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Transcript of Mutual Funds Project
1. INTRODUCTION
A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. It offers an opportunity to invest in a diversified, professionally managed basket
of securities at a relatively low cost. The flow chart below describes broadly the working of a
mutual fund:
“Mutual Funds are popular among all income levels. With a mutual fund, we get a
diversified basket of stocks managed by professionals”
These Trusts are run by experienced Investment Managers who use their knowledge and
expertise to select individual securities, which are classified to form portfolios that meet
predetermined objectives and criteria.
These portfolios are then sold to the public. They offer the investors the following main services:
Portfolio Diversification
Marketability: A new financial asset is created that may be more easily marketable than
the underlying securities in the portfolio.
Pool their money with
Investors Fund managers
Invest in
Passed back to
Returns Securities
1.1 HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY:-
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at
the initiative of the Government of India and Reserve Bank. Though the growth was slow, but it
accelerated from the year 1987 when non-UTI players entered the Industry. In the past decade,
Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as
quantity wise. Before, the monopoly of the market had seen an ending phase
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank
of India and functioned under the Regulatory and administrative control of the Reserve Bank of
India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India
(IDBI) took over the regulatory and administrative control in place of RBI. The first scheme
launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets
under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and
Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
1993 was the year in which the first Mutual Fund Regulations came into being, under which all
mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund registered in July
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes The second is the UTI Mutual
Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions MFR.
1.2 INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS ASPECTS
Mutual fund is a trust that pools the savings of a number of investors who share a common
financial goal. This pool of money is invested in accordance with a stated objective. The joint
ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. The money thus
collected is then invested in capital market instruments such as shares, debentures and other
securities. The income earned through these investments and the capital appreciations realized
are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual
Fund is the most suitable investment for the common man as it offers an opportunity to invest in
a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund
is an investment tool that allows small investors access to a well diversified portfolio of equities,
bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are
issued and can be redeemed as needed. The fund’s Net Asset value (NAV) is determined each
day. Diversification reduces the risk because all stocks may not move in the same direction in the
same proportion at the same time. Investors of mutual funds are known as unit holders.
INVESTMENT ALTERNATIVES IN INDIA:-
Non marketable financial assets: These are such financial assets which gives
moderately high return but cannot be traded in market.
Bank Deposits
Post Office Schemes
Company FDs
PPF
Equity shares: These are shares of company and can be traded in secondary market.
Investors get benefit by change in price of share and dividend given by companies.
Equity shares represent ownership capital. As an equity shareholder, a person has an
ownership stake in the company. This essentially means that the person has a residual
interest in income and wealth of the company. These can be classified into following
broad categories as per stock market:
Blue chip shares Growth shares
Income shares Cyclic shares
Speculative shares
Bonds: Bonds are the instruments that are considered as a relatively safer investment
avenues.
Govt. sec bonds
GOI relief funds
Govt. agency funds
PSU Bonds
RBI BOND
Debenture of private sector co.
Money market instrument: By convention, the term "money market" refers to the
market for short-term requirement and deployment of funds. Money market instruments
are those instruments, which have a maturity period of less than one year.
T-Bills Commercial Paper
Certificate of Deposit
Mutual Funds- A mutual fund is a trust that pools together the savings of a number of
investors who share a common financial goal. The fund manager invests this pool of
money in securities, ranging the scheme. The different types of schemes are
Balanced Funds
Index Funds
Sector Fund
Equity Oriented Funds
Life insurance: Now-a-days life insurance is also being considered as an investment
avenue. Insurance premiums represent the sacrifice and the assured sum the benefit.
Under it different schemes are:
Endowment assurance policy
Money back policy
Whole life policy
Term assurance policy
Real estate: One of the most important assets in portfolio of investors is a residential
house. In addition to a residential house, the more affluent investors are likely to be
interested in the following types of real estate:
Agricultural land
Semi urban land
Farm House
Precious objects: Investors can also invest in the objects which have value. These
comprises of:
Gold
Silver
Precious stones
Art objects
Financial Derivatives: These are such instruments which derive their value from some
other underlying assets. It may be viewed as a side bet on the asset. The most important
financial derivatives from the point of view of investors are:
Options
Futures
1.3 ADVANTAGES OF MUTUAL FUNDS
There are numerous benefits of investing in mutual funds and one of the key reasons for its
phenomenal success in the developed markets like US and UK is the range of benefits they offer,
The benefits have been broadly split into universal benefits, applicable to all schemes and
benefits applicable specifically to open-ended schemes. Universal Benefits
Affordability:
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the
investment objective of the scheme. An investor can buy in to a portfolio of equities, which
would otherwise be extremely expensive. Each unit holder thus gets an exposure to such
portfolios with an investment as modest as Rs.500/-. This amount today would get you less than
quarter of an Infosys share! Thus it would be affordable for an investor to build a portfolio of
investments through a mutual fund rather than investing directly in the stock market. It simply
means that you must spread your investment across different securities (stocks, bonds, money
market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile,
information technology etc.). This kind of a diversification may add to the stability of your
returns.
Professional Management:
Qualified investment professionals who seek to maximize returns and minimize risk monitor
investor's money. When you buy in to a mutual fund, you are handing your money to an
investment professional that has experience in making investment decisions. It is the Fund
Manager's job to (a) find the best securities for the fund, given the fund's stated investment
objectives; and (b) keep track of investments and changes in market conditions and adjust the
mix of the portfolio, as and when required.
Tax Benefits:
Any income distributed after March 31, 2002 will be subject to tax in the assessment of all
Unit holders. However, as a measure of concession to Unit holders of open-ended equity-
oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a
concessional rate of 10.5%. In case of Individuals and Hindu Undivided Families a deduction
upto Rs. 9,000 from the Total Income will be admissible in respect of income from investments
specified in Section 80L, including income from Units of the Mutual Fund.
1.4 DRAWBACKS FROM MUTUAL FUND
Fluctuating Returns:
Mutual funds are like many other investments without a guaranteed return: there is always
the possibility that the value of your mutual fund will depreciate. Unlike fixed-income products,
such as bonds and Treasury bills, mutual funds experience price fluctuations along with the
stocks that make up the fund. When deciding on a particular fund to buy, you need to research
the risks involved - just because a professional manager is looking after the fund, that doesn't
mean the performance will be stellar.
Cash, Cash and More Cash:
As you know already, mutual funds pool money from thousands of investors, so everyday
investors are putting money into the fund as well as withdrawing investments. To maintain
liquidity and the capacity to accommodate withdrawals, funds typically have to keep a large
portion of their portfolios as cash. Having ample cash is great for liquidity, but money sitting
around as cash is not working for you and thus is not very advantageous.
Costs:
Mutual funds provide investors with professional management, but it comes at a cost. Funds
will typically have a range of different fees that reduce the overall payout. In mutual funds, the
fees are classified into two categories: shareholder fees and annual operating fees.
The shareholder fees, in the forms of loads and redemption fees are paid directly by shareholders
purchasing or selling the funds. The annual fund operating fees are charged as an annual
percentage - usually ranging from 1-3%. These fees are assessed to mutual fund investors
regardless of the performance of the fund. As you can imagine, in years when the fund doesn't
make money, these fees only magnify losses.
Misleading Advertisements:
The misleading advertisements of different funds can guide investors down the wrong path.
Some funds may be incorrectly labelled as growth funds, while others are classified as small cap
or income funds. The Securities and Exchange Commission (SEC) requires that funds have at
least 80% of assets in the particular type of investment implied in their names. How the
remaining assets are invested is up to the fund manager.
Evaluating Funds:
Another disadvantage of mutual funds is the difficulty they pose for investors interested in
researching and evaluating the different funds. Unlike stocks, mutual funds do not offer investors
the opportunity to compare the P/E ratio, sales growth, earnings per share, etc. A mutual fund's
net asset value gives investors the total value of the fund's portfolio less liabilities, but how do
you know if one fund is better than another?
Furthermore, advertisements, rankings and ratings issued by fund companies only describe
past performance. Always note that mutual fund descriptions/advertisements always include the
tagline "past results are not indicative of future returns". Be sure not to pick funds only because
they have performed well in the past - yesterday's big winners may be today's big losers.
RISK HIERARCHY OF MUTUAL FUNDS
1.5 CATEGORIES OF MUTUAL FUND
Mutual funds can be classified as follow:-
Based on their structure:· Open-ended funds: Investors can buy and sell the units from the
fund, at any point of time.
· Close-ended funds: These funds raise money from investors only once. Therefore, after the
offer period, fresh investments cannot be made into the fund. If the fund is listed on a stocks
exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently,
most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis
such as monthly or weekly. Redemption of units can be made during specified intervals.
Therefore, such funds have relatively low liquidity.
Based on their investment objective:
Equity funds: These funds invest in equities and equity related instruments. With fluctuating
share prices, such funds show volatile performance, even losses. However, short term
fluctuations in the market, generally smoothens out in the long term, thereby offering higher
returns at relatively lower volatility. Hence, investment in equity funds should be considered for
a period of at least 3-5 years. It can be further classified as
i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their portfolio mirrors the benchmark index both in terms of composition
and individual stock weightages.
ii) Equity diversified funds- 100% of the capital is invested in equities spreading
across different sectors and stocks.
iii) Dividend yield funds- it is similar to the equity diversified funds except that they
invest in companies offering high dividend yields.
iv) Thematic funds- Invest 100% of the assets in sectors which are related through some
theme.e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector
fund will invest in banking stocks.
ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the
risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual
funds vehicle for investors who prefer spreading their risk across various instruments.
Following are balanced funds classes:
i) Debt-oriented funds -Investment below 65% in equities.
ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.
