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TRAINING REPORT
ON
MUTUAL FUND IN SHARE MARKET SECTOR
(SHAREKHAN LTD.)
(M-5, D-15, South Extension-2, Delhi-110049)
Submitted to
MAHARSHI DAYANAND UNIVERSITY, ROHTAK
In partial fulfillment of the requirements
For the award of the degree of
BACHELOR OF BUSINESS ADMINISTRATION(INDUSTRY INTEGRATED)
(IVth Semester)
Submitted by
Name: Ranjana Lata Upadhyay
Roll No.:
HARGOBIND INSTITUTE OF GURU MANAGEMENT
& INFORMATION TECHNOLOGY
(Hargobind Enclave, Delhi-110092)
JULY 2012
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STUDENT DECLARATION
I hereby declare that the Training Report conducted at
SHAREKHAN LTD.M-5, D-15, South Extn-2, Delhi-110049
Under the guidance of
Ms. Rajni
Submitted in partial fulfillment of the requirement for the
Degree of
BACHELOR OF BUSINESS ADMINISTRATION(Industry Integrated)
TO
MAHARSHI DAYANAND UNIVERSITY,
ROHTAK
Is my original work and the same has not been submitted for theaward of any other Degree/diploma /fellowship
or other similar title or prizes.
Ranjana Lata Upadhyay
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ACKNOWLEDGEMENTS
I take this opportunity to thank the various persons who helped me in
one way or during the development of my summer training Product &
Services of Sharekhan in Share market sector.
I would also like to express my gratitude towards Mr. Nurul Hasan
(A.M, Assistant Manager), Shahid, Darnish and other friends and Mrs.
Mrs. Rajni (Faculty Guide) for valuable suggestion without which it
have been difficult for me to accomplish my project work.
Mrs. Rajni
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CONTENTS
CHAPTER 1: INTRODUCTION
1.1 General Introduction about the sector.
1.2 Industry Profile.
a. Origin and Development of the industry.
b. Growth and present status of the industry.
c. Future of the industry.
CHAPTER 2 : PROFILE OF THE ORGANISATION
2.1 Origin of the Organization.
2.2 Growth, Development and Present status of the Organization.
2.3 Organization structure and Organization chart.
2.4 Product and Service profile of the organization.
2.5 Market profile of the Organization.
CHAPTER 3 : DISCUSSIONS ON TRAINING
3.1 Students work profile (Role and Responsibilities).
3.2 Key learnings from training.
CHAPTER 4 : STUDY OF SELECTED RESEARCH PROBLEM
4.1 Statement of research problem.
4.2 Statement of research objectives.
4.3 Research design and methodology.
CHAPTER 5 : ANALYSIS
5.1 Data Analysis.
5.2 Summary of Findings.
CHAPTER 6 : SUMMARY AND CONCLUSIONS
6.1 Summary of Learning Experience.
6.2 Conclusions and Recommendations.APPENDICES
Annexure re like copy of questionnaires, interview schedules, leaf lets, brochures,
Photographs to be enclosed.
BIBLIOGRAPHY
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1.1General Introduction about the sector.
Introduction
Stock markets refer to a market place where investors can buy and sell
stocks. The price at which each buying and selling transaction takes is
determined by the market forces (i.e. demand and supply for a particular
stock).
A stock market orequity market is a public entity (a loose network of
economic transactions, not a physical facility or discrete entity) for the
trading of company stock(shares) and derivatives at an agreed price; these
are securities listed on a stock exchange as well as those only tradedprivately.
The size of the world stock market was estimated at about $36.6 trillion at the beginning
of October 2008. The totalworld derivatives market has been estimated at about
$791 trillion face or nominal value,11 times the size of the entire world economy. The
value of the derivatives market, because it is stated in terms ofnotional values, cannot be
directly compared to a stock or a fixed income security, which traditionally refers to an
actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a
derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the
event notoccurring). Many such relatively illiquid securities are valued as marked to
model, rather than an actual market price.
The stocks are listed and traded on stock exchanges which are entities of a
corporation ormutual organization specialized in the business of bringing
buyers and sellers of the organizations to a listing of stocks and securities
together. The largest stock market in the United States, by market
capitalization, is theNew York Stock Exchange (NYSE). In Canada, the
largest stock market is the Toronto Stock Exchange. Major European
examples of stock exchanges include the Amsterdam Stock Exchange,
London Stock Exchange, Paris Bourse, and the Deutsche Brse (Frankfurt
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Stock Exchange). In Africa, examples includeNigerian Stock Exchange,
JSE Limited, etc. Asian examples include the Singapore Exchange, the
Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai
Stock Exchange, and the Bombay Stock Exchange. In Latin America,
there are such exchanges as the BM&F Bovespa and the BMV.
Market participants include individual retail investors, institutional investors such as
mutual funds, banks, insurance companies and hedge funds, and also publicly traded
corporations trading in their own shares. Some studies have suggested that institutional
investors and corporations trading in their own shares generally receive higher risk-
adjusted returns than retail investors.
Trading
Participants in the stock market range from small individual stock investors to large
hedge fundtraders, who can be based anywhere. Their orders usually end up with a
professional at a stock exchange, who executes the order of buying or selling.
Some exchanges are physical locations where transactions are carried out on a trading
floor, by a method known as open outcry. This type ofauction is used in stock exchanges
and commodity exchanges where traders may enter "verbal" bids and offers
simultaneously. The other type of stock exchange is a virtual kind, composed of a
network of computers where trades are made electronically via traders.
