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A PROJECT REPORT
ON
“STUDY OF MUTUAL FUND INDUSTRY”
Submitted in partial fulfillment for
MASTER OF BUSINESS ADMIMISTRATION
Programme of
THE NIS ACADEMY, AURANGABAD
Batch2008-10
Submitted by :- Under Guidance :-
RUSHENDRA TARTE Mr. KETAN NANIVADEKAR
MBA( Two Year Programme) SMART MONEY
Batch (2009-2010) FINANCIAL SERVICES,
Enrolment No-474800850 AURANGABAD.
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ACKNOWLEDGEMENT
With regard to my Project with Mutual Fund I would like to thank each and every
one who offered help, guideline and support whenever required.
I am extremely grateful to my guide, Mr. KETAN NANIVADEKAR for
their valuable guidance and timely suggestions. I would like to thank all faculty
members of THE NIS ACADEMY, AURANGABAD for the valuable guidance&
support.
I would also like to extend my thanks to my members and friends for their
support.
RUSHENDRA TARTE
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CERTIFICATE
This is to certify that Mr. RUSHENDRA
S.TARTE (Enrolment No-474800850) a student of The NIS
Academy, Aurangabad has completed project work on “STUDY OF
MUTUAL FUND INDUSTRY” under my guidance and supervision.
I certify that this is an original work and has not been copied from
any source.
Signature of Guide
Name of Project Guide: Mr. KETAN NANIWADEKAR
Date- 10,Aug 2009
The NIS Academy, Aurangabad.
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DECLERATION
I hereby declare that this Project Report entitled “STUDY OF MUTUAL FUND
INDUSTRY” in the partial fulfillment of the requirement of Master of Business
Administration (MBA) of THE INS ACADEMY, AURANGABAD is based on primary
& secondary data found by me in various departments, books, magazines and
websites & Collected by me in under guidance of s Mr. KETAN NANIVADEKAR.
DATE: RUSHENDRA TARTE
Enrollment No.4740800850
EXECUTIVE SUMMARY
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In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being.
Mutual Funds have not only contributed to the India growth story but have also helped
families tap into the success of Indian Industry. As information and awareness is rising
more and more people are enjoying the benefits of investing in mutual funds. The main
reason the number of retail mutual fund investors remains small is that nine in ten
people with incomes in India do not know that mutual funds exist. But once people are
aware of mutual fund investment opportunities, the number who decide to invest in
mutual funds increases to as many as one in five people. The trick for converting a
person with no knowledge of mutual funds to a new Mutual Fund customer is to
understand which of the potential investors are more likely to buy mutual funds and to
use the right arguments in the sales process that customers will accept as important
and relevant to their decision.
This Project gave me a great learning experience and at the same time it gave me
enough scope to implement my analytical ability. The analysis and advice presented in
this Project Report is based on market research on the saving and investment
practices of the investors and preferences of the investors for investment in Mutual
Funds. This Report will help to know about the investors’ Preferences in Mutual Fund
means Are they prefer any particular Asset Management Company (AMC), Which type
of Product they prefer, Which Option (Growth or Dividend) they prefer or Which
Investment Strategy they follow (Systematic Investment Plan or One time Plan). This
Project as a whole can be divided into two parts.
The first part gives an insight about Mutual Fund and its various aspects, the Company
Profile, Objectives of the study, Research Methodology. One can have a brief
knowledge about Mutual Fund and its basics through the Project.
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The second part of the Project consists of data and its analysis collected through
survey. For the collection of Primary data I made a questionnaire and survey. This
Project covers the topic “STUDY OF MUTUAL FUND INDUSTRY.” The data collected
has been well organized and presented. I hope the research findings and conclusion
will be of use.
CONTENTS
The NIS Academy, Aurangabad.
