A Project Report On "Why Mutual Fund is the Better Investment Plan"

8/12/2019 A Project Report On "Why Mutual Fund is the Better Investment Plan"

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projECt rEport on why Mutu lFunD is thE BEttEr invEstMEnt pl nA Summer Internship Project Submitted to Utkal University in Partial

Fulfilment of the Master of Finance and Control Degree

Submitted By: Sandeep Kumar Mahasuar

Under the able guidance of:

Shri C Vasudevan Prof Jayanta Parida

Senior General Manager P.G.Dept. of Commerce

IPF - Secretariat Utkal University

BSE Limited Bhubaneswar


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DECLARATION

I do hereby declare that the project entitled Why Mutual

Fund is the better Investment plan submitted in partial

fulfillment of the requirement of the degree of Master of

Finance and Control , Utkal University in the course

curriculum for the third semester is an original piece of work

done by me under the guidance and supervision of Mr. C

Vasudevan (Senior General Manager, IPF Secretariat,

Bombay Stock Exchange limited) and Prof Jayanta Parida

(Faculty, P.G. Dept. of Commerce, UtkalUniversity,

Bhubaneswar) . This has not been submitted for the award of

any degree elsewhere in part or in full. This project report isnot an exhaustive study of the topic undertaken.

Date:

Place: Signature


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Acknowledgement

I do hereby acknowledge that this Summer Internship Project is agenuine work undertaken and successfully completed by me. I would

also like to acknowledge the fact that I would not have been able to

complete my project without the due permission of the SGM Shri C

Vasudevan Sir for allowing me to work here as a Summer Intern, the

AGM Shri Nilkanth P. Pandya Sir, for paying his due attention and

imparting some valuable knowledge on the topic.

It would have been impossible for me to complete the project without

the constant counseling and guidance of my mentor, Dr. V. Aditya

Srinivas Sir. I would also like to acknowledge my thankfulness to Mr.

Shashank Chaturvedi Sir for divulging some precious time out of their

hectic work schedule to guide me in my project.

I would also like to express my gratitude towards my faculties, family

and friends who have directly or indirectly helped me in the successful

completion of my project

Date:

Place: Signature


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Content

Chapter 1: INTRODUCTION

1.1 Mutual Fund1.2 History of Mutual Fund1.3 Emerging Issues and Present Position1.4 Investment Strategies1.5 Advantages and dis-advantages1.6 Classification of Mutual Fund

Chapter 2: COMPANY PROFILE2.1 History2.2 Prominent Position2.3 A Pioneer2.4 Awards2.5 BSE SWOT

Chapter 3: THEORETICAL CONCEPT3.1 Concept and working of Mutual Fund3.2 Mutual Fund Risk3.3 Measuring and evaluating mutual fund performance

Chapter 4: OBJECTIVES AND SCOPE OF STUDY

Chapter 5: RESEARCH METHODOLOGY

5.1 Research design5.2 Sample design

Chapter 6: DATA ANALYSIS AND INTERPRETATION

Chapter 7: FINDINGS AND CONCLUSION

Chapter 8: RECOMMENDATION AND SUGGESTION

Bibliography


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CHAPTER 1

INTRODUCTION


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INTRODUCTION TO MUTUAL FUNDS AND ITS VARIOUS

ASPECTS

1.1 MUTUAL FUNDS

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.

Mutual funds are considered as one of the best available investments as compare to

others they are very cost efficient and also easy to invest in, thus by pooling money

together in a mutual fund, investors can purchase stocks or bonds with much lower

trading costs than if they tried to do it on their own. But the biggest advantage to

mutual funds is diversification, by minimizing risk & maximizing returns.

1.2 HISTORY OF MUTUAL FUNDS

In 1774, a Dutch merchant invited subscriptions from investors to set up an

investment trust by the name of Eendragt Maakt Magt (translated into English, it

means, Unity Creates Strength), with the objective of providing diversification at

low cost to small investors. Its success caught on, and more investment trust was


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launched, with verbose and quirky names that when translated read profitable and

prudent or small maters grow by consent. The foreign and colonial Govt. trust

formed in London in 1868, promised start the investor of modest means the same

advantages as the large capitalist by spreading the investment over a number of

stocks.

When three Boston securities executives pooled their money together in 1924 to

create the first mutual fund, they had no idea how popular mutual funds would

become. The idea of pooling money together for investing purposes started in

Europe in the mid-1800s. The first pooled fund in the U.S. was created in 1893 for

the faculty and staff of Harvard University. On March 21st, 1924 the first official

mutual fund was born. It was called the Massachusetts Investors Trust.

After one year, the Massachusetts Investors Trust grew from $50,000 in assets in

1924 to $392,000 in assets (with around 200 shareholders). In contrast, there are

over 10,000 mutual funds in the U.S. today totaling around $7 trillion (with

approximately 83 million individual investors) according to the Investment

Company Institute.

THE EVOLUTIONThe formation of Unit Trust of India marked the evolution of the Indian mutual

fund industry in the year 1963. The primary objective at that time was to attract the

small investors and it was made possible through the collective efforts of the

Government of India and the Reserve Bank of India. The history of mutual fund

industry in India can be better understood divided into following phases:

Phase I. Establishment and Growth of Unit Trust of India (1964-87)

Unit Trust of India enjoyed complete monopoly when it was established in the year

1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it

continued to operate under the regulatory control of the RBI until the two were de-

linked in 1978 and the entire control was transferred in the hands of Industrial

Development Bank of India (IDBI). UTI launched its first scheme in 1964, named

as Unit Scheme 1964 (US-64), which attracted the largest number of investors in

any single investment scheme over the years. UTI launched more innovative

schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP

in 1971, six more schemes between 1981-84, Children's Gift


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Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare

(Indias first equity diversified scheme) in 1987 and Monthly Income Schemes

(offering assured returns) during 1990s. By the end of 1987, UTI's assets under

management grew ten times to Rs 6700 crores.

Phase II. Entry of Public Sector Funds (1987-1993):

The Indian mutual fund industry witnessed a number of public sector players

entering the market in the year 1987. In November 1987, SBI Mutual Fund fromthe State Bank of India became the first non-UTI mutual fund in India. SBI

Mutual Fund was later followed by Can bank Mutual fund, LIC Mutual Fund,

Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and

PNB Mutual Fund. By 1993, the assets under management of the industry

increased seven times to Rs. 47,004 crores. However, UTI remained to be the

leader with about 80% market share.

Mobilization

1992- AmountAssets as % of

Under Gross

93 Mobilized Management Domestic

Savings

UTI 11,057 38,247 5.2%

Public1,964 8,757 0.9%

Sector

Total 13,021 47,004 6.1%


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Phase III. Emergence of Private Sector Funds (1993-96):

The permission given to private sector funds including foreign fund management

companies (most of them entering through joint ventures with Indian promoters) to

enter the mutual fund industry in 1993, provided a wide range of choice toinvestors and more competition in the industry. Private funds introduced

innovative products, investment techniques and investor-servicing technology. By

1994-95, about 11 private sector funds had launched their schemes.

