual Fund. I am thankful to Mr. Darshan Patel, Company Guide, who gave me support at every time during my Training Program. I am obliged to Mr. Darshan Patel, Branch Head who provides such an important knowledge for effective communication skill to the customer and other staff members who always ready to help in all manners they can. I am also thankful to Ms. Sheetal Thomas, Faculty Guide who gave me guidance and cooperation for preparation of Reports and disciplinary behavior.

Table of Contents:

Chapter No.

Title Title Page (Front) Certificates: i. From organisation ii. From Faculty Guide Declaration Acknowledgement Table of Contents List of Tables List of Graphs Executive Summary PART I ORGANISATIONAL PROFILE The Company / Organisation Company Profile Mission and Vision Products and service-mix Industry background and about industry Functional Areas Markets and Marketing department Financial department Types of Mutual with their investment objective Various ratios to evaluate mutual funds schemes Risk associated with mutual fund Where do mutual fund invest List of tax saving mutual fund in mutual fund industry PART II PROJECT STUDY Overview of the Project Background of the study Importance of the study to the organisation Objectives of the study Research Research Design Data Sources and Data Collection Method Sampling Plan (wherever necessary) Data Analysis, Findings and Interpretations Conclusions and Limitations Recommendations & Suggestions Annexure Bibliography

Approximate No. of Pages


01 02

04 04 05

07 08

17

22

34

36

8 9 10 11 12

37 48 50 51 55

List of Graphs and Tables

SR NO. 1 2 3 4

PARTICULARS Do you invest your savings for tax benefit? Do you have complete information about mutual fund?

PAGE NO. 37 38 39 40

Are you an investor, who is interested in getting good deduction from tax? Do you know mutual fund is a good Instrument of tax saving? Among which of the following income group do you fall?

41

Investment instruments used every year

42

What is the Basic purpose of your investments?

43

What returns do you receive at present from all your investments?

44

9 10

Which types of funds would you like to prefer for your investment in mutual fund? Give your preference for how many periods would you like to invest in mutual fund for tax savings?

45 46

Executive Summary: This project is solely designed and constructed for A study of Preferences of Mutual Fund as an investment avenue for Tax Planning. To some extent it also covers the distribution channel for the selling and promotion of Mutual Fund through Financial intermediaries. The importance of the study encompasses the various investment avenues available in our country. It analyses various investment options on certain criteria and then compares all the options with mutual funds. The basic idea of this project is to find out whether the people are Aware about Mutual Fund as instrument of tax saving in the investment Avenue and better as compared to other competitive investment Avenues. In order to determine customer needs and to implement marketing strategies and programs organization aimed at satisfying those needs. As competition become more intense company needs information on effectiveness of their marketing tools Due to this study investors will get very good knowledge of mutual fund and they will find the best way to invest their savings. The first part gives an insight about company profile and its various aspects & the details regarding all products of the company. The second part of the Project consist objective of study, research methodology, data and its analysis collected through survey of 35 respondents. For the collection of Primary data, I made a questionnaire and surveyed of 35 respondents.

Corporate Profile:

ICICI Prudential Asset Management Company Ltd. is a joint venture between ICICI Bank, Indias second largest commercial bank & a well-known and trusted name in the financial services in India, & Prudential Plc, one of the United Kingdoms largest players in the financial Services sectors. In a span of over 18 years since inception and just over 13 years of the Joint Venture, the company has forged a position of preeminence as one of the largest Asset Management Companys in the country, contributing significantly towards the growth of the Indian mutual fund industry The company manages significant Mutual Fund Assets under Management (AUM), in addition to our Portfolio Management Services (PMS) and International Advisory Mandates for clients across international markets in asset classes like Debt, Equity and Real Estate with primary focus on risk adjusted returns. As an Asset Management Company, we have over 18 years of experience and are currently managing a comprehensive range of schemes of more than 46 Mutual fund schemes and a wide range of PMS Products for our investors spread across the country. We service this investor base with our own branch network of around 168 branches and a distribution reach of over 42,000 channel partners.

