Abhinay Axis Project Final

8/8/2019 Abhinay Axis Project Final

1/97


2/97


3/97


4/97


5/97


6/97


7/97


8/97


9/97


10/97


11/97


12/97


13/97

Communicate in his language, not in ours.

Enduring Wealth Creation Play a serious and credible role in investor's money basket. Encourage investors to build a long-term perspective of the

mutual fund category.

Long-term Relationships Leverage the equity of the 'Axis' brand Aim at building relationships rather than being transactional.

PRODUCTS

Mutual fund is such an investment avenue which can be changed

according to the customers needs .If any investor wants high returnsthen equity will be preferred and when he wants a fixed income thenbond will be a good option for him. So axis has taken due care in

forming any mutual fund of their AMC. So, the following are theproducts which have to offer to its investors.

Axis Liquid Fund An extremely low risk fund suitable for an investment horizon of

1 day 90 days

Returns are calculated for the number of days you remaininvested

No entry or exit loads

High liquidity - Under normal circumstances, we will endeavourto ensure that an investor gets his money back one day afterputting in a valid redemption request

Axis Treasury Advantage Fund A low risk fund suitable for an investment horizon of 91 days to

180 days

13


14/97


No entry or exit loads

High liquidity - Under normal circumstances, we will endeavor toensure that an investor gets his money back one day afterputting in a valid redemption request

Tax efficient as dividends are tax-free in your hands (postdeduction of 14.1625% dividend distribution tax for individualinvestors - inclusive of cess and surcharge)

Axis Short Term Fund A low risk fund suitable for an investment horizon of 6 months - 1

year

Aims to provide stable returns by investing in debt and moneymarket instruments


No entry load but with an exit load of 0.25% if units areredeemed/switched out within three months from the date of allotment

Easy Call facility available

High liquidity - Under normal circumstances, we will endeavourto ensure that an investor gets his money back one day afterputting in a valid redemption request

Tax efficient as dividends are tax-free in your hands (postdeduction of 14.1625% dividend distribution tax for individualinvestors - inclusive of cess and surcharge)

Axis Income Saver Fund A low to medium risk fund suitable for an investment horizon of 2

4 years

Brings stability to your portfolio by investing primarily in fixedincome instruments

Offers the potential for capital growth through limited exposureto equity instruments

14


15/97

Adopts a quantitative asset allocation strategy for riskmanagement

Open-ended nature allows you to buy or sell units of the schemeat any point of time subject to applicable loads

Scheme managed by an experienced team of fund managers

15


16/97

Axis Equity Fund A diversified equity fund that invests primarily in the Indian

equity markets

Provides the opportunity to capitalize on India's high paced

growth Supported by a strong investment management team at Axis

Mutual Fund

Suitable for an investment horizon of 3 years or more

With no entry load

Easy Call facility available

Axis Triple Advantage Fund - Growth through diversification

Axis Triple Advantage Fund helps you take advantage of diversification

by investing in a mix of equity, fixed income and gold. This not only

helps avoid monetary surprises but also provides opportunity for

wealth growth. With Axis Triple Advantage Fund, if you have planned

for something, chances are you should be able to go and get it. Key

Features

Provides diversification across three asset classes viz. equity,fixed income and gold thereby leading to reduction in risk

Returns potential not compromised even with reduced risk levels

Returns more stable than pure equity or gold investments overthe long term

Offers convenience. Now one single application is sufficient for

investment in three asset classes. 20 - 30% of investment in gold. Gold is a good hedge against

financial crises.

16


17/97

MUTUAL FUND INDUSTRY

Alone UTI with just one scheme in 1964 now competes with as many as

400 odd products and 34 players in the market. In spite of the stiff competition and losing market share, UTI still remains a formidableforce to reckon with.

Last six years have been the most turbulent as well as exiting ones for

the industry. New players have come in, while others have decided toclose shop by either selling off or merging with others. Productinnovation is now pass with the game shifting to performance delivery

in fund management as well as service. Those directly associated withthe fund management industry like distributors, registrars and transferagents, and even the regulators have become more mature and

responsible.

The industry is also having a profound impact on financial markets.While UTI has always been a dominant player on the bourses as well asthe debt markets, the new generations of private funds which have

gained substantial mass are now seen flexing their muscles. Fundmanagers, by their selection criteria for stocks have forced corporate

governance on the industry. By rewarding honest and transparentmanagement with higher valuations, a system of risk-reward has beencreated where the corporate sector is more transparent then before.

Funds have shifted their focus to the recession free sectors like

pharmaceuticals, FMCG and technology sector. Funds performancesare improving. Funds collection, which averaged at less than Rs100bnper annum over five-year period spanning 1993-98 doubled to

Rs210bn in 1998-99. In the current year mobilization till now haveexceeded Rs300bn. Total collection for the current financial yearending March 2000 is expected to reach Rs450bn.

17


18/97

What is particularly noteworthy is that bulk of the mobilization hasbeen by the private sector mutual funds rather than public sector

mutual funds. Indeed private

MFs saw a net inflow of Rs. 7819.34 crore during the first nine monthsof the year as against a net inflow of Rs.604.40 crore in the case of public sector funds.

Mutual funds are now also competing with commercial banks

in the race for retail investors savings and corporate float

money. The power shift towards mutual funds has become

obvious. The coming few years will show that the traditionalsaving avenues are losing out in the current scenario. Many

investors are realizing that investments in savings accounts

are as good as locking up their deposits in a closet. The fund

mobilization trend by mutual funds in the current year

indicates that money is going to mutual funds in a big way.

The collection in the first half of the financial year 1999-2000

matches the whole of 1998-99.

India is at the first stage of a revolution that has already

peaked in the U.S. The U.S. boasts of an Asset base that is

much higher than its bank deposits. In India, mutual fund

assets are not even 10% of the bank deposits, but this trend is

beginning to change. Recent figures indicate that in the first

quarter of the current fiscal year mutual fund assets went up

by 115% whereas bank deposits rose by only 17%. (Source:Think-tank, the Financial Express September 99) This is

forcing a large number of banks to adopt the concept of

narrow banking wherein the deposits are kept in Gilts and

some other assets, which improves liquidity and reduces risk.

The basic fact lies that banks cannot be ignored and they will

18


19/97

not close down completely. Their role as intermediaries cannot

be ignored. Mutual Funds are going to change the way banks

do business in the future.

WHAT EXACTLY IS A MUTUAL FUND?

A Mutual Fund is a trust that pools the savings of a number of investorswho share a common financial goal. The money thus collected is then

invested in capital market instruments such as shares, debentures andother securities. The income earned through these investments and

the capital appreciation realized is shared by its unit holders in

proportion to the number of units owned by them. Thus a Mutual Fundis 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. The flow chart below describes

broadly the working of a mutual fund.

The Situation could vary as per age groups, mindsets and risk taking

ability, but the solution, in each case wants money to grow. Most of theinvestors dont have sufficient knowledge about different investmentoptions, financial instruments nature, market information, analytical

skills and therefore their funds are lacking proper management anddiversification to get market-linked return with flexibility as well as

liquidity. These kinds of investors should prefer mutual funds tochannelize their funds properly.

A security that gives small investors access to a well-diversifiedportfolio of equities, bonds and other securities. Each shareholder

participates in the gain or loss of the fund. Shares are issued and canbe redeemed as needed.