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Sr. No Content Page No
1ACKNOWLEDGEMENT
2
2DECLARATION
4
3 EXECUTIVE SUMMARY 5
4 INTRODUCTION 8
5 COMPANY PROFILE 31
6 OBJECTIVES AND SCOPE 35
7 RESEARCH METHODOLOGY 37
8 DATA ANALYSIS AND INTERPRETATION 43
9 FINDINGS AND CONCLUSIONS 55
10SUGGESTIONS & RECOMMENDATIONS 60
11 BIBLIOGRAPHY 62
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Introduction
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Definition
SEBI (Mutual Fund) Regulations 1993 defines Mutual Fund as “a fund established in
the form of a trust by a sponsor to raise money by the trustees through the sale of units
to the public under one or more schemes for investing securities in accordance with
these regulations” The rationale behind a mutual fund is that there a large number of
investors who lack the time and or the skills to manage their money.
Hence, professional fund managers, acting on behalf of the Mutual Fund, manage the
investments (investor’s money) for their benefit in return for a management fee. The
organization that manages the investment is called the Asset Management Company
(AMC). Thus, a Mutual Fund is the most suitable investment for the common person as
it offers an opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost. Anybody with an investible surplus of as little as a
few thousand rupees can invest in mutual fund .Each mutual fund scheme has defined
investment objective and strategy.
A Draft offer documents is to be prepared for launching a fund. Typically, it specifies
the investment objectives of the fund, the risk associated, the cost involved in the
process and the broad rules for entry into and exit from funds and others areas of
operation. As you probably know, mutual funds have become extremely popular over
the last couple of decades what was once just another obscure instrument is now part
of daily lives. More than 80 million people or one half of the household in America
invest in mutual funds. That means that, in the United States alone, trillions of dollars
alone are invested in mutual fund. In fact, too many people, investing means buying
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mutual funds After all, its common knowledge that investing in mutual fund is (or at
least should be) better than simply letting cash waste away in a saving account but for
most people, that’s where the understanding of fund ends.
Mutual fund is a mechanism for pooling the resources by issuing unit to the investors
and investing funds in securities in accordance with the objective as disclosed in offer
document. Investment in securities is spread across a wide section of industry and
sector and the risk is reduced. Diversification reduces the risk because all stock may or
may not move in the same direction in the same proportion to their proportion at the
same time. Mutual fund issues units to the investors in accordance with quantum of
money invested by them. Investor of mutual are called unit holders.The profit or losses
are shared by the investors in proportion to their investment. The mutual fund usually
comes out with a number of schemes with different investment objectives which are
launched from time to time. A mutual fund is required to be registered with the SEBI,
which regulates securities markets before it can collect fund from the public.
A mutual fund is nothing more than a collective stock and /or bonds. You can think of a
mutual fund as a company that brings together a group of people and invests their
money in stock, bonds and other securities Each investors owns shares which
represent a portion of holding of the fund.
In India, SEBI (Mutual Fund) Regulations, 1996 regulates the structure of mutual funds.
Mutual funds in India are constituted in the form of a Public Trust created under The
Indian Trusts Act, 1882.
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INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS ASPECTS.
Mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. This pool of money is invested in accordance with a stated
objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all
investors. The money thus collected is then invested in capital market instruments such
as shares, debentures and other securities. The income earned through these
investments and the capital appreciations realized are shared by its unit holders in
proportion the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. A
Mutual Fund is an investment tool that allows small investors access to a well-
diversified portfolio of equities, bonds and other securities. Each shareholder
participates in the gain or loss of the fund. Units are issued and can be redeemed as
needed. The funds Net Asset value (NAV) is determined each day.
Investments in securities are spread across a wide cross-section of industries and
sectors and thus the risk is reduced. Diversification reduces the risk because all stocks
may not move in the same direction in the same proportion at the same time. Mutual
fund issues units to the investors in accordance with quantum of money invested by
them. Investors of mutual funds are known as unit holders.