Vision of the company: To be a dominant player in the Indian mutual fund space recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.

Services and product mix: They provide mainly three types of services they are as follows:(1) PMS (PORTFOLIO MANAGEMENT SERVICES) (2) Mutual Fund (3) Advisory Services Services in detail: (1) PMS (PORTFOLIO MANAGEMENT SERVICES): ICICI Prudential Portfolio Management Services provides solutions for the investment needs of select clientele, through focused portfolios. ICICI Prudential AMC was the first institutional participant to offer Portfolio Management Services to HNIs and Institutions in India, in the year 2000. We have a successful track record of over 10 years of experience in offering Portfolio Management Services and today our strong base of over 7,000 PMS clients stands testament to the quality and value of our services. Our aim is to create a portfolio that suits your requirements; therefore we will first seek to understand a clients needs and investment objectives, and on that basis offer a portfolio that best suits these needs and objectives. (2) Mutual Fund: ICICI Prudential Mutual Fund offers a wide range of retail and corporate investment solutions across different asset classes like Equity, Fixed Income, Real Estate and Gold. It has been voted as the Most Trusted Mutual Fund Brand in by Brand Equity (in their 2011 Most Trusted Brand Survey (Conducted by The Economic Times Intelligence Group and The Nielsen Company). Year after year, the Fund has been consistently winning many awards in the industry at the Fund House and Scheme Levels, the most recent ones being: India Debt Fund House for 2011 by Morningstar

The CNBC TV18 - CRISIL Mutual Fund of the Year Award 2009 in the Category Debt Mutual Fund House of the Year The organization today is an ideal mix of investment expertise, resource bandwidth & process orientation and endeavors is to bridge the gap between savings & investments, to help create long term wealth and value for investors through innovation, consistency and sustained risk adjusted performance. (3) Advisory services: The International Advisory Business Division of ICICI Prudential Asset Management Company Ltd. advises offshore funds in jurisdictions spanning Japan, Middle East, Taiwan & Singapore. As on June 30, 2011, we are advising a cumulative asset size of close to $1.54 Billion spanning Equity, Debt & Real Estate. Through the onshore presence and legacy of our parent company in India, we present the following benefits to offshore investors: Excellent Onshore Investment Insights and Information. Extensive on the ground research capabilities. Deep knowledge of the reputation, vision and execution capabilities of promoterrun companies. An innate understanding of governance structures of corporate entities. As one of the largest Asset Management Companies in India, we have had a successful track record in serving domestic clients across the Institutional and Retail Investor space. We are very confident in our ability to enable International Investors to participate in the long-standing India growth story and generate alpha over a medium to long term horizon.

Key Indicators Assets Under Management Number of Funds Managed

At inception - May 98 Rs. 160 crores 2

As on May 31, 2011 Rs. 50,742.07 crores 35

INDUSTRY BACKGROUND Changing Scenario Since 1991, there has been a radical change in the Indian economic environment. In the early 90s the country was confronted with a severe crisis due to a sharp plunge in the foreign exchange reserves, a downgrading of the credit rating, suspension of foreign private capital flows and a decline in the industrial output. India was on the verge of defaulting on its foreign debt obligations. The only way was to initiate reforms and a structural adjustment program. The country would have to lift restrictions on foreign investments, on the flow of private capital and on private initiatives in many area of economic development. The structural reforms focused on liberalizing industry, trade, taxation and foreign investment, and on reforming the financial sector. What Is An Investment? An Investment is the use of capital to create more money through the acquisition of a security that promises the safety of the principal and generates a reasonable return.

Fundamentals of Investment:There are three fundamentals of investment, namely: SAFETY LIQUIDITY RETURN The order is quite clear: Safety- always first, then the Liquidity- next and Return- third. A lot of people fall prey to the lure of high returns, and usually, this has resulted in a LOSS.