Mutual Funds are the unique instrument that offers an individual

19


20/97

professional management, diversification, flexibility, liquidity and achance to get market linked returns. Mutual funds are indeed the best

tool for wealth creation. Whatever other instruments can do, mutualfunds can do too and more efficiently.

HISTORY & BACKGROUND

Four Phases Of Mutual Fund In India The mutual fund industry can be

broadly put into four phases according to the development of thesector. Each phase is briefly described as under.

First Phase - 1964-87

An Act of Parliament established Unit Trust of India (UTI) on 1963. It

was set up by the Reserve Bank of India and functioned under theRegulatory and administrative control of the Reserve Bank of India. In

1978 UTI was de-linked from the RBI and the Industrial DevelopmentBank of India (IDBI) took over the regulatory and administrative controlin 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 undermanagement.

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

Entry of non-UTI mutual funds. SBI Mutual Fund was the first

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 in 1989 and GIC in 1990. The end of 1993 marked Rs.47,

004 as assets under management.

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

20


21/97

With the entry of private sector funds in 1993, a new era

started in the Indian mutual fund industry, giving the Indian

investors a wider choice of fund families. Also, 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 morecomprehensive and revised Mutual Fund Regulations in 1996. The

industry now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with

many foreign mutual funds setting up funds in India and also

the industry has witnessed several mergers and acquisitions.

As at the end of January 2003, there were 33 mutual funds

with total assets of management was way ahead of other

mutual funds. Rs. 121805 crores. The Unit Trust of India with

Rs.44541 crores of assets.

Fourth Phase - since February 2003

This phase had bitter experience for UTI. It was bifurcated into

two separate entities. One is the Specified undertaking of the

Unit Trust of India with AUM of Rs.29, 835 crores (as on

January 2003). The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules

framed by Government of India and does not come under the

purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB,

21


22/97

BOB and LIC. It is registered with SEBI and functions under the

Mutual Fund Regulations. With the bifurcation of the erstwhile

UTI which had in March 2000 more than Rs.76, 000 crores of

AUM and with the setting up of a UTI Mutual Fund, conforming

to the SEBI Mutual Fund Regulations, and with recent mergers

taking place among different private sector funds, the mutual

fund industry has entered its current phase of consolidation

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

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

schemes.

22


23/97

GROWTH IN ASSETS UNDER MANAGEMENT

As on Mar-08, the Asset under management is approx. 621238 crore.

23


24/97

March 2009 the asset under management is approx 751521

TYPES OF MUTUAL FUNDS

Mutual fund schemes may be classified on the basis of its structure and its

investments.

By Structure:

Open-ended Funds

An open-end fund is one that is available for subscription all through

the year. These do not have a fixed maturity. Investors canconveniently buy and sell units at Net Asset Value ("NAV") related

prices. The key feature of open-end schemes is liquidity.

Closed-ended Funds

A closed-end fund has a stipulated maturity period which generallyranging from 3 to 15 years. The fund is open for subscription onlyduring a specified period. Investors can invest in the scheme at the

time of the initial public issue and thereafter they can buy or sell theunits of the scheme on the stock exchanges where they are listed. In

order to provide an exit route to the investors, some close-ended fundsgive an option of selling back the units to the Mutual Fund throughperiodic repurchase at NAV related prices. SEBI Regulations stipulate

that at least one of the two exit routes is provided to the investor.

Interval Funds

Interval funds combine the features of open-ended and close-endedschemes. They are open for sale or redemption during pre-determined

intervals at NAV related prices.

24


25/97

By Investment Objective:

Income Funds

The aim of income funds is to provide regular and steady income toinvestors. Such schemes generally invest in fixed income securitiessuch as bonds, corporate debentures and government securities.Income Funds are ideal for capital stability and regular income.

Balanced Funds

The aim of balanced funds is to provide both growth and regular

income. Such schemes periodically distribute a part of their earning

and invest both in equities and fixed income securities in theproportion indicated in their offer documents. In a rising stock market,the NAV of these schemes may not normally keep pace, or fall equallywhen the market falls. These are ideal for investors looking for a

combination of income and moderate growth.

Growth Funds

The aim of growth funds is to provide capital appreciation over themedium to long-term. Such schemes normally invest a majority of their

corpus in equities. It has been proven that returns from stocks, haveoutperformed most other kind of investments held over the long term.Growth schemes are ideal for investors having a long-term outlook

seeking growth over a period of time.

Money Market Funds

The aim of money market funds is to provide easy liquidity,preservation of capital and moderate income. These schemes

generally invest in safer short-term instruments such as treasury bills,certificates of deposit, commercial paper and inter-bank call money.Returns on these schemes may fluctuate depending upon the interest

rates prevailing in the market. These are ideal for Corporate and

25


26/97

individual investors as a means to park their surplus funds for shortperiods.

Load Funds:A Load Fund is one that charges a commission for entry or exit. That is,each time you buy or sell units in the fund, a commission will bepayable. Typically entry and exit loads range from 1% to 2%. It could

be worth paying the load, if the fund has a good performance history.

No-Load Funds:

A no-Load Fund is one that does not charge a commission for entry or

exit. That is, no commission is payable on purchase or sale of units inthe fund. The advantage of a no load fund is that the entire corpus isput to work.

Other Schemes:

Tax saving Schemes

These schemes offer tax rebates to the investors under specific

provisions of the Indian Income Tax laws as the Government offers taxincentives for investment in specified avenues. Investments made inEquity Linked Savings Schemes (ELSS) and pension Schemes are

allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act alsoprovides opportunities to investors to save capital gains u/s 54EA byinvesting in Mutual Funds, provided the capital asset has been sold

prior to April 1, 2000 and the amount is invested before September 30,2000.

Special Schemes:-

Industry Specific Schemes

26


27/97

Industry Specific Schemes invest only in the industriesspecified in the offer document. The investment of these

funds is limited to specific industries like InfoTech, FMCG andPharmaceuticals etc.

Index Schemes

Index Funds attempt to replicate the performance of aparticular index such as the BSE Sense or the NSE 50

Sectoral Schemes

Sect oral Funds are those, which invest exclusively in aspecified industry or a group of industries or various segments

such as 'A' Group shares or initial public offerings.

27


28/97

PROCESS OF MUTUAL FUND

In the above graph shows how Mutual Fund works and how investor

earns money by investing in the Mutual Fund. Investors put their

saving as an investment in mutual fund. The fund manager, who is a

person who takes the decisions where the money should be invested in

securities according to the schemes objective. Securities include

Equities, Debentures, Govt. securities, Bonds and Commercial Paper

etc. These securities generate returns to the fund manager. The fund

manager passes beck return to the investor.

28


29/97

Mutual Funds Organization

There are many entities involved and the diagram below illustrates the

organizational set up of a mutual fund:

Organization of a Mutual Fund

Rights of a Mutual Fund Unit holder A unit holder in a Mutual Fund

scheme governed by the SEBI (Mutual Funds) Regulations is entitled

to:

1. Receive unit certificates or statements of accounts confirming thetitle within 6 weeks from the date of closure of the subscription orwithin 6 weeks from the date of request for a unit certificate is

received by the Mutual Fund.

2. Receive information about the investment policies, investment

29


30/97

objectives, financial position and general affairs of the scheme.

3. Receive dividend within 42 days of their declaration and receive theredemption or repurchase proceeds within 10 days from the date of redemption or repurchase.