Actual trades are based on an auction market model where a potential buyerbids a
specific price for a stock and a potential sellerasks a specific price for the stock. (Buying
or selling at marketmeans you will accept any ask price or bid price for the stock,
respectively.) When the bid and ask prices match, a sale takes place, on a first-come-first-
served basis if there are multiple bidders or askers at a given price.
The purpose of a stock exchange is to facilitate the exchange of securities between buyers
and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-
time trading information on the listed securities, facilitatingprice discovery
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Market participants
Market participants include individual retail investors, institutional investors such as
mutual funds, banks, insurance companies and hedge funds, and also publicly traded
corporations trading in their own shares. Some studies have suggested that institutionalinvestors and corporations trading in their own shares generally receive higher risk-
adjusted returns than retail investors.
1.2: Industry Profile
A. Origin and Development of Stock Exchange
History
Established in 1875, the Bombay Stock Exchange is Asia's first stock exchange
In 12th century France the courretiers de change were concerned with managing and
regulating the debts of agricultural communities on behalf of the banks. Because these
men also traded with debts, they could be called the first brokers. A common misbelief isthat in late 13th century Bruges commodity traders gathered inside the house of a man
called Van der Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing
what had been, until then, an informal meeting, but actually, the family Van der Beurze
had a building in Antwerp where those gatherings occurred; the Van der Beurze had
Antwerp, as most of the merchants of that period, as their primary place for trading. The
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idea quickly spread around Flanders and neighboring counties and "Beurzen" soon
opened in Ghent and Amsterdam.
In the middle of the 13th century, Venetian bankers began to trade in government
securities. In 1351 the Venetian government outlawed spreading rumors intended to
lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also
began trading in government securities during the 14th century. This was only possible
because these were independent city states not ruled by a duke but a council of influential
citizens. Italian companies were also the first to issue shares. Companies in England and
the Low Countries followed in the 16th century. The Dutch East India Company
(founded in 1602) was the firstjoint-stock company to get a fixed capital stock and as a
result, continuous trade in company stock emerged on the Amsterdam Exchange. Soonthereafter, a lively trade in various derivatives, among which options and repos, emerged
on the Amsterdam market. Dutch traders also pioneered short selling - a practice which
was banned by the Dutch authorities as early as 1610
There are now stock markets in virtually every developed and most developing
economies, with the world's largest markets being in the United States, United Kingdom,
Japan, India, China, Canada, Germany (Frankfurt Stock Exchange), France, South Korea
and theNetherlands
Importance of stock market
Function and purpose
The stock market is one of the most important sources forcompanies to raise money.
This allows businesses to be publicly traded, or raise additional financial capital for
expansion by selling shares of ownership of the company in a public market. The
liquidity that an exchange affords the investors gives them the ability to quickly and
easily sell securities. This is an attractive feature of investing in stocks, compared to other
less liquid investments such as real estate.Some companies actively increase liquidity by
trading in their own shares.
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Relation of the stock market to the modern financial system
The financial system in most western countries has undergone a remarkable
transformation. One feature of this development is disintermediation. A portion of the
funds involved in saving and financing, flows directly to the financial markets instead of
being routed via the traditional bank lending and deposit operations. The general public
interest in investing in the stock market, either directly or through mutual funds, has been
an important component of this process.
Statistics show that in recent decades shares have made up an increasingly large
proportion of households' financial assets in many countries. In the 1970s, in Sweden,
deposit accounts and other very liquid assets with little risk made up almost 60 percent of
households' financial wealth, compared to less than 20 percent in the 2000s. The major
part of this adjustment is that financial portfolios have gone directly to shares but a good
deal now takes the form of various kinds of institutional investment for groups of
individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of
premiums, etc.
Crashes
A stock market crash is often defined as a sharp dip in share prices ofequities listed on
the stock exchanges. In parallel with various economic factors, a reason for stock market
crashes is also due to panic and investing public's loss of confidence. Often, stock market
crashes end speculative economic bubbles.
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Robert Shiller's plot of the S&P Composite Real Price Index, Earnings, Dividends, and
Interest Rates, fromIrrational Exuberance, 2d ed.[21] In the preface to this edition, Shiller
warns, "The stock market has not come down to historical levels: the price-earnings ratio
as I define it in this book is still, at this writing [2005], in the mid-20s, far higher than the
historical average... People still place too much confidence in the markets and have too
strong a belief that paying attention to the gyrations in their investments will someday
make them rich, and so they do not make conservative preparations for possible bad
outcomes."
Price-Earnings ratios as a predictor of twenty-year returns based upon the plot by Robert
Shiller(Figure 10.1,[21]
source). The horizontal axis shows the real price-earnings ratio of
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the S&P Composite Stock Price Index as computed inIrrational Exuberance (inflation
adjusted price divided by the prior ten-year mean of inflation-adjusted earnings). The
vertical axis shows the geometric average real annual return on investing in the S&P
Composite Stock Price Index, reinvesting dividends, and selling twenty years later. Data
from different twenty year periods is color-coded as shown in the key. See also ten-year
returns. Shiller states that this plot "confirms that long-term investorsinvestors who
commit their money to an investment for ten full yearsdid do well when prices were
low relative to earnings at the beginning of the ten years. Long-term investors would be
well advised, individually, to lower their exposure to the stock market when it is high, as
it has been recently, and get into the market when it is low."[21]
Stock market index
The movements of the prices in a market or section of a market are captured in price
indices called stock market indices, of which there are many, e.g., the S&P, the FTSE and
the Euronext indices. Such indices are usually market capitalization weighted, with the
weights reflecting the contribution of the stock to the index. The constituents of the index
are reviewed frequently to include/exclude stocks in order to reflect the changing
business environment.