Phase IV. Growth and SEBI Regulation (1996-2004):

The mutual fund industry witnessed robust growth and stricter regulation from theSEBI after the year 1996. The mobilization of funds and the number of players

operating in the industry reached new heights as investors started showing more

interest in mutual funds. Investors' interests were safeguarded by SEBI and the

Government offered tax benefits to the investors in order to encourage them. SEBI

(Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform

standards for all mutual funds in India. The Union Budget in 1999 exempted all

dividend incomes in the hands of investors from income tax. Various Investor

Awareness Programmes were launched during this phase, both by SEBI andAMFI, with an objective to educate investors and make them informed about the

mutual fund industry.

In February 2003, the UTI Act was repealed and UTI was stripped of its Special

legal status as a trust formed by an Act of Parliament. The primary objective

behind this was to bring all mutual fund players on the same level.

UTI was re-organized into two parts:

1.The Specified Undertaking,

2. The UTI Mutual Fund

Presently Unit Trust of India operates under the name of UTI Mutual Fund and its

past schemes (like US-64, Assured Return Schemes) are being gradually wound

up. However, UTI Mutual Fund is still the largest player in the industry. In 1999,

there was a significant


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Phase V. Growth and Consolidation - 2004 Onwards:

The industry has also witnessed several mergers and acquisitions recently,

examples of which are acquisition of schemes of Alliance Mutual Fund by Birla

Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund.

Simultaneously, more international mutual fund players have entered India like

Fidelity, Franklin Templeton Mutual Fund etc. There were 29 funds as at the end

of March 2006. This is a continuing phase of growth of the industry through

consolidation and entry of new international and private sector players


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1.3 Emerging Issues of the Mutual Fund Industry in India:

By end of 2012, Indian mutual fund industry reached more than Rs. 8

trillion which is a very smart turnover.100% growth in last 8 years

Number of foreign AMC'sare in the queue to enter the Indian markets

Our saving rate is over 34%, highest in the world. Only channelizing

these savings in mutual funds sector is required.

We have approximately 45 mutual funds which are much less than US

having more than 800. There is a big scope for expansion

'B' and 'C' class cities are growing rapidly. Today most of the mutual

funds are concentrating on the 'A' class cities. Soon they will find scopein the growing cities.

Mutual fund can penetrate rural like the Indian insurance industry with

simple and limited products.

SEBI allowing the MF's to launch commodity mutual funds.

Emphasis on better corporate governance.

Trying to curb the late trading practices.

PRESENT POSITION

Mutual funds play vital role in resource mobilization and their efficient

allocation in a transitional economy like India. Economic transition is usually

marked by changes in the financial mechanism, institutional integration, market

regulation, re-allocation of savings and investments, and changes in the inter-

sector relationships. These changes often imply negativity which shakes

investors confidence in the capital market. Mutual funds perform a crucial taskas efficient alligators of resources in such a transitional period.

Throughout the world, mutual funds have worked as reliable instruments of

change in financial intermediation, development of the capital market, and

growth of the corporate sector. The active involvement of mutual funds in

promoting economic development can also be seen in their dominant presence

in the money and capital markets. Mutual funds make a significant contribution

in vibrating both the markets.


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The spread of equity cult has further increased reliance of the corporate sector

on equity financing. The role of mutual funds in the financing of corporate has

substantially increased after the SEBI allowed the corporate sector to reserve

20% of their public issues for Indian mutual funds.

The percentage share of corporate equity and debentures in the household

investors, together with UTI units, have increased from 3.7% in 1980-81 to

17.2% in 1992-93, while the share of less liquid assets like LIC, PF, and

pension have shown a marginal increase from 25.1% to 27.2% during the same

period. Mutual funds have been the fastest growing institution during this period

in the household savings sector. Growing market complications and investment

risk in the stock market with high inflation have pushed households further

towards mutual funds.

INVESTMENT STRATEGIES

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 andmore units when the NAV is low. This is called as the benefit of Rupee Cost

Averaging (RCA)

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.

Systematic Withdrawal Plan: if someone wishes to withdraw from a mutualfundthen he can withdraw a fixed amount each month.


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1.4 Advantages of Investing Mutual Funds:

1.Professional Management - The basic advantage of funds is that, they are

professional managed,by well qualified professional. Investors purchase funds

because they do not have the time or the expertise to manage their own

portfolio. A mutual fund is considered to be relatively less expensive way to

make and monitor their investments.

2.Diversification - Purchasing units in a mutual fund instead of buying

individual stocks or bonds,the investors risk is spread out and minimized up to

certain extent. The idea behind diversification is to invest in a large number of

assets so that a loss in any particular investment is minimized by gains in others.

3.Economies of Scale - Mutual fund buy and sell large amounts of securities at

a time, thus help to reducing transaction costs, and help to bring down the

average cost of the unit for their investors.

4.Liquidity - Just like an individual stock, mutual fund also allows

investors to liquidate theirholdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare

to other availableinstruments in the market, and the minimum investment is

small. Most AMC also have automatic purchase plans whereby as little as Rs.

2000, where SIP start with just Rs.50 per month basis.


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1.5 Disadvantages of Investing Mutual Funds:

1.Professional Management - Some funds doesnt performs in neither the

market, as theirmanagement is not dynamic enough to explore the available

opportunity in the market, thus many investors debate over whether or not the

so-called professionals are any better than mutual fund or investor himself,

for picking up stocks.

2.Costs - The biggest source of AMC income is generally from the entry &

exit load which theycharge from investors, at the time of purchase. The mutual

fund industries are thus charging extra cost under layers of jargon.

3.Dilution - Because funds have small holdings across different companies,

high returns from a few investments often don't make much difference on the

overall return. Dilution is also the result of a successful fund getting too big.

When money pours into funds that have had strong success, the manager often

has trouble finding a good investment for all the new money.

4.Taxes - when making decisions about your money, fund managers don't

consider your personal taxsituation. For example, when a fund manager sells a

security, a capital-gain tax is triggered, which affects how profitable the

individual is from the sale. It might have been more advantageous for the

individual to defer the capital gains liability.


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1.6 CLASSIFICATION OF MUTUAL FUNDS


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OPEN-ENDED FUNDS

Investor Enter or Exit at Anytime.

Existing Investors buy additional Unitsor new investors buy new units,which is referred as purchase transaction. It happens at NAV.

Return of any units to the scheme and getting back their equivalent values

is called a Re-purchase transaction. Repurchase price is also linked to

NAV.

Some unit-holders may exit from the scheme, wholly or partly, the

scheme continues operation with remaining investors.

The scheme does not have a definite time-frame.

The on-going entry and exit of investor implies that the unit capital in an

Open-Ended fund would keep changing on a regular basis.

CLOSE-ENDED FUNDS

Investor can buy units from funds only during its NFO.

Units are traded, post-NFO in a stock exchange. This is done through

listing of the scheme in a stock exchange, such listing is compulsory for

Close-Ended funds. Since post-NFO, sale and purchase of units happen to or from a counter

party in stock exchange and not to or the mutual fund, the unit capital of

the scheme remains stable.

INTERVAL FUNDS

Combine features of both the Open-Ended and Close-Ended schemes.

