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SAAB MARFIN MBA
Mutual Fund Awarnes
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SAAB MARFIN MBA
CONTENTS
1. INTRODUCTION
2. GROWTH OF MUTUAL FUNDS IN INDIA
3. REVIEW OF LITERATURE
4. RESEARCH METHODOLOGY
(i) Need of study
(ii) Objective of the study
(iii) Research design
(iv) Universe of the study
(v) Selection of sample
(vi) Tools for data analysis
(vii) Limitation Of The Study
5. AWARENESS & INVESTOR’S PERCEPTION REGARDING
MUTUAL FUNDS
6.IMPACT OF ISLAMIC BANKING PERSPECTIVE ON
MUTUAL FUND INVESTMENT IN VALLEY.
7.FINDINGS AND SUGGESTIONS
8. BIBLIOGRAPHY
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INTRODUCTION
A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is invested by the
fund manager in different types of securities depending upon the objective of
the scheme. These could range from shares to debentures to money market
instruments. The income earned through these investments and the capital
appreciation realized by the scheme are shared by its unit holders in
proportion to the number of units owned by them (pro rata). 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 portfolio at a
relatively low cost. Anybody with an inventible surplus of as little as a few
thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has
a defined investment objective and strategy.( Vaid,Seema (1994))
A mutual fund is the ideal investment vehicle for today’s complex and
modern financial scenario. Markets for equity shares, bonds and other fixed
income instruments, real estate, derivatives and other assets have become
mature and information driven. Price changes in these assets are driven by
global events occurring in faraway places. A typical individual is unlikely to
have the knowledge, skills, inclination and time to keep track of events,
understand their implications and act speedily. An individual also finds it
difficult to keep track of ownership of his assets, investments, brokerage
dues and bank transactions etc.(Chandra ,Prasanna(1995))
A mutual fund is the answer to all these situations. It appoints professionally
qualified and experienced staff that manages each of these functions on a
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full time basis. The large pool of money collected in the fund allows it to
hire such staff at a very low cost to each investor. In effect, the mutual fund
vehicle exploits economies of scale in all three areas - research, investments
and transaction processing. While the concept of individuals coming
together to invest money collectively is not new, the mutual fund in its
present form is a 20th century phenomenon.
In fact, mutual funds gained popularity only after the Second World War.
Globally, there are thousands of firms offering tens of thousands of mutual
funds with different investment objectives. Today, mutual funds collectively
manage almost as much as or more money as compared to banks.
( Gupta,L.C(1993),)
A draft offer document is to be prepared at the time of launching the fund.
Typically, it pre specifies the investment objectives of the fund, the risk
associated, the costs involved in the process and the broad rules for entry
into and exit from the fund and other areas of operation. In India, as in most
countries, these sponsors need approval from a regulator, SEBI (Securities
exchange Board of India) in our case. SEBI looks at track records of the
sponsor and its financial strength in granting approval to the fund for
commencing operations.A sponsor then hires an asset management company
to invest the funds according to the investment objective. It also hires
another entity to be the custodian of the assets of the fund and perhaps a
third one to handle registry work for the unit holders (subscribers) of the
fund.
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In the Indian context, the sponsors promote the Asset Management
Company also, in which it holds a majority stake. In many cases a sponsor
can hold a 100% stake in the Asset Management Company (AMC). E.g.
Birla Global Finance is the sponsor of the Birla Sun Life Asset Management
Company Ltd., which has floated different mutual funds schemes and also
acts as an asset manager for the funds collected under the schemes.
Historical perspective
Massachusetts Investors Trust (now MFS Investment Management) was
founded on March 21, 1924, and, after one year, it had 200 shareholders and
$392,000 in assets. The entire industry, which included a few closed-end
funds, represented less than $10 million in 1924.
The stock market crash of 1929 hindered the growth of mutual funds. In
response to the stock market crash, Congress passed the Securities Act of
1933 and the Securities Exchange Act of 1934. These laws require that a
fund be registered with the Securities and Exchange Commission (SEC) and
provide prospective investors with a prospectus that contains required
disclosures about the fund, the securities themselves, and fund manager. The
SEC helped draft the Investment Company Act of 1940, which sets forth the
guidelines with which all SEC-registered funds today must comply.
With renewed confidence in the stock market, mutual funds began to
blossom. By the end of the 1960s, there were approximately 270 funds with
$48 billion in assets. The first retail index fund, the First Index Investment
Trust, was formed in 1976 and headed by John Bogle, who conceptualized
many of the key tenets of the industry in his 1951 senior thesis at Princeton
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University. It is now called the Vanguard 500 Index Fund and is one of the
largest mutual funds ever with over $100 billion in assets.
One of the largest contributors of mutual fund growth was individual
retirement account (IRA) provisions added to the Internal Revenue Code in
1975, allowing individuals (including those already in corporate pension
plans) to contribute $2,000 a year. Mutual funds are now popular in
employer-sponsored defined contribution retirement plans (401(k)s), IRAs
and Roth IRAs.
As of October 2007, there are 8,015 mutual funds that belong to the
Investment Company Institute (ICI), the national association of investment
companies in the United States, with combined assets of $12.356 trillion.
(http://www.amfiindia.com/showhtml.asp?page=mfindustry)
GROWTH OF MUTUAL FUNDS IN INDIA
The Evolution
The 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:
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Phase 1. 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 Growth Fund and India Fund (India's first offshore
fund) in 1986, Mastershare (India’s 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
from the State Bank of India became the first non-UTI mutual fund in India.
SBI Mutual Fund was later followed by Canbank 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.
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SAAB MARFIN MBA
1992-93Amount
Mobilized
Assets Under
Management
Mobilization as % of
gross Domestic Savings
UTI 11,057 38,247 5.2%
Public
Sector1,964 8,757 0.9%
Total 13,021 47,004 6.1%
[source:geojit.com: http://www.geojit.indiacoe.com/Geojit_LP.htm?
gclid=CMDI85PXyZMCFQUXewodqGltoA&clkid=vp_483d9150176cf]
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 to investors 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 the SEBI after the year 1996. The mobilization of funds and the
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SAAB MARFIN MBA
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 and AMFI, 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-organised 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 growth in mobilization of funds
from investors and assets under management which is supported by the
following data:
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SAAB MARFIN MBA GROSS FUND MOBILISATION (RS. CRORES)
FROM TO UTIPUBLIC
SECTOR
PRIVAT
E
SECTOR
TOTAL
01-April-98 31-Mar-99 11,679 1,732 7,966 21,377
01-April-9931-
March-0013,536 4,039 42,173 59,748
01-April-0031-
March-0112,413 6,192 74,352 92,957
01-April-0131-
March-024,643 13,613 1,46,267 1,64,523
01-April-02 31-Jan-03 5,505 22,923 2,20,551 2,48,979
01-Feb.-0331-
March-03* 7,259* 58,435 65,694
01-April-0331-
March-04- 68,558 5,21,632 5,90,190
01-April-0431-
March-05- 1,03,246 7,36,416 8,39,662
01-April-0531-
March-06- 1,83,446 9,14,712 10,98,158
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[source:amfiindia.com:http://www.amfiindia.com/pu-
showfundwiseaum.asp?admin=yn]
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
ASSETS UNDER MANAGEMENT (RS. CRORES)
AS ON UTIPUBLIC
SECTOR
PRIVATE
SECTORTOTAL
31-
March-9
9
53,320 8,292 6,860 68,472
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SAAB MARFIN MBA
private sector players.
Latest Asset Under Management for all Mutual Fund houses,
increase or decrease in corpus, sales & redemption figures..
Amount in Rs. Crores
Mutual Fund
Name
No. of
Schemes*
Asset Under Management
As on Corpus As on Corpus Net inc/dec
in corpusABN AMRO
Mutual Fund
337 Apr
30,
2008
6,081.74 Mar
31,
2008
6,675.73 -593.99
AIG Global
Investment
Group Mutual
Fund
54 Apr
30,
2008
4,525.50 Mar
31,
2008
3,148.63 1376.87
Benchmark
Mutual Fund
12 Feb
29,
2008
4,954.72 Jan
31,
2008
5,611.00 -656.276
Birla Mutual
Fund
350 Apr
30,
2008
42,722.59 Mar
31,
2008
34,750.00 7972.59
BOB Mutual
Fund
22 Apr
30,
73.16 Mar
31,
70.34 2.812
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SAAB MARFIN MBA
2008 2008Canara
Robeco
Mutual Fund
54 Apr
30,
2008
3,341.37 Mar
31,
2008
2,484.28 857.09
DBS Chola
Mutual Fund
80 Apr
30,
2008
1,790.23 Mar
31,
2008
1,963.92 -173.69
Deutsche
Mutual Fund
187 Apr
30,
2008
12,740.00 Mar
31,
2008
11,996.00 744
DSP Merrill
Lynch Mutual
Fund
211 Feb
29,
2008
19,940.40 Jan
31,
2008
19,136.00 804.396
Escorts
Mutual Fund
26 Feb
29,
2008
146.93 Jan
31,
2008
175.80 -28.872
Fidelity
Mutual Fund
40 Apr
30,
2008
8,943.36 Mar
31,
2008
8,294.05 649.31
Franklin
Templeton
Investments
234 Feb
29,
2008
29,424.58 Jan
31,
2008
29,604.33 -179.756
HDFC Mutual
Fund
401 Feb
29,
2008
46,291.97 Jan
31,
2008
43,762.70 2529.274
HSBC Mutual
Fund
232 Apr
30,
2008
17,701.83 Mar
31,
2008
13,953.08 3748.754
ICICI
Prudential
435 Apr
30,
57,575.02 Mar
31,
51,810.85 5764.17
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SAAB MARFIN MBA
Mutual Fund 2008 2008ING Mutual
Fund
266 Mar
31,
2008
8,608.29 Feb
29,
2008
9,844.71 -1236.42
JM Financial
Mutual Fund
171 Apr
30,
2008
12,686.73 Mar
31,
2008
11,032.93 1653.8
JPMorgan
Mutual Fund
9 Apr
30,
2008
2,646.22 Mar
31,
2008
2,081.42 564.8
Kotak
Mahindra
Mutual Fund
200 Apr
30,
2008
21,228.96 Mar
31,
2008
16,135.52 5093.44
LIC Mutual
Fund
118 Feb
29,
2008
15,103.00 Jan
31,
2008
13,387.40 1715.602
Lotus India
Mutual Fund
230 Feb
29,
2008
9,763.88 Jan
31,
2008
10,057.10 -293.218
Mirae Asset
Mutual Fund
35 Apr
30,
2008
2,186.04 - - -
Morgan
Stanley
Mutual Fund
3 Apr
30,
2008
3,561.65 Mar
31,
2008
3,172.00 389.65
PRINCIPAL
Mutual Fund
156 Apr
30,
2008
15,506.55 Mar
31,
2008
11,780.02 3726.53
Quantum
Mutual Fund
6 Apr
30,
65.71 Mar
31,
64.22 1.49
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SAAB MARFIN MBA
2008 2008Reliance
Mutual Fund
353 Feb
29,
2008
93,531.68 Jan
31,
2008
77,210.04 16321.638
Sahara Mutual
Fund
45 Apr
30,
2008
262.84 Mar
31,
2008
180.38 82.464
SBI Mutual
Fund
177 Feb
29,
2008
29,492.97 Jan
31,
2008
27,581.54 1911.428
Standard
Chartered
Mutual Fund
261 Apr
30,
2008
14,676.10 Mar
31,
2008
11,364.50 3311.6
Sundaram
Mutual Fund
224 Feb
29,
2008
14,356.00 Jan
31,
2008
13,285.04 1070.96
Tata Mutual
Fund
395 Mar
31,
2008
19,517.45 Feb
29,
2008
19,422.61 94.84
Taurus
Mutual Fund
16 Apr
30,
2008
348.22 Mar
31,
2008
318.53 29.69
UTI Mutual
Fund
319 Mar
31,
2008
48,347.60 Feb
29,
2008
52,464.71 -4117.114
[Source: Mutualfundsindia Research Team:
http://www.mutualfundsindia.com/Assets%20_under%20_Management.asp]
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TYPES OF MUTUAL FUNDS
General Classification of Mutual Funds
Open-end Funds
Funds that can sell and purchase units at any point in time are classified as
Open-end Funds. The fund size (corpus) of an open-end fund is variable
(keeps changing) because of continuous selling (to investors) and
repurchases (from the investors) by the fund. An open-end fund is not
required to keep selling new units to the investors at all times but is required
to always repurchase, when an investor wants to sell his units. The NAV of
an open-end fund is calculated every day.