Debt fund: They invest only in debt instruments, and are a good option for investors averse to
idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income
instruments like bonds, debentures, Government of India securities; and money market
instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put
your money into any of these debt funds depending on your investment horizon and needs.
Liquid funds- These funds invest 100% in money market instruments, a large portion being
invested in call money market.
Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.
Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which
have variable coupon rate.
Gilt funds LT- They invest 100% of their portfolio in long-term government securities.
Income funds LT- Typically, such funds invest a major portion of the portfolio inlong-term debt
papers.
MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and anexposure of 10%-
30% to equities.
FMPs- fixed monthly plans invest in debt papers whose maturity is in line withthat of the fund.
INVESTMENT STRATEGIES:-
1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed
date of a month. Payment is made through post dated cheques or direct debit facilities.
The investor gets fewer units when the NAV is high and more units when the NAV is
low. This is called as the benefit of Rupee Cost Averaging (RCA)
2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give
instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same
mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then
he can withdraw a fixed amount each month.
RISK V/S. RETURN:
1.6 STRUCTURE OF MUTUAL FUND
In developed countries like the UK and the US, the mutual funds industry is highly regulated
with a view of imparting operational transparency and protecting investors’ interest. Since there
is a clear distinction between open ended schemes and close ended schemes, usually two
different types of structural and management approaches are followed. Open-ended funds (unit-
trusts) in the UK follow the ‘trust approach’, while close-ended schemes follow (investment
trusts) follow the ‘corporate approach’. The management and operations of the two types of
funds, are, therefore, guided by separate regulatory mechanisms, and the rules are laid down by
separate controlling authorities. However, no such distinctions exist in India and both
approaches (Trust and Corporate) have been integrated by SEBI. The formation and operations
of mutual funds in India are guided solely by the SEBI regulations. The figure below gives an
idea of the structure of the Indian mutual funds. A mutual fund consists of four separate entities
– sponsor, mutual fund trust, AMC and custodian. These are, of course, assisted by other
independent administrative entities, such as banks, registrars and transfer agents.
Sponsor Company Establishes MF as a Trust
Registers MF with SEBI
Mutual Fund
Asset Management Company
Custodian
Holds unit holders’ fund in MFEnsures compliance to SEBIEnters into agreement with AMC
Floats MF fundsManages funds as per SEBI guidelines andAMC agreement
Provides necessary custodian services
Managed by a Board of Trustees
Bankers
Registrars and Transfer Agents
Provide Banking Services
Provide registrar services and act as transfer agents
Appointed by BOT
Appointed by Trustees
Appointed by AMC
Appointed by AMC
STRUCTURE OF THE INDIAN MUTUAL FUNDS
The sponsor for a mutual fund can be any person who, acting alone or in combination with
another corporate body, establishes the mutual fund and gets it registered with SEBI. The
sponsor is required to contribute at least 40% of the minimum net worth (Rs 10 crore) of the
AMC. He must have a sound track record and a reputation for fairness and integrity in all his
business transactions.
As per the 1996 regulations, ‘A mutual fund shall be constituted in the form of a trust and the
instrument of trust shall be in the form of a deed, duly registered under the provisions of the
Indian Registration Act, 1908, executed by the sponsor in favor of trustees named in such an
instrument. The mutual fund is managed by the board of trustees or Trustee Company, and the
sponsor executes the trust deeds in favor of the trustees. The mutual fund raises money through
the sale of units under one or more schemes for investment in securities, in accordance with
SEBI guidelines. The trustees must see to it that the schemes floated and managed by the AMC
are in accordance with the trust deeds and SEBI guidelines. It is also their responsibility to
control the capital property of the mutual fund schemes.
The trustees have the right to obtain relevant information from the AMC, as well as a
quarterly report on its activities. They can also dismiss the AMC under certain conditions, as per
SEBI regulations. At least half the trustees have the right to obtain relevant information from the
AMC or its employees cannot act as trustees. The trustee of a particular mutual fund cannot be
appointed as a trustee of any other mutual fund unless he is an independent trustee and obtains
prior permission from the mutual fund in which he is a trustee. The trustees are required to
submit half-yearly reports to SEBI on the activities of the mutual fund. They appoint a
custodian, whose activities they supervise. A trustee can be removed only with the prior
approval of SEBI.
The trustees appoint the AMC, which must act as per the SEBI guidelines, the trust deeds,
and the management agreement it has made with the trustees.
The AMC should be registered with SEBI. Its net worth should be in the form of cash and all
assets should be held in its name. In case it wants to carry out other fund management business,
it should satisfy the capital adequacy requirement for each such business independently. The
AMC cannot give or guarantee loans, and is prohibited from acquiring any assets (out of the
scheme property) which would involve the assumption of unlimited liability. It is required to
disclose the scheme particulars and the base calculation of the NAV. It must submit quarterly
reports to the mutual fund. The director of the AMC should be a person of repute and high
standing, with at least five years experience in the relevant field. The appointment of the AMC
can be terminated by a decision of 75% of unit-holders or a majority of trustees.
Mutual funds are also allowed to diversify their activities in the following areas.
Portfolio management services Management of money market funds
Management of offshore funds Management of real estate funds
Providing advice to offshore funds
Management of pension or provident funds
Management of venture capital funds
The regulations deal with various issues relating to launching, advertising and listing of
mutual funds schemes. All the schemes to be launched by an AMC need to be approved by the
trustees. Copies of the offer document of such schemes are to be filed with SEBI, and should
contain adequate disclosures to enable investors to make informed decisions. Advertisements in
respect of schemes should be in conformity with the prescribed advertisement code of SEBI.
provides for periodic repurchase facilities to all unit-holders, or
provides for monthly income or caters to special classes of persons, or
discloses details of repurchase in the offer document, or
opens for repurchase within six months of the closure of subscription
Considering the various irregularities and sharp deterioration in the performance of many
mutual funds, it was decided to fix certain responsibilities for the trustees to ensure that they
remained vigilant and played a more active role. The SEBI appointed a committee under the
chairmanship of P.K. Kaul to examine the issue of responsibilities of trustees. The committee’s
report was accepted by SEBI and the following measures were decided upon, among others.
The manner in which the trustees are to fulfill their responsibilities has been spelt out.
They are required to meet at least once in three months.
Trustees can appoint independent auditors.
Several other measures, like revision of the codes of conduct, were taken to promote
integrity, diligence, and fairness among the trustees as well as the AMCs. All this, together with
the standardization of several provisions relating to operations, has increased the level of
transparency and strengthened the mechanism of investor protection.
1.8 MUTUAL FUNDS STUDIES
EQUITY DIVERSIFIED FUNDS
These are the funds in the market which have investment across the sectors, asset classes and
financial instruments to provide optimal benefit of diversification of portfolio to investors.
EQUITY LINKED SAVING SCHEME (ELSS)
These are the open ended saving schemes which generally have lock-in-period of three years
which means that once you have invested certain amount in your fund, you can’t withdraw any
amount from your account. These scheme are most popular among retail investors(also see in
Appendices) due to its three-in-one feature which means these schemes are able to satisfy three
different investment objectives simultaneously which are mentioned as follows:
Tax Benefit
Good Return
Capital Appreciation
EQUITY MID AND SMALL CAP
These are the equity funds which invest primarily in mid cap and small cap stocks, the stocks
which have growth potentials and also have high risk when compared to large cap.
EQUITY LARGE CAP
These are the funds which have investments predominantly in large cap stock. These are the
stocks which has a solid track record and sound fundamentals. These are the less risky stocks and
hence generally have low growth rates when compared to small and mid-cap stocks.
LIC NOMURA MUTUAL FUND
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989 and contributed
Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in
accordance with the provisions of the Indian Trust Act, 1882. The settlor is not responsible for
the management of the Trust. The settler is also not responsible or liable for any loss or shortfall
resulting in any of the schemes of LIC Mutual Fund. The Trustees of the LIC Mutual Fund have
exclusive ownership of Trust Fund and are vested with general power of superintendence,
discretion and management of the affairs of the Trust. LIC Mutal Fund Asset Management
Company Ltd. was formed on 20th April 1994 in compliance with the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1993.
2. REVIEW OF LITERATUREThe existing “Behavioural Finance” studies are very few and very little information is available
about investor perceptions, preferences, attitudes and behaviour. All efforts in this direction are
fragmented.
SEBI –In 1964 NCAER Survey of households was undertaken to understand the attitude towards
and motivation for saving of individuals. Another NCAER study in 1996 analysed the structure
of the capital market and presented the views and attitudes of individual shareholders was carried
out to estimate the number of households and the population of individual investors, their
economic and demographic profile, portfolio size, investment preference for equity as well as
other savings instruments. This was 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 : Households 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 predicted that in the next
two years (i.e., 2000 hence) the investment of households in MFs is likely to increase. We have
to wait and watch the investors’ reaction to the July 2nd 2001, great fall of the Big Brother, UTI.
De Bondt and Thaler (1985) investigated the possible psychological basis for investor
behaviour, argued that mean reversion in stock prices was an evidence of investor over reaction
where investors overemphasise recent firm performance in forming future expectations.
Ippolito (1992) said that fund/scheme selection by investors was based on past performance of
the funds and money flows into winning funds more rapidly than they flow out of losing funds.
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 revealed among other things that Income
Schemes and Open Ended Schemes were 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 were
the first source of information through which investors get to know about MFs/Schemes and
investor service was a major differentiating factor in the selection of Mutual Fund Schemes.
Shankar (1996) pointed 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 had been published in financial dailies,
periodicals, professional and research journals, explaining the basic concept of Mutual Funds and
highlight their importance in the 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 were critical views on the performance and functioning of
Mutual Funds.