Derivative instruments
Financial innovation has brought many new financial instruments whose pay-offs or
values depend on the prices of stocks. Some examples are exchange-traded funds (ETFs),
stock index and stock options, equity swaps, single-stock futures, and stock index futures.
These last two may be traded on futures exchanges (which are distinct from stock
exchangestheir history traces back to commodities futures exchanges), or traded over-
the-counter. As all of these products are only derivedfrom stocks, they are sometimes
considered to be traded in a (hypothetical) derivatives market, rather than the
(hypothetical) stock market.
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Leveraged strategies
Stock that a trader does not actually own may be traded using short selling; margin
buying may be used to purchase stock with borrowed funds; or, derivatives may be used
to control large blocks of stocks for a much smaller amount of money than would be
required by outright purchase or sales.
Short selling
In short selling, the trader borrows stock (usually from his brokerage which holds its
clients' shares or its own shares on account to lend to short sellers) then sells it on the
market, hoping for the price to fall.
Margin buying
In margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to
rise. Most industrialized countries have regulations that require that if the borrowing is
based on collateral from other stocks the trader owns outright, it can be a maximum of a
certain percentage of those other stocks' value. .
A margin call is made if the total value of the investor's account cannot support the loss
of the trade. (Upon a decline in the value of the margined securities additional funds may
be required to maintain the account's equity, and with or without notice the margined
security or any others within the account may be sold by the brokerage to protect its loan
position. The investor is responsible for any shortfall following such forced sales.)
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B. Growth and present status of the industry.
India Stock Market
Stocks in India had a positive performance during the last month. The SENSEX, a major
stock market index based in India, rallied 673 points or 3.87 percent during the last 30
days. Historically, from 1979 until 2012, the SENSEX averaged 5267.2 reaching an all
time high of 21005.0 in November of 2010 and a record low of 113.3 in December of
1979. The SENSEX is a major stock market index which tracks the performance of large
companies based in India. A stock market or exchange is the centre of a network of
transactions where securities buyers meet sellers at a certain price. This page includes achart with historical data for India Stock Market.
STOCKMARKETS
A stock market or exchange is the center of a network of transactions where securities
buyers meet sellers at a certain price. A stock market or exchange is not necessary a
physical facility and with the advancement of information technology are increasingly
rare those traders that exchange their stocks in the floor of a major stock exchange. The
main stock market in the United States is New York Stock Exchange (NYSE). In Europe,
examples of stock exchanges include the London Stock Exchange, the Paris Bourse, and
the Deutsche Bourse. In Asia, the main stock exchanges include the Tokyo Stock
Exchange, the Hong Kong Stock Exchange, and the Bombay Stock Exchange. In Latin
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America, there are such exchanges as the BOVESPA in Brazil and the MERVAL in
Argentina.
C. Future of the industry.
Market
The turnover for the global market in exchange-traded equity index futures is notionally valued, for 2008,
by the Bank for International Settlements at USD 130 trillion.
Uses
Stock index futures are used forhedging, trading, and investments.
Hedging using stock index futures could involve hedging against a portfolio of shares or equity
index options.
Trading using stock index futures could involve, for instance, volatility trading (The greater the
volatility, the greater the likelihood of profit usually taking relatively small but regular profits).
Investing via the use of stock index futures could involve exposure to a market or sector without
having to actually purchase shares directly.
Please note the following cases of equity hedging with index futures:
Where your portfolio 'exactly' reflects the index (this is unlikely). Here, your portfolio is perfectly
hedged via the index future.
Where your portfolio does not entirely reflect the index (this is more likely to be the case). Here,
the degree of correlation between the underlying asset and the hedge is not high. So, your portfolio is
unlikely to be 'fully hedged'.
Equity index futures and index options tend to be in liquid markets for close to delivery contracts. They
trade for cash delivery, usually based on a multiple of the underlying index on which they are defined (for
example 10 per index point).
OTC products are usually for longer maturities, and are usually a form of options product. For example, the
right but not the obligation to cash delivery based on the difference between the designated strike price, and
the value of the designated index at the expiration date. These are traded in the wholesale market, but are
often used as the basis of guaranteed equity products, which offer retail buyers a participation if the equity
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index rises over time, but which provides guaranteed return of capital if the index falls. Sometimes these
products can take the form ofexotic options (for example Asian options orQuanto options).
PricingForward prices of equity indices are calculated by computing the cost of carry of holding a long position in
the constituent parts of the index. This will typically be
The risk-free interest rate, since the cost of investing in the equity market is the loss of interest
Minus the estimated dividend yield on the index, since an equity investor receives the sum of the
dividends on the component stocks. Since these occur at different times, and are difficult to predict,
estimation of the forward price can be difficult, particularly if there are not many stocks in the chosen
index.
Indices for futures are the well-established ones, such as S&P 500, FTSE, DAX, CAC40 and
otherG12 country indices. Indices forOTCproducts are broadly similar, but offer more flexibility.
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2.1 Origin of the Organization.
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2.2 Growth, Development and Present status of the
Organization.
Sharekhan is online stock trading company of SSKI Group, provider of India-basedinvestment banking and corporate finance service. Sharekhan is one of the largest stock
broking houses in the country.
Sharekhan's equity related services include trade execution on BSE, NSE,
Derivatives,Commodities, Depository Services, Online Trading and Investment Advice.
Along with Sharekhan.com website, ShareKhan has 1700 'Share Shops' in 550 cities and
serving more than 10,00,000 customers across the nation. It also has international
presence through its branches in the UAE.