They are largely Close-Ended, but become Open-Ended at pre-specified

intervals. Interval funds can be bought/sold to the mutual fund (not completely

dependent on stock exchanges).

Compulsorily listed on stock exchanges.

Minimum duration of interval15 days.

No Redemption/Repurchase of units is allowed except during specified

transaction period. The specified transaction period will be minimum 2

days.


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AGGRESSIVELY/ACTIVELY MANAGED FUNDS

Fund manager has flexibility to choose the investment portfolio, within

the broader parameters of the objective of the scheme.

Increase role of the fund manager, increase in running cost of the fund. Investors expect actively managed funds to perform better than the

market.

PASSIVE FUNDS

Tracks specified index. Mirrors the concerned index.

Not designed to perform better than the market.

Also called as INDEX SCHEMES.

Fund managers have a little role to play, so running cost of the fund is

also low.

EQUITY FUNDS

Largely invest in equity shares and equity related investments like

convertible debentures.

Objective of the fund is growth.

High risk profile.

DEBT FUNDS

Mostly invest in debt securities like bonds, debentures, T Bills,

government securities.

Aims at regular income.

Low risk profile.

HYBRID FUNDS

Invest in both equity as well as debt securities.

Also invest in gold along with either equity or debt or both.

Mostly aims at a balanced portfolio. Income as well as capital

appreciation.

GILT FUNDS

Invest only on T bills and Government securities.

Mostly suits T riskadverse investors as the risk profile is very low here.


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DIVERSIFIED DEBT FUNDS

Invests both in Government and Non-Government securities.

JUNK BOND SCHEMES

High yield bond scheme.

Invest in company that are having a poor credit quality.

High riskHigh return.

FIXED MATURITY PLANS

Investment portfolio is closely aligned to maturity of the scheme.

AMC structures the scheme around Pre-specified investment.

Close-Ended schemes, do not accept money post-NFO.

FLOATING RATE FUNDS

Invests largely in floating rate debt securities.

The NAVs fluctuate lesser than debt funds that invest more in debt

securities offering a mixed rate of interest.

LIQUID SCHEMES

Invests only in debt securities where the money will be repaid within 61

days.

Also called as MONEY MARKET SCHEMES.

Lowest risk.

SECTORAL FUNDS

Invests only in specific sectors.

Example: Banking sector funds invest only in banking companies. Goldsectoral companies will invest only in gold related funds.

DIVERSIFIED EQUITY FUNDS

Invest in a mix of securities that cut across sectors.

Low risk, as a mix of compensate the others loss.

Example : Investment in gold, equity shares, debt, e.g.


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EQUITY LINKED SAVING SCHEMES (ELSS)

Offers tax benefits.

A lock in period of 3 years.

EQUITY INCOME/DIVIDEND YIELD SCHEMES

Invests in shares whose price fluctuate less and dividend represents a

larger proportion of returns on those shares.

NAV fluctuates less.

ARBITRAGE FUNDS

Take contrary positions in different markets/securities, such that the risk

is neutralized, but a return is earned.

Most arbitrage funds take contrary positions between the equity market

and the futures and options market.

Expected returns are in line with liquid funds.

THEMATIC FUNDS

Invests in line with an investment theme.

Example: Infrastructure thematic fund invest in shares of companies that

are into infrastructure toll collection, cement, steel, telecom, power e.g.

Investment is thus more broad based than the sector fund; but narrower

than a diversified equity fund.

GOLD FUNDS

Invests in gold and gold related securities.

GoldETFs:

o

An index that invests in goldo NAV moves in line with gold prices in market.

GoldSector Funds:

o Invests in companies engaged in gold mining and processing.

o Though gold prices influence these shares, the price of this shares

are more closely linked to profitability and gold reserves of the

companies.

o NAV do not closely mirror gold prices.


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MONTHLY INCOME PLANS

Declare a dividend every month.

Invests largely in debt securities; a small percentage is invested in equity

shares to improve the schemes yield.

BALANCED FUND

Type of hybrid fund.

Provides exposure to both equity and debt simultaneously in one

portfolio.

Objective is to provide both growth and stability.

CAPITAL PROTECTED SCHEMES

Close-Ended schemes.

Structured to ensure that investors get their principal back irrespective of

what happens in market.

Achieves objective by investing in Zero Coupon Government securities

whose maturity is aligned to schemes maturity.

CAPITAL PROTECTION ORIENTED SCHEMES

Invests in good quality debt securities issued by companies, rather than

government securities.

Some of these funds are also launched as asset allocation funds.

REAL ESTATE FUNDS

Exposure to Real Estate.

Helps small investors to take exposure to real estate as asset class.

Although permitted by law, Real Estate mutual funds are yet to hit themarket in India.

COMMODITY FUNDS

Exposure in commodities.

Investment objective would specify the commodity which proposes to

invest in.

Such funds can be structured as commodity ETFs or commodity sector

funds.


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INTERNATIONAL FUNDS

Invest outside the country.

One way for the fund to manage investment is to hire the requisite

people, since their salaries would add to fixed costs, a large corpus isneeded.

The alternative route would be to tie up with a foreign fund (called as

HOST FUND).

o Domestic fundFeeder fund.

o International fundHost fund.

o By feeder fund money is collected and invested in host fund.

FUND OF FUNDS

Fund invested in various other funds.

Pre-specify the mutual funds whose schemes the fund will invest.

Designed to help investor to get over the trouble of choosing between

multiple schemes and their varieties in the market.

EXCHANGE TRADED FUNDS

Open-Ended funds, whose units are traded in a stock exchange,

MirrorsAn index/equity/debt/commodity/gold.

Market makers are appointed.


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CHAPTER 2

COMPANY PROFILE


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2.1 COMPANY PROFILE

Bombay Stock Exchange Limited is the oldest stock exchange of Asia and

one of the oldest in World with a rich heritage. As the first stock exchange

in India, the Bombay Stock Exchange Limited is considered to have played a

very important role in the development of countyscapital market. The BSE is

the largest stock exchange of 24 exchanges in India, with over 6000 listed

companies. It is also the fifth largest exchange in the world with a market

capitalization of $466 billion.

The Bombay Stock Exchange Limited uses BSE SENSEX, an index of 30

large, developed BSE stocks. This index gives a measure of overall

performance of BSE and is tracked worldwide.

In addition to individual stocks the Bombay Stock Exchange Limited also a

market for derivatives, which was first introduced in India. Listed derivatives

on the exchange include stock futures and options, Index futures and options

and weekly options. The Bombay Stock exchange is also actively involved

withthedevelopment of retail debt market.

The Exchange has a nationwide reach with its presence in 417 cities and

towns of India. The systems and processes of the exchange are designed to

safeguard market integrity and enhance transparency in the operations. The

Exchange provides an efficient and transparent market for trading in equity,

debt and derivative instruments. The BSE provides online trading with the

BSEsOnline trading System (BOLT), which is a proprietary system of the

exchange and is BS 7799-2-2002 certified. The Surveillance and Clearing

Settlement function of the Exchange are ISO 9001:2000 certified.

