Mt-II a Project Report On

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MT-II

A PROJECT REPORT ON

Need of financial advisors for mutual

fund investors

(With special reference to KARVY)

SUBMITTED BY

V.V.KRISHNA KUMAR

(8NBNL006)

SUBMITED TO

MRS. JYOTHIRMAYE REDDY

Faculty Supervisor

ICFAI NATIONAL COLLEGE, NELLORE

(2008-2010)

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CERTIFICATE

This is to certify that the Management Thesis titled A STUDY ONNeed of

financial advisors for mutual fund investors(With special reference to KARVY)IN NELLORE Submitted by V.V.KRISHNAKUMAR Enroll No: (8NBNL006) during

semester III of the MBA program (the Class of 2010)embodies original work done by

him.

Signature of the Faculty Supervisor:

Name (in Capitals) :

Designation :

Campus :

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ACKNOWLEDGEMENT

The satisfaction and exhilaration that accompanies the successful completion

of all my tasks would be in complete without mentioning the people who made it

possible, whose constant guidance and encouragement, crowned all my efforts with

success.

At the outset I acknowledge the opportunity provided to me by INC-Nellore

to do my research.

I am grateful to Mrs. JYOTHIRMAYE REDDY (Principal), for her kind co-

operation, valuable advice and support all along for the successful completion of this

report.

I am very thankful to my faculty guideMrs. R. INITHA RINA, Faculty Member, INC-

Nellore, for her valuable inputs, guidance, support and cooperation all along the

research. This project would not have been possible without her help.

V.V.KRISHNAKUMAR

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D E C L A R A T I O N

I hereby declare that the following documented project report titled Need

of financial advisors for mutual fund investors(With special reference to

KARVY) IN NELLORE is an authentic work done by me.

The study was undertaken as a part of the course curriculum of MBA full

time program of ICFAI University,

V.V.KRISHNAKUMAR

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ORGANIZATIONOVERVIEW

INTRODUCTION:Success is a journey, not a destination.

If we look for examples to prove this quote then we can find many but there

is none like that of karvy. Back in the year 1981, five people created history

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by establishing karvy and company which is today known as karvy, the

largest financial service provider of India.

Success sutras of karvy:

The success story of karvy is driven by 8 success sutras adopted by it namely

trust, integrity, dedication, commitment, enterprise, hard work and team

play, learning and innovation, empathy and humility. These are the values

that bind success with karvy.

VISION&MISSION:

Vision of karvy :

To achieve & sustain market leadership,

Karvy shall aim for complete customer satisfaction,

by combining its human and technological resources,

to provide world class quality services

In the process Karvy shall strive to meet and exceed customer's

satisfaction and set industry standards.

Mission statement:

Our mission is to be a leading and preferred service provider to our

customers, and we aim to achieve this leadership position by building an

innovative, enterprising , and technology driven organization which will set

the highest standards of service and business ethics.

The success ladder:

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COMPANY OVERVIEW

COMPANY OVERVIEW :

Karvy was established as karvy and company by five chartered accountants

during the year 1979-80, and then its work was confined to audit and

taxation only. Later on it diversified into financial and accounting services

during the year 1981-82 with a capital of rs.150000. it achieved its first

milestone after its first investment in technology. Karvy became a known

name during the year 1985-86 when it forayed into capital market as

registrar.

Evolution of KARVY:

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It is well said that success is a journey not a destination and we can see it

being proved by karvy. Under this section we will see that how this karvy

and company of 1980 became karvy of 2008. Karvy blossomed with the

setting up of its first branch at Mumbai during the year 1987-88. The turning

point came in the year 1989 when it decided to enter into one of the not only

emerging rather potential field too i.e; stock broking. It added the feather of

stock broking into its cap. At the same time it became the member of

Hyderabad Stock Exchange through associate firm karvy securities ltd and

then karvy never looked back..it went on adding services one after

another, it entered into retail stock broking in the year 1990. Karvy investor

service centers were set up in the year 1992. Karvy which already enjoyed a

wide network through its investor service centers, entered into financial

product distribution services in the year 1993. One year more and karvy was

now dealing into mutual fund services too in the year 1994 but it didnt

stopped there, it stepped into corporate finance and investment banking in

the year 1995.