Sharekhan launched online trading portal in 2000, providing fundamental and statistical
information across equity, mutual funds and IPOs. Sharekhan offers its services to all
types of customers- individual investors and traders, corporate, institutional and NRI's;
trade execution facilities for cash as well as derivatives, on BSE and NSE, depository
services, mutual funds, initial public offerings (IPOs), commodities trading on MCX and
NCDEX and currency trading facilities on NSE, USE & MCX-SX. Sharekhan provides
market related news, stock quotes fundamental and statistical information across equity,
mutual funds, IPOs and much more.
Trade In: BSE and NSE
Stock Broker Review Ratings
Overall Rating Fees Brokerage Usability Customer Service 68 votes
Account Types
1. Classic account
Allow investor to buy and sell stocks online along with the following features like multiple watch
lists, Integrated Banking, demat and digital contracts, Real-time portfolio tracking with price alerts
and Instant credit & transfer.
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a. Online trading account for investing in Equities and Derivatives
b. Free trading through Phone (Dial-n-Trade)
I. Two dedicated numbers for placing your orders with your cellphone or landline.
II. Automtic funds tranfer with phone banking (for Citibank and HDFC bank
customers)
III. Simple and Secure Interactive Voice Response based system for authentication
IV. get the trusted, professional advice of our telebrokers
V. After hours order placement facility between 8.00 am and 9.30 am
c. Integration of: Online trading + Bank + Demat account
d. Instant cash transfer facility against purchase & sale of shares
e. IPO investments
f. Instant order and trade confirmations by e-mail
g. Single screen interface for cash and derivatives
2. Trade Tiger account
This is a net based executable application for active traders who trade frequently during the day's
trading session. Following are few popular features of Trade Tiger account.
a. A single platform for multiple exchange BSE & NSE (Cash & F&O), MCX, NCDEX
b. Multiple Market Watch available on Single Screen
c. Hot keys similar to a traditional broker terminal
d. Tie-up with 12 banks for online transfer of funds
e. Different tools available to gauge market such as Tick Query, Ticker, Market Summary,
Action Watch, Option Premium Calculator, Span Calculator
f. Graph Studies are available including Average, Band- Bollinger, Know SureThing, MACD,
RSI, etc
Sharekhan's Trading Brokerage, AMC and Fees
Account Opening Fees & Annual maintenance charges (AMC)
Trading Account Opening Charges (One Time): Rs 750 (Classic Account), Rs 1000 (Trade Tiger
Account)
Trading Annual maintenance charges (AMC): -
Demat Account Opening Charges (One Time): -
Demat Account Annual Maintenance Charges (AMC): Rs. 400 (Free for 1st year with trading
account.)
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Trading Brokerages
Intra-day Trades: 0.1% on the buy side and 0.1% on the sell side.
Delivery Based Trades: 0.5% or 10 paise per share or Rs. 16/- per scrip whichever is higher.
F&O Trades: 0.1% on the first leg and 0.02% on the second leg if squared off on the same day and0.1% if squared off on any other day.
Options Trades: Rs. 100/- per contract or 2.5% on the premium (which ever is higher).
How to open account with Sharekhan?
For online trading with Sharekhan, investor has to open an account. Following are the ways to open an
account with Sharekhan:
Call them at phone number provided below and ask that you want to open an account with them.
1. Call on Toll free number: 1-800-22-7500 to speak to a Customer Service executive
2. Land Line: 39707500 / 022-6115 1111
Visit one of their branches. Sharekhan has a huge network all over India. Click
on http://sharekhan.com/Locateus.aspx this link to find out your nearest branch. Just select the
place near you and you'll find a manager to assist you there.
You can send them an Email on [email protected] to know about their products and services.
If you wish to chat with customer service representative, you can join the chat sesssion.
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2.3 Organization structure and Organization chart.
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Organizational chart
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2.4 Product and Service profile of the organization
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INTRODUCTION
The term Mutual Fund has been defined as a non-depository or non-banking financial
intermediary which acts as an important vehicle for bringing wealth holders and deficit
units together indirectly.
Mutual funds are financial intermediaries which pool the savings of numerous
individuals and invest the money thus raised in a diversified portfolio of securities, thus
spreading and reducing risk. The object is to minimize the return to the investor who
participates in equity indirectly through Mutual Funds.
Mutual Funds earn income by way of interest or divided or both from the securities if
holds. It deducts operating expenses fee and a management income and them posses the
remember to wealth holders through dividends on the Mutual Fund shares.
Mutual Funds offer to their investors the following Main Advantages :
1. Responsible dividends and capital appreciation.
2. Reduced Risk through diversification of portfolio.
3. Access to expertise investment decision and professional Management.
4. Safety and liquidity.
5. Economics of scale in transaction casts and cast of search of information.
6. Liquidity of investments and ability to choose a fund, which meets the precise cash,
flow needs.
the Mutual fund industry is growing and will continue to grow due to the following
factors :
1. In the past scan phase, millions of investors and no longer so sure about primary issues
and one looking for a lower risk option. Which is offered by funds.
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2. Companies are new changing a higher premium on primary and rights issue. As a
result of this small in vestures are shying away.
3. SEBIs introduction of proportionate allotment system for new issued has reduced the
small investor's chances of allotment in primary issues.
4. The minimum for primary issues has been liked to Rs. 500 from Rs. 1000. But for
Mutual Funds the least inevitable amount is only Rs. 1000.
The share of individual investors in primary issues has dropped shortly from 83% in
192-93 to 61% in December 1995.