INVESTMENT OPTIONS AVAILABLE IN INDIA There are basically two kinds of investment options available for the investor on the basis of their Risk, Return and time horizon. As per the Return is concern one can earn a fixed rate of interest and other where the rates fluctuate depending on certain factors prevailing in the market at that point of time. Given below are the options available in each category. Investment avenues in the last decades The Indian investors in the last decades were very risky so the saving was focused in high fixed earning investment. Also there were not many investment options and investments with sovereign guarantee were preferred. This was partly due to high interest rates in India.

Investment Avenues Diagram 4


Investments

Liquid Small Savings PPF

Debt

Insurance Primary Market

Equity Secondary Market

RBI Bonds

Fixed Return Options: 1. 2. 3. 4. 5. 6. 7. 8. 9. Post Office (KVP, NSC, M.I.S.) Public Provident Fund Bank Fixed Deposits Government Securities or Gilts RBI Taxable Bonds Insurance Company Debentures Company Fixed Deposit Infrastructure Bonds

Post Office

Variable Return Options: 1. 2. Mutual Fund Shares and Stock Market o Primary Market (IPO) o Secondary Market

1) Post office sch

3. 4. 5.

Bullion Market (Gold & Silver) Property Foreign Exchange Assets

About the Industry Definition:Mutual Fund is a pool of money, collected from investors, and is invested according to certain investment objective. Mutual Fund is the pooling of Money from the retail investors to the corporate investors for Sustainable growth of the investments. Introduction:A Mutual Fund is a pool of money, collected from investors, and is invested according to certain investment objectives with a common financial goal. A Mutual Fund is created when investors put their money together. The most important characteristic of a mutual fund is that the contributors and the beneficiaries of the fund are the same class of people, namely the investors. The money thus collected is invested by the fund manager in different type of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned by these instruments and the capital appreciation realized by the scheme are 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 portfolio at a relatively low cost. Each Mutual Fund scheme has a defined investment objective and strategy.

Characteristics: A mutual fund actually belongs to the investors who have pooled their funds. A mutual fund is managed by investment professionals and other service providers, who earn a fee for their services, from the fund. The pool of funds is invested in a portfolio of marketable investments. The value of the portfolio is updated every day. The investors share in the fund is denominated by units. The value of the units changes with change in the portfolios value, every day.

STRUCTURE OF ASSET MANAGEMENT COMPANY (AMC) MUTUAL FUND STRUCTURE

SEBI

TRUSTEE

SPONSOR

OPERATIONS

AMC

FUND MANAGER MKT./ SALES MUTUAL FUND MKT./ SALES SCHEMES DISTRIBUTER

INVESTORS Source: www.hdfcfund.com

Finance Department Procurement of finance is mainly done through investment in Mutual Fund. Role of Financial Department

Investors
Profit/Loss from Portfolio of Investment Invest / Pool Their Money Mutual Fund Co. ( Pool of Money ) Profit/Loss from Individual Investment Invest In Number of Stocks / Bonds Market Fluctuates

Financial Markets A financial market is a market for creation and exchange of financial assets. If we buy or sell financial assets, we will participate in financial markets in some way or the other. This includes the various instruments for investment contains four attributes essential for an investor for taking investment decision: Yield of the Instrument, Liquidity, Risk Perception, and Initial Investment. Functions of Financial Markets: Financial markets facilitate price discovery. The continuous interaction among numerous buyers and sellers who through financial markets helps in establishing the prices of financial assets. Financial markets provide liquidity to financial assets. Investors can readily sell their financial assets through the mechanism of financial markets. Financial markets considerably reduce the cost of transaction. Two major costs associated with transaction are search costs and information costs.

Marketing Department:-

DISTRIBUTION NETWORK OF MUTUAL FUNDS ASSET MANAGEMENT COMPANY

DISTRIBUTORS

BANKS CUSTOMERS

BROKER S* CUSTOMERS

NON-BANKING FINANCIAL INSTITUTIONS CUSTOMERS

* BROKERS are required to be AMFI certified.