Closed-end Funds
Funds that can sell a fixed number of units only during the New Fund Offer
(NFO) period are known as Closed-end Funds. The corpus of a Closed-end
Fund remains unchanged at all times. After the closure of the offer, buying
and redemption of units by the investors directly from the Funds is not
allowed. However, to protect the interests of the investors, SEBI provides
investors with two avenues to liquidate their positions:
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SAAB MARFIN MBA
1. Closed-end Funds are listed on the stock exchanges where investors
can buy/sell units from/to each other. The trading is generally done at
a discount to the NAV of the scheme. The NAV of a closed-end fund
is computed on a weekly basis (updated every Thursday).
Closed-end Funds may also offer "buy-back of units" to the unit holders. In
this case, the corpus of the Fund and its outstanding units do get changed.
Load Funds
Mutual Funds incur various expenses on marketing, distribution, advertising,
portfolio churning, fund manager's salary etc. Many funds recover these
expenses from the investors in the form of load. These funds are known as
Load Funds. A load fund may impose following types of loads on the
investors:
• Entry Load - Also known as Front-end load, it refers to the load
charged to an investor at the time of his entry into a scheme. Entry
load is deducted from the investor's contribution amount to the fund.
• Exit Load - Also known as Back-end load, these charges are imposed
on an investor when he redeems his units (exits from the scheme).
Exit load is deducted from the redemption proceeds to an outgoing
investor.
• Deferred Load - Deferred load is charged to the scheme over a period
of time.
• Contingent Deferred Sales Charge (CDSC) - In some schemes, the
percentage of exit load reduces as the investor stays longer with the
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SAAB MARFIN MBA
fund. This type of load is known as Contingent Deferred Sales
Charge.
No-load Funds
All those funds that do not charge any of the above mentioned loads are
known as No-load Funds.
Tax-exempt Funds
Funds that invest in securities free from tax are known as Tax-exempt
Funds. All open-end equity oriented funds are exempt from distribution tax
(tax for distributing income to investors). Long term capital gains and
dividend income in the hands of investors are tax-free.
Non-Tax-exempt Funds
Funds that invest in taxable securities are known as Non-Tax-exempt Funds.
In India, all funds, except open-end equity oriented funds are liable to pay
tax on distribution income. Profits arising out of sale of units by an investor
within 12 months of purchase are categorized as short-term capital gains,
which are taxable. Sale of units of an equity oriented fund is subject to
Securities Transaction Tax (STT). STT is deducted from the redemption
proceeds to an investor.
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SAAB MARFIN MBA
BROAD MUTUAL FUND TYPES
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SAAB MARFIN MBA
1. Equity Funds
Equity funds are considered to be the more risky funds as compared to
other fund types, but they also provide higher returns than other funds.
It is advisable that an investor looking to invest in an equity fund
should invest for long term i.e. for 3 years or more. There are different
types of equity funds each falling into different risk bracket. In the
order of decreasing risk level, there are following types of equity
funds:
a. Aggressive Growth Funds - In Aggressive Growth Funds, fund
managers aspire for maximum capital appreciation and invest in less
researched shares of speculative nature. Because of these speculative
investments Aggressive Growth Funds become more volatile and
thus, are prone to higher risk than other equity funds.
b. Growth Funds - Growth Funds also invest for capital appreciation
(with time horizon of 3 to 5 years) but they are different from
Aggressive Growth Funds in the sense that they invest in companies
that are expected to outperform the market in the future. Without
entirely adopting speculative strategies, Growth Funds invest in those
companies that are expected to post above average earnings in the
future.
c. Specialty Funds - Specialty Funds have stated criteria for
investments and their portfolio comprises of only those companies
that meet their criteria. Criteria for some specialty funds could be to
invest/not to invest in particular regions/companies. Specialty funds
are concentrated and thus, are comparatively riskier than diversified
funds.. There are following types of specialty funds:
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SAAB MARFIN MBA
i. Sector Funds: Equity funds that invest in a particular
sector/industry of the market are known as Sector Funds. The
exposure of these funds is limited to a particular sector (say
Information Technology, Auto, Banking, Pharmaceuticals or
Fast Moving Consumer Goods) which is why they are more
risky than equity funds that invest in multiple sectors.
ii. Foreign Securities Funds: Foreign Securities Equity Funds
have the option to invest in one or more foreign companies.
Foreign securities funds achieve international diversification
and hence they are less risky than sector funds. However,
foreign securities funds are exposed to foreign exchange rate
risk and country risk.
Mid-Cap or Small-Cap Funds: Funds that invest in companies
having lower market capitalization than large capitalization
companies are called Mid-Cap or Small-Cap Funds. Market
iii. Capitalization of Mid-Cap companies is less than that of big,
blue chip companies (less than Rs. 2500 crores but more than
Rs. 500 crores) and Small-Cap companies have market
capitalization of less than Rs. 500 crores. Market Capitalization
of a company can be calculated by multiplying the market price
of the company's share by the total number of its outstanding
shares in the market. The shares of Mid-Cap or Small-Cap
Companies are not as liquid as of Large-Cap Companies which
gives rise to volatility in share prices of these companies and
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SAAB MARFIN MBA
consequently, investment gets risky.
iv. Option Income Funds*: While not yet available in India,
Option Income Funds write options on a large fraction of their
portfolio. Proper use of options can help to reduce volatility,
which is otherwise considered as a risky instrument. These
funds invest in big, high dividend yielding companies, and then
sell options against their stock positions, which generate stable
income for investors.
Diversified Equity Funds - Except for a small portion of investment
in liquid money market, diversified equity funds invest mainly in
equities without any concentration on a particular sector(s). These
funds are well diversified and reduce sector-specific or company-
specific risk. However, like all other funds diversified equity funds
too are exposed to equity market risk. One prominent type of
diversified equity fund in India is Equity Linked Savings Schemes
(ELSS). As per the mandate, a minimum of 90% of investments by
ELSS should be in equities at all times. ELSS investors are eligible to
claim deduction from taxable income (up to Rs 1 lakh) at the time of
filing the income tax return. ELSS usually has a lock-in period and in
case of any redemption by the investor before the expiry of the lock-in
period makes him liable to pay income tax on such income(s) for
which he may have received any tax exemption(s) in the past.
d. Equity Index Funds - Equity Index Funds have the objective to
match the performance of a specific stock market index. The portfolio
of these funds comprises of the same companies that form the index
and is constituted in the same proportion as the index. Equity index
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SAAB MARFIN MBA
funds that follow broad indices (like S&P CNX Nifty, Sensex) are less
risky than equity index funds that follow narrow sectoral indices (like
BSEBANKEX or CNX Bank Index etc). Narrow indices are less
diversified and therefore, are more risky.
e. Value Funds - Value Funds invest in those companies that have
sound fundamentals and whose share prices are currently under-
valued. The portfolio of these funds comprises of shares that are
trading at a low Price to Earning Ratio (Market Price per Share /
Earning per Share) and a low Market to Book Value (Fundamental
Value) Ratio. Value Funds may select companies from diversified
sectors and are exposed to lower risk level as compared to growth
funds or specialty funds. Value stocks are generally from cyclical
industries (such as cement, steel, sugar etc.) which make them volatile
in the short-term. Therefore, it is advisable to invest in Value funds
with a long-term time horizon as risk in the long term, to a large
extent, is reduced.
Equity Income or Dividend Yield Funds - The objective of Equity Income
or Dividend Yield Equity Funds is to generate high recurring income and
steady capital appreciation for investors by investing in those companies
which issue high dividends (such as Power or Utility companies whose share
prices fluctuate comparatively lesser than other companies' share prices).
Equity Income or Dividend Yield Equity Funds are generally exposed to the
lowest risk level as compared to other equity funds.