TYPES OF MUTUAL FUNDS
Broadly speaking, Mutual funds may be classified into two categories :
a. Open ended mutual funds
Open-ended mutual funds function on a regular deposit and withdrawal basis. they accept
funds form investors at any point of time and the investor has the right to withdraw from
the share/units instead of being publicly traded, are repurchased by the fund at any time ata repurchased rate. instances of such a fund are Unit Trust of India and can stock of can
bank.
b. Close ended mutual funds
Close-ended mutual funds raise their capital at one point of time. the size of fund the
number of share/units is determined in advance, once subscription reaches this
predetermined level, entry of any prospective investor is closed. The share/units of suchfunds are publicity traded instead of being repurchased by the fund. An other fact of
close-ended mutual funds is that at end of specific term of mutual funds, these liquidate
their investments and distribute the realization amongst the investors. Master Card
issued by UTI and canshare issued by can bank fund are examples of such funds.
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Depending upon the varying needs and objectives of different types of investors, mutual
funds may also be classified on the basis of yield and investment pattern. The main
categories are :
Money market mutual funds
Besides the above type of funds, mutual funds have now come up with other important
varieties such as Money Market Mutual funds (MMMFs) and offshore funds.
With the gradual broadening f the capital market over the past few year, setting up of
money market mutual funds has been a logical step. As the name itself suggests money
market mutual funds invest their resources in a portfolio of high quality money market
instruments exclusively. Money market instruments are intentions or claims, having low
default risk, short marketability. For example, Treasury Bills, commercial paper,
certificates of deposit, commercial bills, Inter corporate deposit certificates, participation
certificates etc. They assist in bridging the gap between receipts and expenditure of
economic units.
Money market mutual funds have been eminently successful in a few countries in the
west for instance in finance where mutual funds activity has surged by 300% since 1986,
and this growth has been contributed entirely by funds. In India, the money market which
had a limited number of participants and was characterized by a policy of instruments,
opened up as a result of some major developments such as introduction of instruments
(commercial paper, certificates of deposit, 182 days Treasury bills, 364 days Treasury
bills), removal of ceiling on call money rate, establishment of Discount and finance house
of India (DFHI) and promotion of financial instruments to participate in call money.
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Off-Shore Mutual Funds
In order to channelsise the foreign funds into the domestic stock markets and to enable
NRIs and other international investors to participates in Indian capital market. Offshore
mutual funds were launched by UTI-once again the pioneer in the filed. Offshore mutual
funds are an ideal vehicle for opening up domestic capital markets to the international
investors. They are an excellent means of bringing foreign funds into the country and are
often preferred to the direct foreign investment since they do allow foreign dominate over
the host countrys corporate sector.
Off-share mutual funds, though of the same type as domestic mutual funds, are different
in many ways. Incase off-shore mutual funds, source of funds are from abroad, they
involve currency and country risk for the floral investors and can yield higher returns and
greater spread of risk through diversification into newer markets. Offshore funds like
domestic funds can be either closed ended or open end. So far, India has floated only
closed ended funds, which means that an individual investor has nor right to ask for
redemption of his holdings except at the end of specified period, the first off-shore
mutual fund launched as India funds in 1986, in association with Merrill Lynch in UK
and was targeted at the non resident Indians and other foreign investors.
This fund is listed on the London stock exchange. the initial offering was 70 million
pounds (Rs. 210 crores) but was heavily over subscribed and as a result, the size was
raised to 94.2 million pounds (Rs 282.60 crores) Indian growth funds was floated by the
UTI in 1988 in the US with a corpos of $ 60 million. This was marketed by Merrill lunch
and is listed on the New York Stock exchange. The state bank of India floated the Indian
magnum fund of # 156 million in Netherlands., It has a lock in period of 5 years and is
managed by Morgan Stanley Asset Management and SBI Capital markets. The fourth
major fund. The Indo Suez Himalayan Fund N. V. was launched by canbank mutual
funds jointly with Indosuez Asia Investment services Ltd., in 1990. This fund is listed on
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the London stock exchange and was targeted for investment in the Indian sub-continent
with 70% of this fund Invested in the Indian equity market.
Apart from these four funds the ADB sponsored a multi-currency regional fund-Asia
convertibles & Income fund was for promoting use of convertibles in emergent capital
markets of Asia. This fund was for private placement an demobilized about $ 63 million.
Twenty percent of these were set of to be invested in Indian capital market. Canbank
mutual fund also floated commonwealth Equity fund (CEF), in association with Battery
March financial service, which attracted capital of $ 51 million. The CEF is to invest
40% each in India and Malaysia and balance in 16 developing countries within the
commonwealth.
Though the government has already approved many offshore funds no new fund has
actually been floated since mid 1990. Total investment under these funds is not only
small as compared to the total market capitalization of the quoted companies in India, but
is also small in comparison to similar funds floated by other countries. Apart from Indias
low credit rating one of the reasons for absence of new off-shore mutual funds is the fact
that the existing funds are quoted well below their Net Asset value.
The outlook of off-shore mutual funds is colossal related to future of Indian capital
market. the potential of Indian capital market is associated with the continued good
performance of economy. Rapid policy changes are point that soon the Indian corporate
sector, in future, will have to meet international present half-yearly performance by
internationally, quartile reporting is the usual practice.
In sum, it can be said that whole India is making great efforts to heralds market
orientation, they have also occurred big changes of the international scenario. There has
also been an explosive word wide growth in mutual funds as an investment medium.
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Name Of The Instrument Limit (% Of Non-Invisible
Resources of Each Scheme)
Treasury Bills and dated Government Securities
having an unexplored maturity upto one year.