Mutual Fund Operation Flow Chart

POOL THEIR MONEY TO PASS ON TO INVESTORS FUND MANAGER

R E T U R N S

INVEST IN

GENRATE SECURITIES & STOCK MARKET

Operation Department All the Investments and Portfolio of the investors are processed by the operation department. Even after the hard work of the sales executive, in bringing the business is done on time, but if the operation departments finds any fault in it, the whole application is Rejected. So its a very important job. Sales Department This is the department, which only looks after the increase and achievement of the companys target. All AMC Companies appoint Banks as Agents for selling their Companys Mutual Fund. This is a very important department from the Profit point of view. Service Department. Any Complains or grievances are handled by this department. The Redemption request, Switchover request, Change of bank details are all look after by this department and then pass on to the Operation Department

Types of Mutual Fund:A Mutual Fund may float several schemes, which may be classified on the basis of its structure, its investment objectives and other objectives. Mutual Fund schemes by structure: 1. Open Ended Scheme: Open-Ended fund scheme is open for subscription all through year. An investor can buy or sell the units at "NAV" (Net Asset Value) related price at any time. 2. Close Ended Scheme: A Close-Ended fund is open for subscription only during a specified period, generally at the time of initial public issue. The Close-Ended fund scheme is listed on the some stock exchanges where an investor can buy or sell the units of this type of scheme. 3. Interval Schemes: These combine the features of open- ended and closeended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre- determined intervals at NAV related prices.

Mutual Fund schemes by Investment Objectives: (I) EQUITY FUNDS

These funds invest a major part of their corpus in equities. The composition of the fund may vary from scheme to scheme and the fund managers outlook on various scrips. The Equity Funds are sub-classified depending upon their investment objective, as follows: 1. Growth Fund: Aim to provide capital appreciations over the medium to long term. These schemes normally invest a majority of their funds in equities and are willing to bear short term decline in value for possible future appreciation. These schemes are not for investors seeking regular income or needing their money back in the short-term 2. Diversified Equity Fund : Diversified equity funds are the most popular among investors. They invest in many stocks across many sectors, and because they have the freedom to chop and churn their portfolios as they like, diversified equity funds are a good proxy to the stock market. If a general exposure to equities is what you want, they are a good option. They can invest in all listed stocks, and even in unlisted stocks. They can invest in which ever sector they like, in what ever ratio they like. 3. Equity Linked Savings Schemes (ELSS) : Equity linked savings schemes (ELSS) are diversified equity funds that additionally offer income tax benefits to individuals. ELSS is one of the many section 80c instruments, along with the more popular debt options like the PPF, NSC and infrastructure bonds. In this Section 80c grouping. ELSS is unique. Being the only instrument to offer a total equity exposure. 4. Index Fund: An index fund is a diversified equity fund; with a differencea fund manager has absolutely no say in stock selection. At all times, the

portfolio of an index fund mirrors an index, both in its choice of stocks and their percentage holding. As of March 2004, equity index funds tracked either the Sensex or the Nifty. So, an index fund that mirrors the Sensex will invest only in the 30 Sensex stocks that too in the same proportion as their weight age in the index. 5. Sector Fund: Sector funds invest in stocks from only one sector, or a handful of sectors. The objective is to capitalize on the story in the sectors, and offer investors a window to profit from such opportunities. Its a very narrow focus, because of which sector funds are considered the riskiest among all equity funds. 6. Mid Cap Fund: These are diversified funds that target companies on the fast growth trajectory. In the long run, share prices are driven by growth in a companys turnover and profits. Market players refer to them as mid-sized companies and mid-cap stocks with size in this context being benchmarked to a companys market value. So, while a typical large cap stock would have a market capitalization of over Rs 1,000 crores, a mid-cap stock would have a market value of Rs 250-2,000 crores.