Sujit Sikidar and Amrit Pal Singh (1996) carried out a survey with an objective to understand
the behavioural 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 mutural 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.
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 Visakapatnam. 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 revealed that brand image factor,
though cannot be easily captured by computable performance measures, influences the investor’s
perception and hence his fund/scheme slection.
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.
A few among them were Samir K. Barua et al., (1991) investigated the segmentation of
investors on the basis of their characteristics. Investor’s characteristics on the basis of their
investment size Raja Rajan (1997), and the relationship between stage in life cycle of the
investors and their investment pattern was studied Raja Rajan (1998).
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 in depth study.
COMPANY PROFILES
PUBLIC SECTOR MUTUAL FUNDS
SBI MUTUAL FUND
With 25 years of rich experience in fund management, we at SBI
Funds Management Pvt. Ltd. bring forward our expertise by consistently delivering value to our
investors. We have a strong and proud lineage that traces back to the State Bank of India (SBI) -
India's largest bank. We are a Joint Venture between SBI and AMUNDI (France), one of the
world's leading fund management companies. With our network of over 222 points of acceptance
across India, we deliver value and nurture the trust of our vast and varied family of
investors.Excellence has no substitute. And to ensure excellence right from the first stage of
product development to the post-investment stage, we are ably guided by our philosophy of
‘growth through innovation’ and our stable investment policies. This dedication is what helps our
customers achieve their financial objectives.
VISION
“To be the most preferred and the largest fund house for all asset classes, with a consistent track
record of excellent returns and best standards in customer service, product innovation,
technology and HR practices.”
SERVICES
Mutual Funds :-Investors are our priority. Our mission has been to establish Mutual Funds as a
viable investment option to the masses in the country. Working towards it, we developed
innovative, need-specific products and educated the investors about the added benefits of
investing in capital markets via Mutual Funds.Today, we have been actively managing our
investor's assets not only through our investment expertise in domestic mutual funds, but also
offshore funds and portfolio management advisory services for institutional investors.
PORTFOLIO MANAGEMENT AND ADVISORY SERVICES
SBI Funds Management has emerged as one of the largest player in India advising various
financial institutions, pension funds, and local and international asset management
companies.We have excelled by understanding our investor's requirements and terms of risk /
return expectations, based on which we suggest customized asset portfolio recommendations.
We also provide an integrated end-to-end customized asset management solution for institutions
in terms of advisory service, discretionary and non-discretionary portfolio management services.
Offshore Funds :-SBI Funds Management has been successfully managing and advising India's
dedicated offshore funds since 1988. SBI Funds Management was the 1st bank sponsored asset
management company fund to launch an offshore fund called 'SBI Resurgent India Opportunities
Fund' with an objective to provide our investors with opportunities for long-term growth in
capital, through well-researched investments in a diversified basket of stocks of Indian
Companies.
FUND HOUSE EXPERTISE :- Investment Expertise
The best investment strategies put together by the best minds, our Fund Managers. With a sharp
eye to monitor, gauge and understand the changes in the market, our fund managers and analysts
gear up to meet new challenging environments. Their ability to capture the growth potential of
Indian securities and manage complex portfolios as well as the drive to deliver optimum results
is their forte. With superior securities selection, incisive research, intensive coverage including
internal forecasts, active monitoring and regular tracking, our dedicated team ensures
minimization of risks while protecting our investor's interest. Always.
Investment Philosophy:-Growth through innovation.
Our expert team of experienced and market savvy researchers prepare comprehensive analytical
and informative reports on diverse sectors and identify stocks that promise high performance in
the future. What is innovation? Innovation is the process of turning ideas into concrete plans for
progressive growth. We always seek to provide our investors with opportunities for progressive
growth through our innovative products, superior stock selection and active portfolio
management. Accordingly, we also enhance and optimize asset allocation and stock selection
based on internal and external research. Derivatives are used to hedge and rebalance portfolios to
keep the risk factors at reasonable levels, The three main phrases, which act as a guiding force
for the investment performance, are as follows:
Long-term capital appreciation for the investor: Our fund manager's view is not guided
by any momentum play but by the objective of generating sustainable performance for
the investor.
Superior stock selection: Our team is encouraged to be ahead of the rest of the industry in
terms of identifying new ideas & opportunities.
Active fund management: While the performance of all the funds is benchmarked against
a specific index, we do not encourage our investment team to replicate the index
composition with the fund portfolio.
Optimal Risk Management:
Risk Management is an inherent part of any business. As one of the core focus areas, each of our strategies is subject to close scrutiny on a continuous basis. Regulatory agencies around the world are placing increasing pressure on institutions to measure and manage risk better. At SBI Funds Management, we follow enterprise wide approach to risk management with a dedicated, experienced and professional risk management team covering significant functions of the organization. Risk Management focuses on:
Identifying actual and potential areas of risk
Assessing the adequacy of internal controls
Proposing risk mitigating measures and
Safeguarding investor interest through ongoing analysis and monitoring
Investment Objective:- Setting benchmarks time and again. For our
investors.:Our objective is to endeavor to outperform our benchmarks through well
researched investments in Indian equities. This is achieved by implementing an active
management style based on fundamental analysis, leading to the construction of a
portfolio. It could be blended, large cap, mid cap, or specific sector oriented - which aims
at capturing the growth potential of Indian equities.
BOARD OF DIRECTORS - AMC
Mr. Pratip Chaudhuri
Chairman & Associate Director
Mr. Deepak Kumar Chatterjee
Managing Director & CEO
Mr. Shishir Joshipura
Independent Director
Dr. H. Sadhak
Independent Director
Mrs. Madhu Dubhashi
Independent Director
Dr. H. K. Pradhan
Independent Director
Mr. Jashvant Raval
Independent Director
Mr. Fathi Jerfel
Associate Director
Mr. Thierry Raymond Mequillet
Associate Director
Mr. Philippe Batchevitch
Alternate Director to Mr. Jerfel
MANAGEMENT TEAM
Mr. Deepak Kumar Chatterjee
MD & CEO
Mr. Philippe Batchevitch
Deputy CEO
Mr. K. T. Ravindran
Executive Director & Chief Operating Officer
Mr. Navneet Munot
Executive Director & Chief Investment
Officer
Mr. R. S. Srinivas Jain
Executive Director & Chief Marketing
Officer (Strategy and International Business)
Mr. D. P. Singh
Executive Director & Chief Marketing
Officer (Domestic Business)
Ms. Aparna Nirgude
Chief Risk Officer
Mr. Rakesh Kaushik
Senior Vice President (Accounts &
Administration)
LIC MUTUAL FUND
Life Insurance Corporation of India (LIC) (Hindi: भा�रती�य जी�वन बी�मा� निनगमा) is the largest
insurance group and investment company in India. Its a state-owned where Government of India
has 100%stake. LIC also funds close to 24.6% of the Indian Government's expenses. It has assets
estimated of 13.25 trillion (US$240 billion). It was founded in 1956 with the merger of 243
insurance companies and provident societies.
Type State-owned
Industry Financial services
Founded 1 September 1956
Headquarters Mumbai, India
Key people D. K. Mehrotra, (Chairman)
Products Life and health insurance, investment management, mutual fund
Total assets 13.25 trillion (US$240 billion) (2010)
Owner(s) Government of India
Employees 115,966 (2010)
Subsidiaries LIC Housing FinanceLIC Cards ServicesLIC Nomura Mutual Fund
Website www.licindia.in
Headquartered in Mumbai, financial and commercial capital of India, the Life Insurance
Corporation of India currently has 8 zonal Offices and 113 divisional offices located in different
parts of India, around 3500 servicing offices including 2048 branches, 54 Customer Zones, 25
Metro Area Service Hubs and a number of Satellite Offices located in different cities and towns
of India and has a network of 13,37,064 individual agents, 242 Corporate Agents, 79 Referral
Agents, 98 Brokers and 42 Banks (as on 31.3.2011) for soliciting life insurance business from
the public.The slogan of LIC is "Yogakshemam Vahamyaham" which translates from Sanskrit to
"Your welfare is our responsibility". The slogan is derived from the Ancient Hindu text, the
Bhagavad Gita's 9th Chapter, 22nd verse. The literal translation from Sanskrit to English is "I
carry what you require". The slogan can be seen in the logo, written in Devanagiri script.
History:- The Oriental Life Insurance Company, the first corporate entity in I ndia
offering life insurance coverage, was established in Calcutta in 1818 by Bipin Behari
Dasgupta and others. Europeans in India were its primary target market, and it
charged Indians heftier premiums. The Bombay Mutual Life Assurance Society,
formed in 1870, was the first native insurance provider. Other insurance companies
established in the pre-independence era included
Bharat Insurance Company (1956)
United India (1906)
National Indian (1906)
National Insurance (1906)
Co-operative Assurance (1906)
Hindustan Co-operatives (1907)
Indian Mercantile
General Assurance
Swadeshi Life (later Bombay Life)
Sahyadri Insurance (Merged into LIC, 1956)
The first 150 years were marked mostly by turbulent economic conditions. It witnessed, India's
First War of Independence, adverse effects of the World War I and World War II on the
economy of India, and in between them the period of world wide economic crises triggered by
the Great depression. The first half of the 20th century also saw a heightened struggle for India's
independence. The aggregate effect of these events led to a high rate of bankruptcies .
Nationalization:- In 1955, parliamentarian Amol Barate raised the matter of insurance
fraud by owners of private insurance companies. In the ensuing investigations, one of
India's wealthiest businessmen, Ram Kishan Dalmia, owner of the Times of India
newspaper, was sent to prison for two years. Eventually, the Parliament of India passed
the Life Insurance of India Act on 1956-06-19, and the Life Insurance Corporation of
India was created on 1956-09-01, by consolidating the life insurance business of 245
private life insurers and other entities offering life insurance services. Nationalization of
the life insurance business in India was a result of the Industrial Policy Resolution of
1956, which had created a policy framework for extending state control over at least
seventeen sectors of the economy, including the life insurance.