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When an investor subscribes for the units of a mutual fund, he becomes part owner of
the assets of the fund in the same proportion as his contribution amount put up with the
(the total amount of the fund). Mutual Fund investor is also known as a mutual fund
shareholder or a unit holder.
Any change in the value of the investments made into capital market instruments (such
as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme.
NAV is defined as the market value of the Mutual Fund scheme's assets net of its
liabilities. NAV of a scheme is calculated by dividing the market value of scheme's
assets by the total number of units issued to the investors.
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ADVANTAGES OF MUTUAL FUND
Portfolio Diversification
Professional management
Reduction / Diversification of Risk
Liquidity
Flexibility & Convenience
Reduction in Transaction cost
Safety of regulated environment
Choice of schemes
Transparency.
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DISADVANTAGE OF MUTUAL FUND
No control over Cost in the Hands of an Investor
No tailor-made Portfolios
Managing a Portfolio Funds
Difficulty in selecting a Suitable Fund Scheme
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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. Though the
growth was slow, but it accelerated from the year 1987 when non-UTI players entered
the Industry.
In the past decade, Indian mutual fund industry had seen a dramatic improvement,
both qualities wise as well as quantity wise. Before, the monopoly of the market had
seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The
private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993
and till April 2004; it reached the height if Rs. 1540 billion.
The Mutual Fund Industry is obviously growing at a tremendous space with the mutual
fund industry can be broadly put into four phases according to the development of the
sector. Each phase is briefly described as under.
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
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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.
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
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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.
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Structure of the Indian mutual fund industry:
The Indian mutual fund industry is dominated by the Unit Trust of India and which has
a total corpus of Rs 700bn collected from more than 20 million investors .The UTI has
many fund /schemes in all categories i.e. equity, balanced, income etc with some being
open ended and some being closed ended. The United Scheme 1964 commonly
referred to as US64, which is a balanced fund, is the biggest scheme with a corpus of
about Rs 200bn URI was floated by financial institution and is governed by a special
act of the parliament. Most of its investors believe that the UTI is government owned
and controlled, which, while legally incorrect, is true for all practical purposes.
The second largest categories of mutual funds are the ones floated by nationalized
banks. Can bank Asset management floated by Canara Bank and SBI Funds
Management floated by the State Bank of India are the largest of these. GIC AMC
floated by General Insurance Corporation and Jeevan Bima Sahayog AMC floated by
the LIC are some of the prominent ones. The aggregate corpus of funds managed by
this category of AMC’s is about Rs 150 billion
The third largest categories of the mutual funds are the once floated by the private
sector and by the foreign asset management companies. The largest of these are
Prudential ICICI AMC and Birla SUN LIFE AMC. The aggregate corpus of the asset
managed by this category of AMC s is in excess of Rs 250bn.
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Recent trends in the mutual fund industry:
The most important in the mutual fund industry is the aggressive expansion of the
foreign owned mutual fund companies and the decline of the companies floated by the
nationalized bank and smaller private sector players. Many nationalized banks got into
the mutual fund business in the early nineties and go off to a good start due to the
stock market boom prevailing then. These banks did not really understand the mutual
fund business and they just viewed it as another kind of banking activity. Few hired
specialized staff and generally choose to transfer staff from the parent organization.
Some schemes had offered guaranteed returns and their patent organization had to
bail out these AMCs by paying large amount of money the difference between the
guaranteed and actual returns. The service level was also bad. Most of these AMCs
have not been able to retain staffs, float, and new schemes etc. and it is doubtful
whether barring a few expectations, they have serious plans of continuing the activity in
a major way.
The experience of some of the AMCs floated by private sector Indian companies was
also very similar. They quickly realized that the AMCs business is a business, which
makes money in the long term and requires deep pocketed support in the intermediate
years. Some have sold out to foreign owned companies, some have merged with the
others and there is general restructuring going on.
The foreign owned companies have deep pockets and have come in here with the
expectation of a long haul. They can be credited with introducing many new practices
such as new product innovation, sharp improvement in the service standards and The NIS Academy, Aurangabad.