2. Debt / Income Funds
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SAAB MARFIN MBA
Funds that invest in medium to long-term debt instruments issued by
private companies, banks, financial institutions, governments and
other entities belonging to various sectors (like infrastructure
companies etc.) are known as Debt / Income Funds. Debt funds are
low risk profile funds that seek to generate fixed current income (and
not capital appreciation) to investors
3. Diversified Debt Funds – Debt funds that invest in all securities
issued by entities belonging to all sectors of the market are known as
diversified debt funds. The best feature of diversified debt funds is
that investments are properly diversified into all sectors which results
in risk reduction. Any loss incurred, on account of default by a debt
issuer, is shared by all investors which further reduces risk for an
individual investor.
a. Focused Debt Funds* - Unlike diversified debt funds, focused debt
funds are narrow focus funds that are confined to investments in
selective debt securities, issued by companies of a specific sector or
industry or origin. Some examples of focused debt funds are sector,
specialized and offshore debt funds, funds that invest only in Tax Free
Infrastructure or Municipal Bonds. Because of their narrow
orientation, focused debt funds are more risky as compared to
diversified debt funds. Although not yet available in India, these funds
are conceivable and may be offered to investors very soon.
High Yield Debt funds - As we now understand that risk of default is
present in all debt funds, and therefore, debt funds generally try to minimize
the risk of default by investing in securities issued by only those borrowers
who are considered to be of "investment grade". But, High Yield Debt Funds
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SAAB MARFIN MBA
adopt a different strategy and prefer securities issued by those issuers who
are considered to be of "below investment grade". The motive behind
adopting this sort of risky strategy is to earn higher interest returns from
these issuers. These funds are more volatile and bear higher default risk,
although they may earn at times higher returns for investors.
b. Assured Return Funds - Although it is not necessary that a fund will
meet its objectives or provide assured returns to investors, but there
can be funds that come with a lock-in period and offer assurance of
annual returns to investors during the lock-in period. Any shortfall in
returns is suffered by the sponsors or the Asset Management
Companies (AMCs). These funds are generally debt funds and
provide investors with a low-risk investment opportunity. However,
the security of investments depends upon the net worth of the
guarantor (whose name is specified in advance on the offer
document).
c. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-
end schemes having short term maturity period (of less than one year)
that offer a series of plans and issue units to investors at regular
intervals. Unlike closed-end funds, fixed term plans are not listed on
the exchanges. Fixed term plan series usually invest in debt / income
schemes and target short-term investors. The objective of fixed term
plan schemes is to gratify investors by generating some expected
returns in a short period.
4. Gilt Funds
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Also known as Government Securities in India, Gilt Funds invest in
government papers (named dated securities) having medium to long
term maturity period. Issued by the Government of India, these
investments have little credit risk (risk of default) and provide safety
of principal to the investors. However, like all debt funds, gilt funds
too are exposed to interest rate risk. Interest rates and prices of debt
securities are inversely related and any change in the interest rates
results in a change in the NAV of debt/gilt funds in an opposite
direction.
4. Money Market / Liquid Funds
Money market / liquid funds invest in short-term (maturing within one
year) interest bearing debt instruments. These securities are highly
liquid and provide safety of investment, thus making money market /
liquid funds the safest investment option when compared with other
mutual fund types. However, even money market / liquid funds are
exposed to the interest rate risk. The typical investment options for
liquid funds include Treasury Bills (issued by governments),
Commercial papers (issued by companies) and Certificates of Deposit
(issued by banks).
5. Hybrid Funds
As the name suggests, hybrid funds are those funds whose portfolio includes
a blend of equities, debts and money market securities. Hybrid funds have an
equal proportion of debt and equity in their portfolio. There are following
types of hybrid funds in India:
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a. Balanced Funds - The portfolio of balanced funds include assets like
debt securities, convertible securities, and equity and preference
shares held in a relatively equal proportion. The objectives of
balanced funds are to reward investors with a regular income,
moderate capital appreciation and at the same time minimizing the
risk of capital erosion. Balanced funds are appropriate for
conservative investors having a long term investment horizon.
b. Growth-and-Income Funds - Funds that combine features of growth
funds and income funds are known as Growth-and-Income Funds.
These funds invest in companies having potential for capital
appreciation and those known for issuing high dividends. The level of
risks involved in these funds is lower than growth funds and higher
than income funds.
c. Asset Allocation Funds - Mutual funds may invest in financial assets
like equity, debt, money market or non-financial (physical) assets like real
estate, commodities etc.. Asset allocation funds adopt a variable asset
allocation strategy that allows fund managers to switch over from one asset
class to another at any time depending upon their outlook for specific
markets.
6. Commodity Funds
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Those funds that focus on investing in different commodities (like metals,
food grains, crude oil etc.) or commodity companies or commodity futures
contracts are termed as Commodity Funds. A commodity fund that invests in
a single commodity or a group of commodities is a specialized commodity
fund and a commodity fund that invests in all available commodities is a
diversified commodity fund
7. Real Estate Funds
Funds that invest directly in real estate or lend to real estate developers or
invest in shares/securitized assets of housing finance companies, are known
as Specialized Real Estate Funds. The objective of these funds may be to
generate regular income for investors or capital appreciation.
8. Exchange Traded Funds (ETF)
Exchange Traded Funds provide investors with combined benefits of a
closed-end and an open-end mutual fund. Exchange Traded Funds follow
stock market indices and are traded on stock exchanges like a single stock at
index linked prices. The biggest advantage offered by these funds is that
they offer diversification, flexibility of holding a single share (tradable at
index linked prices) at the same time. Recently introduced in India, these
funds are quite popular abroad.
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9. Fund of Funds
Mutual funds that do not invest in financial or physical assets, but do invest
in other mutual fund schemes offered by different AMCs, are known as
Fund of Funds. Fund of Funds maintain a portfolio comprising of units of
other mutual fund schemes, just like conventional mutual funds maintain a
portfolio comprising of equity/debt/money market instruments or non
financial assets.
Risk Hierarchy of Different Mutual Funds
Thus, different mutual fund schemes are exposed to different levels of risk
and investors should know the level of risks associated with these schemes
before investing. The graphical representation hereunder provides a clearer
picture of the relationship between mutual funds and levels of risk associated
with these funds:
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[source:http://finance.indiamart.com/india_business_information/mutual_fu
nds_industry.html
Advantages of Mutual Funds:
• Professional Management - The primary advantage of funds (at least
theoretically) is the professional management of your money. Investors
purchase funds because they do not have the time or the expertise to manage
their own portfolio. A mutual fund is a relatively inexpensive way for a
small investor to get a full-time manager to make and monitor investments.
• Diversification - By owning shares in a mutual fund instead of owning
individual stocks or bonds, your risk is spread out. The idea behind
diversification is to invest in a large number of assets so that a loss in any
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particular investment is minimized by gains in others. In other words, the
more stocks and bonds you own, the less any one of them can hurt you
(think about Enron). Large mutual funds typically own hundreds of different
stocks in many different industries. It wouldn't be possible for an investor to
build this kind of a portfolio with a small amount of money.
• Economies of Scale - Because a mutual fund buys and sells large amounts
of securities at a time, its transaction costs are lower than you as an
individual would pay.
• Liquidity - Just like an individual stock, a mutual fund allows you to
request that your shares be converted into cash at any time.
• Simplicity - Buying a mutual fund is easy! Pretty well any bank has its
own line of mutual funds, and the minimum investment is small. Most
companies also have automatic purchase plans whereby as little as $100 can
be invested on a monthly basis.
Disadvantages of Mutual Funds:
• Professional Management- Many investors debate over whether or not
the so-called professionals are any better than you or I at picking stocks.
Management is by no means infallible, and, even if the fund loses money,
the manager still takes his/her cut.
• Costs - Mutual funds don't exist solely to make life easier--all funds are in
it for a profit. The mutual fund industry is masterful at burying costs under
layers of jargon.
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• Dilution - It's possible to have too much diversification because funds
have small holdings in so many 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.
• Taxes - When making decisions about money, fund managers don't
consider personal tax situation. 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.
REVIEW OF LITERATURE
In this section the literature study has been done by analyzing the various
research studies done by the various researchers in this regard i.e the
investors perception and awareness regarding the mutual fund investment
from time to time. By In India, one of the earliest attempts was made by
NCAER in 1964 when a survey of households was undertaken to understand
the attitude towards and motivation for saving of individuals. Another
NCAER study in 1996 analyzed the structure of the capital market and
presented the views and attitudes of individual shareholders.
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SEBI – NCAER Survey (2000) was carried out to estimate the number of
households and the population of individual investors, their economic and
demographic profile, portfolio size, and investment preference for equity as
well as other savings instruments. This is a unique and comprehensive study
of Indian Investors, for; data was collected from 3,00,0000 geographically
dispersed rural and urban households. Some of the relevant findings of the
study are:
Household’s preference for instruments match their risk perception;
Bank Deposit has an appeal across all income class; 43% of the non-investor
households equivalent to around 60 million households (estimated)
apparently lack awareness about stock markets; and, compared with low
income groups, the higher income groups have higher share of investments
in Mutual Funds (MFs) signifying that MFs have still not become truly the
investment vehicle for small
investors. Nevertheless, the study predicts that in the next two years (i.e.,
2007 hence) the investment of households in MFs is likely to increase. (Note
: Behavior is a reaction to a situation. So as situation changes, behavior gets
modified. Hence, findings and predictions of behavior studies should be
viewed accordingly).
Dr Gursharan Singh Kainth and Manpinder Kaur: INVESTORS’
PERCEPTION To examine the investors’ perception, a sample of 300
investors of Jalandhar investing in mutual fund was selected. 34 per cent
of the target population included business class, 50 per cent service class and
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the remaining 16 per cent were professionals who have invested in mutual
funds. Nearly three-fourth of the target population was in the age group of
25 to 50 years of age. One fourth of the target population was above 50
years of age and the balance 6 per cent below 25 years of age. Furthermore,
one-fourth of the investors fall between the income group of Rs. 40,000 to
50,000; 16 per cent in above 50,000 income class. Majority of the investors
(58 per cent) fall between the income groups of Rs.10, 000 to 40,000 per
month. On the other hand, one-fifth of the respondents are not satisfied with
their investment due to poor service after sales (9 per cent), other better
paying avenues in the market (6 per cent) and longer redemption period (21
per cent).One half of the investors believe bright future of mutual fund
industry. Only 5 per cent believe to be dark and 9 per cent it is a risky
avenue. One-tenth of the investors believe that most of the people are not
aware about the functioning of the mutual fund industry. Some generally
people have a traditional mind set of investing in banks, post offices and
government securities. In the era of declining interest rates, investors are
looking foe at other avenues and mutual funds is the foremost avenue.