VISION

Emerge as the premier Indian stock exchange by establishing global

benchmark


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2.2HISTORY

One of the oldest stock exchanges of the world and the first in the country to be

granted permanent recognition under the Securities Contract (Regulation)

Act, 1956, Bombay Stock Exchange Limited has had an interesting rise to

prominence over the past 133 years.

The Bombay Stock Exchange Limited traces its history to the 1850s, when

four Gujarati and one Parsi stock broker would gather under the banyan tree

in front of the Town Hall, where the Horniman Circle is now situated. A

decade later, the brokers moved their venue to another set of foliage, this

time under banyan trees at the junction of Meadows Street and Mahatma

Gandhi Road. As the number of brokers increased, they had to shift from

place to place and wherever they went, through sheer habit, they overflowed

to the streets. At last, in 1874, found a permanent place. The new place was,

aptly, called Dalal Street.

This group of brokers in 1875 formed an official organization known as

TheNative Share and Stock Brokers Association. In 1956, BSE became

the first stock exchange to be recognized by the Indian Government under

the Securities Contract (Regulation) Act, 1956. In 1979, BSE introduced its

Index SENSEX and from that time it achieved many milestones in the

capital market. In 2002, the name The Exchange, Mumbai was changed

to Bombay Stock Exchange. Subsequently on August 5, 2005, the

exchange turned into a corporate entity from an Association of Persons

(AOP), under the provision of Companies Act, 1956, pursuant To BSE

(Corporatization and Demutualization) Scheme, 2005 notified by

Securities and Exchange Board of India (SEBI). Then it is renamed as the

Bombay Stock Exchange Limited.

2.3 PROMINENT POSITION

The journey of BSE is as eventful and interesting as the history of securities

markets of India. Indias biggest bourse, in terms of listed companies and

market capitalization, BSE has played a pioneering role in Indian securitiesmarket. Much before the actual legislations were enacted, BSE had formulated


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comprehensive set of rules and regulations for Indian capital markets. It also

laid down best practices adopted by Indian capital market after India gained

its independence. Perhaps, there would not be any leading corporate inIndia,

which has not sourced BSEsservices in resource mobilization.

2.4 A PIONEER

BSE as brand is synonymous with the capital markets in India. The BSE

SENSEX is the benchmark equity index that reflects the robustness of the

economy and finance. At par with international standards, BSE has been a

pioneer in several areas. It has a several firsts to its credit,

First in India to introduce Equity Derivatives. First in India to launch a Free Float Index.

First in India to launch US$ version of BSE SENSEX.

First in India to launch Exchange Enable Internet Trading Platform.

First in India to obtain ISO certification for Surveillance, Clearing and

Settlement.

First to have exclusive facility for financial training.

BSE On-Line Trading System (BOLT) has awarded with the global

recognized Information Security Management System Standard BS7799-

2-2002.

Moved from Open Outcry to Electronic Trading within just 50 days.

An equal important accomplishment of BSE is the launch of a nationwide

investor awareness campaign Safe Investing in the Stock Market under

which nationwide awareness campaigns and dissemination of information

through print and electronic medium was undertaken. BSE also actively

promoted the securities market awareness campaign of the Securities and

Exchange Board of India (SEBI).


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2.5AWARDS

Bombay Stock Exchange Limited has many awards to its name for

its excellence in several fields, these are

The World Council of Corporate Governance has awarded the Golden

Peacock Global CSR Award for BSEs initiatives in Corporate Social

Responsibility (CSR).

The Annual Reports and Accounts of BSE for the year ended March

31, 2006 and March 31, 2007 have been awarded the ICAI Awards for

excellence in financial reporting.

The Human Resource Management at BSE has won the Asia Pacific HRM Award for its efforts in employer branding through talent

management at work, health management at work and excellence in HR

through technology.

2.6 BSE SWOT

STRENGTHS:

BSE has inherent advantages: its history, larger scrip base and a stronger

brand.

The SENSEX (BSEs 30-share sensitive index) is one of the most

recognized indexes and tracked worldwide.

Apart from lager base of listed companies, BSE also has a historical

perspective.

Its online trending system (BOLT) has awarded with the global recognized

Information Security Management System Standard BS7799-2-2002.

It got the ISO certification for its surveillance and clearing and settlement.


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WEAKNESS

The BSE SENSEX, which delivers inferior hedging effectiveness

and higher impact cost.

At present BSE has fewer than 12% share across the cash and

derivative market of equity markets.

OPPORTUNITIES

Corporatization will improve internal management

systems and investor relations, and benefit companies that are

listed on BSE.

Derivatives market is growing at exponential rate and BSE with

its large infrastructure and long presence in the capital market

has the capability to expand its market share in this segment.

If large a private sector bank picks up a strategic stake in BSE, it

could give the exchange access to a largedistribution network and

promote new products like derivatives. The strategic investor could

also be a market maker (providing buy and sell quotes at any given

time).

30 to 40 percent of the income of exchange like NASDAQ and

NYSE is from vending data. For BSE, its measly 4 percent. The

potential for growth then, is immense.

THREATS

Aggressive competitor like NSE poses major threat to BSEsfuture.

NSEs top 100 stocks alone account for nearly 80 percent of its cash

segments turnover, indicating that NSE is clearly the preferred

destination for trading in the top stocks.


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CHAPTER 3

THEORETICAL

CONCEPT


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3.1 WORKING OF MUTUAL FUND

A Mutual Fund is a collection of stocks, bonds, or other securities owned bya group ofInvestors and managed by a professional investment company.

For an individual investor tohave a diversified portfolio is difficult. But he can

approach to such company and can invest into shares. Mutual funds have

become very popular since they make individual investors to invest in equity

and debt securities easy. When investors invest a particular amount in mutual

funds, he becomes the unit holder of corresponding units. In turn, mutual funds

invest unit holders money in stocks, bonds or other securities that earn interest

or dividend. This money is distributed to unit holders. If the fund gets money byselling some stocks at higher price the unit holders also are liable to get capital

gain.


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MUTUAL FUND OPERATION FLOWCHART


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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 corpus (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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3.2 HOW RISKY YOUR MUTUAL FUND IS

Investors always judge a fund by the return it gives, never by the risk it took. In

any historical analysis of a mutual fund, the return is remembered but the risk is

quickly forgotten. So a fund manager may have used very high-risk strategies

(that are bound to fail disastrously in the long run), hoping that his wins will be

remembered (as they often are), but the risk he took will soon be forgotten.

WHAT IS RISK?

Risk can be defined as the potential for harm. But when anyone analyzing

mutual funds uses this term, what is actually being talked about is volatility.Volatility isnothing but the fluctuation of the Net Asset Value (price of a unit

of a fund). The higher the volatility, the greater the fluctuations of the NAV.

Generally, past volatility is taken as an indicator of future risk and for the task

of evaluating mutual fund; this is an adequate (even if not ideal) approximation.

Defining Mutual fund risk:

Mutual funds face risks based on the investments they hold. For example, a

bond fund faces interest rate risk and income risk. Bond values are inversely

related to interest rates. If interest rates go up, bond values will go down and

vice versa. Bond income is also affected by the change in interest rates. Bond

yields are directly related to interest rates falling as interest rates fall and rising

as interest rise. Income risk is greater for a short-term bond fund than for a long-

term bond fund.