Current status
Over its existence of around 57 years (upto 2013), Life Insurance Corporation of India, which
commanded a monopoly of soliciting and selling life insurance in India, created huge surpluses,
and contributed around 7% of India's GDP in 2006. The Corporation, which started its business
with around 300 offices, 5.7 million policies and a corpus of INR 459 million (US$ 92 million as
per the 1959 exchange rate of roughly Rs. 5 for a US $, has grown to 25000 servicing around
350 million policies and a corpus of over 8 trillion (US$150 billion). ₡==Awards and
recognition== The Economic Times Brand Equity Survey 2010 rated LIC as the No. 5Service
Brand of the Country. Though in the year 2010 is ranked at 4, the organization is consistently
among the top rated service company of the India. From the year 2006, LIC is continuously
winning the Readers' Digest Trusted brand award. According to The Brand Trust Report 2012,
LIC is the 8th most trusted brand of India.Golden Jubilee Foundation: LIC Golden Jubilee
Foundation was established in 2006 as a charity organization. This entity has the aim of
promoting education, alleviation of poverty, and providing better living conditions for the under
privileged. Out of all the activities conducted by the organization, Golden Jubilee Scholarship
awards is the best known. Each year, this award is given to the meritorious students in standard
XII of school education or equivalent, who wish to continue their studies and have a parental
income less than 60,000 Rupees.
4. RESEARCH METHODOLOGY
Research Design- Descriptive Study:-A study that tries to reveal patterns associated with performance analysis of mutual funds.
Sources – The sources are:
Types of data-
Secondary Data was collected from various bank brochures, journals, books, magazines and internet.
Sample Size:- 100 Investors
Two Public Sector Mutual fund Mutual Funds
SAMPLING TECHNIQUE:-Convenience sampling technique was used to select Mutual Funds
Funds in
Public Sector Mutual Funds
SBI mutual fund
LIC mutual fund
4.1 NEED OF THE STUDY
Finance & its functions are the part of economic activity. Finance is very essentially needed for
all types of organizations viz; small, medium, large-scale industries & service sector. Hence the
role of finance manager & the subject finance accounting gained maximum importance.
Liberalization, globalization & privatization created new challengers to entrepreneur & corporate
in carrying they’re day to day activities. So, “finance is regarded as the life blood of a business
organization.” Data pertaining to Public and Private mutual funds and was analysed with the
performance to accomplish the objectives of the study. Source of the data was secondary. For
better consolidation of results data templates was provided to all the concerned sites. These data
templates was framed in a way that desirable information is obtained easily and is readily
accessible for quick interpretations.
4.2 OBJECTIVES OF THE STUDY
Main objectives of the study are:
1. To study mutual funds of public sector and their product portfolio.
2. To study the performance analysis of public sector mutual funds on the basis of equity
diversified funds, balanced funds, tax saving funds and equity linked saving schemes.
3. To study the performance analysis of public sector mutual funds on the basis of equity mid
and small cap and equity large cap.
4. To find out the Preferences of the investors for Asset Management Company.
5. To know the Preferences for the portfolios.
6. To study the comparative analysis of equity diversified funds, equity linked saving schemes,
equity large-mid-small cap and equity thematic funds.
7. To know why one has invested or not invested in Reliance Mutual fund
8. To find out the most preferred channel.
9. To find out what should do to boost Mutual Fund Industry in India.
5.1 PERFORMANCE ANALYSIS OF PUBLIC SECTOR MUTUAL FUNDS1. SBI MUTUAL FUNDS
1) EQUITY DIVERSIFIED FUNDS:
Meaning: These are the funds in the market which have investment across the sectors,
asset classes and financial instruments to provide optimal benefit of diversification of
portfolio to investors.The following are the funds in the market in this category as per the
recently held survey:
a) SBI MAGNUM CONTRA
b) SBI MAGNUM EQUITY
ANALYSIS:
FUNDS RETURNS:As per this criterion funds are compared from 2009 to 2012 years time.
Latest returns are shown in the analysis.
Years SBI Magnum Contra
Return (in Rs ‘000 cr.)
SBI Magnum Equity
Return(inRs ‘000 cr.)
2010 -10.6 -4.5
2011 -4.8 2.0
2012 14.4 20.6
2013 5.6 8.2
FINDINGS: Since two funds SBI Magnum Contra and SBI magnum Equity, that’s shows how
well the portfolios are managed by the concerned Fund Managers.
Hit by global recession, from 2010 perspective also both funds from SBI are showing
negative returns.
Last, but not the least from 2012 both funds, the horizon which is considered to be very
important from investors point of view, both funds from SBI, especially Magnum Equity
outperformed in the category. It is giving highest return of 20.6% and 14.4% return in
2012 time periods and even in the 2013 time period it gives low return of 5.6% as
compared to high return of 8.2% of SBI Magnum Equity.
RISK PROFILE:
SBI Magnum Contra SBI Magnum Equity
Standard Deviation 27.37 25.45
Sharpe Ratio 0.63 0.90
Beta 0.97 0.90
FINDINGS:
Since Standard Deviation is the measure which shows variability in the returns from the
mean return, therefore it is considered to be the direct measure of risk. As Both SBI
Magnum Contra funds have higher Standard Deviation, it shows that these funds are
more aggressive in nature than other funds.
Sharpe ratio, which means returns per unit of risk that a fund is able to generate.
Therefore, higher the ratio the better it is. Accordingly, Magnum Contra is not a winner
as per this criterion.
Beta, which shows the co-movement of funds return with Market rate of returns, is again
measure of volatility or risk. Since Magnum Contra is having highest Beta which is
closed to one and also Magnum Equity which is second highest shows that they are tend
to be aggressive or volatile in nature.
PORTFOLIO ANALYSIS:
SBI Magnum Contra SBI Magnum Equity
P/E ratio 26.41 23.16
Fund Size(in Rs. cr.) 2770.86 518.13
Portfolio Turnover (in %) 144.00 127
FINDINGS:
P/E RATIO is a measure of investors’ confidence in the fund/stock. High P/E ratio
means that investors are paying higher prices for stock when compared to its earnings.
Generally, P/E ratio is high for young/growth funds/stock. Since Magnum Contra is
having a highest P/E ratio in the category, it shows that investors have a lot of confidence
in funds. On the contrary, Magnum Equity is slowly losing its contrarian approach which
reflects in its lowest P/E ratio in the category.
The Magnum Contra has highest fund size in the category.
Portfolio Turnover which measures the extent to which the fund is active in terms of its
dealings in the markets. However, high turnover also implies that high transaction cost
are charged to fund. Since SBI Magnum Equity of the funds from SBI have very low
turnover, it means that funds were not required to be changed in recent period which
ultimately results in greater efficiency.
NAV DETAILS OF FUNDS AS ON Mar-30-2013
FUND NAV (in Rs ‘000 cr.)
SBI Magnum Contra 51.23
SBI Magnum Equity 42.32
2) EQUITY LINKED SAVING SCHEME :(ELSS)
The following are the top five performing funds in ELSS category:
a) SBI MAGNUM TAX GAIN 93
ANALYSIS:
FUNDS RETURN:
As per this criterion funds are compared from 2010 to 2013 years time. Latest returns are shown
in the analysis. Returns of less than one year are on absolute basis and for more than one year are
on compounded basis:
Years SBI Magnum Tax Gain 93 Return (in Rs ‘000
cr.)2010 -5.6
2011 -5.0
2012 17.8
2013 5.2
FINDINGS: In 2010and 2011 year category, fund has not performed well as it is showing return
of -5.6 and -5.0 respectively.
Last but not the least, it is good news that fund has outperformed in 2012 giving returns
of 17.8% with the average performance 5.2% in the 2013.
RISK PROFILE:SBI Magnum Tax gain 93
Standard Deviation 3.66
Sharpe Ratio 0.04
Beta 0.87
FINDINGS :- Standard Deviation is the measure which shows variability in the returns from
the mean return, therefore it is considered to be the direct and primary measure of risk. In case of
Magnum Tax Gain 93, it has the lowest standard deviation in the category which means that the
fund has not much risky portfolio.
Sharpe ratio, which means returns per unit of risk that a fund is able to generate. Therefore,
higher the ratio the better it is. Accordingly, Magnum Tax Gain is having lowest ratio in the
category.
Beta, which shows the co-movement of funds return with Market rate of returns, is again
measure of volatility or risk. Magnum TAX Gain 93 which is having one of the lowest beta
0.87 in the category shows that the fund is actually very less sensitive to stock market
movement.
PORTFOLIO ANALYSIS:
SBI Magnum Tax gain 93
P/E R 24.08
Fund Size(in Rs. Cr.) 4697.46
Portfolio Turnover(in %) 40
FINDINGS:From the above table it can be concluded that:
P/E RATIO is a measure of investors’ confidence in the fund/stock. High P/E ratio
means that investors are paying higher prices for stock when compared to its earnings.
Generally, P/E ratio is high for young/growth funds or stock. In this case Investors have
faith in SBI Magnum Taxgain 93 as it is having highest P/E ratio(24.08).
Again Magnum Tax gain has largest fund size as a result of strong distribution network,
strong brand, and the message of faith that SBI name itself give to masses of investors.
Therefore, SBI Mutual Funds in particular should build on strength of its Sponsor.