Sujit Sikidar and Amrit Pal Singh (1996) carried out a survey with an
objective to understand the behavioral aspects of the investors of the North
Eastern region towards equity and mutual funds investment portfolio. The
survey revealed that the salaried and self employed formed the major
investors in mutual fund primarily due to tax concessions. UTI and SBI
schemes were popular in that part of the country then and other funds had
not proved to be a big hit during the time when survey was done.
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kavitha Ranganathan 2006 ” A Study of Fund Selection Behavior of
Individual Investors Towards Mutual Funds - with Reference to Mumbai
City ” Consumer behaviors from the marketing world and financial
economics has brought together to the surface an exciting area for study and
research: behavioral finance. The realization that this is a serious subject is,
however, barely dawning. Analysts seem to treat financial markets as an
aggregate of statistical observations, technical and fundamental analysis. A
rich view of research waits this sophisticated understanding of how financial
markets are also affected by the 'financial behaviors' of investors. With the
reforms of industrial policy, public sector, financial sector and the many
developments in the Indian money market and capital market, Mutual Funds
which has become an important portal for the small investors, is also
influenced by their financial behaviors. Hence, this study has made an
attempt to examine the related aspects of the fund selection behaviors of
individual investors towards Mutual funds, in the city of Mumbai. From the
researchers and academicians point of view, such a study will help in
developing and expanding knowledge in this field.
Shanmugham (2000) conducted a survey of 201 individual investors to
study the information sourcing by investors, their perceptions of various
investment strategy dimensions and the factors motivating share investment
decisions, and
reports that among the various factors, psychological and sociological
factors dominated the economic factors in share investment decisions
Ippolito (1992) says that fund/scheme selection by investors is based on
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past performance of the funds and money flows into winning funds more
rapidly than they flow out of losing funds.
De Bondt and Thaler (1985) while investigating the possible psychological
basis for investor behaviors, argue that mean reversion in stock prices is an
evidence of investor over reaction where investors overemphasize recent
firm performance in forming future expectations.
Gupta (1994) made a household investor survey with the objective to
provide data on the investor preferences on MFs and other financial assets.
The findings of the study were more appropriate, at that time, to the policy
makers and mutual funds to design the financial products for the future.
Madhusudhan V Jambodekar (1996) conducted a study to assess the
awareness of MFs among investors, to identify the information sources
influencing the buying decision and the factors influencing the choice of a
particular fund. The study reveals among other things that Income Schemes
and Open Ended Schemes are more preferred than Growth Schemes and
Close Ended Schemes during the then prevalent market conditions. Investors
look for safety of Principal, Liquidity and Capital appreciation in the order
of importance; Newspapers and Magazines are the first source of
information through which investors get to know about MFs/Schemes and
investor service is a major differentiating factor in the selection of Mutual
Fund Schemes.
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Syama Sunder (1998) conducted a survey to get an insight into the mutual
fund operations of private institutions with special reference to Kothari
Pioneer. The survey revealed that awareness about Mutual Fund concept was
poor during that time in small cities like Vishakhapatnam. Agents play a
vital role in spreading the Mutual Fund culture; open-end schemes were
much preferred then; age and income are the two important determinants in
the selection of the fund/scheme; brand image and return are the prime
considerations while investing in any Mutual Fund.
Anjan Chakarabarti and Harsh Rungta (2000) stressed the importance of
brand effect in determining the competitive position of the AMCs. Their
study reveals that brand image factor, though cannot be easily captured by
computable performance measures, influences the investor’s perception and
hence his fund/scheme selection.
Shankar (1996) points out that the Indian investors do view Mutual Funds
as commodity products and AMCs, to capture the market should follow the
consumer product distribution model.
Since 1986, a number of articles and brief essays have been published in
financial dailies, periodicals, professional and research journals, explaining
the basic concept of Mutual Funds and highlight their importance in the
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Indian capital
Market environment. They touch upon varied aspects like Regulation of
Mutual Funds, Investor expectations, Investor protection, Trend in growth of
Mutual Funds and some are critical views on the performance and
functioning of Mutual Funds.
Mariassunta Giannetti & Andrei Simonov June 2004” Which
Investors Fear Expropriation? Evidence from Investors' Portfolio
Choices “ Using a data set that provides unprecedented detail on investors'
stockholdings, we analyze whether investors take the quality of corporate
governance into account when selecting stocks. We find that all categories
of investors who generally enjoy only security benefits (domestic and
foreign, institutional and small individual investors) are reluctant to invest in
companies with weak corporate governance. In contrast, individuals who are
well connected with the local financial community because they are board
members or hold large blocks of at least some listed companies behave
differently. They seem not to care about the expected extraction of private
benefits and even prefer to invest in companies where there is more scope
for it. These findings shed new light on the determinants of investor
behavior and portfolio choice, and suggest that it is important to distinguish
between investors who enjoy private benefits or access private information
and investors who enjoy only security benefits.
Bhagat, Sanjai June 22 1999 “ Why Consumers Choose Managed
Mutual Funds Over Index Funds: Hypotheses from Consumer
Behavior.” Much evidence exists which suggests that the vast majority of
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equity mutual fund managers do not possess differential information (or
skills) which allow them to achieve above average market returns for their
investors. Thus, when investors pay fees to equity mutual fund managers for
investment advice and management, the very probable outcome is that they
are reducing the return that they would otherwise achieve by investing in a
no managed index fund that tracks the total stock market (e.g., Wilshire
5000) or some significant portion of it (e.g., the Standard & Poor's 500). The
long-term negative consumer welfare implications are large, very possibly in
the hundreds of thousands of dollars for individual consumer investors.
Drawing largely on insights from the psychology, consumer behavior, and
behavioral finance literatures, we offer a series of hypotheses that may
partially account for such consumer choices. We conclude with a call for
increased government- and employer-sponsored education programs aimed
at creating a more informed consumer investor.
Peles, Nadav June 22 1997” Cognitive dissonance and mutual fund
investors.” One of the greatest mysteries in the mutual fund industry is why
some investors stay with funds that consistently perform poorly. Several
researchers note that investor dollars flow into winning funds more rapidly
than they flow out of losing funds. This differential is taken as evidence of
irrationality (Ippolito (1992)), differential management services and high
transactions costs (Sirri and Tufano (1992)), and a failure of investor
probability heuristics (Harliss and Peterson (1994)). In this paper we provide
evidence that investor psychology may affect the fund-switching decision.
Questionnaires taken from two groups of mutual fund investors suggest that
investor aversion to switching from poor performers may be explained by
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overly optimistic perceptions of past mutual fund performance. Samples of
both educated and casual mutual fund investors show that investor
recollections of past performance are consistently biased above actual past
performance. This recollection bias may be why investors justify remaining
in funds that consistently perform poorly. Although investor inertia might
actually be due to high economic switching costs, our evidence suggests that
investors nonetheless adjust their beliefs to support past decisions
Falkenstein, Eric(1996)” Preferences for Stock Characteristics as
Revealed by Mutual Fund Portfolio Holdings ” This investigation of the
cross-section of mutual fund equity holdings for the years 1991 and 1992
shows that mutual funds have a significant preference towards stocks with
high visibility and low transaction costs, and are averse to stocks with low
idiosyncratic volatility. These findings are relevant to theories concerning
investor recognition, a potential agency problem in mutual funds, tests of
trend-following and herd behavior by mutual funds, and corporate finance.
Lunde, Timmermann, and Blake (1999), in “The Hazards of Mutual
Fund Underperformance: A Cox Regression Analysis,” investigate the
relationship between funds’ conditional probability of closure and their
return performance. The authors explain that the process of fund attrition
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rates is important because: (1) survivorship bias is impacted by the funds’
lives and their relative performance; (2) duration profiles of funds is
important for understanding fund managers’ incentive environments; and (3)
termination processes may provide information about investor reaction to
poor performance. The paper measures the importance of various factors
influencing the process and rate by which funds are terminated. After
examining a data set of dead and surviving funds (973 and 1402,
respectively), the authors present some reasons why funds are terminated:
(1) not reaching critical mass in capitalization, (2) merging a poorly
performing fund with a similar, more successful fund, and (3) merging or
closing a poorly performing fund to improve family group performance
overall. All of these are related to fund performance, which the authors use
to explain fund deaths.
Treynor and Mazuy (1966), in “Can Mutual Funds Outguess the
Market?”, discuss how investors frequently expect managers to be able to
anticipate market moves, and the dilemma of whether or not managers
should try to time the market. In addressing the issue, they explain that the
only way a fund can translate ability to outguess the market into higher
shareholders’ returns is to vary the fund’s systematic volatility in a manner
that results in an upwardly concave characteristic line. Returns for 57 funds
(1953-1962) are employed to determine if the volatility of a fund is higher in
up-years than in years when the market does poorly. They compute a
characteristic line wherein a managed fund’s return is plotted against the rate
of return for a suitable market index
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From the above review it can be inferred that Mutual Fund as an
investment vehicle is capturing the attention of various segments of the
society, like academicians, industrialists, financial intermediaries,
investors and regulators for varied reasons and deserves an indepth
study.
RESEARCH METHODOLOGY
For this study a survey conducted by collecting information from
various sources. For the purpose of collecting information both primary and
secondary data was used. The study is manly aims to now the
“AWARENESS AND INVESTORS PERCEPTION RERGARDING
MUTUAL FUND IN THE KASHMIR VALLEY”. The study undertaken is
of exploratory in nature. The present chapter deals with the database and
research methodology. This chapter explains the research design, universe of
the study, selection of sample, data collection techniques and tools used in
data analysis.
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NEED OF THE STUDY
The need of study has been aroused in order to see the preference,
awareness and the investors perception regarding the mutual funds in the
Kashmir valley
The mutual funds industry has grown by leaps and bounds in last couple of
years. Following the strengthening of regulatory framework there is now
greater transparency and credibility in the functioning of mutual funds and
has been successful in regaining investor’s faith. But to sustain the
momentum it should start focusing on the areas where greater accountability
and transparency could propel the industry towards a new growth trajectory.
As of now big challenge for the mutual fund industry is to mount on investor
awareness and to spread further to the semi-urban and rural areas. These
initiatives would help towards making the Indian mutual fund industry more
vibrant and competitive. To make this happen it calls for a greater role not
only part of the regulator but also on industry and distributors and ensure
that investor confidence is maintained through consistent performance and
best business practices.
Mutual Funds have emerged as an important segment of financial markets
and so far have delivered value to the investors. But no industry can flourish
without a proper regulatory mechanism in the place. SEBI has played a vital
role in regularizing the mutual fund business. From time to time it has tried
to plug the loopholes prevailing in the system and safeguard the interest of
investor who has been the backbone of this unprecedented growth.