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disclosure, usage of technology, broker education etc. In fact, they have forced the
industry to upgrade itself and service levels of the organization like UTI have improved
dramatically in the last few years in response to the competition provided by these.
Future scenario:
The asset base will continue to grow at an annual rate of about 30 to 35% over the
next few years as investor’s shift their asset from banks and other traditional avenues.
Some of the older public and private sector players will either close or be taken
over.Out of ten public sectors players five will sell out, close down or merge with strong
players in three to four years. In the private sector this trend has already started with
two mergers and one takeover. Here too some of them will down their shutter in the
near future to come.
But this does not mean there is no room for other players. The market will witness a
flurry of new players entering the area. There will be a large number of offers from
various asset management companies in times to come. Some big names like Fidelity,
Principal and Old Mutual etc. are looking at Indian market seriously.
The mutual fund industry is awaiting the derivation in India as this would enable it to
hedge its risk and this in turn would be reflected in its Net Asset Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund scheme to trade in
derivatives. Importantly, many market players have called on the Regulator to initiate
the process immediately, so that the mutual funds can implement the changes that are
required to trade in derivates.
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Role of SEBI in mutual fund:
In the year 1992 SEBI act was passed. The objectives of SEBI are – to protect the
interest of investors in securities, to promote the development of, and to regulate the
securities market. As far as mutual are concerned, SEBI formulates policies and
regulation the mutual fund to protect the interest of the investors. SEBI notified
regulation for mutual funds in 1993. Thereafter mutual fund sponsored by private
sector entities were allowed to enter the capital market. The regulations were fully
revised in 1996 and been amended. Therefore, from time to time SEBI has also issued
guidelines to the mutual fund from time to time to protect the interest of the investors.
All mutual funds whether promoted by public sector or private sector entities including
those promoted by foreign entities are governed by the same set of regulation. There is
no distinction in regulatory requirement of the mutual fund and all are subject to
monitoring and inspecting by SEBI. The risks associated with the scheme launched by
mutual funds sponsored by these entities are of similar type.
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CATEGORIES OF MUTUAL FUND:
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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:
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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.
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.
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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.
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.
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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: if someone wishes to withdraw from a mutual fund
then he can withdraw a fixed amount each month.
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RISK V/S. RETURN:
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MAJOR PLAYERS
1. Bank Sponsored
1. Joint Ventures - Predominantly Indian
1. SBI Funds Management Private Ltd.
2. Others
1. BOB Asset Management Co. Ltd.
2. Canbank Investment Management Services Ltd.
3. UTI Asset Management Co. Private Ltd.
2. Institutions
1. Jeevan Bima Sahayog Asset Management Co. Ltd.
3. Private Sector
1. Indian
1. Benchmark Asset Management Co. Private Ltd.
2. Cholamandalam Asset Management Co. Ltd.
3. Credit Capital Asset Management Co. Ltd.
4. Escorts Asset Management Ltd.
5. J. M. Financial Asset Management Private Ltd.
6. Kotak Mahindra Asset Management Co. Ltd.
7. Reliance Capital Asset Management Ltd.
8. Sahara Asset Management Co. Private Ltd
9. Sundaram Asset Management Co. Ltd.
10.Tata Asset Management Ltd.
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2. Joint Ventures - Predominantly Indian
1. Birla Sun Life Asset Management Co. Ltd.
2. DSP Merrill Lynch Fund Managers Ltd.
3. HDFC Asset Management Co. Ltd.
4. Prudential ICICI Asset Management Co. Ltd.
3. Joint Ventures - Predominantly Foreign
1. ABN AMRO Asset Management (India) Ltd.
2. Deutsche Asset Management (India) Private Ltd.
3. Fidelity Fund Management Private Ltd.
4. Franklin Templeton Asset Management (India) Private Ltd.
5. HSBC Asset Management (India) Private Ltd.
6. ING Investment Management (India) Private Ltd.
7. Morgan Stanley Investment Management Private Ltd.
8. Principal Pnb Asset Management Co. Private Ltd.
9. Standard Chartered Asset Management Co. Private Ltd
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Who can invest?