Karvys strategy has always been being the first entrant in the market. Karvy

again hit the limelight by becoming the first registrar in the country to be

awarded ISO 9002 in the year 1997. Then it stepped into the other most

happening sector i.e; IT enabled services by establishing its own BPO units

and at a gap of just 1 year it took the path of e-Business through its website

www.karvy.com . Then it entered into insurance services in the year 2001

with the launch of its retail arm karvy- the finapolis: your personal finance

advisor. Then in the year 2002 it launched its PCG(Private Client Group)

which looks after its High Networth Individuals .and maintain their portfolio

and provides them with other financial services. In the year 2003, it

commenced secondary debt and WDM trading.

It was a decade which saw many Indian companies going global..so why

the largest financial service provider of India should lag behind? Hence, karvy

launched karvy global services limited after entering into a joint venture9
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with Computershare, Australia in the year 2004.the year 2004 also saw karvy

entering into commodities marketing through karvy comtrade.

Year 2005 saw karvy establishing a separate branch for its insurance services

under the head karvy insurance broking ltd and in the same year, afterbeing impressed with the rapid growth of karvy stock broking limited, PCG

group of Hong Kong acquired 25% stake at KSBL. In the year 2006, karvy

entered into one of the hottest sector of present time i.e real estate through

Karvy realty& services (India) ltd. hence , we can see now karvy being

established as the lagest financial service provider of the country.

NOW KARVY GROUP CONSISTS OF 8 HIGHLY RENOWNED ENTITIES

WHICH ARE AS FOLLOW:

1. : The first securities registry to receive ISO 9002

certification in India. Registered with SEBI as Category I Registrar, is Number

1 Registrar in the Country. The award of being Most Admired Registrar is

one among many of the acknowledgements we received for our customer

friendly and competent services.

2. : karvy stock broking ltd. Consists of five units namely stock

broking servics, depository participant, advisory services, distribution of

financial products, advisory services and private client goups.

3. : it is registered with SEBI as a category 1 merchant banker.

Its clientele includesinclude leading corporates, State Governments, foreign

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institutional investors, public and private sector companies and banks, in

Indian and global markets.

4. : karvy insurance broking ltd is also a part of karvy stock

broking ltd. At Karvy Insurance Broking Limited both life and non-life

insurance products are provided to retail individuals, high net-worth clients

and corporates.

5. : The company provides investment, advisory and

brokerage services in Indian Commodities Markets. And most importantly, it

offer a wide reach through our branch network of over 225 branches located

across 180 cities.

6. :Karvy Global is a leading business and knowledge

process outsourcing Services Company offering creative business solutions toclients globally. It operates in banking and financial services, inurance,

healthcare and pharmaceuticals, media , telecom and technology. It has its

sales and business development office in New York, USA and the offshore

global delivery center in Hyderabad, India

7. : Karvy Realty (India) Limited is engaged in the business of

real estate and property services offering:

Buying/ selling/ renting of properties

Identifying valuable investments opportunities in the real estate sector

Facilitating financial support for real estate and investments in

properties

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Real estate portfolio advisory services

8. : it is a joint venture between Computershare, Australia and

Karvy Consultants Limited, India in the registry management services

industry.

Organization structure of karvy:

talking about the organization structure of karvy, we have the board of

directors as the supreme governing body , the chairman being Mr. C

parthasarthy, mr. m yugandhar as the managing director, mr m s

ramakrishna andmr. Prasad v. potluri as directors.

The board of diretors head the karvy group, karvy computershares limited,

karvy investors services ltd., karvy comtrade, karvy stock broking ltd., and

karvy global services ltd.

Karvy group being the flagship company looks after the functional

departments such as corporate affairs, group human resources, finance &

accounting, training & development, technology services and corporate

quality.

Karvy computershare private limited facilitates mutual fund services, share

registry and issue registry whereas merchant banking is looked after by

karvy investor services ltd. Karvy stock broking ltd heads its another branch

too ie. Karvy insurance broking ltd. The services offered by KSBL are:

stock broking, depository, research, distribution, personal client group

and institutional desk.

And finally the BPO services are managed by karvy global services ltd.

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offered by karvy, we can get the products of 33 AMCs over here. it deals in

both closed ended funds as well as open ended too. Now one must be

thinking why to get the mutual funds from karvy instead of getting it directly

from AMCs???we have great reasons for it: the first one being ; if we avail the

services of karvy then we can get the information about all the AMCs and

their products at a single place along with expert recommendations whereas

at an AMC we can get information about the products of that specific AMC

only. And the second being wide network of karvy.nowadays we can find

karvy offices at remote areas too.