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OBJECTIVES OF THE STUDY
The study has been undertaken and various objectives have been
determined. These objectives are as follows:-
To evaluate the Awareness and investors perception regarding the
mutual funds in the Kashmir valley.
To evaluate the impact of Islamic banking perspective on mutual funds
in Kashmir valley
Research Design
A research design is an arrangement of condition for collection and analysis
of data in a manner that aims to combine relevance to the research purpose
with economy in procedure. A good research design has the characteristics
like; problem definition, specific method of data collection and analysis, a
research design is purely and simply the frame work or planned for a study
that guides the collection and analysis of data.
Scope of the study
The Primary study is conducted in the city of Srinagar and some rural areas
of Kashmir also. Due to time and resources constraints, the primary study is
limited to certain boundaries. But secondary study has been made with the
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help of various literatures.
Data Collection
Both primary and secondary data has been collected for meeting the
objectives of the research.
Primary data
Primary data has been collected by conducting personal interviews and
administering an undisguised, unbiased structured questionnaire to the
respondents. Primary data was collected, by getting filled the questionnaires
from the respondents. A copy of the questionnaire has been attached in the
appendix.
Secondary data
The secondary data has been collected from secondary sources of
information that included websites, books and previous reports, brochures,
journals, magazines, newspapers.
Procedure of data collection
The procedure, which has been used for data collection, is through
Questionnaire.
Universe of the study
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The universe of present study was taken as the rural as well as the
urban people of the valley.
Selection of sample
A sample of 70 respondents were taken from the universe. The
respondents of both genders belonging to different age groups, occupation
and having different education qualification were taken for the study.
Random sampling technique was used for collecting the sample and the
respondents were personally interviewed for the data collection. Random
sampling refers to that fraction of population being investigated, which is
selected by the convenience of the investigator.
Sample Size: The sample size for this project is 70 on the basis of the
questionnaire.
Tools for data analysis:
For analyzing “Awareness and investors perception regarding mutual
fund in Kashmir valley” percentage analysis is used. This has been done
through bar charts.
Tables are useful when comparative percentage and analysis has to be made.
Limitations Of the study
Although the report has been made on the relevant facts and figures but
certain problems have been faced, which are as follows: -
Sample size taken is small (70) and may not be sufficient to predict the
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results with 100% accuracy.
1. Due to paucity of time, money and resources the sample size is
limited to…. Respondents which may bring bias in the results.
2. The respondents were sometimes biased while answering the
questions.
3. In certain cases the respondents were lazy and they filled the
questionnaire without any seriousness.
4. The study only covers the particular area of the Kashmir valley that
may not be applicable to other areas.
5. Unpredictable customer’s psychology in itself is another limitation of
every consumer behavior study including the present one.
AWARENESS & INVESTOR’S PERCEPTION
REGARDING MUTUAL FUNDS
This section deals with the research part of he study. I have categories the
study into various phases. I have distribute the investors into various
categorize i.e on the basis of their age, occupation, education, nature,
experience and the preference.
I have categorize the investors on the basis of their age as follows. as I have
taken the sample of 70 investors, the age of the investors follows as:
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1 .AGE STRUCTURE (i) up to 30 years-Y1
(ii) 31-45 years –Y2
(iii) 46-60 years –Y3
(iv) Above 60-Y4
Table: 1
AGE GROUP WISE DISTRIBUTION OF INVESTORS
Age Number of investors % of investors
Y1 25 35.71%
Y2 26 37.14%
Y3 14 20.01%
Y4 05 07.14%
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TOTAL 70 100%
After analyzing the above table ,it can be extracted that the maximum
percentage of the investors falls in the 31-45 years of age i.e
37.14%.which is followed by the age group of 30 years i.e 35.71%,and
the least investors falls in the category of Y4 i.e only 05 investors and i.e
07.14%
Table: 2
2. OCCUPATION WISE DISTRIBUTION OF INVESTORS
OCCUPATION Number of investors % of investors
SERVICE 37 52.87%
BUSINESSMEN 18 25.71%
PROFESSION 10 14.21%
AGRICULTURE 03 04.28%
OTHERS 02 02.85%
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TOTAL 70 100%
As far as the occupation of the investors is concerned, this can be seen
from the above mentioned table that the maximum number of investors
falls in the service class i.e 37(52.87%)which is followed by the
businessmen i.e 18(25.71%) and then the profession 10(14.21%).so
business class form a major portion in the mutual fund investment.
because they also have to save their tax in one form or the other.
businessmen also invest their surplus funds in one or the other fund in
order to save themselves from the income tax liability. because of the less
knowledge of the investment in mutual funds the agriculturist form the
least portion in the investment.
Table: 3
3. QUALIFICATION WISE DISTRIBUTION OF INVESTORTS
EDUCATION Number of investors % of investors
UNDERGRADUATES 05 07.01%
GRADUATES 28 40.04%
POST GRADUATES 13 18.67%
PROFESSIONALS 24 34.28%
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TOTAL 70 100%
As far as the qualification is concerned it can be depicted from the above
table that the maximum number of the investors falls in the category of
graduates i.e 28(40.04%) which is followed by professionals i.e
24(34.28%),which further is followed by post graduates 13(18.67%) and
the least falls in the category of the undergraduates i.e 05(07.01%).as far
as the literacy rate of the Jammu and Kashmir is concerned we can see
that The average rural literacy rate of Jammu and Kashmir is 48.22%
while the urban literacy rate marks an exemplary figure of 71.27%.
Table: 4
4. INVESTMENT EXPERIENCE WISE DISTRIBUTION OF
INVESTORS
EXPERIENCE IN
YEARS
Number of investors % of investors
< 1 YEAR (E1) 16 22.18%
1-3 years (E2) 25 35.91%
3-5 years (E3) 12 17.34%
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Above 5Years (E4) 17 24.57%
Total 70 100%
From the above table it can be extracted that the maximum number of
investors (25)are having the experience of 1-3 years(E2),which is
followed by the E4 and after that E1 i.e 16(22.18%),and the least falls I
the category of E3(12)17.34%.so we can see from the above table that
there is not too much of experience regarding the mutual fund investment
in the valley among the investors. because still there is beginning of this
mutual fund industry. but no doubt that the mutual fund sector is getting
speed in the valley day by day and the awareness in the investors is also
increasing.
Table: 5
5. PREFRENCE TOWARDS VARIOUS FINANCIAL ASSETS
OPTED FOR INVESTMENT BY INVESTORS
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NOTE:
1)Weights equal to 10,9,8,7…….1 have been assigned to ranks
1,2,3,4……..10 respectively to calculate weighted average score
2) weighted average score has been assigned ranks in the descending order
On the basis of the weighted average score, We can see from the above table
that the people of Jammu and Kashmir are more concerned towards the
traditional method of investment in bank deposits which makes a major
portion of investment i.e 9.09 which is followed by the public provident
fund 8.18 and the post office time deposits 8.12 and LIC 7.56 as far as the
FINANCIAL
ASSETS
RANKS1 2 3 4 5 6 7 8 9 10
WAS RANKS
Mutual funds 9 8 2 7 14 4 5 9 6 6 7.20 VI
Equity shares 11 4 8 7 3 8 10 7 5 7 7.18 VII
Debentures 9 6 12 4 8 4 8 9 6 4 7.47 V
Bonds 8 12 4 5 3 8 7 6 9 8 7.00 IX
Bank deposits 20 10 6 9 4 7 6 3 2 3 9.09 I
Kisan Vikas
patra
5 7 9 8 5 11 2 7 10 6 6.92 X
Post office time
deposits
10 9 8 7 12 7 5 5 4 3 8.12 III
Public provident
fund
16 7 5 10 4 7 8 3 7 3 8.18 II
LIC policies 6 8 7 9 10 12 4 6 3 5 7.56 IV
National saving
certificate
9 5 6 6 12 13 6 4 7 2 7.16 VIII
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SAAB MARFIN MBA
investment in mutual fund is concerned we can see that there is only a less
percentage of people who knows mutual funds alternate for investment i.e
only 7.20.but the trend is changing day by day. people are getting aware and
they are changing their preference of investment in other different schemes
and mutual fund is one of them.
Table: 6
6. SECTOR WISE PREFERENCE OF INVESTORS
Sector Number of investors % of investors
Public 49 70.00%
Private 12 17.09%
Both 09 12.91%
Total 70 100%
People of Kashmir valley are very much sensitive .On analyzing the past
many private investment companies enter into the valley they get the money
from the people but with the passage of time most of the companies were
fraudulent companies and they ran away after getting a huge sum of money,
most among them were the local companies also. so people are afraid of
putting their money in other investment alternate rather than the bank
deposits and the post office time deposits. and people mostly rely and
believe upon the public sector. we can see from the above table that the
major portion of sector preference is of public sector i.e 49(70%)which is
followed by the private sector i.e 12 out of 70(17.09%).so the people of
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SAAB MARFIN MBA
Kashmir valley mostly depend upon the public sector companies rather than
the private sector companies, in spite of that the private sector companies
provide better service to them.
Table: 7
(i) SECTOR WISE PREFERENCE OF INVESTORS BELONGING
TO VARIOUS AGE GROUPS
Age Group
Sector
Y1 Y2 Y3 Y4 TOTAL
Public 20
(40.81)
15
(30.61)
10
(20.40)
04
(08.16)
49
(70.00)Private 06
(50.00)
03
(25.00)
02
(16.67)
01
(08.33)
12
(17.14)Both 03
(33.33)
03
(33.33)
02
(22.22)
01
(11.11)
09
(12.85)Total 29 21 14 06 70
The above table shows the sector wise performance of investor belonging to
various age groups. The above table reflects that the most of the investors
falls in the category of Y1 i.e 20 which is followed by the Y2 i.e 15 and then
the Y3 and Y4.
Table: 8
(ii) SECTOR WISE PREFERENCE OF INVESTORS BELONGING
TO VARIOUS OCCUPATION GROUPS
55
SAAB MARFIN MBA
Occupation
Sector
Service agricultur
e
businessme
n
Professiona
l
Others TOTAL
Public 21
(42.85)
02
(04.08)
15
(30.61)
06
(12.24)
05
(10.2)
49
(70.00)
Private 03
(25.00)
-- 03
(25.00)
06
(50.00)
- 12
(17.14)
Both 03
(33.33)
- 04
(44.44)
01
(11.11)
01
(11.11)
09
(12.85)
Total 27 02 22 13 06 70
It is clearly reflected from the above table that the service class and the
business class 21 and 15 form the major portion of investors for the mutual
fund investment in the public sector also and the professionals 06 form the
major portion in the private sector which is followed by the business class.