Minimum 25%
Call/Notice Money Minimum 30%
Exponential commercial papers not to be more
than 3%
Minimum 15%
Commercial bill arising out of genuine
trade/commercial transactions and accepted/co-
accepted by banks
Minimum 20%
Certificate of deposits No limit
The above limits have been designed basically with a view to ensuring safety and
inquidity of the investors.
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S. No. Types of funds Objective
1. Income funds Maximization of yield on securities.
2. Growth funds Maximization capital appreciation I security
value
3. Equity funds Undertaking risk associated with investment
inequity share
4. Tax exempt funds Investment in securities getting tax
benefit/exclusive tax frees treatment.
5. liquidity funds Investment in short term money market
instruments given low rate of return but high
liquidity.
6. Specialized funds Investment in specialized channels likes a
specific category of companies (technology
funds) or gold and silver.
7. Index linked funds Investment in share included in market
indices and in the same proportion (value of
shares vary correspondingly with the market
index).
8. Leveraged funds Increasing the value of portfolio and benefit
to unit holders by gains exceeding the cost of
borrowed. leveraged funds
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9. Dual purpose funds high yield and capital appreciation arising
our of the whole portfolio for the investors
wishing for such benefits.
10. Real Estate funds Investment in real estate
11. Balanced funds Investment in both equity shares and bonds
for safety, growth and regularity of income.
12. Hedge funds Use of funds in the way of a speculator-
buying/selling shares when prices are likely
to go up/down.
13. Off-shore funds Investment in foreign company/corporations
to channels foreign funds into domestic
market
14. New Direction funds Investment in companies engaged in
scientific and technological research.
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HOW THE INDUSTRY HAS GROWN IN LAST 10 YEARS
Year Rs. in crores % growth
1986-87 4563.68 --
1987-88 6738.81 3.2
1988-89 13455.65 49.91
1989-90 1911.92 29.59
1990-91 23060.45 17.12
1991-92 37480.20 38.47
1992-93 46988.02 20.23
1993-94 60385.21 22.18
1994-95 72050.21 16.19
1995-96 77367.00 6.89
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SIZE OF SCHEMES
A study of the schemes launched by all mutual funds excluding UTI reveals the following
:
a. Of the total number of schemes launched 84% are from Public sector mutual funds,
while remaking 16% are from Private sector mutual funds.
No. of schemes Corpus size
27 > - 50 Cr
28 50 - 100 Cr
23 100 - 200 Cr
12 200 - 500 Cr
05 < - 500 Cr
% of Public Sector Mutual
Fund
% of Private Sector Mutual
Fund
Corpus Size
57 60 > - 100 cr.
26 13 100 - 200 cr.
17 27 < - 200 cr.
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2.5 Market profile of the Organization
MUTUAL FUNDS : THE PRESENT SENARIO IN THE INDIAN MARKET
The institution dealing in mutual fund is professional fund managers who manager
funds of individuals and bodies who.
May not have such high degree of expertise
May not have sufficient time to cope up with the complexities of various investment
instruments, tax laws, corporate performance, stock market behaviour.
Saving may be too small to take advantage of a widely diversified and growth oriented
portfolio on the market.
By subscribing to mutual funds, an investor is able to get a balanced and well diversified
portfolio, which would reduce his exposure to risk. Mutual funds as professional
managers take into account diverse income needs of investors and respond with various
different schemes or funds.
The certainty of yield has mainly been instrumental in attracting large flow of funds from
the household sector to mutual funds under these schemes. While the mutual funds
endeavor to offer higher yields than available on alternative instruments and provide high
degree of safety both for yield as well as return of capital, they also aim at providing
continuous liquidity on their subscription. The Indian mutual funds, have attempted to
provide all three requirements of good investment namely, yield and liquidity in a fairly
satisfactory way.
The first mutual was launched in Indian in 1986 and upto 1993 all the mutual funds
operating were government owned. The real fund began as 1993 drew to an end. The
mutual funds industry was deregulated and private financial institutions were allowed to
raise funds from the market just as public sector organization had so far. Kothari Pioneer
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and CRB capital were the first to announce the launch of their mutual funds. Today there
are 14 private mutual funds operating in the market. In just three years, they have
between the mobilized Rs. 3223 crores. And this is just the beginning.
But the last two years have not been kind to the countrys mutual funds. Whipped by
falling stock prices, frustrated by the growing refusal on the part of investors to trust their
money to them and tormented by the lack of autonomy and operational flexibility.
However, not all of them have been bleeding. More than one fund manager has not only
managed to protect his portfolio from the assault on prices, but also even boosted the
value of his corpus with smart mind and even smart selling. Leaders of a battered
brigade, they have succeeding in proving that mutual fund scheme can still do its job.
Shield the investor from risks and still ensure high reward.
The icy scalpel of dropping stock prices sliced way the portfolio values of funds after
fund, scheme after scheme. Realizing that their investment vehicles were lunging rather
roaring, investors have been punishing mutual funds by refusing to provide them with
fuel.
Out of 197 schemes presently operating in the market close-end schemes dominant.
MAJOR DEVELOPMENTS PREDICTED TO TAKE PLACE IN COMING YEARS
Most funds now have more to offer than just a straight forward investment additional
features are being packed into the schemes to make them more attractive.
The latest such is a medium issue by IDBI Mutual fund. IDBI-nit95, a zero discount
encashable close end scheme is target4ed at investors who are low on the risk dimension
but high on the income dimension. Despite being a close-end fund, I-NITs without any
discount to the NAVs
GIC Fortune 94 provided offered insurance warrants to avail discounts on premium
payable on a variety of issuance covers without tax deduction at source.
Mutual funds : Enter the Foreign Banks
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More than three years after the government permitted private mutual funds, a clutch of
foreign banks is getting ready to test the waters (ING Bank, Hong Kong Bank, Citibank
and ANZ Grindlays).