Along with these, karvy is very well handling the role of depository

participant. Being registered with both the depositories i.e.; NSDL (national

securities depository ltd) and CDSL (central depository services ltd), karvy

can have access to both. Its wide network also facilitates it in distribution of

retail financial products.

Karvy believes in being updated always. So it is always ready to use latest

technologies so that its clients always be in touch with the latest happenings

along with karvy. It offers e-business through internet through its website:

www.karvy.com . Other than it, it also provides its various services throughSMSes.

Karvys services are not limited to its investors only rather its offerings are

for its corporate clients and distributors too. it is very well aware of the fact

that in this era of neck to neck competition, we cant ignore any of the

aspects of our business.so theres a offering for everybodyeveryones

welcome at karvy.

Why should investors choose for karvy?

Excellence is next to nothing.and here at karvy everybody tries their best

to offer excellent services to its clientele through its offerings maintaining the

karvy culture which includes:

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1. Controlled and low cost service culture: karvy is there to serve its client at

the minimum possible cost. it controls cost by its various cost- cutting

techniques and minimization of avoidable costs.

2. Large volume processing capability: being the largest financial serviceprovider in the country, it has the unique distinction of operating its activities

on a large scale which benefits all the parties cordially.

3. Adherence to strict time schedule: karvy knows that time is money and

tries it best to finish the task within the stipulated time schedule.

4. Expertise in coordinating multi-location responses: karvy has got a wide

network and hence one can find its branches at most of the places in India.

Thus it enjoys its presence everywhere and coordinates among itself in

solving the queries and in responding to any situation.

5.Expertise in managing independent entities such as banks, post-office etc.:

the work culture of karvy and the ethics followed inside karvy makes its

workforce compatible with everybody, so the karvy people establishes good

coordination with independent entities too.

6. Pooling of group resources: karvy group consists of eight subsidiaries, soit can easily pool up its resources for accomplishment of its goals, whenever

needed. The groups can help each other whenever there are peaks and lows,

and even in the case when they have huge targets just as we saw few years

back, Tata group pooling its resources to acquire Corus.

How karvy achieved it?

The core competency of karvy lies in the following points due to which it

enjoys a competitive edge over its competitors. The following culture

adopted by karvy makes it all time favorite among its clientele:

1. Professionally managed by qualified and trained manpower.

2. Uniquely structured in-house software and hardware department

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3. Query handling within 48 hrs.

4. Strong secretarial, accounting and audit systems.

5. Unique work culture of working 7 days a week in 3 shifts.

6. Unmatched network spreading all over India.

How Achievements sounds synonymous to karvy:

The landmarks achieved by karvy very well define its success story. In the

previous pages, we learnt how a company started by five chartered

accountants, named as karvy and company turned into todays karvy group,

the largest financial intermediary of India. But success didnt came to karvy

at a flow, the hard work and dedication of its workforce made it what it is

todaygradually it achieved the following landmarks and now it has became

what we call the karvy group, now it is:

1.largest independent distributor for financial products.

2.amongst the top 5 stock broker.

3.among the top 3 depository participants.

4.largest network of branches & business associates.

5.ISO 9002 certified operations by DNV.

6.Amongst top 10 investment bankers.

7.adjudged as one of the top 50 IT users in India by MIS south Asia.

8.full- fledged IT driven operation.

9.Indias no.1 registrar & securities transfer agent.

Clientele of karvy:Karvys culture has helped karvy in achieving such a distinct position in the

market where it can boast of its huge client base. Be it a retail investor

investing Rs. 500 in a SIP in Reliance mutual fund or be it the largest

corporate house of the country: Reliance industries- everybody is heading

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towards karvy for their wealth maximization, lets have a look at the clientele

of karvy :

According to the datas published in year 2007, karvy stock broking ltd.