Table:9
(iii)SECTOR WISE PREFERENCE OF INVESTORS BELONGING
TO VARIOUS EDUCATION GROUPS
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SAAB MARFIN MBA
Education
Sector
Under
graduate
Graduate Post
Graduate
Professional TOTAL
Public 03
(09.09)
14
(42.42)
06
(12.24)
10
(30.30)
33
(47.14)
Private 01
(03.12)
11
(34.37)
07
(21.87)
13
(40.62)
32
(45.71)Both 01
(20.00)
03
(60.00)
- 01
(20.00)
05
(07.14)
Total 05 28 13 24 70
From the above table it can be analyzed that the graduates (14)form the
major portion in the public sector which is followed by the professionals
(10).and in the private sector the professionals form the major part (13)
followed by the graduates.
Table: 10
(iv)SECTOR WISE PREFERENCE OF INVESTORS BELONGING
TO VARIOUS EXPERIENCE GROUPS
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SAAB MARFIN MBA
Experience
Sector
E1 E2 E3 E4 TOTAL
Public 05
(12.82)
14
(35.89)
09
(23.07)
11
(28.20)
39
(55.71)Private 08
(34.78)
07
(30.43)
02
(8.69)
06
(26.08)
23
(32.85)Both 03
(37.50)
04
(50.00)
01
(12.50)
- 08
(11.42)Total 16 25 12 17 70
As far as the experience regarding the various sector is concerned, The
Study from the above table shows that the major part is made by the E2
group i.e 14 people followed by the E4 group i.e 11.and in the private sector
the E1 group forms the major part as far as the experience is concerned
followed by the E2.
Table: 11
7. NATURE WISE PREFERENCE OF INVESTORS
58
SAAB MARFIN MBA
Nature Number of investors Percentage of
investors
Open ended 51 72.00%
Close ended 08 12.00%
Both 11 16.00%
TOTAL 70 100%
It is a trend of the whole india that the majority of the people prefer the
open ended schemes so is the case in the valley also. Shown in the above
table that the majority of the people i.e 51(72%)prefer the open ended
schemes which is followed by the close ended schemes 08(12%).this also
shows that people prefer the liquidity of the investment also because in
the open ended schemes they can withdraw their money at any time of
their need.
Table: 12
8. CATAGORY WISE PREFRENCE OF INVESTORS
59
SAAB MARFIN MBA
CATEGORY Number of investors Percentage of investors
Growth schemes 27 38.07%
Sector specific schemes 03 04.12%
Balanced schemes 06 08.15%
Tax saving schemes 12 17.24%
More than one 22 31.42%
Total 70 100%
The above table depicts that the major part of the investors invest in the
schemes of growth 27(38.07%) and the tax rebate schemes 12
(17.24%)because to save the tax. they don’t go for the speculation
purpose and because of the less knowledge they cant invest in the
particular sector.
Table: 13
9. PURPOSE BEHIND MAKING INVESTMENT IN MUTUAL
FUND
60
SAAB MARFIN MBA
PURPOSE OF
INVESTMENT
RANKS
1 2 3 4 5
WAS RANKS
Regular
income
21 11 09 15 14 14.66 III
Growth 22 12 14 16 06 15.86 I
Liquidity 18 13 12 14 13 14.60 IV
Speculation 08 13 17 20 12 12.33 V
Tax saving 19 12 14 15 10 15.00 II
NOTE:
• Weights equal to 5,4,3…….1 have been assigned to ranks 1,2,……..5
respectively to calculate weighted average score
• Weighted average score has been assigned ranks in the descending
order
On the basis of weighted average score , it is clear from the above
table that the major portion of the investment purpose is of the growth
i.e 15.86 followed by the tax saving schemes and the regular income
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SAAB MARFIN MBA
schemes i.e 15.00 and 14.66 respectively. for the liquidity purpose
also i.e 14.60 invest in the mutual fund. Speculation is the least
portion in the purpose in investing in the mutual funds i.e 12.33
Table: 14
10. INVESTORS PERCEPTION ABOUT BENEFITS OFFERED
BENEFITS
Highly
satisfied
satisfied average Not
satisfied
Highly
unsatisfied
TOTA
L
Return 09
(12.85)
25
(35.71)
15
(21.42)
13
(18.57)
08
(11.42)
70
Safety 07
(10.00)
20
(28.57)
18
(25.71)
14
(20.00)
11
(15.71)
70
Liquidity 15
(21.42)
30
(42.85)
15
(21.42)
06
(08.57)
04
(05.71)
70
Diversification 06
(08.57)
15
(21.42)
25
(35.71)
14
(20.00)
10
(14.28)
70
Well Said that the mutual fund returns are based on the market
conditions and their so is always written a note in the offer documents
that the “investment in mutual fund are subject to market risk, please
read the offer document carefully before investing” so as far as the
returns and the satisfaction level is concerned most of the people are
satisfied with the returns, safety and the liquidity. we can also see that
the liquidity forms a major preference in the mutual fund investment.
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SAAB MARFIN MBA
Table: 15
11. FACTORS CONSIDERING WHILE MAKING SELECTION
FOR A MUTUAL FUND
NOTE:
• Weights equal to 6,5,4…….1 have been assigned to ranks 1,2,……..6
respectively to calculate weighted average score
• Weighted average score has been assigned ranks in the descending
order
As far a the sensitivity of the people of valley is concerned, they see
the past performance of a particular fund and the scheme and of
course of the company Only then they invest. so here also the past
performance of the scheme i.e 12.61 people analyze the past
Preference
Factor
RANKS
1 2 3 4 5 6
WAS RANK
S
Promoters Name 11 13 14 16 05 11 12.19 IIPast
performance
17 14 08 09 12 10 12.61 I
Sector where
investment
would be made
09 16 12 13 11 09 12.00 III
Size of corpus 13 09 15 12 07 14 11.76 IV
Lock in period 12 14 15 09 08 12 11.38 V
Entry-exit load 07 15 10 11 16 11 11.09 VI
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SAAB MARFIN MBA
performance which is followed by the promoters name like the SBI
and the UTI.
Table: 16
12. SOURCES RELIED UPON BY INVESTOR FOR GETTING
INFORMATION WHILE INVESTING
SOURCES RELIED
UPON
RANKS1 2 3 4 5
WAS RANK
SBroker/sub-broker 21 15 14 11 09 15.86 I
Prospectus/newsletter 18 15 13 09 15 14.80 III
Friends/relatives 18 16 12 11 13 15.00 II
Professional
magazines/newspaper
s
08 15 23 14 10 13.80 V
Advertisements 11 15 16 17 11 13.86 IV
NOTE:
• Weights equal to 5,4,3…….1 have been assigned to ranks
1,2,3……..5 respectively to calculate weighted average score
• Weighted average score has been assigned ranks in the descending
order
On the basis of the weighted average score, After analyzing the above
table we can see that the brokers and the sub brokers made a major
portion of the source for the investor to invest in a particular fund. in
the valley there are almost 30 plus brokers(ARN holders) almost in
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SAAB MARFIN MBA
every district. so here also the brokers form the major portion i.e
15.86 which is followed by the information given by the friends and
the relatives i.e 15.00.other wise there are no other such means of
advertisement and the sources which can attract the people of valley
towards the mutual fund. Now some private limited companies of
mutual fund like the reliance and the ICICI mutual fund stress upon
these things to make advertisement in somewhat different manner.
they are using the radios and the news channels in order to promote
and advertise their schemes which is still lacking in the public sector
mutual funds.
Table: 17
13. INVESTORS PREFRENCE REGARDING MUTUAL
FUNDS
NAME OF
FUND
RANKS1 2 3 4 5 6 7 8 9 10 11 12
WAS RANK
SUTI MF 13 08 10 02 03 06 05 09 07 02 03 02 6.98 IJM MF 06 01 02 08 09 04 06 05 10 07 05 07 5.30 X
LIC MF 07 09 08 07 06 03 02 02 07 06 08 05 6.20 IV
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SAAB MARFIN MBA
SBI MF 09 08 07 05 09 04 06 03 02 05 06 06 6.44 II
HDFC MF 03 05 07 05 09 07 06 06 04 05 07 06 5.69 VII
PRINCIPLE
MF
02 03 04 04 06 06 06 12 09 07 06 05 5.11 XII
FRANKLIO
N
TEMPLTON
MF
10 07 05 08 07 04 05 03 05 06 04 06 5.12 XI
RELIANCE
MF
10 06 07 06 05 09 03 04 05 03 07 05 6.39 III
BIRLA SUN
LIFE MF
03 04 07 05 08 03 06 10 09 05 06 04 5.55 VIII
ALLIANCE
MF
02 07 03 07 05 04 09 06 11 10 02 04 5.48 IX
TATA MF 04 05 08 03 07 07 08 09 02 03 06 08 5.70 VI
ICICI PRU
MF
07 08 08 04 04 05 03 04 06 07 08 06 5.89 V
NOTE:
• Weights equal to 12,11,10,9,8…….1 have been assigned to ranks
1,2,3,4,5……..12 respectively to calculate weighted average score
• Weighted average score has been assigned ranks in the descending
order
Depicted from the above table that the people mostly believe in the public
sector ,so as per the weighted average score same is the case here people
mostly prefer the UTI and the SBI 6.98 and 6.39 for their investment which
is followed by the RELIANCE 6.39 and the LIC 6.20 and other private
companies.
Table: 18
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SAAB MARFIN MBA
14. REGARDING SATISFACTION LEVEL
SECTO
R
Very
satisfied
Reasonably
Satisfied
neutral Somewhat
unsatisfactory
Very
unsatisfactory
Total
Public 05
(12.5)
25
(62.5)
----- 07
(17.5)
03
(07.5)
40
(57.14)
Private 06
(30.00)
11
(55.00)
02
(10.00)
01
(05.00)
----- 20
(28.57)
Both 03
(30.00)
07
(70.00)
----- ----- ----- 10
(14.29)
Total 14 43 02 08 03 70
Majority of the people are reasonably satisfied with both the sectors
and what differs them is the after sale service by the sector companies,
which is preferred for the private sector only. their are some reasons why the
people are somewhat unsatisfied it is because still it is the beginning of the
mutual fund in the valley and the problems of redemption, statements and
other online problems in the SIP makes the people somewhat unhappy. but
these things will go away with the passage of time.