4. Vote in accordance with the Regulations to:-

a. Approve or disapprove any change in the fundamentalinvestment policies of the scheme, which are likely to modify thescheme or affect the interest of the unit holder. The dissenting

unit holder has a right to redeem the investment.b. Change the Asset Management Company.c. Wind up the schemes.

5. Inspect the documents of the Mutual Funds specified in thescheme's offer document.

30


31/97

WHY SHOULD ONE INVEST IN MUTUALFUNDS?

One can avail of the benefits of better returns with addedbenefits of anytime liquidity by investing in open-ended

debt funds at lower risk.

One can minimize his risk by investing in mutual funds as

the mutual fund managers analyze the companies financials

more minutely than an individual can do as they have the

expertise to do so. They can manage the maturity of their

portfolio by investing in instruments of varied maturity

profile.

Moreover, mutual funds are better placed to absorb the

fluctuations in the prices of the securities as a result of

interest rate variation and one can benefits from any such

price movement.

Liquid funds offer liquidity as well as better return than

banks and so attract investors. Many funds provide anytime

withdrawal enabling a big investor to take maximum

benefits.

Apart from liquidity, the funds provide very good post-tax

returns on year-to-year basis. Even some of the debt funds

have generated superior returns at relatively low level of risk. On an average debt funds have posted returns over 10

percent over one year horizon. In nutshell we can say that

these funds have delivered more than what one expects of

debt avenues such as post office schemes or bank fixed

deposits.

31


32/97

Mutual funds specialize in identification of stocks through

dedicated experts in the field and this enables them to pick

stocks at the right movement. Sector funds provide an edge

and generate good returns if the particular sector is doing

well.

The benefits listed so far are essentially for the small retail

investor but the industry can attract investments from

institutional and big investors as well.

Moving up in the risk spectrum, there are many people who

would like to take some risk and invest in equityfunds/capital market. However, since their appetite for risk

is also limited, they would rather have some exposure to

debt as well. For these investors, balanced funds provide an

easy route of investment. Armed with the expertise of

investment techniques, they can invest in equity as well as

in good quality debt thereby reducing risk and providing the

investor with better returns than he could otherwise

manage.

Next problem is that of our funds or money. A single person

cant invest in multiple high-priced stocks for the sole

reason that his pockets are not likely to be deep enough.

This limits him from diversifying his portfolio as well as

benefiting from multiple investments.

Investing through MF route enables an investor to invest in

many good stocks and reap benefits even through a small

investment. This not only diversifies the portfolio and helps

in generating returns from a number of sectors but reduces

the risk as well. Through identification of the right fund

32


33/97

might not be an easy task, a good investment consultants

and counselors will can investors take informed decision.

Investing in just one Mutual Fund scheme may not meet all

investment needs. One might consider investing in a

combination of schemes to achieve your specific goals. Here

is the risk, return grid that shows how and where an

investor can invest according to his risk, returns appetite.

An investor can see different kinds of funds where in he can

get maximum benefit with utmost care.

33


34/97

COMMON INVESTMENT MISTAKES THATPEOPLE CAN MAKE

Knowing about some investment mistakes people can make.

1. Investing without a clear plan of action: Many people neglect to takethe time to think about their needs and long-term financial goals

before investing. Unfortunately, this often results in falling short of their expectations. You should decide whether you are interested in

rice stability, growth, or a combination of these. Determine yourinvestment goals. Then, depending on your age and your tolerancefor risk, select mutual fund with objective similar to yours.

2. Meddling with your account too often: You should have clearunderstanding of your investments so that you are comfortable with

their behavior. If you keep transferring investments in response todownturns in prices, you may miss the upturns as well. Even in the

investment field, the tortoise that is more patient, may win over

the hare. While past performance does not necessarily guaranteefuture performance, your understanding of the behavior of various

investments over a time can help prevent you from becomingshortsighted about your long-term goals.

3. Losing sight of inflation: While may be aware of the fact that the costof goods and services are rising, people tend to forget the impact of

inflation will have on investment in long-term. The value of Rs.100 in

1980 was down to Rs. 26 in 1995. This means that the buying powerof rupee has decreased, you can not buy as much for Rs.100 now

that you could 9.35% per annum between 1980-81 and 1994-95.Source: RBI report on Currency and Finance).You have to keep in

mind that will eat into your savings faster than you can imagine.

34


35/97

4. Investing too little too late: People do not pay themselves first.Most people these days have too many bills to pay every month, and

planning for your future often takes a backseat. Regardless of age orincome, if you do not place long-term investing among your top

priorities, you may not be able to meet your financial goals. Thesooner you start, the less you have to save every month to reachyour financial goals.

5. Do not put all your eggs into one basket, diversify: When it comes to

investing, most of us do not appreciate the importance of diversification. While we know that we should not put all our eggs in

one basket, we often relate this concept to stocks and bonds. Takethe time to discuss the importance of diversifying investmentsamong different assets categories and industries. When you spread

your holdings around, you do not have to rely on the success of justone investment.

35


36/97

BENEFITS OF MUTUAL FUND

Mutual funds serve as a link between the saving public and the capitalmarkets. They mobilize savings from the investors and bring them toborrowers in the capital markets. Today mutual funds are fast

emerging as the favorite investment vehicle because of the many

advantages they have over other forms and avenues of investing. Themajor advantages offered by mutual funds to all investors are:

Professional Management

Mutual Funds provide the services of experienced and skilledprofessionals, backed by a dedicated investment research team that

analyses the performance and prospects of companies and selectssuitable investments to achieve the objectives of the scheme.

Diversification

Mutual Funds invest in a number of companies across a broad cross-

36


37/97


38/97

directly investing in the capital markets because the benefits of scalein brokerage, custodial and other fees translate into lower costs for

investors.

Liquidity

In open-end schemes, the investor gets the money back promptly at

net asset value related prices from the Mutual Fund. In closed-endschemes, the units can be sold on a stock exchange at the prevailing

market price or the investor can avail of the facility of directrepurchase at NAV related prices by the Mutual Fund.

Transparency

You get regular information on the value of your investment in additionto disclosure on the specific investments made by your scheme, theproportion invested in each class of assets and the fund manager's

investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal

plans and dividend reinvestment plans, you can systematically investor withdraw funds according to your needs and convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-gradestock. A mutual fund because of its large corpus allows even a smallinvestor to take the benefit of its investment strategy.

38


39/97

Choice of schemes

Mutual Funds offer a family of schemes to suit your varying needs overa lifetime.

Regulations

All Mutual Funds are registered with SEBI and they function within theprovision of strict regulations designed to protect the interests of

investors. The operations of Mutual Funds are regularly monitored bySEBI.

Tax Benefits

Any income distributed after March 31, 2002 will be subject to

tax in assessment of all unit holders. However, as a measure of

concession to unit holders of open-ended equity-oriented

funds, income distributions for the year ending March 31,

2003, will be taxed at a concessional rate of 10.5%.

In case of Individuals and Hindu Undivided Families a deduction up toRs 9000 from the Total income will be admissible in respect of incomefrom investments specified in Section 80L, including income from units

of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax

and Gift-Tax.

39


40/97

DRAWBACKS OF INVESTING IN MUTUALFUNDS

Potential loss

Unlike a bank deposit, the investment in a mutual fund could fall invalue, as the fund is nothing bur a portfolio of different securities.Apart from a few assured returns schemes, the fund does not

guarantee any minimum percentage of return.