Operates through more than 12000 terminals, more than 290000 accountsare maintained and commands over 3.14% market share of NSE. The

distribution services has access to more than Rs. 40 billion Assets Under

Management. Karvy being a depository participant with both NSDL and CDSL,

manages more than 700000 accounts from more than 380 locations. Talking

about the registry services, it manages over 750 public/ right issues.at the

same time, it is managing over 16 million portfolios as registrar. If we took a

look at some of the top corporate houses availing the services of karvy then

we have: Reliance, IOC, IDBI,LIC, Hindustan Unilever, Principal Mutual Fund,

Duetsche Mutual Fund, Yogokawa, Marico Industries, Patni Computers,

Morgan Stanley, Glenmark, CRISIL, 3M, Kotak Mahindra Bank, Bharti

Televenture, Infosys Technologies, Wipro, Infotech, IPCL,TATA consultancy

services, UTI mutual fund etc. Thus in total karvy serves over 16 million

investors and 300 corporates.

Now, as the project was carried on in Nellore , so there is a special referenceto working of karvy at eastern zone and mutual funds in particular.

KARVY at eastern zone:

Karvy stock Broking Ltd was started 11 yrs ago i.e.; during the year 1996 at

Jatin Das road which was later on established as the regional head office.

Presently Mr. Alok Chaturvedi is heading the eastern zone. Talking about the

zonal offices, Karvy has zonal offices at Kolkata, south Bengal, north Bengal,

North east, Jharkhand, Bihar, Orissa and Chhattisgarh. Each zonal office hasgot its own zonal heads. Karvy is a member of three stock exchanges of

India: National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and

Hyderabad Stock Exchange (HSE).

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Hierarchical Structure in diagram:

The above diagram shows the hierarchy of Karvy stock broking ltd. It can be

easily depicted from the diagram that the regional head (presently Mr. AlokChaturvedi) is the supreme in the eastern region, under whom the various

zonal heads operate and under these zonal heads, the branch heads operate.

Between each level o the hierarchy, there exists a coordinator, who acts as

the facilitator between the different heads.

Karvy at Nellore :Now if we look at karvys branch offices at Kolkata, then

there exist ten branches of karvy at Nellore , which are as follow:

Structure According To The Products Offered By Karvy:

18REGIONAL

HEADS

PRODUCT

HEADS

HEA

Mutua

l funds

Insura

nce

brokin

g

comm

odities

Stock

brokin

g

Deposi

tory

partici

pant

Merch

ant &

inv.ba

nking PMSRealty

Debt

divisio

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KA

KARVY Mutual Fund Services:

Mutual funds have servings for everybody. Whichever type of investor you

are, you will surely get a mutual fund meeting your requirements. But

investing in mutual funds is no childs play therefore karvy mutual fund

advisory services is there to guide in each and every step of investment in

mutual funds so that the dream of wealth creation doesnt turns into

nightmares. Its offerings includes: products of all the 33 major AMCs,

research report about all the existing funds as well as NFOs, customized

mutual fund portfolios designed for individual as well as institutional

customers, it not only design the portfolios rather it offers continuous

portfolio revision too depending on changing market outlook and evolvingtrends, it further gives access to its online consolidated portfolio statement.

Thus karvy with its various offerings makes the investor feel safe in this

dynamic environment of the Indian financial market.

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Karvy Computershare mutual fund services offers investors services,

distributor services and client services.

It can be said that karvy is dedicated towards providing quality service

to all these three facets of the investment process.

Karvy being an intermediary is well registered with the Association of

Mutual Funds of India (AMFI).

KARVY has got the registration no [ARN 0018] for mutual funds, which

is mentioned on every form.

After the procurement of forms from various AMCs, the forms are

passed on to its various zonal and branch offices (as per their

requirements) and then further processing is done either directly or

through sub-brokers.

Karvy operates through its sub- brokers, associates and its excellent

pool of own direct employees.

The employees are offered salary by karvy whereas the sub- brokers

and associates get certain commission.

Karvy has 70 branches and 3 franchisees in the eastern region.

All the work of mutual funds is regulated from Rashbehari avenue

branch, an extension of the JDR branch.

The main source of earning for KARVY is the brokerage offered by the

various AMCs known as pay-in.

The amount offered may vary from AMC to AMC. Also, the franchisees

have to pay a certain amount every month.

Now karvy also pay a certain amount to the sub brokers and associates

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The payout is decided according to the procurement done by them.

Recruitment:

Karvy has an enviable pool of dynamic employees.

Its people power has a great contribution in making it the No. 1 financial

intermediary.

All the employees of karvy dealing in mutual funds have to go through AMFI

test.

The recruitment process is at par with the industry standards, it is mostly

done through campus recruitment from reputed B- schools.