Table: 19
15. REGARDING DEFICIENCIES IN MUTUAL FUND
S.NO DEFICIENCY PUBLIC
SECTOR
PRIVATE
SECTOR
67
SAAB MARFIN MBA
1 Functioning
Unclear
05
(07.14)
11
(15.71)
2 Procedural
complexities
15
(21.42)
17
(24.28)
3 Service
dissatisfaction
35
(50.00)
25
(35.71)
4 Awareness
lacking
07
(10.00)
08
(11.42)
5 More than one 06
(08.57)
07
(10.00)6 none 02
(02.85)
02
(02.85)TOTAL 70 70
In valley, the service offered by the companies to the investor after the
investment is not satisfactory. This is what the negative point becomes for
both the sector companies. Many of the mutual funds don’t have their offices
in the valley they are doing their business with the help of a particular broker
or an agent or a brokerage house. Because that the PAN card has been made
mandatory by the SEBI it becomes the major problem for the invest to
invest in the fund because there is a negligible awareness of the PAN among
the people, and the negative perception regarding the PAN is being found
among the people.
Table: 20
16. REGARDING FUTURE OF MUTUAL FUND
68
SAAB MARFIN MBA
CATAGORY VERY
BRIGH
T
BRIGH
T
CAN’T
SAY
BLACK VERY
BLACK
TOTAL
PUBLIC 08
(24.24)
15
(45.45)
06
(18.18)
03
(09.09)
01
(03.03)
33
(47.14)
PRIVATE 11
(29.72)
18
(48.64)
05
(13.51)
02
(05.40)
01
(02.70)
37
(52.86)
TOTAL 19 33 11 05 02 70
It can be extracted from the above tables that it is still beginning of
mutual fund industry in the Kashmir valley. but the future of the mutual fund
is bright in the valley as far as the perception of the people is concerned. it
will take time to spread the wings in the valley with the passage of time.
Their are very other religious factors/reasons for the hindrance and slow start
of the mutual fund in he valley. But the concept of the Islamic banking has
also open the windows for the people to invest somewhat in the stock market
an in the mutual funds also. But overall with the advancement and the
changing perception of the people of the valley mutual fund is growing at a
good rate and is making a good space in the minds of the people of the
valley. not only he public sector mutual funds is being preferred by the
people but the private sector mutual fund is also gearing up in this field.
They are competing with the other mutual fund which has already made
entry in the valley. So future is bright for both of the sector and it depends
69
SAAB MARFIN MBA
upon the service and the transparency of the fund in the future. People are
getting aware and the knowledge about the mutual fund is spreading day by
day among the people.
IMPACT OF ISLAMIC BANKING PERSPECTIVE ON
MUTUAL FUND INVESTMENT
The term ‘Islamic Investment’ means a joint pool wherein the investors
contribute their surplus money for the purpose of its investment to earn
HALAL profits in strict conformity with the precepts of Islamic Shari’ah.
The subscribers of the Fund may receive a document certifying their
subscription and entitling them to the pro-rata profits actually accrued to the
Fund. These documents may be called ‘certificates’ ‘units’ ‘shares’ or may
be given any other name, but their validity in terms of Shari’ah, will always
be subject to two basic conditions:
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SAAB MARFIN MBA
Firstly, instead of a fixed return tied up with their face value, they must carry
a pro-rata profit actually earned by the Fund. Therefore, neither the principal
nor a rate of profit (tied up with the principal) can be guaranteed. The
subscribers must enter into the fund with a clear understanding that the
return on their subscription is tied up with the actual profit earned or loss
suffered by the Fund. If the Fund earn s huge profits, the return on their
subscription will increase to that proportion; however, in the case the Fund
suffers loss, they will have to share it also, unless the loss is caused by the
negligence or mis -management, in which case the management, and not the
Fund, will be liable to compensate it.
Secondly, the amounts so pooled together must be invested in a business
acceptable to Shari’ah. It means that not only the channels of investment, but
also the terms agreed with them must conform to the Islamic principles.
Keeping these basic requisites in view, the Islamic Investment Funds may
accommodate a variety of modes of investment, which are discussed briefly
in the following paragraphs.
(SOURCE:http://iio.moneycontrol.com/principles.php)
Equity Fund
In an equity fund the amounts are invested in the shares of joint stock
companies. The profits are mainly achieved through the capital gains by
purchasing the shares and selling them when their prices are increased.
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SAAB MARFIN MBA
Profits are also achieved by the dividends distributed by the relevant
companies.
It is obvious that if the main business of a company is not lawful in terms of
Shari’ah, it is not allowed for an Islamic Fund to purchase, hold or sell its
shares, because it will entail the direct involvement of the share holder in
that prohibited business.
Moreover, when a company is financed on the basis of interest, its funds
employed in the business are impure. Similarly, when the company receives
interest on its deposits an impure element is necessarily included in its
income which will be distributed to the shareholders through dividends.
However, a large number of the present day scholars do not endorse this
view. They argue that a joint stock company is basically different from a
simple partnership. In partnership, all policy decisions are taken by the
consensus of all the partners, and each one of them has a veto power with
regard to the policy of the business. Therefore, all the actions of a
partnership are rightfully attributed to each partner.
Conditions for investment in Shares/units
In the light of the foregoing discussion, dealing in equity shares can be
acceptable in Shari’ah subject to the following conditions:
1. The main business of the company is not volatile of Shari’ah. Therefore, it
is not permissible to acquire the shares of the companies providing financial
72
SAAB MARFIN MBA
services on interest, like conventional banks, insurance companies, or the
companies involved in some other business not approved by the Shai’ah,
such as the companies manufacturing, selling or offering liquors, pork haram
meat, or involved in gambling, night club activities, pornography etc.
2. If the main business of the companies is halal, like automobiles, textiles
etc, but they deposit their surplus amounts in an interest-bearing account or
borrow money on interest, the share-holder must express his disapproval
against such dealings, preferably by raising his voice against such activities
in the annual general meeting of the company.
3. If some income from interest-bearing accounts is included in the income
of the company, the proportion of such income in the dividend paid to the
shareholder must be given to charity, and must not be retained by him. For
example, if 5% of the whole income of a company has come out of interest-
bearing deposits, 5% of the dividend must be given to charity.
4. The shares of a company are negotiable only if the company owns some
illiquid assets. If all the assets of a company are in liquid form, i.e. in the
form of money, they cannot be purchased or sold except on par value,
because in this case the share represents money only and the money cannot
be traded in except at par. Some scholars are of the view that the ratio of
illiquid assets must be 51% at the least. They argue that if such assets are
less than 50%, the most of the assets are in liquid form, therefore, all its
assets should be treated as liquid on the basis of the juristic principle:
‘The majority deserves to be treated as the whole of a thing’ Some other
scholars have opined that even if the illiquid asset of a company are 33%, its
73
SAAB MARFIN MBA
shares can be treated as negotiable.
Firstly, the illiquid part of the mixture must not be in ignorable quantity. It
means that it should be in a considerable proportion.
Subject to these conditions, the purchase and sale of shares is permissible in
Shari’ah. An Islamic Equity Fund can be established on this basis. The
subscribers to the Fund will be treated in Shari’ah as partners ‘inter se’. All
the subscription amounts will form a joint pool and will be invested in
purchasing the shares of different companies. The profits can accrue either
through dividends distributed by the relevant companies or through the
appreciation in the prices of the shares. In the first case i.e. where the profits
earned through dividends, a certain proportion of the dividend, which
corresponds to the proportion of interest earned by the company, must be
given in charity. The contemporary Islamic Funds have termed this process
as ‘purification’.
INVESTING IN MUTUAL FUND FROM ISLAMIC POINT
OF VIEW
OCCUPATION Can
invest
freely
Can
invest
under
norms
Can’t
say
Prohibited Strictly
prohibited
TOTAL
SERVICE 15
(40.54)
13
(35.13)
07
(18.91)
01
(02.70)
01
(02.70)
37
(52.85)PROFESSION 05
(50.00)
03
(30.00)
02
(20.00)
- - 10
(14.28)
74
SAAB MARFIN MBA
AGRICULTUR
E
01
(33.33)
- 02
(66.67)
- - 03
(04.28)BUSINESSME
N
04
(22.22)
04
(22.22)
08
(44.44)
02
(11.11)
- 18
(25.71)OTHERS - 01
(50.00)
- 01
(50.00)
- 02
(02.85)TOTAL 25 21 19 04 01 70
Islamic investment is a major part of the Islamic Banking industry. Parsoli
Islamic Equity (PIE) Index tracks Shariat compliant stocks from listed
equities on Indian Stock Exchanges and offers an opportunity to the Muslim
investors to invest in Shariat compliant stocks.
The Parsoli Corporation Limited held the first Islamic Investment
Conference in Srinagar on June 2. Talha Sareshwala Chief Financial
Officer, PCL, talks to Nissar Bhat on Islamic financial solutions and
investment avenues for Muslims in the stock exchange. Excerpts:
Equity investment is the best hedging instrument against inflation. So when
they come they get the risk profile of an investor, that is what is the risk
bearing capacity of the client. putting all the money in stock market is like
putting all the eggs in one basket. Depending on the risk profile of the
clients, the company advise them to put 60 per cent in secondary market
that is pure investment, 10 per cent in mutual fund, 15 per cent in
commodity or insurance products and for rest to keep that in their hand but
not in the liquid form
75
SAAB MARFIN MBA
Commodities is a very good Shariat compliant. And so far as insurance is
concerned, ten years before it was haram. Why it was initially haram was
because the corpus of the amount which was collected in the form of
premium was invested in fixed instruments. So that was the main issue for
the Ulema to term insurance as non-Islamic. But now recently with
insurance sector opening up there are some products which are Shariat
compliant. Unit Linked Insurance Policy, for example, it is a monthly
insurance policy. Suppose if your premium is Rs 2000/month, you will see
in their statement it is clearly mentioned that Rs 400 goes towards your
premium, Rs 200 goes towards your administrative expenses and Rs 1400
goes towards your units and you are allotted the mutual fund units
equivalent to that. So when you take a ULIP product the risk part which has
been covered in the insurance you consider that as a bonus, that would be
your bonus, your main purpose is to invest in a long term perspective,
because that mutual fund investment is a long term investment and it is a
very good tax saving instrument. See if you are not saving tax you are
losing. So when you have some tax saving instrument why pay tax and not
go for investment. So insurance we consider as an investment avenue for
Muslims. So you can park some of your money into insurance investment,
some in mutual fund, some in secondary market and rest in primary market.