Portfolio Turnover which measures the extent to which the fund is active in terms of its
dealings in the markets. However, high turnover also implies that high transaction cost
are charged to fund. As it is clearly visible from the table that Magnum Tax Gain93
(40%) has high ratio.
NAV DETAILS OF FUNDS AS ON 30 Mar,2013
FUND NAV (in Rs ‘000 cr.)
SBI Magnum Tax Gain 93 58.08
EQUITY MID AND SMALL CAP:
The following are the top five performing funds in this category as on date:
a) MAGNUM GLOBAL 94
b) MAGNUM MULTIPIER PLUS 93
ANALYSIS:
FUNDS’ RETURN:
Years Magnum Global 94
(in Rs’000cr.)
Magnum Multiplier Plus 93
(in Rs’000cr.) 2011 1.4 -7.3
2012 31.7 18.6
2013 6.0 7.2
FINDINGS:
Since two funds Magnum Global 94 and Magnum multiplier, that’s shows how well the
portfolios are managed by the concerned Fund Managers.
In 2011 category is Magnum Multiplier Plus 93 giving the -7.3% return.
In 2012 category which is one of the preferred choice of a retail investor Magnum Global
94 is giving the highest return of 31.7%.
But in 2013 category, Multiplier plus is giving a return of 7.2% and Magnum Global is
giving a return of 6.0% which is not a bad return.
RISK ANALYSIS:
Magnum Global 94 Magnum Multiplier Plus 93
Standard Deviation 4.14 3.57
Sharpe Ratio 0.07 0.05
Beta 0.95 0.83
FINDINGS:
The primary measure of risk i.e. Magnum Global 94 having Standard Deviation of
4.14%.Fund having lowest Standard Deviation is also from Magnum Multiplier Plus 93 is
having 3.57% as Standard Deviation.
All funds in this category are showing positive ratio which indicates that funds are able to
justify well whatever it hac investments in risky assets. Now, highest return per unit of risk in
the category is from Magnum Multiplier Plus 93 is having a Sharpe Ratio of 0.05 which
justify its not risk.
Magnum Multiplier Plus 93 is having lowest Beta of 0.83which means that it is less
sensitive to the market and hence less risky.
PORTFOLIO ANALYSIS:
Magnum Global 94 Magnum Multiplier Plus 93
P/E Ratio 29.51 23.85
Turnover(in %) 76 68
Fund size(in Rs.cr) 946.71 1126.37
FINDINGS:
P/E RATIO is a measure of investors’ confidence in the fund/stock. High P/E ratio
means that investors are paying higher prices for stock when compared to its earnings.
Generally, P/E ratio is high for young/growth funds or stock. Magnum Multiplier Plus 93
is having highest P/E ratio of 29.51 in the category.
Portfolio Turnover which measures the extent to which the fund is active in terms of its
dealings in the markets. However, high turnover also implies that high transaction cost
are charged to fund. As it is clearly visible from the table that Magnum Multiplier Plus 93
is having lowest turnover ratio of 68% compared to 76% in case of Magnum Global 94, it
shows that the fund is well managed and is having a lowest transaction costs.
Fund Size, as visible from table itself that Magnum Global 94 (Rs.946.71 Cr) and
Magnum Multiplier Plus (Rs.1126.37Cr) which shows popularity of these funds in the
market.
NAV DETAILS OF FUNDS AS ON 30 Mar,2012
FUND NAV (in Rs ‘000 cr.)
MAGNUM GLOBAL 94 57.49
MAGNUM MULTIPIER PLUS 93 77.18
2) EQUITY LARGE CAP:The following are the top performing funds in the category:
A) MAGNUM EQUITY
ANALYSIS:
FUNDS RETURN
In 2011category, Magnum Equity, giving the negative return of -4.8%.
In 2012 category Magnum Equity giving a good return of 20.6%.
In 2013 category Magnum Equity giving the average return of 8.1%.
RISK PROFILE:
Magnum Equity
Standard Deviation 3.76
Sharpe Ratio 0.06
Beta 0.88
FINDINGS:
As per the Standard Deviation, Magnum Equity is having the highest risk in the
category (3.76%).
Years Magnum Equity (in Rs ‘000cr.)
2011 -4.8
2012 20.6
2013 8.1
The return per unit of risk is nil in case of Magnum Equity (0.06) it is risky.
Magnum Equity is having highest Beta (0.88) in the category signifying its less risky
nature. therefore whenever Stock Market will fall or rise fund will fall or rise more than
the market.
PORTFOLIO ANALYSIS:
Magnum Equity
P/E Ratio 23.16
Portfolio Turnover(in %) 127
Fund Size(in Rs.cr.) 518.13(30-03-13)
FINDINGS: As per P/E Ratio Magnum Equity is the winner in the category, it is having highest
ratio of 23.16 i.e. Investors are really confident about the fund and they are paying much higher
than the earnings.
Portfolio Turnover which measures the extent to which the fund is active in terms of its
dealings in the markets. Magnum Equity is having the highest Portfolio Turnover Ratio
of (127),thus incurring the highest transaction cost.
As per the Fund Size, Magnum Equity is having the 518.13 minimum Fund Size
indicating the not much popularity of the fund in the market.
NAV DETAILS OF FUNDS AS ON 30 Mar,2013
2. LIC NOMURA MUTUAL FUND
FUND NAV (in Rs‘000 cr.)
Magnum Equity 42.32
1.Best performing “Balanced funds” are:
LIC NOMURA BOND Fund
LIC NOMURA Balanced Fund
ANALYSIS:
FUNDS RETURNS: As per this criterion funds are compared from 2011 to 2013 years time.
Latest returns are shown in the analysis.
Years LIC NOMURA Bond
Return(in Rs ‘000 cr.)
LIC NOMURA Balanced
Return(in Rs ‘000 cr.)
2011 10.0 10.0
2012 5.6 6.4
2013 8.6 8.6
FINDINGS:
Since two funds LIC NOMURA Bond and LIC NOMURA Balanced, that’s shows how well
the portfolios are managed by the concerned Fund Managers.
In 2011 LIC NOMURA Balanced fund are showing same returns 10.0%
In 2012 LIC NOMURA Balanced shows positive return 6.4% it is good return on the other
hand LIC NOMURA Bond decrease the return.
In last 2013 both these funds performed average return.
RISK PROFILE:LIC NOMURA Bond LIC NOMURA Balanced
Standard Deviation 0.66 2.6
Sharpe Ratio 0.11 0.43
Beta 1.28 0.89
FINDINGS:
Since Standard Deviation is the measure which shows variability in the returns from the
mean return, therefore it is considered to be the direct measure of risk. LIC NOMURA
Balanced have higher Standard Deviation, it shows that these funds are more aggressive
in nature than other funds.
Sharpe ratio, which means returns per unit of risk that a fund is able to generate.
Therefore, higher the ratio the better it is. Accordingly, LIC NOMURA Balanced has
high sharpe ratio.
Beta, which shows the co-movement of funds return with Market rate of returns, is again
measure of volatility or risk. Since LIC NOMURA Bond is having highest Beta which is
closed to one and also LIC NOMURA Balanced which is lowest shows that they are not
tend to be aggressive or volatile in nature.
PORTFOLIO ANALYSIS:
LIC NOMURA Bond LIC NOMURA Balanced
P/E ratio NA 18.28
Fund Size(in Rs. cr.) 81.61 20.15
Portfolio Turnover (in %) NA 31
FINDINGS:
P/E RATIO is a measure of investors’ confidence in the fund/stock. High P/E ratio
means that investors are paying higher prices for stock when compared to its earnings.
Generally, P/E ratio is high for young/growth funds/stock. Since LIC NOMURA
Balanced is having a highest P/E ratio in the category, it shows that investors have a lot
of confidence in funds. On the contrary, LIC NOMURA Bond is losing its contrarian
approach which reflects in its not attempted P/E ratio in the category.
The fund size of LIC NOMURA has no problem when it comes to raising funds. Like
LIC NOMURA Bond has highest fund size in balanced funds..
Portfolio Turnover which measures the extent to which the fund is active in terms of its
dealings in the markets. However, high turnover also implies that high transaction cost
are charged to fund. Since LIC NOMURA Balanced funds very high turnover, it means
that funds were required to be changed in recent period which ultimately results in
greater efficiency.
NAV DETAILS OF FUNDS As ON Mar-30-2013:
FUND NAV (in Rs ‘000 cr.)
LIC NOMURA BOND 30.33
LIC NOMURA Balanced 10.49
2. Best performing “Equity Funds” are:
LIC NOMURA EQUITY FUND
LIC NOMURA ULI SCHEME
ANALYSIS:
FUNDS’ RETURN: As per this criterion funds are compared from 2010 to 2012years time.
Latest returns are shown in the analysis.
Years LIC NOMURA Equity
Return(in Rs ‘000 cr.)
LIC NOMURA ULI Scheme
Return(in Rs ‘000 cr.)
2011 -12.7 -7.6
2012 12.8 6.7
2013 2.8 1.5
FINDINGS:
In 2011 year category, both these funds has not performed well as it is showing negative
return of -12.7% and -7.6% respectively.
In 2012 LIC NOMURA Equity has performed well with positive return 12.8%.
Last but not the least, in 2013 both these funds giving average returns.
RISK PROFILE:
LIC NOMURA Equity LIC NOMURA ULI Scheme
Standard Deviation 4.02 2.41
Sharpe Ratio 0.02 NA
Beta 0.94 0.86
FINDINGS:
Since Standard Deviation is the measure which shows variability in the returns from the
mean return, therefore it is considered to be the direct and primary measure of risk. In
case of LIC NOMURA ULI Scheme, it has the lowest standard deviation in the category
which means that the fund has not much risky portfolio.