(II) DEBT FUNDS

These Funds invest a major portion of their corpus 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:-

1. Gilt Funds: Invest their corpus in securities issued by Government, popularly known as GOI 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. 2. Income Funds: Income funds aim to maximize debt returns for the medium to longer term. Invest a major portion into various debt instruments such as bonds, corporate debentures, and Government securities. 3. MIPs: Invests around 80% of their total corpus in debt instruments while the rest of the portion is invested in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the riskreturn matrix when compared with other debt schemes. 4. Short Term Plans (STPs): Meant for investors with an investment horizon of 3-6 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.

5. Liquid Funds: Also known as Money Market Schemes, These funds are meant to provide 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 the safest amongst all categories of mutual funds. 6. Floating Rate Funds: These income funds are more insulated from interest rate than their conventional peers. In other words, interest rate changes, which cause the NAV of a conventional debt fund to go up or down, have little, or no, impact on NAVs of floating rate funds.

(III) BALANCED FUNDS

These funds, as the name suggests, 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. Each category of funds is backed by an investment philosophy, which is predefined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly.

(IV) HYBRID FUNDS:-

1. Growth and Income Fund: Strike a balance capital appreciation and income for the investors. In these funds portfolio is a mix between companies with good dividend paying record and those with potential capital appreciation. These funds are less risky than growth funds bit more than income funds. 2. Asset Allocation Fund: These funds follow variable asset allocation policy. These move in an out of an asset class (equity, debt, money market or even non-financial assets). Asset allocation funds are those, which follow more stable allocation policies like balanced funds. Those, which flexible allocation policies, are like aggressive growth or speculative funds.

VARIOUS CRITERIA TO EVALUATE THE MUTUAL FUNDS SCHEMES The most important and widely used measures of performance are:Basic criterions to evaluate the mutual fund schemes P/E ratio Turnover ratio Expense ratio Standard deviation

P/E Ratio:-

A valuation ratio of a company's current share price compared to its pershare earnings. EPS:Calculated as:

EPS is the profit that a company makes on a per share basis. So, if EPS is one, the PE ratio will reflect the price that an investor will pay for this one rupee of the company's profits. Higher PE ratio signifies that investor expectation from these shares is higher. This is because the growth in share price is expected to follow earnings growth. In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E.

Turnover Ratio:-

The turnover ratio is the lower of the total sales or total purchases over the period divided by the average of the net assets. Higher the turnover ratio, greater is the volume of trading carried out by the fund. The turnover ratio is more important for equity and balanced funds where the trading cost of equities is substantial. So, each time a fund manager buys and sells, he has to keep in mind that the cost of buying and selling will eat into the fund's returns. Dynamic equity funds, which can move rapidly between sectors, will obviously have a higher turnover ratio. Here risk will not be just of the fund manager making a wrong call on a sector but also that of turnover risk. In comparison a passively managed fund, such as an index fund, will have a lower turnover rate compared to an active fund as it has to just mirror the index. The only trading here will be due to investments, redemptions, and changes in the index. Also, it is not meaningful to use turnover ratio for new schemes, which are not fully invested. As the scheme is deploying its assets there will be more transactions, at least buy orders, as compared to a fund` which is fully invested. Turnover ratio is less relevant for income funds as brokerage costs are much lower, and hence they will have a lower potential to eat into returns. So, even though gilt funds may have equally high turnover as compared to equity funds, the impact of this turnover is much less. In Short, Turnover ratio is a measure of how a fund's portfolio changes in a year. This ratio indicates how much a fund is trading. Understanding turnover ratio helps in gaining insights into a fund's performance.

Risk Associated With Mutual Fund:-

Interest Rate Risk: Bond price move inversely to changes in interest rate. If interest rate go up bond price come down and vice-versa changes in bond price will affect the NAV of income funds since NAV is compiled on a daily basis, the effect of interest rate fluctuation will get reflected in the NAV. Liquidity Risk: This prefers to at which security can be sold at or near its true value. The primary assessment of liquidity risk is the spread between the bid price and the offer price quoted by dealer. Credit Risk: Credit risk or default risk refers to the risk that on investors of a fixed income security may default. Because of the risk, debentures are sold at a fixed spread above these offered a treasury security, which are considered as risk free. Normally, fixed income security will fluctuate depending upon the actual changes in the provided level of credit risk and actual event of default. Market Risk: The prices of shares are subject to wide price fluctuations depending upon market conditions over which nobody has a control. Moreover, every economy has to pass through a cycle-Boom, Recession, Slump and Recovery. The phase of the business cycle affects the market conditions largely.