Similarly, a sector stock fund (which invests in a single industry, such as

telecommunications) is at risk that its price will decline due to developments in

its industry. A stock fund that invests across many industries is more sheltered

from this risk defined as industry risk.


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Following is a glossary of some risks to consider when investing in

mutual funds:

CALL RISK:-

The possibility that falling interest rates will cause a bond issuer to redeem or

call its high-yielding bond before the bond's maturity date.

COUNTRY RISK:-

The possibility that political events (a war, national elections), financial

problems (rising inflation, government default), or natural disasters (an

earthquake, a poor harvest) will weaken a country's economy and cause

investments in that country to decline.

CREDIT RISK:-

The possibility that a bond issuer will fail to repay interest and principal in a

timely manner. Also called default risk.

CURRENCY RISK:-

The possibility that returns could be reduced for Americans investing in foreign

securities because of a rise in the value of the U.S. dollar against foreign

currencies. Also called exchange-rate risk.

INCOME RISK:-

The possibility that a fixed-income fund's dividends will decline as a result of

falling overall interest rates.

INDUSTRY RISK:-

The possibility that a group of stocks in a single industry will decline in price

due to developments in that industry.

INFLATION RISK:-

The possibility that increases in the cost of living will reduce or eliminate a

fund's real inflation-adjusted returns.


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INTEREST RATE RISK:-

The possibility that a bond fund will decline in value because of an increase in

interest rates.

MANAGER RISK:-

The possibility that an actively managed mutual fund's investment adviser will

fail to execute the fund's investment strategy effectively resulting in the failure

of stated objectives.

MARKET RISK:-

The possibility that stock fund or bond fund prices overall will decline over

short or even extended periods. Stock and bond markets tend to move in cycles,

with periods when prices rise and other periods when prices fall.

PRINCIPAL RISK:-

The possibility that an investment will go down in value, or "lose money," from

the original or invested amount.

HOW RISK IS MEASURED:-

There are two ways in which you can determine how risky a fund is.

STANDARD DEVIATION:-

Standard Deviation is a measure of how much the actual performance of a fund

over a period of time deviates from the average performance. Since Standard

Deviation is a measure of r isk, alow Standard Deviation isgood.

SHARPE RATIO:-

This ratio looks at both, returns and risk, and delivers a single measure that is

proportional to the risk adjusted returns.Since Sharpe Ratio is a measure of

r isk-adjusted returns, a high Sharperatio is good.


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HOW TO CHECK THE FUNDS RISK

So how would you figure out how risky a mutual fund is?

Value Research a mutual fund research outfit, carries out a rating every month

which is also carried on rediff.com. If you would like to take a look at the latest

ratings, click on the relevant month vizMarch, April, May.

In this rating, each fund is given a star. The funds with a 5-star rating

are the best. Those with a 1-star ( ) rating are the worst.

This star rating is based on risk-adjusted return. In a very simple way, it gives

investors an understanding of whether a fund is taking an acceptable amount of

risk in generating the kind of returns it is doing.

3.3 Distribution channels:

Mutual funds posses a very strong distribution channel so that the ultimate

customers doesnt face any difficulty in the final procurement. The various

parties involved in distribution of mutual funds are:

1. Direct marketing by the AMCs: the forms could be obtained from the AMCs

directly. Theinvestors can approach to the AMCs for the forms. some of the top

AMCs of India are; Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak

Mahindra, HDFC, Sundaram, ICICI, Mirae Assets, Canara Robeco, Lotus India,

LIC, UTI etc. whereas foreign AMCs include: Standard Chartered, Franklin

Templeton, Fidelity, JP Morgan, HSBC, DSP Merill Lynch, etc.

2. Broker/ sub broker arrangements: the AMCs can simultaneously go for

broker/sub-broker topopularize their funds. AMCs can enjoy the advantage of

large network of these brokers and sub brokers.eg: SBI being the top financial

intermediary of India has the greatest network. So the AMCs dealing through

SBI has access to most of the investors.

3. Individual agents, Banks, NBFC: investors can procure the funds through

individual agents, independent brokers, banks and several non- banking

financial corporationstoo, whichever he finds convenient for him.


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3.4 Costs associated:

Expenses:

AMCs charge an annual fee, or expense ratio that covers administrative

expenses, salaries, advertising expenses, brokerage fee, etc. A 1.5% expense

ratio means the AMC charges Rs1.50 for every Rs100 in assets under

management. A fund's expense ratio is typically to the size of the funds under

management and not to the returns earned. Normally, the costs of running a

fund grow slower than the growth in the fund size - so, the more assets in the

fund, the lower should be its expense ratio

Loads:

Entry Load/Front-End Load (0-2.25%) - Its the commission charged at the

time of buyingthe fund to cover the cost of selling, processing etc.

Exit Load/Back- End Load (0.25-2.25%) - It is the commission or charged

paid when an investor exits from a mutual fund; it is imposed to discourage

withdrawals. It may reduce to zero with increase in holding period.

3.5 Measuring and evaluating mutual funds performance:

Every investor investing in the mutual funds is driven by the motto of either

wealth creation or wealth increment or both. Therefore its very necessary to

continuously evaluate the funds performance with the help of factsheets and

newsletters, websites, newspapers and professional advisors like SBI mutual

fund services. If the investors ignore the evaluation of fundsperformance then

he can lose hold of it any time. In this ever-changing industry, he can face anyof the following problems:

1. Variation in the funds performance due to change in its management/

objective.

2. The fundsperformance can slip in comparison to similar funds.

3. There may be an increase in the various costs associated with the fund

4. Beta, a technical measure of the risk associated may also surge.

5. The funds ratings may go down in the various lists published by

independent ratingagencies.6. Can merge into another fund or could be acquired by another fund house.


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Performance measures:

Equity funds: the performance of equity funds can be measured on the basis of:

NAV Growth, Total Return; Total Return with Reinvestment at NAV,

Annualized Returns and Distributions, Computing Total Return (Per Share

Income and Expenses, Per Share Capital Changes, Ratios, Shares Outstanding),

the Expense Ratio, Portfolio Turnover Rate, Fund Size, Transaction Costs, Cash

Flow, Leverage.

Debt fund: likewise the performance of debt funds can be measured on the

basis of: PeerGroup Comparisons, The Income Ratio, Industry Exposures and

Concentrations, NPAs, besides NAV Growth, Total Return and Expense Ratio.

Liquid funds: the performance of the highly volatile liquid funds can be

measured on thebasis of: Fund Yield, besides NAV Growth, Total Return and

Expense Ratio.

Concept of benchmarking for performance evaluation:

Every fund sets its benchmark according to its investment objective. The fundsperformance is measured in comparison with the benchmark. If the fund

generates a greater return than the benchmark then it is said that the fund has

outperformed benchmark , if it is equal to benchmark then the correlation

between them is exactly 1. And if in case the return is lower than the benchmark

then the fund is said to be underperformed.

Some of the benchmarks are :1. Equity funds: market indices such as BSE100, BSE200, BSE-PSU,

BSE500 index, BSE bankex, and other sectoral indices.