Other than that, it also recruits through direct interviews and GDs as per

their requirement.

Karvy never compromises with quality thats the reason it is excelling by

providing quality services to all the investors, clients, AMCs etc. associated

with it.

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MUTUAL FUNDS

ITS ALL ABOUT MUTUAL FUNDS:

Mutual funds:

A mutual fund is a professionally-managed firm of collective investments that

pools money from many investors and invests it in stocks, bonds, short-term

money market instruments, and/or other securities.in other words we can say

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that A Mutual Fund is a trust registered with the Securities and Exchange

Board of India (SEBI), which pools up the money from individual / corporate

investors and invests the same on behalf of the investors /unit holders, in

equity shares, Government securities, Bonds, Call money markets etc., and

distributes the profits.

The value of each unit of the mutual fund, known as the net asset value

(NAV), is mostly calculated daily based on the total value of the fund divided

by the number of shares currently issued and outstanding. The value of all

the securities in the portfolio in calculated daily. From this, all expenses are

deducted and the resultant value divided by the number of units in the fund

is the funds NAV.

NAV = Total value of the fund.No. of shares currently issued and outstanding

Advantages of a MF

Mutual Funds provide the benefit of cheap access to expensive

stocks

Mutual funds diversify the risk of the investor by investing in a

basket of assets

A team of professional fund managers manages them with in-

depth research inputs from investment analysts.

Being institutions with good bargaining power in markets, mutual

funds have access to crucial corporate information, which

individual investors cannot access.

History of the Indian mutual fund industry:

The mutual fund industry in India started in 1963 with the formation of Unit

Trust of India, at the initiative of the Government of India and Reserve Bank.

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The history of mutual funds in India can be broadly divided into four distinct

phases.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by

the Reserve Bank of India and functioned under the Regulatory and

administrative control of the Reserve Bank of India. In 1978 UTI was de-linked

from the RBI and the Industrial Development Bank of India (IDBI) took over

the regulatory and administrative control in place of RBI. The first scheme

launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700

crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by

public sector banks and Life Insurance Corporation of India (LIC) and General

Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI

Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec

87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund

(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC

established its mutual fund in June 1989 while GIC had set up its mutual fund

in December 1990.At the end of 1993, the mutual fund industry had assets

under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

1993 was the year in which the first Mutual Fund Regulations came into

being, under which all mutual funds, except UTI were to be registered and

governed. The erstwhile Kothari Pioneer (now merged with Franklin

Templeton) was the first private sector mutual fund registered in July 1993.

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The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry

now functions under the SEBI (Mutual Fund) Regulations 1996. As at the end

of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805

crores.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI

was bifurcated into two separate entities. One is the Specified Undertaking of

the Unit Trust of India with assets under management of Rs.29,835 crores as

at the end of January 2003, representing broadly, the assets of US 64

scheme, assured return and certain other schemes

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC.

It is registered with SEBI and functions under the Mutual Fund Regulations.

consolidation and growth. As at the end of September, 2004, there were 29

funds, which manage assets of Rs.153108 crores under 421 schemes.

Categories of mutual funds:

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Mutual funds can be classified as follow:

Based on their structure :

Open-ended funds: Investors can buy and sell the units from the fund,

at any point of time.

Close-ended funds: These funds raise money from investors only once.

Therefore, after the offer period, fresh investments can not be made

into the fund. If the fund is listed on a stocks exchange the units can be

traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most

of the New Fund Offers of close-ended funds provided liquidity window

on a periodic basis such as monthly or weekly. Redemption of units can

be made during specified intervals. Therefore, such funds have

relatively low liquidity.

Based on their investment objective:

Equity funds: These funds invest in equities and equity related

instruments. With fluctuating share prices, such funds show volatile

performance, even losses. However, short term fluctuations in the

market, generally smoothens out in the long term, thereby offering

higher returns at relatively lower volatility. At the same time, such

funds can yield great capital appreciation as, historically, equities have

outperformed all asset classes in the long term. Hence, investment in

equity funds should be considered for a period of at least 3-5 years. It

can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or

Nifty is tracked. Their portfolio mirrors the benchmark index both in terms

of composition and individual stock weightages.

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ii) Equity diversified funds- 100% of the capital is invested in equities

spreading across different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds except

that they invest in companies offering high dividend yields.

iv) Thematic funds- Invest 100% of the assets in sectors which are related

through some theme.

e.g. -An infrastructure fund invests in power, construction, cements sectors

etc.