Where Do Mutual Fund Invest? Broadly, mutual funds invest in 3 types of asset classes: Stocks: Stocks represent ownership or equity in a company, popularly known as shares. Bonds: These represent debt from companies, financial institutions, or government agencies. Money market instruments: This includes short term debt instrument such as treasury bills, certificate of deposits and inter-bank call money. What Is Net Asset Value? Net Asset Value (NAV) denotes the performance of a particular scheme of a Mutual fund. Mutual funds invest the money collected from the investors in Securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes Every day, NAV of a scheme also varies on day to day basis. The NAV per Unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakh and the mutual fund has issued 10 lakh units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme.

Basic Concepts and Loads in Mutual Fund:1. Determination of NAV: The NAV of the any scheme at any time shall be determined by dividing the net assets of the scheme by the number of outstanding units on the valuation date. The NAV of the scheme will be calculated on daily basis: Fair/market value of securities + Approved Income + Receivable + other assets + Unauthorized issue Exp. Accrued exp.-payablesOther liabilities NAV per unit = -----------------------------------------------------------------No. of units outstanding of the scheme 2. Recurring Expenses: The total annual recurring expenses of the scheme excluding issue or redemption expenses. 3. Entry Load: The load charged at the time of investment is known as entry load. Its meant to cover the cost that the AMC spends in the process of acquiring subscribers commission payable to brokers, advertisements, register expenses etc. The load is recovered by way of charging a sale price higher than the prevailing NAV. 4. Exist Load: Some AMC do not charge an entry load but they charged an exist load i.e., they deduct a load before paying out the redemption proceeds. Psychologically, investors are much more willing to pay exist loads as compared to entry loads. Unit: Units mean the investment of the unit holders in a scheme. Each unit represents one undivided share in the assets of a scheme. The value of each unit changes, depending on the performance of the fund.

List of Tax Saving Mutual fund in Mutual Fund Industry:

Background of the Study:This project is solely designed and constructed for A study of Preferences of Mutual Fund as an investment avenue for Tax Planning. To some extent it also covers the distribution channel for the selling and promotion of Mutual Fund through Financial intermediaries. Importance of the Study:The importance of the study encompasses the various investment avenues available in our country. It analyses various investment options on certain criteria and then compares all the options with mutual funds. The basic idea of this project is to find out whether the people are Aware about Mutual Fund as instrument of tax saving in the investment Avenue and better as compared to other competitive investment Avenues. In order to determine customer needs and to implement marketing strategies and programs organization aimed at satisfying those needs. As competition become more intense company needs information on effectiveness of their marketing tools Due to this study investors will get very good knowledge of mutual fund and they will find the best way to invest their savings.

Objectives of the study:Primary Objective: Investors preference about the Mutual Fund as Compared to other Investment Avenues for tax saving instrument. Secondary Objective To infer whether mutual fund is better options or not. As Compared to other Investment Avenues.

Research Methodology:a) Research Design: Descriptive Design b) Data Collection Method: Survey Method c) Universe(place): Petlad d) Sampling Method: Non probability convenience sampling method e) Sample Size: 35 respondents f) Sampling Unit: General g) Data Source: Primary data h) Data Collection Instrument: Structured Questionnaire.

Data analysis and interpretations:-

1). Do you invest your saving for tax benefit? Investment Willingness:-

Investment Yes No Total

Number Of Respondents 14 21 35

Investment Willingness.

Number Of Respondents

Yes No Total

We observe that out of total respondents 21 people are not investing their savings for tax benefit and remaining are investing for tax benefit..