Sharpe ratio, which means returns per unit of risk that a fund is able to generate.
Therefore, higher the ratio the better it is. Accordingly, LIC NOMURA Equity is having
lowest ratio in the category.
Beta, which shows the co-movement of funds return with Market rate of returns, is again
measure of volatility or risk. LIC NOMURA ULI Scheme which is having one of the lowest
beta in the category shows that the fund is actually very less sensitive to stock market
movement.
PORTFOLIO ANALYSIS:
LIC NOMURA Equity LIC NOMURA ULI Scheme
P/E ratio 21.61 18.43
Fund Size(in Rs. cr.) 77.82 131.22
Portfolio Turnover (in %) 10 124
FINDINGS:
P/E RATIO is a measure of investors’ confidence in the fund/stock. High P/E ratio
means that investors are paying higher prices for stock when compared to its earnings.
Generally, P/E ratio is high for young/growth funds/stock. Since LIC NOMURA Equity
is having a highest P/E ratio in the category, it shows that investors have a lot of
confidence in funds. On the contrary, LIC NOMURA ULI Scheme is which reflects in
its lowest P/E ratio in the category.
The LIC NOMURA ULI Scheme has highest fund size in the equity funds. This it has no
problem when it comes to raising funds.
Portfolio Turnover which measures the extent to which the fund is active in terms of its
dealings in the markets. However, high turnover also implies that high transaction cost
are charged to fund. Since LIC NOMURA Equity fund have very low turnover, it means
that funds were not required to be changed in recent period which ultimately results in
greater efficiency.
NAV DETAILS OF FUNDS AS ON Mar-30-2013
FUND NAV (in Rs ‘000 cr.)
LIC NOMURA Equity 23.97
LIC NOMURA ULI Scheme 9.36
3. Best performing “Tax Saving Funds” are
LIC LONG TERM FUND
LIC TAX SAVER PLAN FUND
ANALYSIS:
FUNDS RETURNS: As per this criterion funds are compared from 2011 to 2013 years time.
Latest returns are shown in the analysis.
Years LIC Long Term
Return(in Rs ‘000 cr.)
LIC Tax Saver Plan
Return(in Rs ‘000 cr.)
2011 -15.0 -12.4
2012 16.3 11.9
2013 0.5 0.4
FINDINGS:
In 2011 year category, both these funds has not performed well as it is showing negative
return of -15.0% and -12.4% respectively.
In 2012 LIC Long Term Fund performed well with positive return 16.3% on the other
hand LIC Tax Saver Plan positive return 11.9%.
Last but not the least, in 2013 both these funds giving very much low return.
RISK PROFILE:
LIC Long Term LIC Tax Saver Plan
Standard Deviation 4.33 3.9
Sharpe Ratio 0.04 0.02
Beta 1.06 0.92
FINDINGS:
Since Standard Deviation is the measure which shows variability in the returns from the
mean return, therefore it is considered to be the direct and primary measure of risk. In case
of LIC Tax Saver Plan, it has the lowest standard deviation in the category which means that
the fund has not much risky portfolio.
Sharpe ratio, which means returns per unit of risk that a fund is able to generate. Therefore,
higher the ratio the better it is. Accordingly, LIC Tax Saver Plan is having lowest ratio in
the category.
Beta, which shows the co-movement of funds return with Market rate of returns, is again
measure of volatility or risk. LIC Tax Saver Plan which is having one of the lowest beta in
the category shows that the fund is actually very less sensitive to stock market movement.
PORTFOLIO ANALYSIS:
LIC Long Term LIC Tax Saver Plan
P/E ratio 20.42 21.42
Fund Size(in Rs. cr.) 28.39 34.73
Portfolio Turnover (in %) 9 13
FINDINGS:
P/E RATIO is a measure of investors’ confidence in the fund/stock. High P/E ratio
means that investors are paying higher prices for stock when compared to its earnings.
Generally, P/E ratio is high for young/growth funds/stock. LIC Tax Saver Plan is having
a highest P/E ratio in the category, it shows that investors have a lot of confidence in
funds. On the contrary, LIC Long Term is slowly losing its contrarian approach which
reflects in its lowest P/E ratio in the category.
LIC Tax Saver Plan has highest fund size in the category .The LIC tax saver plan has no
problem when it comes to raising funds.
Portfolio Turnover which measures the extent to which the fund is active in terms of its
dealings in the markets. However, high turnover also implies that high transaction cost
are charged to fund. Since LIC Long Term fund have very low turnover, it means that
funds were not required to be changed in recent period which ultimately results in greater
efficiency.
NAV DETAILS OF FUNDS AS ON Mar-30-2013
FUND NAV (in Rs ‘000 cr.)
LIC Long Term 18.39
LIC Tax Saver Plan 26.69
6. ANALYSIS AND FINDINGSPersonal Details
(1). Qualification:-
Table:
Graduation/PG Under Graduate Others
77 36 7
Graph:
64%
30%
6%
INTERPRETATION: According to 120 respondents 64% of them had done gratuation/PG,
30% of them are undergratuate and rest 6% of them are others.
(b). Occupation. Pl tick (√)
Table:
Govt. Sec Pvt. Sec Business Agriculture Others
21 15 26 33 39
Graph:
Govt. Sec Pvt. Sec Business Agriculture Others
21 15 26 33 39
INTERPRETATION: According to the graph of 120 respondents depict that 21 of them are in
govt sector, 15 of them are in pvt. Sector, 26 of them are in business, 33 of them are in
agriculture and rest 39 of them are in other profession.
(c). What is your monthly family income approximately? Pl tick (√).
Table:
Up to Rs.10,000 Rs. 10,001 to
15000
Rs. 15,001 to
20,000
Rs. 20,001 to
30,000
Rs. 30,001
and above
7 15 26 33 39
Graph:
6%13%
22%
28%
33%
Up to Rs.10,000 Rs. 10,001 to 15000 Rs. 15,001 to 20,000Rs. 20,001 to 30,000 Rs. 30,001 and above
INTERPRETATION: The following graph depict that 6% of their income is Up to Rs.10,000,
12% of their income is Rs. 10,001 to 15000, 22% of their income is Rs. 15,001 to 20,000, 27%
of their income is Rs. 20,001 to 30,000 and rest 33% of their income is Rs. 30,001 and above.
1. What kind of investments you prefer most?
Table:1
Saving account 100
Fixed deposits 87
Insurance 100
Mutual Fund 100
Post Office-NSC, etc 69
Shares/Debentures 89
Gold/ Silver 85
Real Estate 72
PPF 33
PF 43
Graph:1
Savi
ng ac
count
Fixe
d dep
osits
Insu
rance
Mutu
al F
und
Post O
ffice
-NSC
, etc
Shar
es/D
eben
ture
s
Gold/ S
ilver
Real E
stat
e
PPFPF
100 87 100 100 69 89 85 72 33 43
INTERPRETATION: According to 120 respondents 100 of them are having saving account, 87
of them are having fixed deposits, 100 of them are ahaving insurance, 69 of them are having post
office-NSC, etc, 89 of them are are having shares/deentures, 85 of them are having gold/silver,
72 of them are having real estate, 33 of them are having PPF and rest 43 ofthem are having PF.
2. While investing your money, which factor you prefermost? Any one
Table:2
Liquidity Low Risk High Return Company
reputation
33 31 35 21
Graph:2
28%
26%
29%
18%Liquidity Low RiskHigh Return Company reputation
INTERPRETATION: According to the graph of 120 respondents depict that 18% of them are
investing in liquidity, 27% of them are in low risk, 26% of them are investing in high return,
29% of them are investing in company reputaion.
3. In this highly volatile market, do you think Mutual Funds are a destination for
Investments?
Table:3
Yes 100
No 20
Graph:3
83%
17%Yes No
INTERPRETATION: The following graph depict that 83% of them are YES highly volatile in
market for Mutual Funds are a destination for Investments and rest 17% of them are not highly
volatile in market for Mutual Funds are a destination for Investments.
4. Have you ever invested your money in mutual fund?
Table:4
Yes 100
No 20
Graph:4
83%
17%Yes No
INTERPRETATION: According to 120 respondents 83% of them say yes they have invested
money in mutual funds, and rest 17% of them say no they have not invested money in mutual
funds.
If yes,
a) Where do you find yourself as a mutual fund investor?
Table:
Totally ignorant 12
Partial knowledge of mutual funds 32
Aware only of any specific scheme in which you invested 20
Fully aware 36
Graph:
12%
32%
20%
36%
Totally ignorantPartial knowledge of mutual fundsAware only of any specific scheme in which you investedFully aware
INTERPRETATION: According to the graph of 100 respondents depict that 12% of them are
totally ignorant themself as a mutual fund investor, 32% of them are partial knowlege of mutual
funds themself as a mutual fund investor, 20% of them are aware only of any specific in which
they invested themself as a mutual fund investor and rest 36% of them are fully aware themself
as a mutual fund investor.
b) In which kind of mutual you would like to invest?
Table:
Public 37
Private 63
Graph:
37%
63%
Public Private
sINTERPRETATION: According to 100 respondents 37% of them like to invest in public
sector and rest 63% of them say that they would like to invest private sector,
c) how do you come to know about Mutual Fund?
Table:
Advertisement Peer Group Banks Financial
Advisors
22 17 31 30
Graph:
22%
17%
31%
30%
Advertisement Peer Group Banks Financial Advisors
INTERPRETATION: According to the graph of 100 respondents depict that 22% of them say
that they got to know about Mutual Funds by advertisement, 17% of them say that they got to
know about Mutual Funds by peer group, 31% of them say that they got to know about Mutual
Funds by banks and rest 30% of them say that they got to know about Mutual Funds by financial
advisors.