2. Debt funds: Interest Rates on Alternative Investments as Benchmarks, I-

Bex Total Return Index, JPM T-Bill Index Post-Tax Returns on Bank

Deposits versus Debt Funds.

3. Liquid funds: Short Term Government Instruments Interest Rates as

Benchmarks, JPM T-Bill India.


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To measure the funds performance, the comparisons are usually done

with:

i) With a market index.

ii) Funds from the same peer group.

iii) Other similar products in which investors invest their funds.

Financial planning for investors (ref. to mutual funds):

Investors are required to go for financial planning before making investments in

any mutual fund. The objective of financial planning is to ensure that the right

amount of money is available at the right time to the investor to be able to meet

his financial goals. It is more than mere tax planning. Steps in financial

planning are:

Asset allocation.

Selection of fund.

Studying the features of a scheme.

In case of mutual funds, financial planning is concerned only with broad asset

allocation, leaving the actual allocation of securities and their management to

fund managers. A fund manager has to closely follow the objectives stated in

the offer document, because financial plans of users are chosen using these

objectives.

3.6 Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then we

can find the market flooded with a variety of investment options which includes

mutual funds, equities, fixed income bonds, corporate debentures, company

fixed deposits, bank deposits, PPF, life insurance, gold, real estate etc. all these

investment options could be judged on the basis of various parameters such as-

return, safety convenience, volatility and liquidity. Measuring these investmentoptions on the basis of the mentioned parameters, we get this in a tabular form.


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We can very well see that mutual funds outperform every other investment

option. On three parameters it scores high whereas its moderate at one.

comparing it with the other options, we find that equities gives us high returns

with high liquidity but its volatility too is high with low safety which doesnt

makes it favourite among persons who have low risk- appetite. Even the

convenience involved with investing in equities is just moderate.

Return Safety Volatility Liquidity Convenienc

e

Equity High Low High High Moderate

Bonds Moderate High Moderate Moderate High

Co. Moderate Moderate Moderate Low Low

Debentures

Co. FDs Moderate Low Low Low Moderate

Bank Low High Low High High

Deposits

PPF Moderate High Low Moderate High

Life Low High Low Low Moderate

Insurance

Gold Moderate High Moderate Moderate Gold

Real Estate High Moderate High Low Low

Mutual High High Moderate High HighFunds


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CHAPTER 4

OBJECTIVES AND SCOPE

OF THE STUDY


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4.1 OBJECTIVES OF THE STUDY

To find out the preferences of the investors for Asset ManagementCompany.

To know the preferences for the portfolios.

To know the awareness of investors about BSE StAR MF.

To find out the most preferred channel.

To find out why investors mostly prefer to invest in mutual fund rather in

equity derivative.

To identify the consumer perception about mutual funds.

To find out what should do to boost Mutual Fund Industry.

4.2 SCOPE OF THE STUDY

A big boom has been witnessed in Mutual Fund Industry in recent times. Alarge 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 Mumbai. I had been sent to Bombay Stock

Exchange, Mumbai where I completed my Project work. I surveyed on my

Project Topic A study on why mutual fund is the better investment plan by

taking help of the investors and brokers working over there.

The study will help to know the preferences of the customers, which company,portfolio, mode of investment, and option for getting return, and mainly why

investors prefer to invest in mutual fund rather in equity derivatives and so on

they prefer. This project report may help the company to make further planning

and strategy.


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CHAPTER 5

RESEARCH

METHODOLOGY


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5 1 RESEARCH METHODOLOGYINTRODUCTION

This report is based on primary as well secondary data, however primary datacollection 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.

Research is divided into two parts

Research designo Type of researcho Research methodo Collection of data

Sample design

TYPE OF RESEARCH

It is a descriptive type of research, as the descriptive of the conditions exist

presently. It includes survey and fact-finding enquiries of different kinds.

RESEARCH METHOD

Research methods are understood as all those methods and techniques that are

used for conduction of research. Research methods or techniques refer to

methods the researchers use in performing research operation. In other words,all those methods which are used by the researchers during the course of

studying his research problems are termed as research methods. Since the object

of research, particularly the applied research, is to arrive at a solution for a

given problem, the available data and the unknown aspects of the problem have

to be related to each other to make a solution possible. Keeping this in view I

took the following two methods:

Analysis of documents

Interview


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COLLECTION OF DATA

Primary data - This method was adopted because it helps to procuring

data and detail information from the respondents. Here I collected data by

filling questionnaires, directly talking to the respondents.

Secondary data - I have also used the secondary data which include

various written documents and other related information about the mutual

fund industry in India.

DURATION OF THE STUDY

The study was carried out for a period of two months, from 9 thMay to 9thJuly

2013.

5 2 SAMPLINGSAMPLING PROCEDURE

The sample was selected out of some of the investors and brokers in BSE and

nearby that area, 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 200 people only. Out of which only

120 people had invested in Mutual Fund. Other 80 people did not have invested

in Mutual Fund.

SAMPLE DESIGN

Data has been presented with the help of bar graph, pie charts, line graphs etc.


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5.3 LIMITATIONS

Some of the persons were not so responsive.

Possibility of error in data collection because many of investors may havenot given actual answers of my questionnaire.

Sample size is limited to 200 numbers of investors & brokers, out of

which 120 had invested in mutual fund. 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 part of Dalal Street or BSE.


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CHAPTER 6

DATA ANALYSIS

AND

INTERPRETATION


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ANALYSIS AND INTERPRETATION OF DATA

After a thorough study and analysis of the questionnaires of my consumer

survey I have come across some important and useful findings. These findings

have helped me in a great way to come to the conclusion part of my projectwork.

The following are the findings of my consumer survey at Bombay

Stock Exchange:

AGE BRACKET

Age Group 50

No. of 12 18 30 24 20 16

Investors

Interpretation:

According to this chart out of 120 Mutual Fund investors the most are in the

age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group

of 41-45yrs i.e. 20% and the least investors are in the age group of below 30

yrs.

0

5

10

15

20

25

30

35

50

Number of investors

Number of investors


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EDUCATIONAL QUALIFICATION OF INVESTORS

Educational

qualification

Number of investors

Graduate/PG 88

Under Graduate 25

others 7

Total 120

INTERPRETATION

Out of 120 Mutual Fund investors 71% of the investors are Graduate/Post

Graduate, 23% are Under Graduate and 6% are others (under HSC).

Number of investors

Graduate/PG

Under Graduate

Others


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OCCUPATION OF INVESTORS

MONTHLY FAMILY INCOME OF INVESTORS

Income Group Number of InvestorsUpto Rs. 10000 5

Rs. 10001 to 20000 12

Rs. 20001 to 30000 28

Rs. 30001 to 50000 43Rs. 50001 and above 32

Number of investors

Businessman

Serviceman

Professional

Others

Businessman Serviceman Professional Others

27 53 28 12


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INTERPRETATION

In the income group, out of 120 investors, 36% investors that is the maximum

investors are in the monthly income group Rs. 30001 to 50000, Second one i.e.

27% investors are in the monthly income group of more than Rs. 50,000 and the

minimum investors i.e. 4% are in the monthly income group of below Rs.

10,000.