The Diversification Penalty

While diversification reduces the risk of loss from holding a single

security, it also limits the gains if a single security increasesdramatically in value. Also, diversification does not protect the unit

holders totally from an overall decline in the market.

No tailor made portfolio

Mutual fund portfolios are created and marked by AMCs, in to whichinvestors invest. They can not made tailor made portfolio.

40


41/97

MUTUAL FUND REGULATION

There was no uniform regulation of the mutual funds industry till a few

years ago. The UTI was regulated by a special Act of Parliament whilefunds promoted by public sector banks were subject to RBI Guidelinesof July 1989. The Securities & Exchange Board of India (SEBI) was

formed in 1993 as a capital market regulator. One of its responsibilitieswas to regulate the mutual fund industry and it came up with

comprehensive regulations for the industry in 1993. The rules for theformation, administration and management of mutual funds in Indiawere clearly laid down. Regulations also prescribed disclosure

requirements.

The regulations were thoroughly reviewed and re-notified in December

1996. The revised guidelines tighten the accounting and disclosurerequirements in line with recommendations of The Expert Committee

on Accounting Policies, Net Asset Values and Pricing of Mutual Funds. The SEBI (Mutual Funds) Regulations, 1996 have been furtheramended in 1997, 1998 and 1999. Today, all mutual funds are

regulated by SEBI. Efforts have been made to bring UTI schemes underSEBI's ambit with the result that all schemes, with the exception of

Unit 64, are now regulated by the capital market regulator.

Some facts for the growth of mutual funds in India

100% growth in the last 6 years.

Number of foreign AMC's are in the queue to enter the Indianmarkets like Fidelity Investments, US based, with over

US$1trillion assets under management worldwide.

Our saving rate is over 23%, highest in the world. Only

41


42/97

channelizing these savings in mutual funds sector is required.

We have approximately 29 mutual funds which is much less thanUS having more than 800. There is a big scope for expansion.

'B' and 'C' class cities are growing rapidly. Today most of themutual funds are concentrating on the 'A' class cities. Soon they

will find scope in the growing cities.

Mutual fund can penetrate rural like the Indian insuranceindustry 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.

Legal and Regulatory Framework

Mutual funds are regulated by the SEBI (Mutual Fund) regulations,1996. SEBI is the regulator of all funds, except offshore funds. Bank

sponsored mutual finds are jointly regulated by SEBI and RBIpermission. If there is a bank sponsored find, it cannot provide aguarantee without RBI permission. RBI regulates money and govt.

securities in which mutual fund invest. Listed mutual funds are subject

to the listing regulations of stock exchanges. Since the AMC andtrustee co, are Co.s they are regulated by the department of co affairs,they have to send periodic report to the roc and the co law board is theappellate authority.

Investors cannot sue the trust, as they are the same as the trust and

42


43/97

cant sure themselves. UTI is governed by the UTI act, 1963 and isvoluntarily under SEBI regulations. UTI can borrow as well as lend and

also engage in other financial services activities. SROs are the secondtier in the regulatory structure; SROs cannot do any legislation on their

own. All stock exchanges are SROs. AMFI is an industry association of mutual funds. AMFI is not yet a SEBI registered SRO. AMFI has createdcode for mutual funds. AMFI aims at increasing investor awareness

about mutual finds, encouraging best practices and bringing abouthigh standards of professional behavior in the industry.

43


44/97

Association of Mutual Funds in India (AMFI)

With the increase in mutual fund players in India, a need for mutual

fund association in India was generated to function as a non-profitorganisation. Association of Mutual Funds in India (AMFI) wasincorporated on 22nd August, 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which

has been registered with SEBI. Till date all the AMCs are that havelaunched mutual fund schemes are its members. It functions under thesupervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian MutualFund Industry to a professional and healthy market with ethical lines

enhancing and maintaining standards. It follows the principle of bothprotecting and promoting the interests of mutual funds as well as their

unit holders.

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered

AMCs of the country. It has certain defined objectives which juxtaposesthe guidelines of its Board of Directors. The objectives are as follows:

This mutual fund association of India maintains high professional andethical standards in all areas of operation of the industry.

It also recommends and promotes the top class business

practices and code of conduct which is followed by members

and related people engaged in the activities of mutual fund

and asset management. The agencies who are by any means

connected or involved in the field of capital markets and

44


45/97

financial services also involved in this code of conduct of the

association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the

mutual fund industry.

Association of Mutual Fund of India do represent the Government of

India, the Reserve Bank of India and other related bodies on mattersrelating to the Mutual Fund Industry.

It develops a team of well-qualified and trained Agent distributors. It

implements a programme of training and certification for allintermediaries and other engaged in the mutual fund industry.

AMFI undertakes all India awareness programme for investors in orderto promote proper understanding of the concept and working of mutualfunds.

At last but not the least association of mutual fund of India alsodisseminate informations on Mutual Fund Industry and undertakes

studies and research either directly or in association with other bodies.

45


46/97

Ten Golden rules for Investing

Warren Buffet has suggested ten golden rules for investing which

proves to be immense use to the investors who want a betterinvestment in stock markets.

1. Never invest in a business you cannot understand.

2. Risk can be reduced by concentrating on a few holdings.

3. Stop trying to predict the direction of the stock market, the

economy, interest rates, or elections.

4. Buy companies with strong histories of profitability and witha dominant business franchisee.

5. Be fearful when others are greedy and greedy when othersare fearful.

6. Unless you can watch your stock holding decline by 50%without becoming panic-stricken, you should not be in thestock market.

7. Do not take yearly results too seriously. Instead, focus onfour or five year averages.

8. Focus on return on equity, not earnings per share (EPS).

9. Calculate "owner earnings" to get a true reflection of value.Look for companies with high profit margins.

10.Always invest for the long term. Does the business havefavorable long-term prospects?

46


47/97

FUTURE SCENARIO

The asset base will continue to grow at an annual rate of about 30 to

35 % over the next few years as investors shift their assets frombanks and other traditional avenues. Some of the older public and

private sector players will either close shop or be taken over.

Out of ten public sector players five will sell out, close down or merge

with stronger 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 shutters 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 arena. There will be a

large number of offers from various asset management companies in

the time to come. Some big names like Fidelity, Principal, Old Mutual

etc. are looking at Indian market seriously. One important reason for it

is that most major players already have presence here and hence

these big names would hardly like to get left behind.

In the U.S. most mutual funds concentrate only on financial funds like

equity and debt. Some like real estate funds and commodity funds also

take an exposure to physical assets. The latter type of funds are

preferred by corporates who want to hedge their exposure to the

commodities they deal with.

For instance, a cable manufacturer who needs 100 tons of Copper in the month of January could buy an equivalent

amount of copper by investing in a copper fund. For Example,

Permanent Portfolio Fund, a conservative U.S. based fund

invests a fixed percentage of its corpus in Gold, Silver, Swiss

47


48/97

francs, specific stocks on various bourses around the world,

short term and long-term U.S. treasuries etc.

In U.S.A. apart from bullion funds there are copper funds, preciousmetal funds and real estate funds (investing in real estate and other

related assets as well.).In

India, the Canada based Dundee mutual fund is planning to launch a

gold and a real estate fund before the year-end.