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A

banking sector fund will invest in banking stocks.

vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund:

Their investment portfolio includes both debt and equity. As a result, on the

risk-return ladder, they fall between equity and debt funds. Balanced funds

are the ideal mutual funds vehicle for investors who prefer spreading their

risk across various instruments. Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

Debt fund:

They invest only in debt instruments, and are a good option for investors

averse to idea of taking risk associated with equities. Therefore, they invest

exclusively in fixed-income instruments like bonds, debentures, Government

of India securities; and money market instruments such as certificates of

deposit (CD), commercial paper (CP) and call money. Put your money into

any of these debt funds depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a

large portion being invested in call money market.

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ii)Gilt funds ST- They invest 100% of their portfolio in government securities

of and T-bills.

iii)Floating rate funds - Invest in short-term debt papers. Floaters invest in

debt instruments which have variable coupon rate.

iv)Arbitrage fund- They generate income through arbitrage opportunities due

to mis-pricing between cash market and derivatives market. Funds are

allocated to equities, derivatives and money markets. Higher proportion

(around 75%) is put in money markets, in the absence of arbitrage

opportunities.

v)Gilt funds LT- They invest 100% of their portfolio in long-term government

securities.

vi) Income funds LT- Typically, such funds invest a major portion of the

portfolio in long-term debt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an

exposure of 10%-30% to equities.

viii)FMPs- fixed monthly plans invest in debt papers whose maturity is in line

with that of the fund.

Investment strategies:

1. Systematic Investment Plan:

under this a fixed sum is invested each month on a fixed date of a month.

Payment is made through post dated cheques or direct debit facilities. The

investor gets fewer units when the NAV is high and more units when the NAV

is low. This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan:

under this an investor invest in debt oriented fund and give instructions to

transfer a fixed sum, at a fixed interval, to an equity scheme of the same

mutual fund.

3. Systematic Withdrawal Plan:

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If someone wishes to withdraw from a mutual fund then he can withdraw a

fixed amount each month.

Risk v/s. return:

Working Of A Mutual Fund:

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The entire mutual fund industry operates in a very organized way. The

investors, known as unit holders,handover their savings to the AMCs under

various schemes. The objective of the investment should match with theobjective of the fund to best suit the investors needs. The AMCs further

invest the funds into various securities according to the investment

objective. The return generated from the investments is passed on to the

investors or reinvested as mentioned in the offer document.

Regulatory Authorities:

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To protect the interest of the investors, SEBI formulates policies and

regulates the mutual funds. It notified regulations in 1993 (fully revised in

1996) and issues guidelines from time to time.

SEBI approved Asset Management Company (AMC) manages the funds by

making investments in various types of securities. Custodian, registered

with SEBI, holds the securities of various schemes of the fund in its

custody.

According to SEBI Regulations, two thirds of the directors of Trustee

Company or board of trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in

units of mutual funds that the mutual funds function within the strict

regulatory framework. Its objective is to increase public awareness of the

mutual fund industry. AMFI also is engaged in upgrading professional

standards and in promoting best industry practices in diverse areas such as

valuation, disclosure, transparency etc.

Documents required (PAN mandatory):

Proof of identity :

1.photo PAN card

2. In case of non-photo PAN card in addition to copy of PAN card any one of

the following: driving license/passport copy/ voter id/ bank photo pass

book.

Proof of address (any of the following ) :

latest telephone bill, latest electricity bill, Passport, latest bank

passbook/bank account statement, latest Demat account statement, voter

id, driving license, ration card, rent agreement.Offer Document:

An offer document is issued when the AMCs make New Fund Offer(NFO). Its

advisable to every investor to ask for the offer document and read it before

investing. An offer document consists of the following:

Standard Offer Document for Mutual Funds (SEBI Format)32


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INTERPRETATION :

Purchases mutual funds,33% Directly from the AMCs ,28%

Brokers only ( large intermediaries), 59% Broker/ sub-brokers, 15%

Other sources purchases mutual funds.

Which feature of the mutual funds allure you most?

Diversification 42Professional management 29Reduction in risk and transaction

cost

34

Helps in achieving long term goal 30

INTERPRETATION :

The mutual funds all ure you most helps in achieving long term goal 30%,

Reduction in risk and transaction cost 34%,professional management29%,diversification 42%.