% of savingsAverage savings of all investors is 35% to 40%

Investor invested in different kinds of Investments

Kind of Investments Number of Investors

Saving Account 195

Fixed Deposits 148

Insurance 152

Mutual Fund 120Post Office - NSC 45

Shares/Debentures 130

Gold/Silver 30

Real Estate 52

Others 18

0

5

10

15

20

25

30

35

40

45

50

upto rs.

10000

Rs. 10001

to 20000

Rs. 20001

to 30000

Rs. 30001

to 50000

RS. 50001

and above

Number of Investors

Number of Investors


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INTERPRETATION

From the above graph it can be inferred that out of 200 people,97.5% people

have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in

Mutual Fund, 22.5% in Post Office, 65% in Shares or Debentures, 15% in

Gold/Silver and 26% in Real Estate, and 9% in others financial securities.

PREFERENCE OF FACTORS WHILE INVESTING

020406080

100120140

160180200

Number of Investors

Number of Investors

0

10

20

3040

50

60

70

80

Liquidity Low Risk High

return

Safety of

Capital

Tax

Benefits

Number of Respondents



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INTERPRETATION

Out of 200 people, 38% People prefer to invest where there is High Return,

22% prefer to invest where there is Tax Benefits, 15% prefer Low risk and

Safety of capital and 10% investor prefer easy Liquidity.

Awareness about Mutual Fund & its operations

Response YES NO

No of respondents 182 18

INTERPRETATION

From the above chart it is inferred that 91% People are aware of Mutual Fund

and its operations and only 9% are not aware of Mutual Fund and its operations.

Source of knowing Mutual Fund

Source of information No of respondent

Advertisement 24

Friends & Relatives 34

Banks 40

Financial advisors 84

Number of respondents

Yes

No


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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 182 Respondents,

46% know about Mutual fund Through Financial Advisor, 22% through Bank,

19% through Peer Group and 13% through Advertisement.

Investors invested in Mutual Fund

Response No of Respondent

Yes 120

No 80

Total 200

0102030405060

708090

Number Of Respondents

Number Of Respondents


Yes

NO


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Reason for not invested in Mutual Fund

Reason No of RespondentsNot aware 18

High risk 28

Not any specific reason 34

Channel Preferred by the Investors for Mutual Fund Investment

Channel Financial Advisor Banks AMCsNo of Respondents 58 20 42

0

10

20

30

40

50

60

70

Financial

Advisor

Banks AMCs




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Awareness of BSE StAR MF

If yes, then are you aware of the benefits of BSE StAR MF

85

90

95

100

105

110

Yes No



0

10

20

30

40

50

60

70

Yes NO




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Mode of Investment Preferred by the Investors

Mode of Investment One Time Investment Systematic InvestmentPlan (SIP)

No of Respondents 68 52

Preferred Portfolios by the Investors

Portfolio Number of Investors

Only Equity 56

Only Debt 20

Balanced 44

0

10

20

30

40

50

60

70

80

One Time Investment Systematic Investment

Plan (SIP)




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INTERPRETATION

From the above graph, Out of the 120 Investors, 46% preferred Only Equity

Portfolio, 37% preferred Balanced Portfolio of Equity and Debt, and 17%

preferred Only Debt portfolio.

Option for getting Return Preferred by the Investors

Option Dividend Payout Dividend Re-investment

Growth in NAV

No of Respondents 25 10 85

Number of Investors

Only Equity

Only Debt

Balanced

0

10

20

30

40

50

60

70

8090

Dividend Payout Dividend Re-investment

Growth in NAV




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Comparison of NAV of different Schemes of Mutual Fund

Balanced Fund

Equity Fund

0

10

20

30

40

50

60

70

80

90

HDFC Reliance UTI ICICI Baroda

Pioneer

NAVs

NAVs

0

50

100

150

200

250

300

HDFC Reliance Axis ICICI Baroda

Pioneer

NAVs

NAVs


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Gilt Fund

Gold ETF

0

5

10

15

20

25

30

HDFC Edelweiss Sahara IDBI Baroda

Pioneer

NAVs

NAVs

2450

2500

2550

2600

2650

2700

2750

2800

Axis Kotak Reliance ICICI Birla Sun Life

NAVs

NAVs


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Gold Fund

Income Fund

0

2

4

6

8

10

12

14

SBI Kotak Axis HDFC IDBI

NAVs

NAVs

0

5

10

15

20

25

30

35

40

Sahara HDFC Axis ING JM

NAVS

NAVS


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Chapter 7

FINDINGS

AND

CONCLUSION


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FINDINGS

In my survey, out of 200 respondents those 120 mutual fund investors

were more in numbers in the age bracket of (36-40 yrs), the second most

Investors were in the age bracket of (41-45 yrs) and the least were in theage group of below 30 years.

Out of total 200 respondents, 39% belong to the upper-lower and lower-

upper social class. 43% belong to upper- middle social class and there

were only 8.33% of the respondents who belong to upper social class.

In my survey most of the Investors were Graduate or Post Graduate i.e.

71% , 23% are under graduate, and below HSC there were very few in

numbers i.e. 6%

Most of the surveyed respondents are service men. 44% of the totalrespondents belong to service class. 23.33% of the respondents are

professionals, 22.5% of the respondents belong to business class and 10%

of the respondents belong to the other category. This other category

includesunemployed, housewives, students.

In family monthly income group, most of the mutual fund investors are in

the group of Rs.30000 to 50000 i.e. 36%, Second one i.e. 27% investors

are in the monthly income group of more than Rs. 50,000 and the

minimum investors i.e. 4% are in the monthly income group of below Rs.10,000.

Average savings of the people varies between 35& to 40%. This no doubt

a good figure to take into account.

out of 200 respondents,97.5% people have invested in Saving A/c, 76%

in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 22.5% in Post

Office, 65% in Shares or Debentures, 15% in Gold/Silver and 26% in

Real Estate, and 9% in others financial securities.

Most of the respondents consider bank deposit as investment vehicle.

They dont have clear cut idea about the difference between the savings

and investment.

38% of Investor prefer to invest where there is High Return, 22% prefer

to invest where there is Tax Benefits, 15% prefer Low risk and Safety of

capital and 10% investor prefer easy Liquidity.


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As question comes to awareness, literacy of mutual fund percentage is

91% which is very good but this data will vary as the sample collected

from the persons, investors and brokers in BSE.

In 46% cases people came to know about Mutual fund Through Financial

Advisor, 22% through Bank, 19% through Peer Group and 13% through

Advertisement. So, Financial Advisor is the most important source of

information about Mutual Fund.

Out of 200 respondents, 60% are invested in mutual funds, those who are

not invested the main reason is that they dont have any specific reason &

high risk and 9% are not even aware of mutual fund.

36% of the respondents want to invest in mutual funds. But they dont

have enough knowledge where and when to invest in mutual funds. This

means customer education is urgently required here.

As when they are asked for BSE StAR MF & its benefits, 53.5% people

are aware about that platform of trading mutual fund units, among that

53.5% people, 40% are aware of all its activities and benefits and rest

60% are only heard about it.