Who can invest in Mutual Funds in India:
First of all, distributors need to be aware of who mutual fund units.
Mutual funds in India are open to investment by
1) Residents including:
a) Resident Indian Individuals.
b) Indian Companies/Partnership Firms.
c) Indian Trust/Charitable Institutions.
d) Banks/Financial Institutions.
e) Non-Banking Finance Companies.
f) Insurance Companies.
g) Provident funds.
h) Mutual funds.
2) Non-Residents including:
Non-Resident Indians, and Persons of Indian Origin.
Overseas Corporate Bodies (OCBs) and
3) Foreign entities, viz.
Foreign Institutional Investors(FII) registered with SEBI.
Foreign citizens/ entities are not allowed to invest in mutual funds in India.
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Company
Profile
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SMART MONEY FINANCIAL SERVICES ( SMFS ) is an Organization engaged
in providing Complete Financial Solutions under one roof.
SMFS was founded in January 2008 and is run by professionals having more
than 10,000 man-hours experience in Banking and Financial Services Industry.
We provide complete Wealth management Solutions ranging from Investments,
Insurance & Loans We adopt modern technologies combined with in depth learning of
trends to provide money management solutions.
. We assure the Best, Affordable and Quality financial products at best value for
maximum returns.
Personal Financial Planning is the need of today for every individual to manage
his Financial health, be secure and lead a tension free financial future life.
Our Directors are highly qualified - B.E, MBA having a working experience of
more than 7 years in Banking and Financial Services Industry. They are also certified
as Financial Consultants by the various Authorized Financial Institutions viz. AMFI-
Association of Mutual Funds in India, IRDA- Insurance & Regulatory Development
Authority.
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SMFS is a Channel partner of Brokerage House “Angel Broking Ltd” for providing
broking services in Share Investment and trading. SMS is a authorized and certified
member of Bombay Stock Exchange ( BSE ) & National Stock Exchange
( NSE ) . We provide Portfolio Management Services ( PMS) in Stocks for High
Networth Individuals ( HNI ) and Retail Customers.
We provide Advisory services for Portfolio management ( PMS ) and investments in
Mutual Funds. Our Director is an empanelled Distributor for all major AMCs viz. ICICI
Prudential MF, Relince MF, HDFC MF, Kotak MF, UTI MF, DSP Blacrock MF etc.
Insurance is one of the basic needs of every individual .We help and guide our
customer select the right Insurance product at the right value as per the need – be it
the Life Insurance, Property Insurance, Vehicle Insurance or a Health Insurance.
Our Director is one of the Top most Insurance Advisor in No 1 Private Insurance
Company ( Life and Non Life Insurance ) and has won many awards.
We are also associated with major Banks like ICICI Bank, HDFC Bank, Axis
Bank for providing our customers with suitable Loans at competitive interest rates to
fulfill the individual needs and goals.
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Our Vision :
“To work and act as a Family Financial Doctor – to touch as many families as
possible - providing them with requisite knowledge , guidance & solutions for
complete Family Financial Planning & related services – and provide a better
and tension-free Financial Future ”
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Objectives and
scope
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OBJECTIVES OF THE STUDY
1. To find out the Preferences of the investors for Asset Management Company.
2. To know the Preferences for the portfolios.
3. To know why one has invested or not invested in Mutual fund
4. To find out the most preferred channel.
5. To find out what should do to boost Mutual Fund Industry.
Scope of the study
A big boom has been witnessed in Mutual Fund Industry in resent times. A large
number of new players have entered the market and trying to gain market share in this
rapidly improving market.