In developed countries like the U.S.A there are funds to satisfy

everybodys requirement, but in India only the tip of the iceberg hasbeen explored. In the near future India too will concentrate on financial

as well as physical funds.

The mutual fund industry is awaiting the introduction of DERIVATIVESin the country as this would enable it to hedge its risk and this in turnwould be reflected in its Net Asset Value (NAV).

SEBI is working out the norms for enabling the existing mutual fundschemes to trade in Derivatives. Importantly, many market playershave called on the Regulator to initiate the process immediately, sothat the mutual funds can implement the changes that are required to

trade in Derivatives.

48


49/97

DIFFERENT TERMS

Sale Price

Sale price is the price you pay when you invest in a scheme. Also

called Offer Price. It may include a sales load.

Repurchase Price

Repurchase price is the price at which a close-ended scheme

repurchases its units and it may include a back-end load. This

is also called Bid Price.

Redemption Price

Redemption price is the price at which open-ended schemes

repurchase their units and close-ended schemes redeem their units onmaturity. Such prices are NAV related.

Sales Load

Sales load is a charge collected by a scheme when it sells the

units. Also called Front-end load. Schemes that do not

charge a load are called No Load schemes.

NET ASSETS VALUE (NAV)

The performance of a particular scheme of mutual fund is

denoted by Net Assets Value (NAV).Mutual fund invest the

money collected from the investors in securities markets. In

49


50/97

simple word, Net Asset Value is the market value of the

securities held by the scheme. Since market value of securities

changes every day, NAV of a scheme also varies on day to day

basis. The NAV per unit is the market vale of securities of a

scheme divided buy the total no of units of the scheme of any

particular date. For example if the market value if securities of

a mutual fund scheme is Rs. 200 lakhs and mutual fund has

issue 10 lakhs units of Rs.10 each to the investors, then the

NAV per unit of the fund is Rs. 20 . NAV is required to be

disclosed by the mutual funds on a regular basis daily of

weekly- depending on the type of scheme.

The net assets value (NAV) is the actual value of one unit of a

given scheme in any given business day. The NAV reflect the

liquidation value of the funds investments on that particular

day after accounting for all expenses. It is calculated by

deducting all liabilities except unit capital of the fund from the

realizable value of all assets and dividing it by number of units

outstanding.

So NAV is equals to-

Market / fair value of schemes

(+) Receivables

(+) Accrued income

(+) Other assets

(-) Accrued expenses(-) Payables

(-) Other liability

(/) Number of unit outstanding.

Here, "other assets" includes any income due to the fund but not

50


51/97

received as on the valuation date (for example, dividend announced bya company but yet to be received). Similarly, "other liabilities" includes

expenses payable by the fund, for example management fees payableto the AMC. Thus, SEBI requires that all expenses and incomes are

accrued up to the valuation date and considered for NAV computation.

Net Asset Value - NAV

1. In the context of mutual funds, the total value of the fund's portfolio

less liabilities. The NAV is usually calculated on a daily basis.

2. In terms of corporate valuations, the book value of assets lessliabilities.

Notes:

The NAV is usually below the market price because the currentvalue of the funds assets is higher than the historical financial NetAsset Value Per Share - NAVPS

3. The value of a mutual fund share. Calculated by dividing the totalnet asset value of the fund by its number of outstanding shares.

4. A fundamental analysis indicator that gives an estimate of the value

of a fund's shares after all assets are sold and all liabilities are paidoff.

5. In other words, NAVPS is the value of a single unit of a mutual fund.

This figure is affected by both its underlying value and marketforces. It is important to consider both these factors when buying amutual fund because the price that the fund investors pay is basedon them.

6. The NAVPS is usually below the market price per share because the

51


52/97

current value of the fund's assets is higher than the value appearingon the historical financial statements used in the NAVPS calculation.

Financial statements used in the NAV.

Unit

Unit means the interest of the holders in a scheme. Each unit

represents one undivided share in the assets of a scheme. The value of each changes depending on the performance of the fund.

Asset Management Company (AMC)

Making decisions regarding investment of the money of the unitholders is a tricky affair. People at the helm of affairs need to have

knowledge about investment alternatives and should also have up- to-date information. This is where the role of an Asset ManagementCompany comes into play. The AMC has to act as the investment

manager of the Trust under the Board supervision and direction of the Trustees. The AMC should also be approved and registered with theSEBI as an AMC. Directors of the AMC should have adequate

professional experience in financial services and should be individualsof high moral standing.

One of the other objectives of forming an AMC is that of bringing abouttransparency in the working of a mutual fund. The AMC and its

directors are answerable to the Trustees and must submit quarterly

reports to them on AMC activities. They also have to make requireddisclosures to the investors in areas such as calculation of NAV andrepurchase price.

Lock in period:

52


53/97

Lock-in-period is the minimum period for which investment made innew units of a scheme cannot be redeemed. Normally, this is specified

for tax saving schemes.

Systematic transfer plan:

This is a plan offered by some funds under which an investor may

choose to transfer a specified amount from their investments in onescheme of the fund to another scheme of the same fund at periodic

intervals (usually monthly or quarterly).

Systematic investments plan:

Under these plans, the investor gives a mandate to the mutual fund to

allot fresh units at specified intervals (monthly, quarterly, etc.) againstwhich the investor provides post-dated cheques. On the specifieddates, the cheques are realized by the mutual fund and, additional

units at the prevailing NAV are allotted to the investor.

This is highly convenient for a person who has a regular source of

income and wishes to allocate a portion of the same towards savings.

The investor does not need to spend time and effort in evaluatinginvestments in each time interval and probably ensures that thesurplus funds do not remain idle.

It carries an additional advantage of Rupee Cost Averaging. Byinvesting a fixed amount at regular intervals, one ends up buying moreunits when the price is low, and fewer units when the price is high. As aresult, over a period of time, the average unit costs will always be less

than average market price per unit, irrespective of whether the marketis rising, falling or fluctuating.

53


54/97

54


55/97

SURVEY FINDINGS

Background & Need for the study:

It is widely believed that MF is a retail product designed to target small

investors, salaried people and others who are intimidated by the stockarket but nevertheless, like to reap the benefits of stock marketinvesting. At the retail level, investors are unique and are a highly

heterogeneous group. Hence, designing a general product andexpecting a good response will be futile, through UTI could do this

nearly for three decades (1964-1987) due to its monopoly in theindustry. In the second phase of oligopolistic competition (1987-1992),the public sector banks and financial institutions entered the field, but

with the then existing boom condition, it was a smooth sailing for theindustry. Further, the globalization and liberalization measures

announced by the government led to a paradigm shift in the mindsetof investors and the capital market nvironment become moreunfriendly to retail investors. They had no other choice but to turn to

MFs to reap the benefits of stock market investing. Hence, the need tobe innovative in designing the product was not felt and investors hadto choose from the limited schemes offered. During the third phase

(1992 hence) the industry was thrown open to the private sector andthe stage got set for competition.