2). Do you have complete information about mutual fund? Awareness Level:-

Information Yes No Not Much Total

Number Of Respondents 11 14 10 35

Number Of Respondents

Yes No Not Much Total

We observe that out of total respondents 32% people are aware of mutual fund while 40% were unaware about mutual fund and remaining 28% know little bit of mutual fund

3). Are you an investor, who is interested in getting good deduction from tax? Interested in Tax Deduction:-

Information Yes No Total

Number Of Respondents 20 15 35

Number Of Respondents

Yes No Total

We observe that out of all respondents 20 people are interested in getting good deduction from tax and remaining people are not at all interested in getting deduction from tax.

4). Do you know mutual fund is a good instrument of tax saving? Awareness for Tax saving:Investment Yes No Total Number Of Respondents 13 22 35

Number Of Respondents

Yes No Total

We observe that 22 of all the respondents are not at all aware of mutual fund as a tax saving and 13 are aware of that mutual fund is good instrument of tax saving.

5). Among which of the following income group do you fall? Income Group:-

Income group > t1,00,000 1,00,001-2,00,000 2,00,001-3,00,000 3,00,001 & more TOTAL

Number Of Respondents 5 11 7 12 35

Number Of Respondents
40 35 30 25 20 15 10 5 0

Number Of Respondents

We observe that out of total respondents 5 people falls under less than 100000 income level, 11 people under 100000 to 200001, 7 people under 200001 to 300000 and remaining 12 people under 300000 and more than that

6). Investment instruments used every year Investment Holding:-

Investment Mutual fund Govt securities and gilts RBI Bonds NSC PPF Insurance Total

Number Of Respondents 03 Nil Nil 5 7 20 35

Number Of Respondents
20 10 0 Number Of Respondents

We observe from the above data that people preferred insurance as a more investment option as compared to other like mutual fund, govt. securities, RBI Bonds, PPF and NSC.

7). what is the Basic purpose of your investments? Purpose for Investment:Investment purpose High return Tax benefit Saving Wealth creation Risk diversification Total Number Of Respondents 6 4 16 7 2 35

Number Of Respondents
35 30 25 20 15 10 5 0

Number Of Respondents

We observe that out of total respondents peoples main purpose for investment is of savings (16) Thereafter wealth creation (7), high return (6), tax benefit (4) and risk diversification (2).

8). what returns do you receive at present from all your investments? Returns from Investment:-

Investment Returns Less than 5% 5%-10% 10-15% 15%-20% Greater than 20% Total

Number Of Respondents 4 14 10 5 2 35

Number Of Respondents
35 30 25 20 15 10 5 0

Number Of Respondents

We observe that 14 people get returns under 5 to 10%,10 people get under 10 to 15%, 5 under 15 to 20% and remaining 4 and 2 under 5 to 10% and more than 20% respectively.

9). Which types of funds would you like to prefer for your investment in mutual fund ? Fund Preference:Investment preference Equity fund Debt fund Balanced fund Total Number Of Respondents 8 7 20 35

Number Of Respondents

Investment preference Equity fund Debt fund Balanced fund

We observe that out of total respondents, people preferred more balance fund in their portfolio followed by equity and then debt. So, we can say that people wants to maintain both equity and debt in their portfolio

10). Give your preference for how many periods would you like to invest in mutual fund for tax savings? Investment period:No. of years No. of Respondents

Three year Five year Seven year More than seven year Total

6 10 14 5 35

No. of Respondents

Three year Five year Seven year more than seven year Total

We observe that people preferred to invest in mutual fund for savings purpose for seven year as compared to three, five, etc..