The research was carried on in Aurangabad. I had been sent at one of the branch of
ANGEL BROKING (SMART MONEY) where I completed my Project work. I surveyed
on my Project Topic “A study of Mutual Fund Industry ” on the visiting to individual &
government offices employee.
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The study will help to know the interest & preferences of the customers, which
company, portfolio, mode of investment, option for getting return and so on they prefer.
This project report may help the company to make further planning and strategy.
Research
Methodology
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RESEARCH METHODOLOGY
This report is based on primary as well secondary data, however primary data
collection was given more importance since it is overhearing factor in attitude studies.
One of the most important users of research methodology is that it helps in identifying
the problem, collecting, analyzing the required information data and providing an
alternative solution to the problem .It also helps in collecting the vital information that is
required by the top management to assist them for the better decision making both day
to day decision and critical ones.
Data sources:
Research is totally based on primary data. Secondary data can be used only for the
reference. Research has been done by primary data collection, and primary data has
been collected by interacting with various people. The secondary data has been
collected through various journals and websites.
Duration of Study:
The study was carried out for a period of two months, from 7th June to 30th July 2009.The NIS Academy, Aurangabad.
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Sampling:
Sampling procedure:
The sample was selected of them who are the Businessman/govt. employee,
irrespective of them being investors or not or availing the services or not. It was also
collected through personal visits to persons, by formal and informal talks and through
filling up the questionnaire prepared. The data has been analyzed by using
mathematical/Statistical tool.
Sample size:
The sample size of my project is limited to 100 people only. Out of which only 10
people had invested in Mutual Fund. Other 90 people did not have invested in Mutual
Fund.
Sample design:
Data has been presented with the help of bar graph, line graphs etc.
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SWOT Analysis of the organization:-
SWOT analysis of organizations to provide recommendations on their performance and
growth potential. It is a powerful tool for analyzing both complex qualitative and
quantitative facets of an investment decision.
The results of this analysis have been fed into marketing and organizational strategic
plans and have been highly successful in strategy formulation.
Through our SWOT analysis, our clients have been able to take advantage of niche
markets and focus on product innovation which allows them to capture greater
margins.
Our SWOT analysis identifies strengths and weaknesses and relates them with forward
looking opportunities and threats. This helps to identify company and industry specific
critical drivers and catalysts.
SWOT Analysis identifies your company’s:
Strengths - to build on
Weaknesses - to cover
Opportunities - to capture
Threats - to defend against.
SWOT Analysis
Strengths:
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* Rich experience of the management.
* Good brand equity
* Giving the very good return from inception
* Stabilized and loyal clients.
* Well combination of new energetic and experienced employees.
* Wide variety of investment product to match with every level of customer
* Giving the mutual fund exposure
Weakness:
* People is not interested to invest in mutual fund & equity because risk & trust.
* People not detail knowledge about mutual funds.
* Not very popular in rural area.
Opportunities:
* Stability through increased brand awareness, market penetration and
Service offerings.
* Across all categories of financial services.
* Increase in customer’s wallet share.
* 6 pay commission.
Threats;
* Increasing interest rate scenario.
* Execution risk.
* Competition from local players.
* Rising inflation could reduce savings and investments
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Limitation:
Some of the persons were not so responsive.
Possibility of error in data collection because many of investors may have not
given actual answers of my questionnaire.
The sample size may not adequately represent the whole market.
Some respondents were reluctant to divulge personal information which can
affect the validity of all responses.
The research is confined to a certain Govt. Dept. & part of Aurangabad.
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Data Analysis
&
Interpretation
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ANALYSIS & INTERPRETATION OF THE DATA
1. On the basis of Age of the Investors:
Age
Group
<=
30
31-35 36-40 41-45 46-50 >50
No. of
Investors
0 4 3 2 1 0
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Interpretation:
According to this chart out of 10 Mutual Fund investors of Auranagabad the most are
in the age group of 31-35 yrs. i.e. 40%, the second most investors are in the age group
of 36-40yrs i.e. 30% and the least investors are in the age group of below 46-50 yrs.