5. Which feature of the mutual funds allure you most?
Table:5
Diversification 11
Better return and safety 39
Reduction in risk and transaction cost 13
Regular Income 22
Tax benefit 15
Graph:5
11%
39%
13%
22%
15%
Diversification Better return and safety Reduction in risk and transaction cost
Regular Income Tax benefit
INTERPRETATION: According to 100 respondents 11% of them are Diversification feature of
the mutual funds allure them most, 39% of them are Better return and safety feature of the
mutual funds allure them most, 13% of them are Reduction in risk and transaction cost feature of
the mutual funds allure them most, 22% of them are Regular Income feature of the mutual funds
allure them most and rest 15% of them are Tax benefit feature of the mutual funds allure them
most
6. Which Mutual Fund Plan do you consider the best? Table:6
Balanced Plan 30
Equity Plans 25
Income Plans 31
Other: 14
Graph:6
30%
25%
31%
14%Balanced Plan Equity Plans Income Plans Other:
INTERPRETATION: According to the graph of 100 respondents depict that 30% of them say
that balanced plan is the best, 25% of them say that equity plans are the best, 31% of them say
that income plans are the best and rest 14% of them say that others plans are the best.
7. How long would you like to hold your Mutual Funds' Investments?
Table:7
1 to 3 Years 39
4 to 6 Years 28
7 to 10 Years 33
More than 10 Years 0
Graph:7
39%
28%
33%
1 to 3 Years 4 to 6 Years 7 to 10 Years More than 10 Years
INTERPRETATION: The following graph depict that 39% of them say that they would like to
hold their mutual funds for 1 to 3 Years, 28% of them say that they would like to hold their
mutual funds for 4 to 6 Years, ans rest 33% of them say that they would like to hold their mutual
funds for 7 to 10 Years
8. How do you rate the risks associated with Mutual Funds? Table:8
Low 21
Moderate 43
High 36
Graph:8
21%
43%
36%
Low Moderate High
INTERPRETATION: According to 100 respondents 21% of them say that there is low risks
associated with Mutual Funds, 43% of them say that there is moderate risks associated with
Mutual Funds and rest 36% of them say that there is high risks associated with Mutual Funds.
9. Which among the following principles do you consider while selecting a Mutual Fund?
Table:9
Enquiring about the Fund Manager 31
Finding about its past performance 45
Identifying your own objectives 24
Graph:9
31%
45%
24%
Enquiring about the Fund Manager Finding about its past performance
Identifying your own objectives
INTERPRETATION: According to the graph of 100 respondents depict that 31% of them say
that Enquiring about the Fund Manager could be considered while selecting mutual funds, 45%
of them say that Finding about its past performance could be considered while selecting mutual
funds and rest 24%of them say that Identifying your own objectives could be considered while
selecting mutual funds.
10. Which end-scheme do you feel is good? * Open end type of mutual fund are those that
does not have restrictions on the amount of shares the fund will issue and Closed end fund
is a publicly traded investment company that raises a fixed amount of capital through an
initial public offering (IPO).
Table:10
Open End 73
Closed End 27
Graph:10
73%
27%
Open End Closed End
INTERPRETATION: The following graph depict that 73% of them say that open end schemes
are good and rest 27% of them say that closed end shemes are good.
11. What do you think which risks usually affects Mutual Funds? * Systematic risk is the
risks inherent to the entire market segment as interest rates and unsystematic risks are
specific risks as NEWS that affects specific stock.
Table:11
Systematic Risk 69
Unsystematic Risk 31
Graph:11
69%
31%Systematic Risk Unsystematic Risk
INTERPRETATION: According to 100 respondents 69% of them say syatematic risk usually
affects Mutual Funds and rest 31% of them say that unsystematic risk usually affects Mutual
Funds
12. Which are the primary sources of your knowledge about Mutual Funds as an
investment option?
Table:12
Television 69
Internet 32
Newspaper / Journals 41
Friends / Relatives 57
Sales Representatives 42
Graph:12
Television
Inte
rnet
Newspaper /
Journ
als
Friends /
Relative
s
Sales R
eprese
ntative
s
69 32 41 57 42
INTERPRETATION: According to the graph of 100 respondents depict that 69 of them say
that Television is the primary sources of their knowledge about Mutual Funds as an investment
option, 32 of them say that Internet Television is the primary sources of their knowledge about
Mutual Funds as an investment option, 41 of them say that Newspaper / Journals Television is
the primary sources of their knowledge about Mutual Funds as an investment option, 57 of them
say that Friends / Relatives Television is the primary sources of their knowledge about Mutual
Funds as an investment option and rest 42 of them say that Sales Representatives Television is
the primary sources of their knowledge about Mutual Funds as an investment option.
13. Which among the following is the safest Investment option?
Table:13
Mutual Funds 31
Stock Markets 26
Bank Deposits 43
Graph:13
31%
26%
43%
Mutual Funds Stock Markets Bank Deposits
INTERPRETATION: The following graph depict that 31% of them say that mutual funds is the
safest Investment option, 26% of them say that stock market is the safest Investment option and
rest 43% of them say that bank deposits is the safest Investment option.
14. Which factors prevent you to invest in mutual fund ?
Table:14
Bitter Past Experience 31
Lack of Knowledge 23
Lack of confidence in service being provided 15
Difficulty in selection of schemes 24
Inefficient investment advisors 7
Graph:14
31%
23%15%
24%
7%
Bitter Past Experience Lack of Knowledge
Lack of confidence in service being provided Difficulty in selection of schemes
Inefficient investment advisors
INTERPRETATION: According to 100 respondents 31% of them say that Bitter Past
Experience is one of the factor to prevent them to invest in mutual fund, 23% of them say that
Lack of Knowledge is one of the factor to prevent them to invest in mutual fund, 15% of them
say that Lack of confidence in service being provided is one of the factor to prevent them to
invest in mutual fund, 24% of them say that Difficulty in selection of schemes is one of the
factor to prevent them to invest in mutual fund and rest 7% of them say that Inefficient
investment advisors is one of the factor to prevent them to invest in mutual fund.
15. In which Mutual Fund you have invested?
Table:15
SBIMF 19
UTI 15
HDFC 22
Reliance 15
ICICI prudential funds 21
JM mutual fund 5
Other. Specify 3
Graph: 15
19%
15%
22%15%
21%
5%3%
SBIMF UTI HDFC RelianceICICI prudential funds JM mutual fund Other. Specify
INTERPRETATION: According to the graph of 100 respondents depict that 19% of them say
that they invest in SBIMF, 15% of them say that they invest in UTI, 22% of them say that they
invest in HDFC, 15% of them say that they invest in Reliance, 21% of them say that they invest
in ICICI prudential funds, 5% of them say that they invest in JM mutual fund and rest 3% of
them say that they invest in Other field.
16. When you invest in Mutual Funds which mode of investment will you prefer?
Table:16
One Time Investment 53
Systematic Investment Plan (SIP) 47
Graph:16
53%
47%
One Time Investment Systematic Investment Plan (SIP)
INTERPRETATION: The following graph depict that 53% of them say that they invest as one
time investment and rest 47% of them say that they invest ads systematic investment plan (SIP).
17. Where from you purchase mutual funds?
Table:17
Directly from the AMCs 23
Brokers only 26
Brokers/ sub-brokers 38
Other sources 13
Graph:17
23%
26%
38%
13%
Directly from the AMCs Brokers only Brokers/ sub-brokers Other sources
INTERPRETATION: According to 100 respondents 23% of them purchase mutual funds
directly from the AMCs, 26% of them purchase mutuial funds by brokers only, 38% of them
purchase mutual funds by brokers/sub brokers and rest 13% of them purchase mutual funds by
other sources.
18. Which sector are you investing in mutual fund sector?
Table:18
General 1st 21Oil and petroleum 12Gold fund 22Diversified equity fund 17Power sector 3Debt fund 9Banking fund 6Real estate fund 10
Graph:18
21%
12%
22%17%
3%9%
6% 10%
General 1st Oil and petroleum Gold fund Diversified equity fundPower sector Debt fund Banking fund Real estate fund
INTERPRETATION: According to the graph of 100 respondents depict that 21% of them
invest in general 1st in mutual fund sector, 12% of them invest in oil and petroleum in mutual
fund sector, 22% of them invest in gold fund in mutual fund sector, 17% of them invest in
diversified equity fund in mutual fund sector, 3% of them invest in power sector in mutual fund
sector, 9% of them invest in debt fund in mutual fund sector, 6% of them invest in banking funds
in mutual fund sector and rest 10% of them invest in real estate in mutual fund sector.
19. How would you like to receive the returns every year?
Table:19
Dividend payout 35
Dividend re-investment 23
Growth in NAV 42
Graph:19
35%
23%
42%
Dividend payout Dividend re-investment Growth in NAV
INTERPRETATION: The following graph depict that 35% of them would like to recieve their
return by dividend payout every year, 23% of them would like to receive their return by dividend
re-investment every year and rest 42% of them would like to receive their return by growth in
NAV every year.
20. Preferred portfolios by the Investors
Portfolio No. of Investors
Equity 56
Debt 20
Balanced 24
56%
20%
24%Equity Debt Balanced
Interpretation:-
From the above graph it can be seen that 46% preferred equity portfolio 37% preferred
Balance and 17% preferred Debt portfolio.
21. Option for getting Return preferred by the Investors
Option Dividend payout Dividend
Reinvestment
Growth
No. of
Respondents25 10 65
25%
10%
65%
Dividend payout Dividend Reinvestment Growth
Interpretation:-
Out of 120 investors 71% preferred Growth option, 21% preferred Dividend option and
Remaining 8% preferred Reinvestment option.