Currently there are more than 3200 schemes with varied objectivesand AMCs compete against one another by launching new products or

repositioning old ones. Now MF industry is facing competition not onlyfrom within the industry but also from other financial products that

may provide many of the same economic functions, as MFs but are notstrictly MFs. For example, in US, one saving institution has patented aproduct that promises to deliver consumers a pay off indexed to

college tuition costs, thus attempting to meet a common consumer

55


56/97

requirement. This product is structured as a certificate of deposit, butit could have been set up as a Mutual Fund. Such products will shortly

appear in the Indian market also. Other examples could be ULIP planswhich are giving a good competition to MFs. All this, in aggregate,

heightens the consumer confusion in his selection of the product. He isconfused as to how to shift the grain from the chaff? Unless the MFschemes are tailored to his changing needs, and unless the AMCs

understand the fund selection/switching behavior of the investors,survival of the funds will be difficult in future. With this background an

attempt is made in this project to study the factors influencing thefund/scheme selection behaviors of retail investors.

56


57/97

OBJECTIVES OF THE STUDY:

In order to examine the issues mentioned above, this survey has the

following objectives before it:

1) To understand the savings avenue preference among MF investors

2) To identify the features the investors look for in Mutual Fund

products.

3) To identify the schemes preference of investors.

4) To identify the factors that influencing the investors fund/schemeselection.

5) To identify the information sources influencing the scheme selection

decision.

6) To identify the preferred communication mode.

57


58/97

SAMPLE PLAN:

Sampling Unit : Any individual above the age of 20 years and who is

earning.

Sample size: 100 people from Ahmedabad.

Sampling Method : Random Sampling

Research Instrument:

The research instrument used for primary data collection isquestionnaire. The questionnaire has close ended questions.

(Questionnaire is attached as Annexure) The questionnaire is supposedto be given to an individual to fill up on his own.

Importance and Benefits:

Though many MF are giving nearly 100% returns in a year, only

2% of total population has invested in MF. The research would

help to understand the reasons why people invest less in MF.

This research would help AMCs to understand what steps can

be taken to increase the investment in MF.

Limitation of the study:

1. Sample size is limited to 500 educated investors in Ahmedabadonly. The sample size may not adequately represent the National

market.

2. This study has not been conducted over an extended period of the

58


59/97

time having both market ups and downs. The market state hassignificance influence on the buying patterns and preferences of

investors. For example, the July 2001 fall has sent violent shockwaves across the MF investor community and is bound to influence

the scheme preference/ selection of the investors. The study hasnot captured such situations.

3. We have to depend on a small sample size of investors to find outthe results of the study which may become biased and this sample

might be small to gather an in depth knowledge of MF.

4. Investors behavior is affected by various factors and in a short spanof time it is not possible to study all this factors.

5. It may not be possible to take proportional sample size from eacharea.

6. People might not reveal there true investment behavior in theinterview. Therefore it might lead to error in judgment.

Method of Data Collection

For the purpose of understanding investors behavior we havecollected data from both primary as well as secondary data. Surveysample is taken as 500.

Primary data in order to collect direct information from investors wehave designed a questionnaire. We have approached investors of different age and income groups.

Secondary data in secondary data we have collected articlesrelated to investors behavior from different sources like internet,

59


60/97

magazines, newspaper and documents provided by our company.

Framework of Analysis :

To understand the savings avenue preference, scheme preference, andobjective for investment in MFs, and also to identify the informationsources to influencing scheme selection, and the preferred mode of

communication, the respondents were asked to rank their preferenceson a ranking scale. The ranks were ascertained by obtaining the

weighted mean value of the responses.

60


61/97

OBSERVATIONS:

Characteristics and Attributes of Focused & Disciplined

Investor

Taking investment as serious study, research and monitoring work

and not a casual game with hear-say and hope for the best.

Understand investment is a matter of timing, not blindly in longterm.

Invest in market instrument that have potential to bring the bestreturn, not using diversification of mix-up good apples with badfruits.

Study risk / reward carefully and prepare to exit if faced with high

uncertainty to acquired gain, or preserve capital or cut loss.

Make research on future scenarios of investment performance with

monitoring to validate the assumptions and not to deal withuncertainty or unknown.

Take care of every dollar of investment to ensure its value creation.

Behavior about investing in Mutual Fund is pretty different.

Most of the people are unaware of MFs or they feel it is verycomplicated thing. They dont understand the philosophy of MutualFunds.

Most of the people invest in MFs only for the purpose of taxbenefits. They are not very much concerned about the returns

61


62/97

which ELSS schemes are giving but they are only concerned aboutgetting the tax deductions.

Those people who want to invest in equity market but dont have

knowledge and huge amount of money to invest in share marketand dont even have ability to take high risk, mutual funds comesout to be the best option for them. These kinds of people invest

heavily in mutual funds. Majority of their go in to the mutual funds.

Investors who are well aware of the knowledge of stock market, whocan manage their portfolio, they dont want invest in mutual funds

because they get huge profits in stock market. They generallydivide their investments into two parts i.e. Fixed incomeinstruments like FDs, Bond, Debentures, PPF, NSC, etc and Stock

Market. MFs are a kind of midway between these two. Even if theyknow about the mutual funds they are not interested. These kindsof investors are very aggressive and high risk taking.

Mutual Funds are attractive to only those people who dont haveknowledge about share market, dont have sufficient Funds and

time to track the market and dont want to take high risks.

Some investors are very risk averse. They dont want to invest inMFs just because it is an indirect investment in stock market.

People who dont want to invest in mutual funds:

Those who have never invested.

Those who are unaware of mutual funds.

Those who are very risk averse.

62


63/97

Those who enjoy investing in stock market; they find MF as aboring.

Birds Eye view of the Sample Taken

63


64/97

64


65/97

Out of these 500 people, 160 lie in the age group of 20-35years, 220 in the age group of 35-50 years and 120 above 50 years of age. The age groups were selected in this manner because aconsiderable change in the knowledge and investment pattern wasseen in these break-ups. The service class people capture the maximum share of 71%. The second largest share is of the businessman with 24%.Student (3%) and retired (2%)people were also included in the samplesize but it was realized that they could not contribute much. Around 40% people are graduates and 34% people havecompleted their professional courses. Here we can relate Qualificationwith Age group and Occupation. We find from our survey that undergraduate (3%) people are not more aware about MF product. In oursurvey we found that the people who have done PG (23%) and Prof.Course are in service class. So it can be one of the reasons that theyprefer safety in Investment so they invest in MF rather than stockmarket.

65


66/97

66


67/97

Interpretation: Based on the duration of operation of schemes, the 1 st

preference is for open- ended schemes (84.57%) and only 15.43% of

the respondents favor close-ended schemes. The main reason for more

investment in Open-ended scheme is no entry and exit barriers.

Generally, those people who want to invest for a long period of time

prefer Close-ended schemes.

Que. 1 Are you aware about Mutual Funds?

Awareness of People about Mutual Fund

Interpretation: The above graph shows that from the total 100

respondents, 70% of people are aware about Mutual Fund while 30% of

people are not aware about Mutual Fund. From our survey of 100

respondents awareness of MF product is more in service class people.

A large group of business class people is aware about Mutual Fund as

67


68/97

to take risk is the nature of business class people they invest in stock

market for high returns.

Que.2 How will you describe your investment knowledge of MutualFunds?

Interpretation: Out of surveyed 100 people 70 % people are aware

about Mutual fund. Out of this 70 %, 5% people have excellent

knowledge, 8% people have Good knowledge, 47% people haveAverage knowledge about mutual fund and remaining 40% people

have poor knowledge about this financial product. Having average

knowledge people are mostly aware about MF concept and they also

invest in Mutual Fund for a long or short period of time. Here, the

service class people have average to good knowledge, they want to

68


69/97

know more about MF but because of time constraints they are unable

to do so. As we also found in our survey that having poor knowledge

people just know only about MF as an Investment tool and invest in it

without knowing it.