2. Occupation of the investors of Aurangabad.
.
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Occupation No. of Investors
Govt. Service 3
Pvt. Service 4
Business 2
Agriculture 0
Others 1
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Interpretation:
In Occupation group out of 10 investors, 40% are Pvt. Employees, 20% are
Businessman, 30% are Govt. Employees, 0% are in Agriculture and 10% are in others.
(3) Investors invested in different kind of investments of Aurangabad.
Priority of Investments No. of Respondents %
Saving A/C 98
Fixed deposits 50
Insurance 99
Mutual Fund 10
RD 45
Real Estate 35
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Interpretation: From the above graph it can be inferred that out of 200 people, 98 %
people have invested in Saving A/c, 91.6% in Insurance, 51.6% in Fixed Deposits, 11%
in Mutual Fund, 43% in RD and 21.6% in Real Estate.
4. Educational Qualification of investors of Aurangabad.
Educational Qualification Number of Investors
Graduate/ Post Graduate 5
Under Graduate 2
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Others 3
Total 120
Interpretation:
Out of 120 Mutual Fund investors 50% of the investors in Aurangabad are
Graduate/Post Graduate, 20% are Under Graduate and 30% are others (under
HSC).
4. Preference of factors while investing
Factors (a) Liquidity (b) Low Risk (c) High Return (d) Trust
No. of 10 31 40 19
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Respondents
Interpretation:
Out of 100 People, 40% People prefer to invest where there is High Return, 31%
prefer to invest where there is Low Risk, 10% prefer easy Liquidity and 19% prefer
Trust
5. Awareness about Mutual Fund and its Operations
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Response Yes No
No. of Respondents 35 55
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Interpretation:
From the above chart it is inferred that 39% People are aware of Mutual Fund and
its operations and 61% are not aware of Mutual Fund and its operations.
6. Channel Preferred by the Investors for Mutual Fund Investment
Channel Financial Advisor Bank AMC
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No. of Respondents 6 1 3
Interpretation:
Out of 10 Investors 60% preferred to invest through Financial Advisors, 30%
through AMC and 10% through Bank.
7. Preference of Investors for future investment in Mutual Fund
Name of AMC No. of InvestorsSBIMF 30
UTI 14HDFC 10
Reliance 20ICICI Prudential 16
Kotak 6Others 4
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Interpretation:
Out of 100 investors, 20% prefer to invest in Reliance, 16% in ICICI Prudential,
30% in SBIMF, 4% in Others, 6% in Kotak, 16% in UTI and 10% in HDFC
Mutual Fund.
8. Source of information for customers about Mutual Fund
Source of information No. of Respondents
Advertisement 13
Peer Group 25
Bank 30
Financial Advisors 42
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Interpretation:
From the above chart it can be inferred that the Financial Advisor is the most
important source of information about Mutual Fund. Out of 100 Respondents,
42% know about Mutual fund Through Financial Advisor, 30 % through Bank,
25% through Peer Group and 13% through Advertisement.
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QUESTIONNAIRE
A study of preferences of the investors for investment in mutual funds.
Name :………………………………………………
Education ………………………………………………………………..
Address :………………………………………………
Telephone No. :………………………………………………
Date of Birth :………………………………………………
Occupation :……………………………………………...
Company/Business Name :……………………………………………..
Designation :……………………………………………..
Income per month (<10,000) (10-15) (15-20) (20-30)
Vehicle Owned :……………………………………………..
Interested in : Personal Financial Planning.
Equity
Mutual Funds
Retirement Plans
Child Education plans
Term Insurance Plans
Med claim/Health insurance plans
Vehicle/Property insurance
Personal/ Business loans
Homes loans
Period of call back :……………………………………………
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Findings and
Conclusion
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Findings
In Aurangabad in the Age Group of 36-40 years were more in numbers.