So this is the way we create the asset allocation for individual clients.
In Kashmir valle`y the company has done in-house research. Kashmir is a
very prominent place at par with other places in terms of making
investments. Because of the turmoil there was some problem, but the
research suggests that there is lot of scope in Kashmir for stock market
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SAAB MARFIN MBA
investment. There are 35 terminals in Kashmir valley from all the major
share brokering houses including ICICI, Asit Mehta etc. Why they are here
because Kashmiri people have money and they are investing and they want
to invest.
In India if you want to do any sort of investment, it is such a regulatory
environment. You have to open a Demat account, you have to open a trading
account and for that you have got a set of documents prescribed by the
authorities and that is called the KYC (know your customer) norms and in
that the most basic document is PAN card. In fact the government intends to
make this PAN card a common universal document for any government
related or any other work. And yet people don’t know what is a PAN card.
For any sort of investment in India, you need to aware the people. In the
finance capital of India, Mumbai, Muslims don’t know what is PAN card.
So you don’t believe in the first month in December when we did conference
we got 460 PAN card issued through our company
The second option for the management is to act as an agent for the
subscribers. In this case, the management may be given a pre-agreed fee for
its services. This fee may be fixed in lump sum or as a monthly or annual
remuneration. According to the contemporary Shari’ah scholars, the fee can
also be based on a percentage of the net asset value of the fund. For
example, it may be agreed that the management will get 2% or 3% of the net
value of the fund (1) at the end of every financial year.
However, it is necessary in Shari’ah to determine any one of the aforesaid
methods before the launch of the fund. The practical way for this would be
to disclose in the prospectus of the fund on what basis the fees of the
management will be paid. It is generally presumed that whoever subscribes
77
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to the fund agrees with the terms mentioned in the prospectus. Therefore, the
manner of paying the management will be taken as agreed upon by all the
subscribers.
FINDINGS AND SUGGESTIONS
The Nilamata Purana describes the Valley's origin from the waters, Ka
means "water" and Shimir means "to desiccate". Hence, Kashmir stands for
"a land desiccated from water". There is also a theory which takes Kashmir
to be a contraction of Kashyap-mira or Kashyapmir or Kashyapmeru, the
"sea or mountain of Kashyapa", the sage who is credited with having drained
the waters of the primordial lake Satisar, that Kashmir was before it was
reclaimed. The Nilamata Purana gives the name Kashmira to the Valley
considering it to be an embodiment of Uma and it is the Kashmir that the
world knows today.
As far as this project is concerned,I have analysed many things during
this session.some points I am going to share with you as summary and
suggestions.
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Time has changed a lot in the valley,it is clearly reflected from the past that
what the kahmir had faced.
But the new sun is almost ready to rise in the valley.as far as the mutual
funds investment in the valley is concerned,as I have already mentioned that
the people in the valley are very sensitive,emotional and somewhat
innocent.people are still dealing with the old and traditional method of
saving their money in the banks and in the post offices.the concept of mutual
fund is somewhat new to the people of kashmir.even the branch managers
,the employees or the person who is dealing with the mutual funds and sell
the mutual fund to the investors don’t know much about the mutual fund,the
basic concepts and the process how to deal with a particular fund.still it is a
beginning of this concept in the valley.but slow and steady this is getting
pace.people are getting involved in investing in the mutual fund.
1) Salaried persons,the professionals the students and the
businessmen are the people who are dealing with the mutual
funds to some extent and obviously there are many reasons for
investment and tax is the main reason.
2) The persons who are investing mainly prefer the open ended
schemes.because it gives him/her the option to redeam at any
time.
3) People are still relied upon the sorces like the brokers,the
relatives,friends etc.
4) People prefer mainly the public sector mutual funds because
there is a sort of faith on the public ,and they thought that the
private companies are somewhat aggressive and they don’t
believe at their transperancy(because of the past experience).
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5) Their is a negligible concept of mutual fund in the rural areas.
6) The problem which is currently faced by the people of kashmir
during the investment is the un-avaibility of the PAN
card.because there is no concept of PAN card among the
people.even the salaried persons and the reputed officers don’t
have PAN card.
7) Another thing is regarding the service provided by the mutual
funds which are already existing in the valley,like the SBI and
The UTI ,RELIANCE, etc. as this is the beginning of the
mutual fund in the valley most of the mutual funds dealing in
valley don’t have their offices in the valley. They can’t provide
the better service to the investors after the investment.
8) The concept of Islamic banking has also helped to a great
extent to the people of valley in investing in the shares and the
units and other investment alternatives .they made this concept
clear that in which particular fund or in a particular company a
person can invest. They show the path of Halal and Haram to
the investor. This thing have also helped the person to invest in
any alternate. Any person who is going to deal with the mutual
fund must have the proper knowledge about that company, the
fund and the risk associated with that fund.
9) As per the 2001 census, Jammu and Kashmir's literacy rate was
55.5 per cent (Male: 66.6 per cent; Female: 43 per cent).which
has improved a lot their after which reflects the educated
persons can help to enhance the growth of mutual fund in the
valley.
10) The Mutual funds in valley has the scope of penetrating into
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the rural and semi urban areas also.
11)People are financially strong and they are in search of various
investment alternatives in which mutual fund can become one.
Some recommendations for the promotion of mutual funds in
Kashmir valley are given as follows:
1)The trend is changing now, people are getting more aware and
the knowledge regarding the mutual fund investment is also
increasing among the people day by day.
2) Govt. of Jammu and Kashmir must do some awareness
programmes with the mutual fund companies in order to make the
people more knowledgably and aware.
3) The mutual funds which are already running in the valley must
upgrade, enhance their programmes, their transparency and must
educate the people of the valley to some extent.
4) People should invest In the mutual funds because it has been
seen that the Islam also allows investing in the mutual funds under
particular norms.
5) There is a great field and opportunities for this industry in the
valley so it should be flourished and run in a better way in the
valley
6) Media or other source of advertisement can also play their role
in the publicity of these investment alternatives
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Still it a beginning of mutual fund in the valley it means that there is a lot of
scope for this particular business and I suggest other companies to enter into
the valley and get the benefit of the business. Development can also come by
this in the valley.
WEBSITES
www.researchonline.com
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www. mutualfunds india.com
www.sebi.gov.in
www.sbimf.com
www.timesofmoney.com
www.thehindubusinessline.com
www.amfiindia.com
www.moneycontrol.com
www.geojit.com
www.morningstar.com
www.ShareKhan-FirstStep.com
www.onlineresearch.com
QUESTIONNAIRE
(1)Personal Information
(a) Name & Address:____________________________
____________________________
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____________________________
____________________________
____________________________
(b)Age: ____________________________
(c) Educational qualification:_______________
(d) Marital Status: Single □ Married □
(e) Gender: Male □ Female □
(f) Monthly Income: < 10000 □ < 25000 □ < 50000 □
< 100000 □
(g) Total annual saving:
Less than 60000 □ Between 60001 to Rs 120000 □
Between 120001 to Rs 250000 □ More than 250000
(h) Occupation: Business □
Profession □
Agriculture □
Student □
Service □ Other□
(2) Did you have the PAN?
Yes □ No □
if no, mention the reason___________________________
(3)Recall names of some of the mutual fund in India?
___________________________________________
____________________________________________
____________________________________________
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(4)You make investment in mutual fund because (rank in order of
preference)
Regular income□
Capital appreciation□
Tax saving □
Growth □
Liquidity □
Speculation □
(5) Which scheme you prefer?
Open ended □ Closed ended□ ELSS□
Growth□ Debt □ Equity□
(6)Rank the following financial assets in order of your preference (rank
1 to be given to most preferred asset)
Mutual funds □ Equity shares □ Debentures □
Bonds □ Bank deposits □ Kisan vikas patra □
Post office time deposits □ Public provident fund □
LIC policies □ National saving certificate □
(7)Your satisfaction level regarding returns in mutual fund:
Highly satisfied □
Satisfied □
Average □
Unsatisfied □
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Highly unsatisfied □
(8)How long you have been investing in the mutual funds?
Less than 1 years □ 1-3 years□ 3-5 years □
Above 5 years □ 1-2 months□
(9)Mutual funds are?
Highly Risky □ Risky □ Average □ Low Risky □ Safe□
(10)The first mutual fund in India was?
SBI □ UTI □ IDBI □ LIC□
(11) Which mutual fund sector you mainly prefer?
Private owned mutual fund□
Public owned mutual funds□
both□ none□
(12)Your satisfaction regarding the promises made by any
MF/agent/broker/distributor to an individual before and after the
investment:
Highly Satisfied □
Satisfied□
Average □
Unsatisfied □
Highly Unsatisfied□
(13)What Is Your Criteria For Selecting The Mutual Fund?(Rank in
order of preference)
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(i) Promoters Name □
(ii) Past performance □
(iii) Sector where investment would be made□
(iv) Professional magazines/newspapers □
(v) Advertisement □
(vi) Any other □
(14) What according to you is the major deficiency in the working of
mutual funds?
(i) Functioning Unclear □ (ii) Procedural complexities □
(iii) Service dissatisfaction □
(iv) Awareness lacking □ (v) Any other □
(15)Please assign ranks in order of preference for mutual funds.
(i)LIC MF □
(ii)GIC MF □
(iii)CANBANK MF □
(iv) SBI MF □
(v) HDFC MF □
(vi) PRINCIPLE MF □
(vii) FRANKLIN TEMPLTON MF □
(viii) RELIANCE MF □
(ix) BIRLA SUN LIFE MF □
(x) ALLIANCE MF □
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(xi) TATA MF □
(xii) ICICI PRU MF □
(16) What do you think is the future of the mutual fund in the valley?
Very Bright □
Bright □
Can’t Say □
Black □
Very Black □
(17)What would be your suggestions regarding proper functioning of
mutual funds?
_______________________________________________
_________________________________________
(Thanking you)
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![AWARNESS & SCOPE OF MUTUL FUND [KARVEY]](https://img.pdfslide.us/doc/110x75/577d2e991a28ab4e1eaf7b93/awarness-scope-of-mutul-fund-karvey.jpg)