After Moragan Stanleys depressing fund management performance, foreign mutualfunds are suffering from a serve image crisis. Alliance capital wasn't even able to get its
entire corpus subscribed at the first go. Persuading investors to trust to foreign with their
money will be infinitely more difficult.
The foreign banks are venturing into an area where they are relatively inexperienced
because of the belief of that Indian investors will begin to look at mutual funds as an
alternative to bank deposit., almost as safe but with better returns and, in the case of
open-ended funds, nearly the same liquidity. they plan to take advantage of the already
existing network they have.
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3.1 Students work profile (Role and Responsibilities)
3.2 Key learning from training
1. Good communication skills
2. Learnt aggressive customers handling
3. Tactful dealing with customers
4. Conduct of work in a systematized & well planned manner
5. Development in over all personality
6. Confidence.
Goals and Outcomes of Training
Take advantage of growth opportunities
Improve efficiency
Better teamwork
A passionate workforce
A strong customer service focus
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4.1 Statement of research problem
Guaranteed / assumed is the main feature that has made mutual fund a popular mode of
investment. It has also because a topic of debate since the SEBI has questioned the
minimum return concept of MF's has given rise to advertisement galore where every fund
is trying to ensure certain minimum return and is not clearly mentioning the risks
involved.
MF's have also been questioned on basis of adequate inception disclosure, not publishing
their annual accounts etc, and consequently, lack of transparency of their transaction.
It has been reported that most of the share / units of mutual funds with certain inception
are not so regularly traded in stock exchanges. Also, the market making function is
virtually absent thus restricting the liquidity offered by these funds to an extent.
It has also been reported that the mutual funds are inverted in certain dubious deals. Since
mutual funds do not function independently of the commercial banks, which sponsor
them, the funds mobilized by them are often diverted to the sponsoring bank, which may
utilize them to suit their needs. It has also been found that mutual funds do not maintain
proper records of the innumerable transactions that they undertake in the stock and
money market. Custodial service being poor, records are after falsified or motivated or
motivated or incomplete.
Another factor which creates a problem while comparing the performance of various
mutual funds is calculation of the NAV. Different mutual funds currently follow different
policies for accounting of NAV and valuation of their investment portfolio. Such
differences in accounting and valuation procedures makes comparison of NAV's of
different funds difficult. Incidentally, divergences in valuation exist not only in respect of
unlisted securities but even in quoted Scripps. For instance, there is no uniformity in the
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market price, which is considered for the purpose of calculation whether it be the losing,
the opening or the mid-market price.
A few mutual funds value fully convertible debenture on basis of the market price of the
underlying shares, after discounting the dividend element from such price Unquote and
listed securities also pose another problem, being value at cost> however, there arises a
school of thought that if a scrip is infrequently traded due to any corrosion in the
profitability of the company then cost is not the right measure. In such cases therefore,
fund managers invite quotes from a few independent borrowers and arrive at an average
value.
In case of fixed income securities, mutual funds follow different valuation policies. Most
funds adopt either the current yield or yield to maturity value of comparable instruments.
The accrued interest is added back to this is most cases.
There are anomalies in dividend accounting as well. Some account for dividend on cash
basis, other on account basis.
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4.2: Statement of research objectives.
OBJECTIVE
the Primary objective of this project is to study the Mutual Funds in the Indian capital
market and to access customer needs and expectation.
SINGNIFICANCE OF MUTUAL FUNDS
Mutual funds act as an investment conduit between the ultimate savers (householders)
and the corporate sector. As non-banking financial intermediaries, they perform the
function of bringing together the saving and investment opportunities. Mutual fund pools
the savings of small and medium investors and invests in financial intermediaries,
opportunities. Mutual funds pool the savings of small and medium investors and invest
the funds in a fairly large and well diversified portfolio of sound in investment by
employing professional, qualified and well experienced investment consultants and fund
managers with the objective of minimizing investment risk by diversification and
maximizing returns/income on investments.
Mutual funds have become immensely popular mainly because they are perceived by the
investor as providing guaranteed returns with minimum of botheration to them, the
investors, particularly the small ones, my bot have the export knowledge required
carrying our portfolio analyze and management. Moreover, the investors would like to be
relived of the botheration of handling the immense paperwork involved in applying for
various issues and in receipt of refunds increases of non allotment, when issues are over-
subscribed. Thus a small investor has a preference for mutual funds because they may not
have the necessary expertise require to manage his portfolio of capital market securities,
prename a postpone top afford prevocational advice promise his risk by spreading his
funds over different industry groups due to limited resources. He may also not have
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access to the up to date information about developments taking place in the corporate
circle and the capital market. Most important of all, a big chunk of the Indian investor's
population is conservative, having a preference for safety and surety of returns and
convenience. Mutual funds not only cats to the above needs, they also ensure conformed
allotment in fundamentally strong companies, thus improving their own NAV and
providing better returns to their client.
4.3 Research design and methodology
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Data Collection
Primary Data
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5.1 Data Analysis
BIFURCATION ON THE BASIS OF OCCUPATION
Amount (Rs. % age
< 25000 20
25000 1,00,000 55
1,00,000 3,00,000 20
Above 3,00,000 5
Usual amount kept in Bank deposit/saving account 55% of the people keep 25000
1,00,000 as bank deposit, 20% keep < 25000 and 1,00,000 3,00,000 each and only 5%
keep above 3,00,000.
Profession
10%
Business
27%
Service
46%
Others
17%
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Conclusion
Most of the people keep 2a50000 1,00,000 as bank deposit/saving account.