The second most Investors were in the age group of 41-45 years and the
least were in the age group of below 45-50 years.
In Occupation group most of the Investors were Private employees., the
second most Investors were Govt. employees
About all the Respondents had a Saving A/c in Bank, 98% Invested in
Fixed Deposits,50% Invested in insurance, Only 99% Respondents
invested in Mutual fund 10%.
Among 100 Respondents only 10% had invested in Mutual Fund.
Out of 90 Respondents 61% were not aware of Mutual Fund, 39% told
there is not any specific reason for not invested in Mutual Fund.
For Future investment the maximum Respondents preferred SBI Mutual
Fund, the second most preferred Reliance , ICICI Prudential has been
preferred after them.
Mostly Respondents preferred High Return while investment, the
second most preferred Low Risk then trust and the least preferred
Liquidity.
Only 61% Respondents were aware about Mutual fund and its
operations and 39% were not.
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Among 100 Respondents only 10% had invested in Mutual Fund and
40% did not have invested in Mutual fund.
Most of the Investors had invested in SBI or Reliance Mutual Fund,
ICICI Prudential has also good Brand Position among investors.
60% Investors preferred to Invest through Financial Advisors, 30%
through AMC (means Direct Investment) and 10% through Bank.
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Conclusion
Running a successful Mutual Funds requires complete understanding of the
peculiarities of the Indian Stock Market and also the psyche of the small investors. This
study has made an attempt to understand the financial behavior of Mutual Fund
investors in connection with the preferences of Brand (AMC), Products, Channels etc.
I observed that many of people have fear of Mutual Fund. They think their money will
not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related
terms. Many of people do not have invested in mutual fund due to lack of awareness
although they have money to invest. As the awareness and income is growing the
number of mutual fund investors are also growing.
“Brand” plays important role for the investment. People invest in those Companies
where they have faith or they are well known with them. There are many AMCs in
Aurangabad but only some are performing well due to Brand awareness. Some AMCs
are not performing well although some of the schemes of them are giving good return
because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc.
they are well known Brand, they are performing well and their Assets Under
Management is larger than others whose Brand name are not well known like Principle,
Sunderam, etc.
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Distribution channels are also important for the investment in mutual fund. Financial
Advisors are the most preferred channel for the investment in mutual fund. They can
change investors’ mind from one investment option to others. Many of investors directly
invest their money through AMC because they do not have to pay entry load. Only
those people invest directly who know well about mutual fund and its operations and
those have time.
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Suggestions And
Recommendations
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Suggestions and Recommendations
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 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.
Mutual Fund Company needs to give the training of the Individual Financial
Advisors about the Fund/Scheme and its objective, because they are the main source
to influence the investors.
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Before making any investment Financial Advisors should first enquire
about the risk tolerance of the investors/customers, their need and time (how long they
want to invest). By considering these three things they can take the customers into
consideration.
Younger people aged under 35 will be a key new customer group into the
future, so making greater efforts with younger customers who show some interest in
investing should pay off..
Systematic Investment Plan (SIP) is one the innovative products launched by
Assets Management companies very recently in the industry. SIP is easy for monthly
salaried person as it provides the facility of do the investment in EMI. Though most of
the prospects and potential investors are not aware about the SIP. There is a large
scope for the companies to tap the salaried persons.
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BIBLIOGRAPHY
NEWS PAPERS
TELEVISION CHANNEL
MUTUAL FUND HAND BOOK
FACT SHEET AND STATEMENT
WWW.SBIMF.COM
WWW.MONEYCONTROL.COM
WWW.AMFIINDIA.COM
WWW.ONLINERESEARCHONLINE.COM
WWW. MUTUALFUNDSINDIA.COM
”MUTUAL FUND INVESTMENT IS SUBJECT TO MARKET
RISKS. PLEASE READ THE OFFER DOCUMENT CAREFULLY
BEFORE INVESTING”
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