69


70/97

70


71/97

71


72/97

the Que.5 Rank investment options according to

your preferences (i.e. Most

Preferable-1, Least preferable-8) (Tick any one)

Interpretation: People are habitual to invest and they have many

investment options. But from our survey we find that because of safety

reasons people mostly invest in Fixed Deposits and another reason we

can say that from the surveyed 20% female they only go for savings

for thats why FDs (30%) have maximum 30%. Service related people

are also investing in PPF(22.5%) as they found it the safer one. Postoffice and Mutual Fund are also popular as an investment tool as share

of both 15.5% and 13.5%. While LIC is 3%, Govt. &RBI bonds is 5% and

Public Issues/IPOS is 4.5% in the total survey.

72


73/97

Que. 6 If you invest in Mutual Funds, what is the share of mutual fund

in your total investments?

Interpretation: Out 70 people 35% people said that their share of mutual funds in total investment ranges between 0-25percent. Only

40% people were having share of 25-50% as mutual fund in their total

investment. While 18% people have the share of 75-100%. Now a

days people are more aware about Mutual Fund and other investment

tool. The proportion of savings in total income has also been increased.

Another reason for more investment is that they are becoming more

future conscious and so they invest more out of their total savings sothat they can use their money whenever it will be needed.

Que.7 What are the types of Mutual Fund schemes where you normallyinvest in?

73


74/97

Interpretation: The above graph shows that out of 70 people 40%

invest in Equity funds. Out of remaining 60%, 30% invest in Debt funds

while 25% and 5% people invest in Balanced funds and Monthly

Income Fund respectively. This shows that the people who give the 1 st

preference to Risk & Return factor, they invest in Equity Funds.Generally, Business class people invest more in Equity Funds because

of high risk and high return. People also give more importance to NAV

because the people who have average to poor knowledge give more

importance to NAV and the NAV of the Equity Funds are always more

than any other funds. People who dont want to take more risk on their

investment they mostly invest in Debt Funds.

\Que.9 Which are the companies in which you invest the most?

74


75/97

Interpretation: Reliance Mutual Fund is having the 1 st position among the 6

mutual fund companies. Franklin Templeton and Fidelity are on 2 nd and 3 rd position respectively while

HDFC MF is on the 4 th position with 15%. Pru. ICICI & SBI HAVE 9% and 6% share respectively. As

Reliance has a good image in the mind of people who have faith in

Reliance. So when Reliance entered in Mutual Fund people invest more

and it results in 1 st rank among the all MF Companies. Where HDFC MF

is known for the its professionalism and for this reason CRISIL has

given the 1 st rank to HDFC MF. HDFC is assumed to be a bit

conservative for short-term investments. Thats why prefer Relianceover HDFC because of its aggressiveness.

75


76/97

Que.10 What types of investing procedure do you normally follow?

Interpretation: From our survey we find that people are investing in

both Lump sum and SIP equally. But the people who are investing on

large basis they prefer to invest in Lump sum. While service class has a

tendency to invest in SIP as it is benefited on certain ways like monthly

installments. Another reason for the service class people is that they

dont have more money to pay at a time. The investor does not need

to spend time and effort in evaluating investments in each

time interval and probably ensures that the surplus funds do not

remain idle. Reason in investing

in SIP is also more units allocation.

Que.11 In what type of plan do you normally invest in?

76


77/97

Interpretation: The people who have good knowledge about Mutual

Fund invest in Growth Fund (65%) because they get interest on capital.

It means their money is compounded annually. In long run dividend

reinvestment (17%) and growth fund becomes the same. In the matter

of NAV growth funds are more beneficial than dividend related funds

because it has very short portion of Equity.

Que.12 At what time do you normally invest in mutual funds?

77


78/97

Interpretation: From the above graph we can interpret that 42% people

invest whenever they have sufficient savings on their hand. Mostly

service class people are investing whenever they have sufficient

saving on their hand. The reason for more percentage in Year Ending

(24%) investment is the limit of Rs.1 lakh given to service class people,

which is beneficial in Tax deduction. The people who have excellent togood knowledge about MF, they invest at the time of NFO i.e.18%.

78


79/97

79


80/97

income is also not more. We find that professionals and business class

80


81/97

have annual saving of more than Rs. 1 lakh to 1.5 lakh i.e.11%.

Que.15 How do you normally get information about MutualFund?

81


82/97

Interpretation: The main source of information for people is

the Agents with 44% because they directly approach to the

customers. Now a day the Internet users are increasing day by

day and therefore 24% people are getting information throughInternet. The respondents prefer to get the routine special

information like daily NAV, dividend, bonus, change in asset

mix etc., through Internet. While 18% people get knowledge

from Newspaper and 6% from Friends.

MODES OF AWARENESS FOR MUTUAL FUNDS

82


83/97

83


84/97

84


85/97

85


86/97

86


87/97

87


88/97

ANALYSIS & INTERPRETATION

The survey reveals that among the 500 respondents only 70%

people were aware about the name of mutual funds. But out of 70% people 40% people did not know about the concept of

mutual funds. Remaining 48 % people had average to poor

knowledge about MFs. Only 7-8 % people had good knowledge

of mutual funds. But the actual investors in MF were even

more less. It could be hardly 5% of investor invests in MF.

Average time period for investing in MF ranges between 1 to 3 years.Maximum investors invest for 1 year. It was also revealed that the

most preferred investment vehicle is Fixed Deposits, with MFs ranking

4 th in the order among 8 choices given. Growth schemes are ranked

first, followed by Income schemes and Balanced schemes. Based on

the duration of operation of schemes, the 1 st preference is for open-

ended schemes (84.57%) and only 15.43% of the respondents favor

close-ended schemes. The investors look for good returns, Tax

Benefits, liquidity and capital appreciation in MF products.

The survey further reveals that the scheme selection decision is made

by respondents on their own and the other sources influencing their

selection decision are Brokers and Agents Direct Mail, News papers

and Magazines, Television , Friends suggestions in that order. Further

24% of the respondents reported that they use Internet facility to know

more about MFs while 76% reported that they do not have access toInternet. Further, 37.43% of the respondents prefer to get the routine

special information like daily NAV, dividend, bonus, change in asset

mix etc., through automated response system while 53.71% prefer

personal communication and 8.86% have no preference.

88


89/97

Out of 100 people only 35% people said that their share of mutual

funds in total investment ranges between 0-25%. Only 40% people

were having share of 25-50% as mutual funds in their total investment.

Most of the investors prefer 10-15% minimum expected returns. Mostpreferred companies in Mutual fund comes out to be Reliance Mutual

Fund, SBI, Franklin Templeton, Fidelity, HDFC mutual fund, Pru ICICI.

Reliance Mutual Fund rank 1 st among all the given choices. Out of

every 10 people who invest in mutual funds at least 5 have invested in

Reliance Mutual Fund. Reliance Mutual Fund is assumed to be a bit

conservative for short-term investments.

The survey indicates that the awareness of financial products in Indiais poor.