USUAL AMOUNT KEPT IN BANK DEPOSIT/SAVING ACCOUNT
1. Approximate proportion of financial investment
Bus Service Prof. Others
Banks 5 30 15 40
Fixed Income Products (eg. GDs, NCDs,
Deb.)
10 35 30 45
Equity & Mutual Funds 30 20 25 5
Private (loan & Chit funds) 15 5 10 -
Others (Properties, bus, etc.) 40 10 20 10
Above 3,00,000
5%1,00,000-3,00,000
20%
25000 - 1,00,000
55%
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i) 40% of the business class prefer investing in others (properties, business etc.) and
only 5% invest in bank.
ii) 35% of the service class prefer investing in fixed income products and only 5% in
private (loan % chit funds).
iii) 30% of the profession class prefer investing in fixed income products and only
10% in private (loan and chit funds).
iv) 45% of the other class prefer investing in fixed income products and only 55 in
equity and mutual funds.
Conclusion
Most popular financial investment is fixed income products.
APPROXIMATE PROPORTION OF FINANCIAL INVESTMENT
0
5
10
15
20
25
30
35
40
45
50
Bnks Fixed Income quity Private Others
Bus Service Prof. Others
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INVESTMENT PLANNING FOR NEXT 3-6 MONTHS
Investment%age
Banks 20
PSU Bonds 5
FD 40
MF 15
Others
40% of the people plan to invest in FDs in next 3-6 months, 20% in Bank and others each
and only 5% in PSU bonds.
Conclusion
Most of the people prefer investing in FDs for the next 3-6 months
MF
15%
FD
40%PSU Bonds
5%
Banks
20%
Other
20%
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THE BEST FUNDS
Income Scheme Growth schemes Balanced Schemes
Indjyoti BBOI Double Sqr. Plus A SBI Magnum triple plus
UTI US-64BIO Double S qr. Plus B LIC Dhansahyog C
GIC Big Value Cum.UTI Master Share Canister CG Cantriple plus
Rise II Cumm.UTI Master Plus 91 Ind band Prakash Plan B
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COMPARISON WITH OTHER INVESTMENT OPTIONS
Parameter Bank DepositMonthly Income
schemes
Bonds Escorts
Income bond
Return 10-13% 14-15% 16% Target > 16%
Risk Low-however
only Rs.
30,000 is
insured
Low-Medium Low-but has
exposure to
one company
Low-
diversified
portfolio of
investment
area bounds &
debenture
Liquidity High Medium Low High-6
monthly buy
back
TDS TDS at
income Rs.
2,500
TDS at Income >
Rs. 10,000
TDS at
income > Rs.
2,500
TDS at
income Rs.
10,000
Low t ax
on
Capital
gains
No. No. No. Yes
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5.2 Summary of Findings
FINDINGS OF SURVEY
Sample size 150
Interested 125
2. Bifurcation on the basis of occupation
Occupation Interested %age
Business 35 27
Service 70 46
Profession 10 10
Others 20 17
Out of the interested people 46% belongs to service class; 27% to the business class and
only 10% to the profession class.
Conclusion
Service class is the most interested in the income bond.
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6.1 Summary of Learning Experience
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6.2 Conclusions and Recommendations
Mutual funds have not been doing well in the past two years due to falling stock prices
and various other reasons as mentioned earlier.
The capital market has been growing by leaps and bounds. This expansion will act as an
impediment to the small investors who either has the where with to play the market or the
knowledge to keep pace with the corporate information of thousands of companies. Their
mutual funds will form a favorable alternative.
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APPENDICES
QUESTIONNAIRE
1. Have you recently invested in (past 6 months 1 year)
Yes No If yes, Amount
IDBI Bonds
ICICI Bonds
UTI monthly income scheme
Other fixed income instrument
(e.g. Kotak Mahindra Deb PSU bonds)
2. What is the usual amount you keep in Bank Deposit/Saving Account?
lacs
3. Approximate proportion of financial investment (%) basis
Bank ..
Fixed income products ..
(eg. FDs, NCDs Deb)
Equity & Mutual funds ..
Private (loan, chitfund) ..
4. Usual Monthly investment surplus
100000 .
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5. Have you invested in
Yes No
Income Mutual fund.
Growth Mutual Find
If income Mutual fund,
Which Mutual fund i.. ii iii.
What return
6. Would you be interested in Bond/Income fund
# investing in Fixed Income Instruments
# Providing assured by back at 16% for first year + Early Bird Incentive equivalent
to 18%-19%.
# where fund manager fees will not be charged if 6% not achieved.
Yes . No
8. Do you have illiquid Debentures/Khokas Yes .. No .
Yes, which Debenture ______________________________________
9. Would you like to exchange these for our units Yes No
10. Where do you plan to invest in next 3-6 months
Bank
PSU Bonds
FD
MF Income Scheme
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MF Equity Schemes
PROFILE OF THE RESPONDENT
Name ___________________________________
Age ___________________________________
Sex ___________________________________
Address __________________________________
Tes No. __________________________________
Occupation
Business ..Service Pub . Pvt .Profession ..Other .
Monthly Household Income
>5000
50000 - 10000 10000 20000 20000 - 50000 >50000
Level of InterestQuiet invested
Somewhat Interested ...
Not at all Interested ..
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BIBLIOGRAPHY
1. Mutual funds - K.G. SachadevaM. Thiriralraju
3. Mastering Mutual funds - C. M. Kulshreshtha
4. Indian Economy - Misra - Puri
5. Nabhi's SEBI Guide Line
6. The Economic Times
7. Business Line.