Results and Findings: We observe that % of people invest their savings for tax benefit in mutual are 40% while remaining 60% not invest in mutual fund. We observe that % of people aware about mutual fund are only 32% while 40% not at all aware and remaining 28% have limited information about mutual fund. We observe that % of people are interested in getting good deduction from tax are only 58% and remaining 42% are not at all interested in getting deduction from tax. We observe that % of people are aware that mutual fund as good instrument of tax saving are 59% while 41% are not aware that mutual fund is a good instrument of tax savings. We observe that out of all the instruments used every year, 58% people used insurance, 20% people used PPF, 15% people used NSC and remaining only 7% used mutual fund for tax saving purpose. We observe that % of returns people get from their present investments are Less than 5%-11% 5 to 10%-40% 10 to 15%-29% 15 to 20%-14% More than 20%- 6% So, from above we can come to know that people get more returns between 5 to 10% as compared to other returns. We observe that out of the funds preference people have very conservative approach towards it. The % of people preferred balanced fund are 58% while 23% preferred equity funds and remaining 19% preferred debt funds.

Limitations of the Study:-Sample size was limited to 35 because of limited time and thus unable to represent the whole population. -The research is limited to petlad town only, if the same research would have been carried in another place, the results could vary. -Sometimes the respondents because of their business didnt able to concentrate while filling up the questions. -My own inexperience and limited fund resources might have affect the research study.

Conclusions: The mutual fund investors prefer more of the Balanced fund as they want more return on their money. They avoid going in the debt fund because they can get same amount of return on there banks that is also without taking any risk. Usually people preferred to invest in mutual fund during NFO rather than seeing the performance of mutual fund scheme. Sometimes due to lack of detailed awareness about mutual fund schemes the investors seek advice of distributors. Investors feel that the AMC should go for more promotional activities & should try to come up with new innovative schemes which can easily be understood by the investors. People will not accept the entry load if the company would charge any such type loads during NFO because during NFO the investors were not sure whether the given scheme can really give them better return or not.

Suggestions: There is need to build awareness of the new funds among the investors with constantly being in contact with them. Some of investors have asked for periodical market report about stock market so that they can get the knowledge properly. AMCs should go for increasing more awareness about different facilities of investment such as SIP& STP among investors. ICICI must try to locate hard working distributors who are providing good business in their respective geographical area. Investors are never going to accept the entry load during NFO. So such type of activity should be avoided as much as possible. The company should advertise their tax saving plan more so that they can gain more customers.

Annexure:Questionnaire:Dear, Sir/madam Name:Qualification:Gender: - M Address:Contact No:E-mail Id: I (Parth shah) am the student of Indukaka Ipcowala Institute of Management, Charusat University, Changa, and presently doing a project on A study of Preferences of mutual fund as an investment avenue for Tax Planning. I request you to kindly fill the Questionnaire below and assure you that the data generated shall be kept confidential. (1) Do you invest your savings for tax benefit? Yes Yes tax? Yes Yes No No 4). Do you know mutual fund is a good instrument of tax saving? No No Not Much 2). Do you have complete information about mutual fund? 3). Are you an investor, who is interested in getting good deduction from F

5). Among which of the following income group do you fall? > 100000 100001-200001 200001-300001 300001-more 6). Investment instruments used every year

(Pl. tick from the following the investment options that you use and prefer)
Used Mutual Fund Insurance RBI Bonds Govt. Securities or Gilts NSC PPF Preferred (Rank them in order of your preference)

Reasons for less preference in mutual fund? (Pl. Rank your less preference reason on the scale of 1 to 5) (1) Uneven returns (2) Risky as it deals with equity / market driven (3) No awareness (4) No Control Over Cost (5) Delay in Redemption (6) Non-availability of Loans

7) What is the Basic purpose of your investments? Investment Purpose (1)High Return (2)Saving (3)Tax Benefit (4)Wealth creation (5)Risk Diversification 8). what returns do you receive at present from all your investments? Investment Returns (1)Less than 5% (2)5 to 10% (3)10 to 15% (4)15 to 20% (5)Greater than 20%

9). which types of funds would you like to prefer for your investment in mutual fund? Investment preference (1) Equity Fund (2) Debt Fund (3) Balanced Fund

10). Give your preference for how many periods would you like to invest in mutual fund for tax savings? Investment period (1) Three year (2) Five year (3) Seven year (4) More than seven year

Thank you!!!!!!!

Bibliography:-

www.icicipruamc.com www.amfiindia.com www.mutualfund.com