Mutual Funds: assured returns. While only 12 % believe that the

government provides a guarantee to investors in mutual funds and just

13 % believe that the value of ones investment in a mutual fund can

not fall below Rs.10, the survey shows that investors are stuck in an

assured returns time warp- four out of five prefer funds that

guarantee returns. These are schemes heading towards extinction. It isno surprise, then, that only, 7% said they were very confident of

choosing a fund, with two out of five investors feeling not confident.

Insurance: high confidence. Here we see that the fruits of familiarity-

barring banks, insurance has the highest number of people (38%)

saying they were very confident of choosing life insurance, with just

7% not confident. Much of the credit for this confidence must go to

LIC. However, it is disheartening to note that just 29% people buy

insurance for securities against death, with savings following at 23%.

Banks: blind faith. With almost half the people very confident about

choosing a banking product and just 3% of them not confident, this

89


90/97

sector truly has the trust of investors, this confidence is misplaced.

Almost three out of five people believe that the unfortunately

government guarantee full deposits in nationalized banks. This is

untrue: only Rs.1 lakh worth of deposits per bank are guaranteed;anything beyond that is not. This faith extends to financial institutions

too-61% people believe the bonds of dithering institutions like IFCI and

IDBI are always safer than mutual funds.

Retirement : worrying. Indias approach to financing its retirement is a

cause for worry.while of the people feel that they will retire between

55 and 65, only 44% believe they will have enough savings to ensure

their current standards of living post retirement. Sociological trendsare too: a third of all people surveyed expect their children will take

care of them post retirement, while an equal number expect they will

not.

90


91/97

SUGGESTIONS AND RECOMMONDATION:

The survey reveals that the investors are basically influenced

by the intrinsic qualities of the product followed by efficientfund management and general image of the fund / scheme in

their selection of fund schemes. Hence it is suggested that

AMCs should design products consciously to meet the

investors needs and should be alert to capture the changing

market moods and be innovative. Continuous product

development and introduction of innovative products, is a

must to attract and retain this market segment. Some

suggestions are:

0 The investors are influenced by the extent andquality of disclosure of information subsequent to theirinvestment regarding disclosure of NAV, portfolio of investment and disclosure of deviation of investment from thestated objectives and the attached fringe to the scheme intheir selection of the scheme. Hence AMCs should take stepsto be as transparent as possible and follow the disclosure

norms spelt out by SEBI and AMFI in this connection. UTIsunique place in the industry that allowed it to be non-transparent has led to the July 2001 UTI scam. The investorswere kept in dark when its income schemes portfolio of debt toequity as1 70:30 got slowly tilted to 20:80. We have to wait and seethe impact of such nondisclosures on future fund mobilizationby UTI. The falling interest rates and a reasonably goodperformance of many growth schemes might have been thereason for the high performance of Growth schemes during the

period under study. Now the scale is in favor of incomeschemes. So it is suggested that AMCs should react in time tothe changing market moods by launching new products orrepositioning old ones. Deviation from the stated investmentobjectives without authority should be dealt seriously by theregulatory bodies. Safety of capital subject to market risk,should be assured to the MF investor. Since the survey reveals priority to self decision in

91


92/97

scheme selection. Information dissemination through allpossible routes which will reach the investors should betapped in a cost effective manner by AMCs. Diagnosticallylooking, the fact that the investors prefer to make their ownscheme selection decision, inspite of their lack of knowledge

about the sophisticated market environment, reflects theirreluctance to believe the available quality of service providedby the agents, financial consultants and investment advisors.These agencies and persons engaged in giving investmentadvice should gear up now to win the confidence of theinvestors. In long run it will help both the investors and theinvestment advisors, thus strengthening the link between theindividual investors and the Mutual Funds. Number of foreign AMC's are in the queue to enterthe Indian markets like Fidelity Investments, US based, withover US$1trillion assets under management worldwide. It is

one of the challenge for HDFC Mutual Fund and they shouldhave to try to come 1 st among all Indian MFs.

92


93/97

CONCLUSION:

Running a successful MF requires complete understanding of

the peculiarities of the Indian stock market and also the

psyche of the small invesor. This study has made an attempt to

understand the financial behavior of MF investors in

connection with the scheme preference and selection. The post

survey developments are likely to have an influence on the

findings.

Behavioral trends usually take time to stabilize and they get

disturbed even by a slight change in any of the influencing

variables. Hence, surveys similar to the present one need to be

conducted at intervals to develop useful models. Nevertheless,

it is hoped that the survey findings will have some useful

managerial implication for the AMCs in their product designing

and marketing.

BIBLIOGRAPHY

Internet:

www.axismf.com

www.amfiindia.com www.angeltrade.com

www.mutualfundindia.com

www.nseindia.com

www.bankersindia.com

93


94/97

www.investindia.com

www.altavista.com

www.indiaonline.com www.google.com

ANNEXURE

A study on theinvestment behavior of people

94


95/97

Questionnaire for investors

1. Are you aware about Mutual Funds?

Yes No

.12. How will you describe your Investment Knowledge of mutual funds?.2 Average Poor.33. What are the purposes of your investments?

High Return Short Term Planning Tax Benefits If Others ________

.44. For what time period do you normally invest? Less than 6 months 6 months to 1 year 1 year to 3 years 3 years to 5 years More than 5 years If Others ________

2. 5. Rank the investment options according to yourpreferences (i.e. Most Preferable-1, Leastpreferable-8)(Tick any one)3. 6. If you invest in Mutual Funds, what is the share of mutualfunds in your total

a. Post Offices b. Fixed Deposits

c. LIC

d. Govt. & RBI bonds

e. PPF

f. Public issues/IPOs

g. Mutual Funds h. Stock market

Investments?

0% -25% 25% -50% 50% -75% 75% -100%

95


96/97

.17. What are the types of mutual fund scheme where younormally invest in?

Monthly Income Funds Equity Funds Balanced Funds Debt Funds

2. 8. The minimum return that you normally expect in a yearis _______________________________________________________..19. Which are the companies in which you invest the most(Rank according to Preferences).

Reliance MF _______ Franklin Templeton _______ SBI MF _______ HDFC MF _______ Fidelity _______

If, Others _______

10. What types of investing procedure do you normally follow?

(Tick) Payment in Lumpsum (One Time) Payment in Systematic Investment Plan

11. In what type of plan do you normally invest in? Growth Fund Dividend Payout Dividend Reinvest Indifferent among the plans

12. At what time do you normally invest in mutual funds?

At the time of NFO At year ending (31 st March) Any time of the year Whenever sufficient savingshave

13. What is your annual income (Approx)

Less than Rs. 1 lakh Rs. 1lakh to Rs. 2 lakh Rs. 2 lakh to Rs.3lakh More than Rs. 3 lakh

14. What is your annual Savings (Approx)

Less than Rs. 50000 Rs.50000 to Rs. 1 lakh

96


97/97

Rs.1 lakh-Rs.1.5 lakh More than Rs.1.5 lakh

15. How do you normally get information about Mutual Fund?

Friend / Associates Newspapers

Advertisements Internet which sites please specify _______________________ Agents

18. Can you suggest any facilities that any mutual fund can provide

you / facilities you want any mutual fund to provide you.

_______________________________________________________ _______________________________________________________ _________________________.

19. Remarks:

_______________________________________________________

_______________________________________________________

_______________________________________________________

_________________________.

Name: ____________________ Age:____ Gender:_______

Family Size:____________Marital status:_______________

Occupation: Education:

Documents

Abhinay Axis Project Final