60% Investors preferred to Invest through Financial Advisors, 25%

through AMC (means Direct Investment) and 15% through Bank.

56.67% preferred One Time Investment and 43.33% preferred SIP out of

both type of mode of investment.

Out of the 120 Investors, 46% preferred Only Equity Portfolio, 37%

preferred Balanced Portfolio of Equity and Debt, and 17% preferred Only

Debt portfolio.

Maximum Number of Investors Preferred Growth in NAV Option for

returns i.e. 70.83%, the second most preferred Dividend Payout and then

Dividend Reinvestment.

HDFC ranked 1stboth in gilt fund and Equity fund in NAV, and in Gold

ETF Birla sun life has the highest NAV, in Balanced fund UTI & in Gold

fund kotak has the highest NAV.


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CONCLUSION

We can infer from the analysis that the concept of mutual fund in Indian

financial market is still in its growing phase. With the growing importance ofmutual fund in other areas in the country, this place (indicating the people at

BSE or nearby) is witnessing the same rate of growth in mutual funds. Apart

from these facts the following are some other important facts which can easily

be inferred from the paper:

Huge opportunities of Mutual funds exist in Indian market. In short the

market in this city is a growing market.

As because many companies exist in this market, competition is cut tothroat.

Mindsets of the investors are not towards mutual funds. They still think

of investing in traditional investment alternatives. Customers are not

properly educated about the mutual funds.

Specialized agents of mutual funds are rarely seen. Financial advisors are

not seen there who can educate the investors.

Posters, banners or other promotional activities are rarely seen in this

market. Mutual fund companies do not have aggressive strategies.

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 Insurance products are and can be the main competitors of mutual funds

Mutual fund investors are confined to the upper-middle and upper social

class in this market. Upper-lower class and lower-upper class people are

still untouched.


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More than half of the respondents have wrong perception about the

mutual funds. They feel mutual funds are very risky investment

alternative.

Most of the respondents are satisfied with their current return from their

investment. Most of the respondents do not want to take risk in investing

their money in mutual funds.

Now-a-days Gold ETF has a great demand as compared to other funds

like Equity fund, Balanced fund, Income fund, e.t.c.

AMC like Birla Sun Life & ICICI has a very good NAV in Gold ETF,

and Kotak and many other AMCs are also performing very well like

Reliance & Axis. These all conclusion is made out of only the Asset

Under Management (AUM) & NAV.


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CHAPTER 8

RECOMMENDATIONS

AND

SUGGESTIONS


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RECOMMENDATIONS AND SUGGESTIONSAfter a thorough study and analysis of the data and information, the following

are the few recommendations and suggestions, if adopted, would definitely

benefit the financial market, which is in its booming stage, in the short run andin the long run as well. Recommendations and suggestions are normally given

when there are some problems or difficulties lying in the market. Here in this

research report my recommendations and suggestions are totally based on the

facts, reactions, attitudes, perceptions, and many other things of the respondents

which I have received from them during my research work. The

recommendation part of this research work has three parts only, which I feel can

push the mutual fund market into a higher level.

The three parts are

1. Market Development.

2. Marketing techniques.

3. Marketing plans.

Market development:

My Investors survey has revealed the fact that the market for mutual fund is still

in its expansion stage. Hence the companies have to do a lot of things and

activities to develop the market for mutual fund in this capital city. Market

development means doing anything and everything for the growth of the mutual

fund industry. Hence in the following ways the market of mutual fund can be

developed more significantly:

Awareness

Awareness of mutual fund products must be increased in this city. The

awareness can be enhanced in the following ways:

Conference or seminars on mutual funds can be conducted on

regular basis. This will no doubt increase the awareness of mutual

fund in the minds of the investors.

All the AMCs must join hands and work together for this.


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Customer education

As the awareness of mutual funds is still improving in this market,

companies should give focus on customer education. For this purpose

again the conference and seminars can be the best way towards educating

the customers. Again free training programme to the agents can be

fruitful.

Government intermediation

Government must also work together with the mutual fund companies &

take necessary steps in promoting the concept of mutual fund i.e. tax

benefits, less volatility, low risk, e.t.c

Confidence building activities

People in this city are not confident in investing their money in mutual

funds. Hence there is a need to do something which will build the

confidence in the minds of the investors. Hence the confidence building

activities must be carried out the mutual fund companies. Because most

of the people think that investing in mutual funds is a very risky affair. In

the following ways the confidence can be increased in the minds of the

people:

As the common person has blind faith in all the government

institutions, hence they have to come forward and convey the

message that investing in mutual fund is not that risky.

The present performance of the mutual funds is very good indeed.

And the companies should cash in on this opportunity. The

performance of the mutual funds can be published in the local and

other newspapers and magazines, journals. This will no doubtinduce the investors towards investing in mutual funds.

Case study of the investors who have been benefited in investing in

mutual funds can be published in the newspapers, magazines and

journals.


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Marketing techniques

While the Mutual in India has seen dramatic improvements in quantity as well

as quality of product and service offerings over the past decade. One of the

primary reasons for this slow growth is the fact that mutual funds are a new

concept in India, which needs to be still understood by large sections of Indian

investors. In this scenario, the mutual fund companies have the onerous

responsibility of not just selling mutual fund products, but marketing them

properly.

Marketing plans

Booklets on mutual funds can be distributed at free of cost to the commonpeople with the newspapers, magazines, journals. This will help in attitude

formation of the investors.

Companies must focus on tailored made mutual fund schemes rather than on the

traditional products/ schemes.

Unlike the case of insurance where there is a restriction on certain age of the

investors to invest on insurance, there is no such restriction on investing inmutual fund. An investor of any age bracket can invest in any scheme of mutual

fund. Hence the strong and efficient CRM can prove to be very fruitful.

Selling of mutual funds only through agents and the branch will not serve the

purpose. Distribution network should be increased. Here aggressive strategy

must be taken by a company in selling mutual funds. This will only be possible

when the investors are well familiar with the concept of mutual funds and its

advantages and benefits. The following are some of the incentives:

Mutual fund companies must tie up with other financial institute like

banks, post office for reaching to the mass people. Because these

financial institutes have tremendous reach to the mass people in our

country. As a result mutual fund companies can have easy access to the

common people. The companies must go in for this kind of strategic

alliance with other companies as well. Because strategic alliance not only

benefit the companies but help in developing the market also.


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For opening of new savings bank account, the account holder should be

given advice and knowledge of mutual fund and its schemes and how

investment distinguish from saving.

On buying of one or some life insurance policies, again certain units of

mutual fund can be given at free of cost to the policy holders. These will

ultimate lead to the mutual fund buying habit of the common people.


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BIBLIOGRAPHY

BOOKS:

Dr. Prasanna Chandra :Portfolio ManagementC.R. Kothari :Research Methodology

NEWSPAPERS:

Times of IndiaThe Economic Times

REFERENCES

AMFI study material Outlook Money - the laymans guide to mutual fundsBrand reporter- Mutual Fund

WEBSITES

www.bseindia.comwww.amfi.comwww.mutualfundindia.comwww.moneycontrol.comwww.bloomberg.com

Documents

A Project Report On "Why Mutual Fund is the Better Investment Plan"