22. Preference of Investors whether to invest in Sectoral Funds
Response No. of Respondents
Yes 25
No 75
25
75
YesNo
Interpretation:-
Out of 120 investor 75% do not prefer to invest in sectoral fund because there is maximum
risk and remaining 25% of investors prefer to invest in sectoral fund.
CONCLUSION
Running a successful Mutual Fund requires complete understanding of the peculiarities of the
Indian Stock Market and also the awareness of the small investors. This study has made an
attempt to understand the financial behavior of Mutual Fund investors in connection with the
preferences of Brand (AMC), Products, and Channels etc. I observed that many of people have
fear of Mutual Fund. They think their money will not be secure in Mutual Fund.
They need the knowledge of Mutual Fund and its related terms. They have to be made aware
of what is mutual fund and how does it operates. What are its advantages and how it may lead to
losses? Many of people do not have invested in mutual fund due to lack of awareness although
they have money to invest. As the awareness and income is growing the number of mutual fund
investors are also growing.
“Brand” plays important role for the investment for this small investors. People invest in those
Companies where they have faith or they are well known with them. There are many AMCs in
Patiala but only some are performing well due to Brand awareness. Some AMCs are not
performing well although some of the schemes of them are giving good return because of not
awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known
Brand, they are performing well and their Assets Under Management is larger than others whose
Brand name are not well known like Principle, Sundaram, etc. Distribution channels are also
important for the investment in mutual fund.
Financial Advisors are the most preferred channel for the investment in mutual fund. They can
change investors’ mindset from one investment option to others. Many of investors directly
invest their money through AMC because they do not have to pay entry load. Only those people
invest directly who know well about mutual fund and its operations and those have time.
After considering all three parameters (Standard Deviation, Sharpe Ratio, Beta) it can be
concluded that MAGNUM CONTRA is the best fund in the equity diversified funds
because unlike a typical contrarian fund that focus on out of stocks, this fund considers
the underlying company’s valuations and compares that with what it believes the
company’s true valuations should be and then decide whether to invest in it or not.
Mutual funds should have to focus on equity diversified funds because unlike a typical
fund and believes the company’s true valuations should be and then decide whether to
invest in it or not.
BSE has set various guidelines and forms that need to be adhered to and submitted by
the companies. These guidelines will help companies to expedite the fulfilment of the
various formalities and disclosure requirements that are required at various stages.
Mutual funds should consider the underlying company’s valuations and compares that
with what it believes the company’s true valuations.
Equity funds are more risky than others. Therefore, its important to know what the
risks are and what your risk capacity is. Generally speaking, equity funds are the most
risky. Debt funds are safer and money market funds are the safest. However, there is a
relationship between risk and returns. Money market funds give you the lowest return
because of their low risk. Equity funds will give you the chance of highest return to
match their high risk.
You should invest for at least 3-5 year time horizon, if investing in an equity fund,
otherwise you will not enjoy the full benefit of your equity exposure. Don't make the
mistake of selling all your equity funds if the market corrects. By waiting for a 3 year
period you will give yourself enough time to not only recover your losses, but also
increase your returns.
For money market funds, these are funds that you should invest in for short-term
liquidity or cash needs.
Like other investments, mutual funds also have tax implications. Each time you sell
your units or receive dividends, there could be a tax liability associated with such
transactions.
The most vital problem spotted is of ignorance. Investors should be made aware of the
benefits. Nobody will invest until and unless he is fully convinced. Investors should be
made to realize that ignorance is no longer bliss and what they are losing by not
investing.
Mutual funds offer a lot of benefit which no other single option could offer. But most of
the people are not even aware of what actually a mutual fund is? They only see it as just
another investment option. So the advisors should try to change their mindsets. The
advisors should target for more and more young investors. Young investors as well as
persons at the height of their career would like to go for advisors due to lack of expertise
and time.
Mutual Fund Company needs to give the training of the Individual Financial Advisors
about the Fund/Scheme and its objective, because they are the main source to influence
the investors.
Before making any investment Financial Advisors should first enquire about the risk
tolerance of the investors/customers, their need and time (how long they want to invest).
By considering these three things they can take the customers into consideration.
Younger people aged less than 35 will be a key new customer group into the future, so
making greater efforts with younger customers who show some interest in investing
should pay off.
Systematic Investment Plan (SIP) is one the innovative products launched by Assets
Management companies very recently in the industry. SIP is easy for monthly salaried
person as it provides the facility of do the investment in EMI. Though most of the
prospects and potential investors are not aware about the SIP. There is a large scope for
the companies to tap the salaried persons.
Divide the spectrum of Mutual Funds depending on major asset classes invested in.
Presently there are only two.
• Equity Funds investing in stocks.
• Debt Funds investing in interest paying securities issued by government, semi-
government bodies, public sector units and corporate.
a) Categorizing equities
• Diversified – invest in large capitalized stocks belonging to multiple sectors.
• Sectoral – Invest in specific sectors like technology, FMCG, Pharma, etc.
• Liquid – Invest in money market, other short term paper, and cash. Highly liquid.
Average maturity is three months.
BIBLIOGRAPHY
BOOKS AND JOURNALS
Anjan Chakrabarti and Harsh Rungta, 2000, “Mutual Funds Industry in India : An indepth
look into the problems of credibility, Risk and Brand”, The ICFAI Journal of Applied
Finance, Vol.6, No.2, April, 27-45.
De Bondt, W.F.M. and Thaler, R, 1985, “Does the stock market over react?” Journal of
Finance, 40, 793-805.
Gupta, L.C., 1994, Mutual Funds and Asset Preference, Society for Capital Market Research
and Development, Delhi.
Madhusudan V. Jambodekar, 1996, Marketing Strategies of Mutual Funds – Current
Practices and Future Directions, Working Paper, UTI – IIMB Centre for Capital Markets
Education and Research, Bangalore.
Raja Rajan V., 1997, “Chennai Investor is conservative”, Business Line, Feb. 23.
Raja Rajan, 1997, “Investment size based segmentation of individual investors”,
Management Researcher, 3 (3 & 4), 21-28.
.
INTERNET RESOURCES
http://www.moneycontrol.com/mutual-funds/
http://www.morningstar.in/mutualfunds/
http://www.moneycontrol.com/mutual-funds
QUESTIONNAIRE
Personal Details:
(a). Name:-
(b). Add: - Contact No:-
(c). Age:-
(d). Qualification:-
Graduation/PG Under Graduate Others
(e). Occupation. Pl tick (√)
Govt. Sec Pvt. Sec Business Agriculture Others
(g). what is your monthly family income approximately? Pl tick (√).
Up to
Rs.10,000
Rs. 10,001 to
15000
Rs. 15,001 to
20,000
Rs. 20,001 to
30,000
Rs. 30,001 and
above
1. What kind of investments you prefer most? Pl tick (√). All applicable
a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund
e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver h. Real Estate
I. PPF j. PF
2. While investing your money, which factor you prefermost? Any one
Liquidity Low Risk High Return Company reputation
3. In this highly volatile market, do you think Mutual Funds are a destination for
Investments? *
Yes
No
4. Have you ever invested your money in mutual fund?
Yes
No
If yes,
a) Where do you find yourself as a mutual fund investor?
Totally ignorant [ ]
Partial knowledge of mutual funds [ ]
Aware only of any specific scheme in which you invested [ ]
Fully aware [ ]
b) In which kind of mutual you would like to invest?
Public [ ] Private [ ]
c) If not invested in Mutual Fund then why?
Not aware of MF Higher risk Not any specific reason
D) Which among the following is the safest Investment option?
Mutual Funds
Stock Markets
Bank Deposits
5. which feature of the mutual funds allure you most?
Diversification [ ]
Better return and safety [ ]
Reduction in risk and transaction cost [ ]
Regular Income [ ]
Tax benefit [ ]
6. Which Mutual Fund Plan do you consider the best?
Balanced Plan
Equity Plans
Income Plans
Other:
7. How long would you like to hold your Mutual Funds' Investments?
1 to 3 Years
4 to 6 Years
7 to 10 Years
More than 10 Years
8. How do you rate the risks associated with Mutual Funds?
Low
Moderate
High
9. Which among the following principles do you consider while selecting a Mutual Fund?
Enquiring about the Fund Manager
Finding about its past performance
Identifying your own objectives
10. Which end-scheme do you feel is good? * Open end type of mutual fund are those that
does not have restrictions on the amount of shares the fund will issue and Closed end fund
is a publicly traded investment company that raises a fixed amount of capital through an
initial public offering (IPO).
Open End
Closed End
11. Which are the primary sources of your knowledge about Mutual Funds as an
investment option?
Television
Internet
Newspaper / Journals
Friends / Relatives
Sales Representatives
14. Which factors prevent you to invest in mutual fund ?
Bitter Past Experience
Lack of Knowledge
Lack of confidence in service being provided
Difficulty in selection of schemes
Inefficient investment advisors
15. In which Mutual Fund you have invested? Please tick (√). All applicable.
a. SBIMF
b. UTI
c. HDFC
d. Reliance
e. ICICI prudential funds
f. JM mutual fund
g. Other. Specify
16. When you invest in Mutual Funds which mode of investment will you prefer?
a. One Time Investment b. Systematic Investment Plan (SIP)
17. Where from you purchase mutual funds?
Directly from the AMCs [ ]
Brokers only [ ]
Brokers/ sub-brokers [ ]
Other sources [ ]
19. How would you like to receive the returns every year?
a. Dividend payout b. Dividend re-investment c. Growth in NAV
20. Preferred portfolios by the Investors
Portfolio No. of Investors
Equity
Debt
Balanced