33


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According to you which is the most suitable stage to invest in mutual

funds?

Young unmarried stage 55Young Married with children stage 32Married with older children stage 21Pre retirement stage 27

INTERPRETATION :

The most suitable stage to invest in mutual funds ,young unmarried stage

55%, young married with children stage 32%,married with older children

stage 21%, pre retirement stage 27%.

34


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Are you availing the services of personal financial advisors?

Yes 87

No 48

INTERPRETATION :

The services of personal financial advisors no of 87%. persons yes 64%,

No of 48%,persons 36%.

35


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Which expertise of the personal financial advisor is demanded most?

Portfolio review & investment

recommendation

43

Planning to achieve specific financial

goals

35

Managing assets in retirement 30Access to specialists in areas such as

tax planning

27

INTERPRETATION :

The personal financial advisor is demanded most portfolio review&

investment recommendation 43%,planning to achieve specific financial goals

35%, managing assets in retirement 30%, access to specialists in areas such

as tax planning 27%.

36


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What is the major reason for using financial advisors?

Want help with asset allocation 42

Dont have enough time to make own

decision

23

To explain various investment

options

37

Want to have surety about financial

goals

33

INTERPRETATION :

The major reason for using financial advisors want help with asset

allocation 42%, dont have enough time to make own decision 23%, to

explain various investment options 37%, want to have surety a boutfinancial goals 33%.

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What is the major reason for not using financial advisor?

Have access to all resources needed 18

Believe advisors are too expensive 53Unsure how to find a trustworthy

advisor

21

Want to be in control of own

investments

43

INTERPRETATION :

The major reason for not using financial advisor ,want to be control of own

investments 43%, and unsure how to find a trust worthy advisor 21%, and

believe advisors are too expensive 53%,and have access to all resources

needed18%.

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FINDINGS AND CONCLUSIONSResearch findings and conclusions:

At the survey conducted upon 200 people, 135 are already mutual fund

investors or are interested to invest in future and the remaining 65 are

not interested in it. So there is enough scope for the advisors to

convert those 65 participants into investors through their convincing

power and great communication skills.

Now, when those 65 people were asked about the reason of not

investing in mutual funds, then most of the people held their ignoranceresponsible for that. They lacked knowledge and information about the

mutual funds. Whereas just 10 people enjoyed investing in other

option. For 18 people, the benefits arousing from these investments

were not enough to drive them for investment in MFs and 12 people

expressed no trust over the fund managers decision. Again the

financial advisors can tap upon these people by educating them about

mutual funds.

Out of the 135 persons who already have invested in mutual funds/ are

interested to invest, only 18% have sound knowledge of MFs, 34%

people are aware of only the schemes in which they have invested.

27% possess partial knowledge whereas 21% stands nowhere in

knowledge about MFs.

33 participants buy forms directly from the AMCs, 28 from brokers only,

55 from brokers and sub-brokers even then 15 people buy from other

sources. The brokers and sub brokers have the maximum reach so they

should try to make those investors aware f the happenings, even the

AMCs should follow it.

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When asked about the most alluring feature of MFs, most of them

opted for diversification, followed by reduction in risk, helps in

achieving long term goals and helps in achieving long term goals

respectively.

Most of the investor preferred to invest at a young unmarried stage.

Even 32 persons were ready to invest at a stage of young married with

children but person with older children avoid investing due to increased

expenses. But again the number rose to 27 at pre-retirement stage.

Out of them 87 were already availing the services of financial advisors

whereas 48 didnt. When asked about the expertise of financial

advisors which they liked most? 43 of them favored portfolio review

and investment recommendation, followed by planning to achieve long

term goals, managing assets in retirement and access to specialists in

area such as tax planning.

42 participants regarded asset allocation as the major reason for going

for financial advisors. 37 of them needed them to explain them thevarious investment options available.33 of them wanted to make sure

that they were saving enough to meet their financial goals. While just

23 gave the reason- lack of time.

When asked about one reason for not availing the services of financial

advisors, about 53 of them pointed the advisors as expensive. 43 of

them wished to be in control of their own assets.21 of them said that

they find it difficult to get trustworthy advisors. Whereas 18 of them

said they have access to all the necessary resources required.

40


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RECOMMENDATIONSRecommendations:

The most vital problem spotted is of ignorance. Investors should be made

aware of the benefits. Nobody will invest until and unless he is fully

convinced. Investors should be made to realize that ignorance is no longer

bliss and what they are losing by not investing.

Mutual funds offer a lot of benefit which no other single option could offer.

But most of the people are not even aware of what actually a mutual fund is?

They only see it as just another investment option. So the advisors should try

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to change their mindsets. The advisors should target for more and more

young investors. Young investors as well as persons at the height of their

career would like to go for advisors due to lack of expertise and time.

The advisors may try to highlight some of the value added benefits of MFssuch as tax benefit, rupee cost averaging, and systematic transfer plan,

rebalancing etc. these benefits are not offered by other options

singlehandedly. So these are enough to drive the investors towards mutual

funds. Investors could also try to increase the spectrum of services offered.

Now the most important reason for not availing the services of advisors was

spotted was being expensive. The advisors should try to charge a nominal

fee at the beginning. But if not possible then they could go for offering more

services and benefits at the existing rate. They should also maintain their

decency and follow the code of ethics so that the investors could trust upon

them. Thus the advisors should try to attract more and more persons and

turn them into investors and finally their clients.

QUESTIONNAIREQuestionnaire:

.have you invested /are you interested to invest in mutual funds?

A. Yes [ ]

B. No [ ]

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.what is the most important reason for not investing in mutual funds?

A. Lack of knowledge about mutual funds [ ]

B. Enjoys investing in other options [ ]

C. Its benefits are not enough to drive you for investment [ ]

D. No trust over the fund managers [ ]

.where do you find yourself as a mutual fund investor?

A. Totally ignorant [ ]

B. Partial knowledge of mutual funds [ ]

C. Aware only of any specific scheme in which you invested [ ]

D. Fully aware [ ]

.where from you purchase mutual funds?

A. Directly from the AMCs [ ]

B. Brokers only [ ]

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C. Brokers/ sub-brokers [ ]

D. Other sources [ ]

.which feature of the mutual funds allure you most?

A. Diversification [ ]

B. Professional management [ ]

C. Reduction in risk and transaction cost [ ]

D. Helps in achieving long term goals [ ]

. According to you which is the most suitable stage to invest in mutualfunds?

A. Young unmarried stage [ ]

B. Young Married with children stage [ ]

C. Married with older children stage [ ]

D. Pre-retirement stage [ ]

. are you availing the services of personal financial advisors?

A. YES [ ]

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B. NO [ ]

.which expertise of the personal financial advisor is demanded most?

A. Portfolio review & investment recommendation [ ]

B. Planning to achieve specific financial goals [ ]

C. Managing assets in retirement [ ]

D. Access to specialist in areas such as tax planning [ ]

.what is the major reason for using financial advisors?

A. Want help with asset allocation [ ]

B. Dont have time to make my own investment decision [ ]

C. To explain various investment options [ ]

D. Want to make sure I am investing enough to meet my financial goals [

]

.what is the major reason for not using financial advisor?

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A. Have access to all resources needed to invest on own [ ]

B. Believe advisors are too expensive [ ]

C. Unsure how to find a trustworthy advisor [ ]

D. Want to be in control of own investment [ ]

BIBLIOGRAPHY

www.the-finapolis.com

www.karvy.com

www.mutualfundsindia.com

www.valueresearchonline.com

www.moneycontrol.com

www.morningstar.com

www.yahoofinance.com

www.theeconomictimes.com

www.rediffmoney.com

46
http://www.the-finapolis.com/http://www.karvy.com/http://www.mutualfundsindia.com/http://www.valueresearchonline.com/http://www.moneycontrol.com/http://www.morningstar.com/http://www.yahoofinance.com/http://www.theeconomictimes.com/http://www.rediffmoney.com/http://www.the-finapolis.com/http://www.karvy.com/http://www.mutualfundsindia.com/http://www.valueresearchonline.com/http://www.moneycontrol.com/http://www.morningstar.com/http://www.yahoofinance.com/http://www.theeconomictimes.com/http://www.rediffmoney.com/


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www.bseindia.com

www.nseindia.com

www.investopedia.com

journals & other references:

Karvy the finapolis

Karvy- business associates manual

MBA FINALMT-II

47
http://www.bseindia.com/http://www.nseindia.com/http://www.investopedia.com/http://www.bseindia.com/http://www.nseindia.com/http://www.investopedia.com/


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